RONALD V LUDKA, Applicant

WEATHER SHIELD MANUFACTURING INC, Employer

SENTRY INSURANCE A MUTUAL COMPANY, Insurer

An administrative law judge (ALJ) for the Worker's Compensation Division (WC 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 makes the following:

a. Facts and posture.

On July 7, 2000, the applicant filed an application for hearing, alleging a low back injury while moving a window, requiring two surgeries including a lumbar fusion. He claimed medical expenses, as well as permanent disability at 15 percent on a functional basis, and loss of earning capacity.

The application was served on the employer and the insurer (collectively, the respondent) on July 20, 2000.

On August 21, 2000, the applicant's attorney wrote a letter amending his application to include a claim for vocational rehabilitation. The letter noted that no answer to the initial application had yet been filed. The applicant's attorney addressed his letter to the WC division, and sent a copy to the insurer.

On November 14, 2000, the applicant's attorney wrote to the insurer asking if it would underwrite the applicant's vocational training. This letter again noted that no answer had been filed.

On March 29, 2001, the WC division sent to all parties notice of a hearing scheduled for June 7, 2001. The hearing notice listed as issues primary compensation, medical expense and vocational rehabilitation.

On April 3, 2001, the applicant's attorney wrote to the WC division asking if an answer had ever been filed in the case. He sent a copy of the letter to the insurer.

On April 17, 2001, Chief ALJ James O'Malley responded to the applicant's attorney by letter to the insurer. Chief O'Malley noted that no answer had been filed in the case. He noted too that Wis. Adm. Code § 80.05(2) provides that the department may issue an order by default without hearing if no answer is filed within 20 days after the application for hearing is served. He instructed the insurer to file an answer as soon as possible, and stated that if no answer were filed within 20 days a default order might be issued.

On April 19, 2001, the applicant's attorney wrote directly to ALJ Andrew Roberts, before whom the hearing was scheduled. The applicant's attorney set out the chronology detailed above, including the July 2000 application, his August 2000 amendment (which the attorney represented was also formally served on the insurer), his November 2000 letter seeking vocational rehabilitation, and finally the March 2001 hearing notice. Noting that under the administrative code, the answer is required to be filed within 20 days of service of the application, and that the administrative rules only permit amendments to pleadings before the hearing notice is sent, the applicant's attorney sought a default order. Specifically, he sought a default order with respect to the initial claim for 15 percent permanent partial disability, and also the claim for vocational retraining and related expenses.

On or about April 26, 2001, the respondent submitted an answer. The answer admits a work injury, but disputes (1) the extent of permanent disability beyond the 15 percent, and (2) the amount of the average weekly wage, indicating it was $460.40, not $467.30 claimed. This appears to be the first time the respondent responded to any of the filings or correspondence set out above.

On April 27, 2001, the applicant's attorney wrote to the WC division stating he would object to any answer filed during the extended deadline set by Chief O'Malley, as being outside the period permitted under the code for filing an answer.

On May 14, 2001, ALJ Roberts issued a default order, based on the failure to file a timely answer within 20 days of service of the application in July 2000. ALJ Roberts noted also that the answer that was eventually filed was filed after the mailing of the hearing notice (which is the deadline for amendment of pleadings), and that the insurer has never explained why it could not have filed a timely answer. Under the terms of ALJ Roberts' default order, the respondent is deemed to have admitted all claims made in the application.

The respondent appeals. It raises two arguments: (a) that Chief O'Malley had given the insurer an extension of time to file an answer, and (b) that the application for hearing, as amended, "does not clearly define the nature and extent of all claims sufficient for granting an Order without a Hearing."

b. Discussion.

The applicable provisions of the administrative code provide:

"DWD 80.05 Procedure on claim.

"(2) . . . the party complaining shall file his or her application with the department, along with sufficient copies of the application for service on the adverse parties. The department shall thereupon serve the adverse parties with a copy of the application and the adverse parties shall file an answer to the application with the department within 20 days after the service and likewise serve a copy of the answer on the party making application. The department shall thereupon notify the parties of the time and place of hearing, at least 10 days prior to the hearing. If no answer is mailed by the respondent within 20 days of mailing by the department, the department may issue an order by default, without hearing, in accordance with the application, as provided by s. 102.18 (1) (a), Stats. (s.102.17, Stats.)

