STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

SCOTT MEYER, Applicant

MILLIKEN MILLWORK INC, Employer

AMERISURE INSURANCE COMPANY, Insurer

WORKER'S COMPENSATION DECISION
Claim No. 93023332

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.

ORDER

The findings and order of the administrative law judge are affirmed.

Dated and mailed: February 27, 1998
meyersc.wsd : 101 : 3 ND § 10.5

/s/ David B. Falstad, Chairman

/s/ Pamela I. Anderson, Commissioner

/s/ James A. Rutkowski, Commissioner

MEMORANDUM OPINION

1. Background.

The applicant worked part-time in the employer's loading dock. He sustained a serious work injury that has resulted in the amputation of his right leg and has rendered his left leg nonfunctional. He is totally and permanently disabled as a matter of law. While recuperating from his injury, the applicant was hospitalized for a substantial period of time. He was 19 years old on the date of injury.

Although the work injury was conceded, a dispute arose about the correct temporary disability rate. The respondent wanted to base it on the applicant's actual part-time wages, while the applicant asserted the applicant's average weekly wage should be expanded to a full time rate of $220 under Wis. Stat. § 102.11 (1). The parties also disputed the respondent's liability for expenses incurred in remodeling the applicant's home. Accordingly, the applicant filed an application for hearing, and a hearing was scheduled on the issues of primary compensation, medical expense, and "wage 102.11."

While the applicant was still in the hospital, the issues were resolved by a limited compromise. The compromise agreement recites that a bona fide dispute existed as to whether the applicant earned a weekly wage of $220; whether the employer and insurer were legally liable to pay housing renovation costs, particularly renovations made to the home of a third party (the applicant's parents); whether the costs incurred by the applicant's parents for the renovations were medically reasonable, necessary and related to the applicant's work injury; and whether the insurer acted in bad faith or inexcusable delay regarding payment of the expense of the renovations and determination of the applicant's wage. The parties compromised the issue by payment of a lump sum of $91,674.92 and by paying temporary disability at the expanded wage retroactively to the date of injury. In exchange, the applicant agreed to waive claims for the remodeling expense; for "past, present and future wage claimed by the employe;" and for bad faith delay in payment regarding the remodeling project and "the determination of the employee's wage." ALJ Thomas R. Jones issued an order approving the compromise on October 26, 1995.

Thereafter, the applicant reached a healing plateau. He then received correspondence from the department indicating he should get permanent total disability (PTD) at a higher rate than his temporary total disability (TTD) benefits. Transcript, page 23. Under Wis. Stat. § 102.11 (1)(g), if a worker is less than 27 years old when injured, his permanent disability rate is based on his probable earnings at age 27 (1). Unless otherwise established, that wage is presumed to be the statutory maximum. Thus, the applicant's PTD rate would normally have been based on a wage of $675 per week (assuming the insurer could not prove he would have earned less at age 27), substantially more than the $220 per week his TTD rate was based on. A $675 average weekly wage would result in a PTD rate of $450 per week, while a $220 average weekly wage would result in a PTD rate of $146.66, both subject of course to the social security reverse offset.

The insurer, however, refused to increase the applicant's PTD rate, contending that the compromise fixed the applicant's wage at $220, and that the applicant expressly agreed waive "past, present and future wage claims."

The applicant initially filed an application for hearing on the issue of PTD. The insurer objected, contending that the wage issue had been addressed in the compromise, so the applicant instead had to request the limited compromise be reopened. The applicant then filed a timely application for review of compromise. However, in that application, the applicant expressly stated that he disagreed with the employer's position that the PTD rate was decided by the compromise.

The issue of setting aside the compromise was heard before ALJ William Phillips. He decided for the applicant, and set aside the part of the limited compromise dealing with the issue of the applicant's wage. ALJ Phillips noted the employer's argument that the only consideration it received for the limited compromise was the agreement to limit the applicant's benefits to the lower rate for the rest of his life. However, he concluded it was grossly inequitable and contrary to public policy to determine the applicant's entitlement to PTD at the lower rate.

ALJ Phillips noted the compromise agreement never expressly stated that it was limiting the applicant's right to a maximum wage under Wis. Stat. § 102.11 (1)(g) for the purposes of PTD. He also noted that the law generally discourages waiver of a private right or benefit conferred by statute unless the waiver is a clear, unambiguous, voluntary and intentional waiver of a known right. (2) The ALJ further noted that Wis. Stat. § 102.32 (7) specifically prohibits lump sum settlements of PTD upon an estimated life expectancy unless a hearing is held.

