PAMELA S. RIESELMAN, Applicant
COLLEGE BARBER SHOP, Employer
An administrative law judge (ALJ) for the Worker's Compensation Division of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.
The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission agrees with the decision of the ALJ, and it adopts the findings and order in that decision as its own.
The findings and order of the administrative law judge are affirmed.
Dated and mailed
July 28, 2011
rieselm.wsd:101:7 ND6 8.21; 8.22; 8.23
BY THE COMMISSION:
/s/ Robert Glaser, Chairperson
/s/ Ann L. Crump, Commissioner
/s/ Laurie R. McCallum, Commissioner
This is a bad faith claim under Wis. Stat. § 102.18(1)(bp) arising from the employer's failure to notify its insurer of the applicant's work injury. The applicant testified that the employer's part-owner and onsite manager, Larry Cobb, actually saw both injuries occur and was aware she had been injured at work. She testified further that, as her condition worsened, she talked to Mr. Cobb about whether or not the employer would be able to pay for treatment. Mr. Cobb, on the other hand, testified that he was unaware that the applicant had injured herself at work.
The ALJ, after hearing the testimony, believed the applicant's version. Specifically, the ALJ found that Mr. Cobb knew of the work injuries and intentionally did not report them and refused to provide the name of the employer's worker's compensation insurer to the applicant so she could report them.
Based on her finding that the employer intentionally failed to report the work injury to its insurer, the ALJ assessed a bad faith penalty against the only proven medical expenses incurred before the insurer was made aware of the injury and began paying on the claim in October 2009. These expenses were $342 incurred by the applicant at Access Community Health Center. Accordingly, the ALJ assessed a penalty against the employer for bad faith at 200 percent of that amount, or $684.
The applicant appeals, asserting that the commission should increase the penalty to include medical expenses incurred after the injury was reported and the insurer began paying the claim, as well as disability compensation accruing and paid after the injury was reported. In its reply, the employer argues there was no bad faith, but even if there was, the penalty should be limited to the $684 ordered by the ALJ.
The bad faith statute, Wis. Stat. § 102.18(1)(bp) provides:
102.18(1)(bp) If the department determines that the employer or insurance carrier suspended, terminated, or failed to make payments or failed to report an injury as a result of malice or bad faith, the department may include a penalty in an award to an employee for each event or occurrence of malice or bad faith. This penalty is the exclusive remedy against an employer or insurance carrier for malice or bad faith. If this penalty is imposed for an event or occurrence of malice or bad faith that causes a payment that is due an injured employee to be delayed in violation of s. 102.22 (1) or overdue in violation of s. 628.46 (1), the department may not also order an increased payment under s. 102.22 (1) or the payment of interest under s. 628.46 (1). The department may award an amount that it considers just, not to exceed the lesser of 200 percent of total compensation due or $30,000 for each event or occurrence of malice or bad faith. The department may assess the penalty against the employer, the insurance carrier or both. Neither the employer nor the insurance carrier is liable to reimburse the other for the penalty amount. The department may, by rule, define actions which demonstrate malice or bad faith.
In addition, the department has also promulgated a rule which provides in relevant part:
DWD 80.70 Malice or bad faith. (1) An employer who unreasonably refuses or unreasonably fails to report an alleged injury to its insurance company providing worker's compensation coverage, shall be deemed to have acted with malice or bad faith.
(2) An insurance company or self-insured employer who, without credible evidence which demonstrates that the claim for the payments is fairly debatable, unreasonably fails to make payment of compensation or reasonable and necessary medical expenses, or after having commenced those payments, unreasonably suspends or terminates them, shall be deemed to have acted with malice or in bad faith.
The court of appeals has previously discussed the interplay between the "inexcusable delay" penalty under Wis. Stat. § 102.22(1), and the "bad faith" penalty under Wis. Stat. § 102.18(1)(bp):
Chapter 102 contemplates three types of conduct stemming from a delay in payments: (1) excusable delay; (2) inexcusable delay, though not in bad faith; and (3) bad faith delay.
Section 102.22(1), Stats., provides that '[w]here the employer or his or her insurer is guilty of inexcusable delay in making payments, the payments as to which the delay is found shall be increased by 10 percent.' The fact that only 'inexcusable' delay is subject to the 10 percent penalty indicates that the legislature contemplated that some delay could be excusable. See Coleman v. American Universal Ins. Co., 86 Wis. 2d 615, 625-26, 273 N.W.2d 220, 224 (1979).
