LORI JANUSZ, Applicant

PIZZA HUT INC STORE #503035, Employer

AMERICAN CASUALTY CO OF READING PA, Insurer

The insurance carrier submitted a petition for commission review alleging error in the administrative law judge's Findings and Order issued in this matter on December 19, 2000. The applicant submitted an answer to the petition and briefs were submitted by the parties. At issue are liability for bad faith and inexcusable delay pursuant to Wis. Stat. § 102.18(1)(bp) and 102.22(1), respectively.

The commission has carefully reviewed the entire record in this matter and hereby affirms in part and reverses in part the administrative law judge's Findings and Order. The commission makes the following:

The applicant, whose birth date is October 13, 1962, was employed as a general manager for the employer's restaurant. At approximately 10:00 p.m. on December 23, 1998, she was doing inventory in the back of the restaurant and was on the phone with the assistant manager. A robber came up from behind and struck her twice in the back, telling her to get off the phone. He was wearing a black ski hat and had a gun. He then stuck the gun in the applicant's back and made her go to the cash register and put the money in the bags he carried. Then he told her to open the store safe and the applicant told him she couldn't because there was a time lock on it. At that point the robber's accomplice noticed that someone had a cell phone and they fled.

The applicant was interviewed by the police that night. She worked her next scheduled shift on December 24, 1998, and was off on a previously scheduled vacation from December 25, 1998, through January 4, 1999. The applicant began reacting to the incident with fear of being alone, sleeplessness, and fear of being in the restaurant. She contacted the employer's Employee Assistance Program and was referred to a mental health professional, Dr. Marilyn Bonjean. Dr. Bonjean saw the applicant for the first time on January 4, 1999, and noted that she had post-traumatic stress symptoms. At Dr. Bonjean's recommendation, the applicant also contacted her psychiatrist, Dr. Gary Hauser. The applicant had been treating with Dr. Hauser for dysthymia (depression) and generalized anxiety disorder, but Dr. Hauser indicated that her condition deteriorated after the work incident.

Dr. Bonjean diagnosed post-traumatic stress disorder and recommended that the applicant not work after dark or be alone while at work. The employer did not accommodate these restrictions and terminated the applicant on January 15, 1999. The applicant continued to receive therapy from Dr. Bonjean and medication from Dr. Hauser. On January 25, 1999, Dr. Bonjean clarified the applicant's work restrictions in writing and sent them directly to the employer.

The applicant consulted Attorney Robert T. Ward and on January 28, 1999, Attorney Ward wrote a letter to the employer and its insurer requesting immediate payment of temporary total disability to the applicant. Enclosed with the letter was a copy of Dr. Bonjean's medical report indicating the applicant was under temporary restrictions. The insurer wrote back on February 5, 1999, and without explanation, indicated that the applicant's claim was being denied. On February 10, 1999, Attorney Ward wrote back to the insurer and indicated that a basis for the denial was required. He requested an explanation as soon as possible. No explanation was forthcoming, and on February 12, 1999, the applicant filed a request for hearing claiming temporary disability, medical expense, and bad faith delay. On February 17, 1999, Attorney Thomas K. Mullins, representing the employer and its insurer, submitted an answer which denied the existence of a work injury. No medical documentation or explanation was submitted with this answer, and the applicant continued to receive no worker's compensation. She eventually exhausted her unemployment compensation, and was forced to accept food stamps and borrow money from family and friends.

On June 24, 1999, Attorney Mullins, sent a letter to the applicant notifying her of an appointment with Dr. John O'Donnell on July 6, 1999, for an independent medical exam. Dr. O'Donnell examined the applicant and issued a written report on July 15, 1999. He diagnosed generalized anxiety disorder, major depression, severe stress, avoidant personality disorder, and post-traumatic stress syndrome. He opined that while some of the applicant's current anxiety problems could be said to be preexisting, they were "reactivated" in December of 1998, and then "further entrenched" in January of 1999. He considered her recovery to be complicated by her anger with the employer, primarily for being discharged. In a follow-up report dated July 15, 1999, Dr. O'Donnell opined that the applicant's preexisting disposition in combination with the robbery had resulted in post-traumatic stress disorder, and that she currently had a 15 percent partial psychological disability. However, he believed her condition was treatable and fully resolvable. He recommended a return to work with temporary restrictions similar to those given by Dr. Bonjean.