"DWD 80.08 Amendments. Amendment may be made to the application or answer by letter mailed to the department prior to the date the notice of hearing is mailed. Copies of the letter shall be sent directly to the other parties. The letter shall state reasons for the amendment. [Underlining supplied.]"

In addition, Wis. Stat. § 102.18(1) provides

102.18 Findings, orders and awards. (1) (a) All parties shall be afforded opportunity for full, fair, public hearing after reasonable notice, but disposition of application may be made by compromise, stipulation, agreement, or default without hearing.

Finally, the court of appeals addressed a similar issue in Verhaagh v. LIRC, 204 Wis. 2d 154 (Ct. App. 1996). In that case, the injured worker filed an application on May 26, 1993. On July 12, 1993, about 40 days later, but before the hearing notice went out, the employer filed its answer. Thereafter, the matter was scheduled for a hearing, and the injured worker sought a default order. Both the ALJ and LIRC denied the applicant's request for a default order.

The worker appealed, claiming that LIRC erred by not finding "surprise, inadvertence, or excusable neglect" -- the standard used in determining whether to extend time deadlines in a civil lawsuit -- as a basis for its denial of the default order. The court rejected this argument, stating:

"Section 102.18(1)(a), STATS., provides: 'All parties shall be afforded opportunity for a full, fair, public hearing after reasonable notice, but disposition of application may be made by a compromise, stipulation, agreement, or default without hearing.'

"The use of the term `may' in the foregoing statute clearly submits the issue of default orders to the LIRC's discretion..

"Verhaaghh contends that the surprise, mistake or excusable neglect standard enunciated in Hedtcke v. Sentry Ins. Co., 109 Wis. 2d 461, 326 N.W.2d 727 (1982), is the standard that must be applied by LIRC. Hedtcke, however, in enunciating the standard to be applied to courts was interpreting § 801.01(2), STATS., which is contained within the rules of civil procedure. In general, with exceptions not applicable here, the rules of civil procedure apply to the courts of this state but are not applicable to administrative agency proceedings. State ex rel. Thompson v. Nash, 27 Wis. 2d 183, 189-90, 133 N.W.2d 769, 773 (1965); see Layton School of Art & Design v. WERC, 82 Wis. 2d 324, 262 N.W.2d 218 (1978).

"Because of the limited application of the rules of civil procedure to the administrative agencies of this state, we reject Verhaaghh's contention that the appropriate legal standard to be applied by LIRC in determining whether to grant his motion for a default order is based upon a finding of surprise, mistake, or excusable neglect. Rather, the agency is entitled to 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. [Underlining supplied.]"

Verhaagh, at 204 Wis. 2d 160-61.

To summarize, as ALJ Roberts held in his decision in this case, the administrative code requires an answer to be filed within 20 days after the application is served, and permits amendments of answers up to the date the hearing notice is filed. The decision whether to grant a default order on a party's failure to file a timely answer is discretionary. Further, the exercise of that discretion should consider the WC division's rules of procedure, the period of time that elapsed before the answer was filed, the extent to which the applicant has been prejudiced by the insurer's tardiness in filing an answer, and any reasons advanced for the tardiness.

In this case, the commission concurs with ALJ Roberts's interpretation of the administrative code provisions governing the filing and amendment of answers in worker's compensation cases. By the time the respondent answered in this case, the WC division had already sent out the hearing notice thus ending the period in which even amendments to answers are permitted. ALJ Roberts reasonably refused to accept an answer first filed at that late date. In addition, the insurer's answer in this case was filed almost 9 months late, not 20 days late as in Verhaagh. Moreover, the insurer has never explained its failure to file a timely answer. Finally, the applicant has been adversely affected, or prejudiced, by the failure to answer: (a) the late answer prevented the applicant from preparing for the hearing, and (b) if the late answer were to be accepted, decision on the applicant's claim will be delayed by months.

The commission cannot accept the respondent's claim on appeal that the application, as amended, is not clear enough to serve as the basis for a default order. The application was made on the WC division's standard form WKC-7, and clearly states the claim for permanent partial disability on a functional basis and for loss of earning capacity. The amendment, though brief, was equally clear in making a claim for vocational retraining benefits under Wis. Stat. § § 102.43(5) and 102.61. Further, the administrative code specifically provides for amendments to be made by letter to the other parties, the practice followed by the applicant here. Wis. Admin. Code § DWD 80.08. The department, clearly, recognized the letter as amendment to the application and treated it as such.