The potential 200 percent penalty of sec. 102.18(1)(bp), Stats., is reserved only for cases where the employer or insurer acted in 'bad faith.' Thus, the legislature contemplated that there could be a delay in payment that, while inexcusable, did not rise to the level of 'bad faith.' We conclude that a finding of the 'knowledge' element of the Anderson test is a prerequisite to imposition of 'bad faith' penalties under sec. 102.18(1)(bp), Stats....
LIRC should determine first if there was a reasonable basis for delay. See Anderson, 85 Wis. 2d at 691, 271 N.W.2d at 376. If LIRC concludes there was not a reasonable basis for the delay, it should next determine whether the employer had knowledge of the lack of a reasonable basis for delaying payments or if there was a reckless disregard of the lack of a reasonable basis. See Id. If LIRC determines from the record, after finding no reasonable basis for the delay, that the 'knowledge' element is satisfied, it may then conclude that the employer's delay of payments was in bad faith.
North American Mechanical, Inc. v. LIRC, 157 Wis. 2d 801, 808-10 (Ct. App. 1990). See also Brown v. LIRC, 2003 WI 142, 27, 267 Wis. 2d 31, 671 N.W.2d 279.
Summarizing the bad faith statute, Wis. Stat. § 102.18(1)(bp), the supreme court stated:
17 Section 102.18(1)(bp) provides, in relevant part, that the Department of Workforce Development (DWD) may include a penalty in an award to an employee if the department determines that "the employer's or insurance carrier's . . . failure to make payments . . . resulted from malice or bad faith." Wis. Stat. § 102.18(1)(bp). A claimant seeking to impose penalties for bad faith failure to make payments under § 102.18(1)(bp) must prove two elements: 1) the employer or insurer did not have a reasonable basis for denying benefits; and 2) the employer or insurer knew it lacked a reasonable basis for denying benefits or recklessly disregarded a lack of a reasonable basis for denying payment. [Citation omitted.]
Bosco v. LIRC, 2004 WI 77, 17, 272 Wis. 2d 586.
Despite the arguments the employer makes in its brief(1), the commission agrees with the ALJ's decision to credit the applicant's testimony over that of Mr. Cobb. The record includes treatment notes in which the applicant refers to the work injuries in the late fall of 2008. See exhibit D. It seems unlikely the applicant would have mentioned a work injury to her medical providers but not the employer. Indeed, a note from November 2008 documents a discussion between the applicant and a nurse practitioner about the applicant's problems getting information from the employer about its worker's compensation insurer. Like the ALJ, the commission concludes that the employer unreasonably failed to report an alleged injury to its worker's compensation insurer, and so should be deemed to have acted in bad faith under Wis. Admin. Code § DWD 80.70(1).
Turning to the applicant's contentions about the amount of the award: Once the insurer became aware of the claim in November 2009, again, it began paying disability compensation and medical expenses. As to expenses incurred and disability accruing after that point, there seems to be little direct effect from the employer's bad faith. Still, the applicant asks that the commission increase the penalty to 200 percent of all the compensation that was eventually paid.
The applicant points out that the commission has made larger awards for similar conduct. Specifically, the employer cites the Sandmire case, but in that case, the penalty was based on medical expenses that appeared to have already been incurred and were unpaid when the insurer was notified of the work injury. Sandmire does not expressly authorize a bad faith award based on medical expenses that were incurred and timely paid after the insurer became aware of the work injury. The Kjell case cited by the applicant involved a 100 percent penalty awarded on disability compensation that an insurer itself had delayed paying. The Northcott case involved a 25 percent penalty based on a limited compromise agreement that a self-insured employer delayed paying because of financial difficulties. None of these cases involved, as here, a claim for the award of a penalty on expenses that had not yet been incurred before the effect of the bad faith ended when the insurer was notified of a work injury and began paying compensation based on it.
On the other hand, in Carlson-Nicks v. General Motors Corporation, WC Claim No. 2008-022279 (LIRC June 30, 2010), the commission awarded a bad faith penalty based on delayed payment of permanent partial disability. However, in that case, the commission specifically limited the calculation of the bad faith award to accrued permanent partial disability. It did not award a penalty based on the unaccrued amounts.
The commission acknowledges that the bad faith statute itself does not expressly limit the amount that may be awarded to accrued disability compensation or incurred expense. It may be, as the applicant suggests, that if she had known her injuries were covered she may have incurred more expense earlier or may even have been able to establish a temporary disability claim earlier. However, on this record, the commission declines to reach back to make an award based on expenses that were not incurred or disability compensation that never accrued. For similar reasons, it declines to award attorney costs of $540.64 as an additional assessment against the employer or as a deduction from the applicant's award.
cc:
Attorney Luke Kingree
Attorney Larry Hanson
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