Attorney Mullins testified that the employer's insurance administrator questioned him about the applicant's claim for the first time in late January or early February of 1999. He looked in the Neal and Danas Worker's Compensation Handbook and also telephoned a worker's compensation practitioner. He thereupon concluded ". . . there was a basis to deny because the event was foreseeable and not so out of the ordinary." He later testified that his understanding of the test for a compensable nontraumatic mental injury claim is ". . . whether the event was fortuitous, unexpected, or unforeseen." On cross-examination, Attorney Mullins testified that although he had not talked to the insurance carrier's representative about why she had not responded to Attorney Ward's letter of February 10, 1999, he assumed it was because the representative had referred the matter to him. When asked why he had not responded, Attorney Mullins indicated he was not certain he ever received a copy of Attorney Ward's letter, and he surmised that the answer to the application for hearing would have sufficed as a reason for the denial. Attorney Mullins also indicated that he could not explain why it took six months to schedule the exam with Dr. O'Donnell, other than unspecified concerns of record gathering, obtaining information including medical records, and determining who would be the appropriate practitioner to do the exam. He conceded that an exam could be scheduled faster than six months from the date of injury notification.

On October 20, 1999, the applicant's claim was payed in a lump sum. Attorney Mullins testified that he finally recommended payment because it became clear that Dr. O'Donnell felt the robbery incident aggravated the applicant's preexisting condition, and Dr. O'Donnell also found the period of disability and treatment to be appropriate. Attorney Mullins indicated they were also concerned about the discharge of the applicant during her healing period, and the amount of money it would cost to defend their position. He also believed the "winds were blowing against us" and they would "lose on the issue of compensability in the final analysis."

The test for compensability of a nontraumatic mental injury is found in School District No. 1 v. DILHR, 62 Wis. 2d 370, 377-78, 215 N.W.2d 373 (1974):

Thus it is the opinion of this court that mental injury nontraumatically caused must have resulted from a situation of greater dimensions than the day-to-day emotional strain and tension which all employees must experience. Only if the "fortuitous event unexpected and unforeseen" can be said to be so out of the ordinary from the countless emotional strains and differences that employees encounter daily without serious mental injury will liability under ch. 102, Stats., be found.

The test for determining whether there has been a bad faith violation under Wis. Stat. § 102.18(1)(bp) is found in North American Mechanical v. LIRC, 157 Wis. 2d 801, 808, 460 N.W.2d 835 (Ct. App. 1990):

We conclude that . . . in order to show bad faith a claimant must make a showing that the employer acted with: (1) a lack of reasonable basis for the delay which occurred and (2) knowledge or a reckless disregard of the lack of a reasonable basis for the delay.

It is Attorney Mullins' legal theory that the "fortuitous and unforeseen" language of School District No. 1 means that a nontraumatic mental injury is not compensable if the event causing the worker's injury could have been foreseen as something that might happen at that worker's job place. Under this theory, virtually no mental injury would be compensable because virtually all claims arise out of circumstances which were reasonably foreseeable. In School District No. 1, the court brought up the phrase "fortuitous event unexpected or unforeseen" when relating the history of how "accident" has been defined for worker's compensation purposes in Wisconsin. It did not interpret the phrase as adding a prerequisite of complete unforeseeability in order for a nontraumatic mental injury to be compensable. Under Attorney Mullins' theory, it is difficult to imagine a case in which a nontraumatic mental injury would be compensable. Certainly, such a theory would have led to a different result in what is probably the best-known case in which a nontraumatic mental injury was found compensable, Swiss Colony v. DILHR, 72 Wis. 2d 46, 240 N.W.2d 128 (1976). In Swiss Colony, a purchasing agent was found to have sustained a compensable nontraumatic mental injury due to the "nerve-racking nature" of her job duties, long work hours, and a berating attitude from her supervisor. These are all "foreseeable and fortuitous" aspects of a purchasing agent's job.