The employer appealed. It argues that the limited compromise was intended to deal with the PTD wage, that terms of the limited compromise are not grossly inequitable, and that the commission has previously refused to reopen compromises under similar circumstances. However, after careful consideration, the commission affirms the ALJ's decision.

2. Discussion.

At the outset, the commission reiterates the ALJ's finding that the limited compromise agreement never expressly states that the parties agreed to determine the applicant's permanent total disability rate based on an average weekly wage of $220 per week. Moreover, the applicant testified that he did not know he was waiving a right to the maximum PTD rate when he entered into the limited compromise. Rather, the applicant testified that, as he understood the limited compromise agreement, it was limited to the issues of whether the insurer would pay for the remodeling expense, whether his TTD rate would be based on his part-time or expanded wage, and whether he could maintain a bad faith claim on those issues.

True, the limited compromise states that the insurer was relieved of "past, present, and future wage claimed by the employe," but that in itself is a rather ambiguous way to waive calculation of disability compensation on the basis of any wage higher than $220 per week. Further, the terms of the limited compromise indicate that the dispute was about wage at the time of injury for the purposes of calculating the TTD rate, not a hypothetical wage at age 27 for the purposes of calculating PPD. Given these facts, it is reasonable to conclude that the limited compromise was never intended to cover the PTD rate, or that if the insurer had that intention the applicant reasonably did not share it.

However, even if the limited compromise may be construed to limit the wage to $220 per week for the purposes of calculating the PTD rate, the ALJ is correct in pointing out that such a provision violates the intent of Wis. Stat. § 102.32 (7). If the law requires a hearing prior to the approval of a lump sum PTD payment based on life expectancy, one may reasonably assume that compromising the wage rate to a level below the rate set by law for payment of PTD, especially when not done expressly, is also disfavored. Simple arithmetic establishes that the wage rate is as important a factor in calculating the PTD benefit as the injured worker's life expectancy.

True, despite the semantic wrangling of the parties on the question, the insurer did not actually pay the permanent total disability compensation in a lump sum. Rather, the $92,000 the insurer paid was for the expenses associated with the home remodeling. Thus, the no-compromise-without-a-hearing requirement of Wis. Stat. § 102.32 (7) may not apply to the limited compromise under a strict reading of the statute. But the legal principle underlying the provision, that the calculation of the PTD benefit is a significant right due special protection, goes a long way toward establishing that the applicant is entitled to the relief he requests: a reopening of the limited compromise which the employer purports implicitly limits his PTD rate to less than the rate provided for by law.

Wisconsin Statute § 102.06 (1) allows either party to request a review of compromise within one year from when the compromise was entered into, but gives no guidance as to when or why a compromise should be set aside. The commission has consistently held that compromises should not be reopened absent gross inequity, important newly-discovered evidence, fraud, duress, or mutual mistake. Michael Blenke v. American Can Company, claim no. 87-037750 (LIRC, September 9, 1992); Julie Stuart-Giese v. Schoeneck Containers, Inc., claim no. 85-060165 (LIRC, February 5, 1990.) The commission has also stated the test as requiring a showing of fraud, duress, important newly discovered evidence, overreaching, or a reasonable misinterpretation of the terms of the compromise. Haffner v. Amery Constant Care, Inc., claim no 85-05202, (LIRC, September 4, 1990).

The alternative formulations are in some respects two ways of saying the same thing, as over-reaching or a reasonable misinterpretation of the terms of the compromise may well add up to "gross inequity" the see Toni Palmer v. Toro Company, WC claim no. 86-012679 (LIRC, June 10, 1993). Compromises are not lightly set aside because a compromise of a worker's compensation claim under sec. 102.16 (1), Stats., encompasses qualities of comprehensiveness, finality and risk. Indeed, "[b]y using the word `compromise' we usually mean that we assume the risk of a mistake for which otherwise one would be entitled to a different result." C.F. Trantow v. Industrial Commission, 262 Wis. 2d 586, 589 (1952).

After reviewing the record, the commission concludes that the applicant testified credibly that he did not intend to compromise his PTD rate at about one-third of the statutory rate to which he was entitled. PTD was not an issue in dispute according to terms of the limited compromise, nor was the issue ever mentioned in the limited compromise. In other words, the limited compromise could reasonably be interpreted as limited to the wage for the purpose of the TTD rate, at least the applicant could reasonably have so interpreted (or misinterpreted) it.

