GWENDOLYN BALLARD, Applicant

TOWER AUTOMOTIVE, Employer

AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY, Insurer

An administrative law judge (ALJ) for the Worker's Compensation Division of the Department of Workforce Development (the department) issued a default order 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 makes the following:

The applicant was injured on August 14, 2000. Ordinarily, an insurer must begin to pay compensation within two weeks of the date of injury, or provide a written report explaining its failure to make the payment. Wis. Admin. Code § DWD 80.02(2)(h). The department will investigate delays in payment of compensation, and if no reasonable excuse is provided, the department will insist on payment of the 10 percent penalty. See John D. Neal & Joseph Danas, Jr., Worker's Compensation Handbook, § 7.24 (4th ed. 1997).

Believing the insurer in this case made its first payment more than 14 days after the injury, the department sent the insurer a demand letter dated September 21, 2000. (1) Essentially, the demand letter noted the delay in first payment by the insurer, and requested the insurer to explain the reason for the delay. The demand letter went on to state that if no response was received within 30 days, a default order- reducible to an enforceable judgment in court-would be issued. Other things being equal, the insurer's failure to respond to it would ordinarily lead to the issuance of a valid, enforceable default order.

The insurer did not respond to the department's demand letter. On April 5, 2001, the ALJ issued an order finding that the applicant was injured on August 14, 2000, that the first payment of compensation was not made until September 19, 2000, that the insurer failed to provide an explanation for that delay, and that therefore the insurer was liable for 10 percent increased compensation for inexcusable delay under Wis. Stat. § 102.22. His order therefore assessed a 10 percent penalty of $274.50.

Thereafter, as noted above, the insurer filed a timely petition for commission review. Attached to its appeal is what ordinarily would be a complete defense to a claim of late payment: a photocopy of a check dated August 25, 2000, drawn on the insurer, and payable to the applicant for a loss on August 14, 2000. The insurer also provides a copy of the reverse of the check, showing an endorsement in the applicant's name. The reverse of the check also includes marks made during the process of transfer between banks for collection which indicate the check was initially transferred by the applicant to a bank for "deposit only" on August 29, 2000, or fifteen days after the work injury.

One might argue that the commission should not consider the insurer's defense to the claim of late payment in determining whether the ALJ properly issued a default order. The argument would run that: there must be an end to litigation; the insurer had its chance to respond to the claim that it was late by answering the demand letter; the insurer missed that chance; and now before the commission the focus should be on why insurer did not respond to the demand letter, not what the insurer could have said if it had responded.

However, the commission perceives a distinction in this case between the defense that an applicant's claim is somehow not valid and the defense the insurer has actually paid the claim in a timely manner. One of the primary justifications for the issuance of a default order is the prejudice against the injured worker by an employer's or insurer's failure to pay or clearly dispute the claim. (2) There is no such prejudice if the claim has already been timely paid.

In sum, the insurer now not only claims it timely paid the disputed claim, but has provided a copy of a canceled check showing timely payment. Only one demand letter was sent to the insurer and, if the insurer's evidence of prompt payment is accepted, there would be no prejudice to the applicant in the insurer's failure to respond to the demand letter. Under the circumstances, the commission concludes that the issue of late payment in this case should not be decided by default. The commission shall therefore set aside the default order.

NOW, THEREFORE, the Labor and Industry Review Commission makes this

The findings and order of the administrative law judge are set aside. The case is remanded to the department for further appropriate action.

Dated and mailed August 10, 2001
ballard . wrr : 101 : 3 ND § 7.24

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

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(1)( Back ) Brown v. Select Staff, WC Claim No. 89-043390 (LIRC July 2, 1990).

(2)( Back ) See: Verhaagh v. LIRC, 204 Wis. 2d 154, 161 (1996), where the court of appeals stated that in determining whether to grant a default order on an insurer's failure to answer a letter, the commission may exercise its discretion based upon its interpretation of its own rules of procedure, the period of time elapsing before the answer was filed, the extent to which the applicant has been prejudiced by the employer's tardiness and the reasons, if any, advanced for the tardiness.

uploaded 2001/08/13