Additionally, in this case, Attorney Mullins failed to give a reasonable explanation for not responding to Attorney Ward's February 1999 request for a basis for denial of the claim. This was a denial which went on from mid-January 1999, until a first payment of temporary disability was made on October 20, 1999, without any explanation beyond that given in the answer to the application for hearing. The application was filed on February 12, 1999, and the answer filed on February 19, 1999, listed as defense: "Existence of work related injury, nature and extent of disability." This did not constitute a reasonable explanation of any legal or factual theory of denial.

Furthermore, it is clear from Attorney Mullins' testimony that neither he or the insurer gave the matter a reasonable degree of attention until they finally had their own medical evaluation from Dr. O'Donnell, which verified the fact that they had no medical defense to the claim. The insurer did not bring anyone to the hearing to explain its part in the excessive delay.

The fact that Attorney Mullins was the insurer's representative in this matter, that his legal theory was without reasonable basis in the law, that there was excessive delay in seeking an independent medical exam and reacting to its results, and that the insurance carrier failed to respond to Attorney Ward's reasonable request for an explanation or to verify that Attorney Mullins had done so, all lead to a finding that the insurance carrier was guilty of bad faith in this matter pursuant to the North American Mechanical test. However, in mitigation of the insurer's reckless disregard of a lack of a reasonable basis for delay, is the fact that it placed some degree of reliance on an attorney which it had hired to defend the claim, and that this attorney apparently articulated to it some legal theory for denial. Accordingly, the bad faith penalty will be assessed at 100 percent instead of 200 percent of the compensation at issue. This finding of mitigation has no practical effect on the amount awarded, because the compensation at issue was $20,064.50 and the maximum bad faith penalty is $15,000.00. It should be noted that the fact that there was a lesser degree of reckless disregard in this matter than otherwise might have been, also had no practical effect on the financial and emotional distress the insurer's delay in payment had on the applicant.

Finally, there was no bona fide justification or motivation for the inexcusable delay in payment, and pursuant to Wis. Stat. § 102.22(1), an additional 10 percent delay penalty will be assessed in the amount of $2,006.45. When added to the bad faith penalty of $15,000.00, the total amount due is $17,006.45. However, this is reduced by a prior overpayment of compensation in the amount of $2,815.86, for a net amount of $14,190.59. A 20 percent attorney's fee is due in the amount of $2,838.12.

Within 30 days from this date, the insurance carrier shall pay to the applicant the sum of eleven thousand three hundred fifty-two dollars and forty-seven cents ($11,352.47); and to the applicant's Attorney, Robert T. Ward, fees in the amount of two thousand eight hundred thirty-eight dollars and twelve cents ($2,838.12).

This order addresses only the issues raised under Wis. Stat. § § 102.18(1)(bp) and 102.22(1), and does not constitute a final order with respect to any other issue which may be outstanding.

Dated and mailed May 31, 2001
januslo . wmd : 185 : 8  ND §§ 7.20  7.22  7.23 7.24

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

The commission did not have any disagreement with the administrative law judge regarding the credibility of the witnesses who testified at the hearing held in this matter on October 4, 2000. The commission's reduction of the bad faith penalty amount from 200 percent to 100 percent was based on the fact that the insurance carrier placed some degree of reliance on its attorney's representation of it in the matter.

cc: 
Attorney Robert T. Ward
Attorney Thomas Gonzalez

Appealed to Circuit Court.

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