Further, attempting to limit the PTD rate implicitly under the circumstances at the time the limited compromise was signed would amount to over-reaching by the insurer. At the time the limited compromise was entered into, the applicant was still in the hospital contemplating further surgery; the insurer was refusing to pay for the remodeling of the applicant's parents' house because it disputed some of the expenses; and the insurer was underpaying his TTD. Under these circumstances, it must also be viewed as grossly inequitable to fix the PTD rate significantly below the statutory rate based on an implicit provision in a limited compromise agreement dealing with other issues when one party reasonably does not believe the PTD rate was compromised, especially in light of the policy behind Wis. Stat. § 102.32 (7).

The employer argues that it eventually paid all the remodeling expenses under the compromise agreement, even those that were not medically necessary. Thus, it argues, the implicit reduction of the PTD rate by two-thirds was not a grossly inequitable compromise. The employer also contends that, except for the wage issue, it received no benefit from the compromise despite paying for remodeling expenses it believes were not necessary.

However, the commission cannot agree. For one thing, the applicant sought simple interest on the remodeling expenses, but waived that claim in the limited compromise. More significantly, the applicant waived his claims for bad faith penalties for the delayed payment of the home remodeling expense and for the delayed payment of TTD at the expanded wage.

Given that the facts of this case, a bad faith or inexcusable delay claim on the expanded wage issue might well have had some merit. In addition, while the insurer argues some of the home remodeling was not medically necessary, it admits some of the expenses were medically necessary. See report of Alba, respondent's exhibit 3. And as the respondent acknowledges in its brief, the commission has previously ordered paid the expenses necessary to modify a paraplegic worker's vehicle and home to accommodate the handicap from his work injury. Flynn v. Allen Roofing & Construction, WC case no. 87048518 (LIRC, June 13, 1990). Further, the insurer itself commissioned the remodeling, at least at some level, before refusing to pay for it. Finally, the commission emphasizes that the inexcusable delay or bad faith claims need not have been certainties for the insurer to realize some benefit in having them waived.

In attempting to justify its denial of the remodeling expense, the insurer asserts that the applicant failed to prove the remodeling expenses were all medically-necessary, referring to the fact the applicant never provided reports from a medical expert to justify the expense and could not have prevailed on a hearing on the issue. However, insurers are supposed to pay claims unless the insurer itself possesses evidence that the claim is fairly debatable; otherwise the insurer is acting in bad faith. Wis. Admin. Code § DWD 80.70 (2). And, of course, the employer's own expert indicated that some of the remodeling expense was medically-necessary. It may be that the fact the remodeling was done to a third party's home makes the entire expense "fairly debatable." But, again, the insurer derived some benefit from settling the penalty claims, even if it might have ultimately prevailed. At any rate, the commission rejects the insurer's claim that its only benefit from the limited compromise was the lower wage rate for PTD.

Further, of course, the sooner the applicant could move in with his parents as a result of the remodeling, the sooner he could leave the hospital. The applicant testified without contradiction that the reason for the home remodeling project was so that he would be able to return home to his parents' house. Transcript, pages 12 and 13. One might reasonably perceive an economic benefit in having the applicant move into the sheltered environment of his parent's home, even at the cost of $92,000 worth of remodeling, rather than paying for extended confinement in a hospital or nursing home. In short, the commission rejects the insurer's argument that reopening the compromise would deprive it of the benefit of its bargain in compromising the unnecessary home remodeling expense in implicit exchange for the greatly reduced PTD rate.

The commission acknowledges that it does not set aside compromises lightly. In prior cases, for example, the commission has refused to set aside a compromise where an injured worker entered into an express agreement on the extent of permanent disability, but then wanted the compromise reopened because his permanent disability turned out to be greater than he had expected. In such cases, of course, the risk of a "bad deal" is the risk of compromise. But this is not such a case. Considering in addition the significant financial impact of compromising of the PTD rate, gross inequity (or over-reaching and reasonable misunderstanding) has been established in this case. (3)

cc: ATTORNEY CHRISTOPHER D WALTHER
WALTHER LAW OFFICES SC

ATTORNEY PATRICK R GRIFFIN
BUNK DOHERTY & GRIFFIN LAW OFFICE

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Footnotes:

(1)( Back ) Wis. Stat. § 102.11 (1)(g) deals with permanent disability only, not temporary disability.

(2)( Back ) The ALJ cites Faust v. Ladysmith-Hawkins School Systems, 88 Wis. 2d 525, 532-33 (1979).

(3)( Back ) The commission considered setting aside the entire compromise, not just the wage issue, to allow the insurer to pursue its claim it overpaid for the remodeling. However, this alternative course was not advocated by either party. Moreover, the commission is satisfied that the parties believed at the time the of the compromise that they were settling the remodeling expenses at the full price to prevent a bad faith and interest claims. The commission thus concludes that part of the limited compromise should stand.