Of course, even if the respondent did not understand the clear wording of the letter serving as an amendment to the answer, that would not explain its failure to answer the original hearing application. That application expressly included a claim not only for permanent partial disability on a functional basis at fifteen percent, but also for loss of earning capacity. Yet that application, too, went unanswered. Finally, if the respondent felt the application and amendment to the application did not state a claim, it should still have answered and raised that objection.

The commission realizes that Chief O'Malley's letter seems to extend the deadline for filing an answer. However, the respondent may not claim any sort of detrimental reliance on Chief O'Malley's letter. It is not as if the respondent had asked Chief O'Malley before the end of the 20-day period for filing an answer for an extension of the time to answer. In fact, the respondent itself never asked for an extension of time, and by the date of Chief O'Malley's letter the answer was already many months late. In short, the respondent cannot claim prejudice based on Chief O'Malley's letter.

The commission also realizes that the purpose of the Chief O'Malley's letter may have been to provide the respondent with notice that a default order might be issued. The commission has previously held that such notice is required before the WC division may issue a default order in cases where an insurer fails to respond to inquiries from the WC division when no formal hearing application has been filed. Enus Brown v. Select Staff, WC claim no. 89-043390 (LIRC, July 2, 1990). The commission has considered the lack of warning prior to default on a claim for the penalty under Wis. Stat. § 102.35(3) where an employer, who may normally rely on its insurer to answer, was required to file an answer. Richard L. Luedke v. Lakewood Filters, Inc., WC claim no. 89-040356 (LIRC, March 27, 1990).

However, the department's normal practice is to include a blank "Admission to Service and Answer to Application" on form WKC-19 when it serves a hearing application upon a party, as it served on the insurer in this case in July 2000. The form specifically instructs the party that it is required to answer within 20 days. In addition, the insurer was notified by the applicant's attorney on two occasions that no answer had been filed. Finally, the party who failed to file an answer in this case is a worker's compensation insurer, who must be held to be aware of the law and WC division procedures, including the possibility of default for failure to answer.

c. Decision.

In sum, ALJ Roberts properly refused to consider the insurer's untimely answer in this case. The respondent is deemed to have admitted all claims raised in the application as amended, specifically, the claims for permanent partial disability on a functional basis and for vocational retraining benefits and related expenses. However, the applicant's attorney did not seek a default order with respect to any potential claim for loss of earning capacity, nor would a default order on that issue be appropriate given the amendment of the application to seek vocational rehabilitation benefits.

Accordingly, a default order is appropriate to order the respondent to pay the claimed permanent partial disability at fifteen percent compared to disability to the body as a whole on a functional basis and to pay all rehabilitation benefits and related expenses pursuant to the statutory and administrative code procedures.

Jurisdiction is reserved to resolve any dispute as to what payments have been made and what payments the respondent shall be liable for in the future, as well as to address all issues not otherwise resolved with this interlocutory order.

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

The findings and the default and interlocutory order of the administrative law judge are modified to conform to the foregoing, and as modified, are affirmed.

The respondent shall pay all of the following:

1. To the applicant, Ron V. Ludka, the claimed permanent partial disability on a functional basis at fifteen percent compared to permanent total disability and the claimed vocational rehabilitation and benefits and appropriate expenses related to vocational rehabilitation, less attorney's fees and pursuant to statutory and administrative code procedures.

2. To Attorney Steven Jackson, 20 percent attorney fees on all permanent disability compensation that was not conceded prior to the filing of the application for hearing and 20 percent of all vocational rehabilitation benefits, as attorney fees.

Jurisdiction is reserved to resolve any dispute as to what payments have been made and what payments the respondent shall be liable for in the future, as well as to address all issues not otherwise resolved with this interlocutory order.

Dated and mailed September 28, 2001
ludkaro . wrr : 101 : 3  ND § 8.8

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

cc: 
Attorney Steve M. Jackson
Attorney Bradley C. Lundeen

[ Search Decisions ] - [ WC Legal Resources ] - [ LIRC Home Page ]

uploaded 2001/10/09