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

JOSE LAZCANO, Applicant

NAVISTAR INTL TRANS CORP, Employer

CONTINENTAL CASUALTY, Insurer

WORKER'S COMPENSATION DECISION
Claim No. 1998-020927


Administrative Law Judge Mary Lynn Endter of the Worker's Compensation Division (WC Division) of the Department of Workforce Development issued a default order in this matter. The employer and the insurer (collectively, the respondent) filed a timely petition for review.

Because the ALJ resolved this matter by default, there was no hearing in this case. However, the commission has carefully considered the documents in the files transmitted to for review, as well as the representations of the respondent in its petition to the commission. Based on its review, the commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Facts and applicable law.

On March 21, 2001, the WC Division served the applicant's application for hearing on the respondent. The respondent did not answer within 20 days as required under Wis. Admin. Code § DWD 80.05(2).

On April 17, 2001, the applicant's attorney sent a letter to the WC Division, with a copy to the insurer, asking for a default order. The attorney's letter indicates a courtesy copy was sent to the insurer. The insurer does not deny receiving this letter, but it nonetheless took no action.

On April 30, 2001, ALJ Endter wrote to the insurer, telling them to answer within 20 days, or a default order might be issued. However, the insurer claims it did not receive ALJ Endter's letter, and took no action.

On June 1, 2001, the applicant's attorney again wrote to the WC Division, seeking a default order. Again, the insurer was copied. Again, however, the insurer claims it did not receive the letter. It still took no action.

On June 12, 2001, ALJ Endter sent another letter to the insurer, this time demanding an answer within seven days or a default order would issue. However, the insurer asserts it did not get this letter either. It still took no action.

On July 11, 2001, the applicant's attorney again wrote to the WC Division, with a copy to the insurer, and asked for a default order.

On that same date, July 11, 2001, the respondent drafted an answer and submitted it to the WC Division. The answer lists the insurer's address as the same Downer's Grove, Illinois, post office box indicated as the insurer's address on the hearing application and on both letters sent to the insurer by ALJ Endter. The WC Division received the answer on July 12, 2001.

On July 16, 2001, ALJ Endter, unaware that an answer had been filed four days earlier, issued a default order.

On July 19, 2001, in a three-way phone call with ALJ Endter and the applicant's attorney, the respondent's attorney asked that the default order be vacated. As grounds, the respondent's attorney pointed out that he had filed an answer on July 12, and asserted that the insurer had not received the letters from ALJ Endter.

ALJ Endter declined to set aside her default order. In explaining why she was not vacating her order, ALJ Endter noted that neither of the two letters she had sent had been returned by the post office as undelivered.

The Wisconsin Administrative Code provides:

"DWD 80.05 Procedure on claim.

"(2) In . . . cases under sub. (1), 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.)

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."

Further, the court of appeals has considered the question of default orders on late answers in worker's compensation cases in Verhaagh v. LIRC, 204 Wis. 2d 154 (Ct. App. 1996). In that case, Mr. Verhaagh, an injured worker, filed an application on May 26, 1993. On July 12, 1993, about four weeks after a 20-day filing deadline, 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 this commission denied the default order. Mr. Verhaagh appealed to court, claiming that this commission 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..

"Verhaagh 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 Verhaagh'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.

Finally, the commission generally finds the bare assertion of a repeated failure of mail delivery, without explanation, to be incredible. See Podgorski v. ABB Paint Finishing, WC Claim No. 95035783 (LIRC, August 29, 1996) aff'd sub nom. ABB Paint Finishing v. LIRC, Case No. 97-1922 (Wis. Ct. App., January 6, 1998); and Wayne Kutay v. James Kramer, WC Claim No. 97018527 (June 30, 1998), aff'd sub nom Kramer v. LIRC, Case No. 99-908 (Wis. Ct. App., November 9, 1999). The commission's policy ties in with the established presumption that mailing a letter will result in delivery and receipt. State ex rel. Flores v. State, 183 Wis. 2d 587, 612 (1994).

2. Appropriateness of default order.

Applying the Verhaagh standard, the commission affirms ALJ Endter's default order in this case.

First, the delay between when the answer should have been filed (April 10, 2000), and when it was filed (July 12, 2001) is 13 weeks. This delay is considerably longer than the four weeks involved in Verhaagh.

Second, ALJ Endter sent two letters to the insurer warning about the imminent default order. The applicant's attorney copied the insurer with his letters seeking default orders as well. While the insurer asserts it did not receive the two letters from ALJ Endter and one of the letters from the applicant's attorney, the commission cannot credit that claim. State ex rel. Flowers, supra. Further, the insurer does not deny receiving the April 17, 2001, letter from the applicant's counsel seeking a default order based on the insurer's failure to answer. ALJ Endter's decision to issue a default order under these facts followed the most reasonable course under the WC Division rules.

The third factor under Verhaagh is prejudice. The primary prejudice against the applicant in this case is the delay in learning the nature of the respondent's defense. Given the other factors present here, this is sufficient prejudice to support a default order.

The fourth and final criterium in Verhaagh is the reason for the late answer. In this case, the insurer has offered no explanation for its failure to answer. The insurer explains its failure to respond to ALJ Endter's letters -- it allegedly did not get them -- but it has not explained why it failed to answer in the first place.

In short, based on the respondent's failure to file a timely answer, disposition of the application by default order is appropriate under Wis. Stat. § 102.18(1).

3. Findings on default.

Based on information in the department's file, the applicant, Mr. Jose Lazcano, worked for the respondent, Navistar International. Mr. Lazcano suffered a burn injury at work on March 23, 1998. For such injury, the insurer paid Mr. Lazcano benefits for temporary disability for various periods between the date of his injury and December 7, 1999.

Dr. Charles Shoham rated the extent of Mr. Lazcano's permanent disability as three percent of the body as a whole. Mr. Lazcano's application requested a hearing for the three percent disability. In addition, Mr. Lazcano had an unpaid medical expense of $525.00, payable to Dr. Shoham. Based on the default of the respondent, no defense to these claims was raised.

The commission therefore finds that the applicant sustained an accident causing a burn injury on March 23, 1998, while performing services for the respondent growing out of and incidental to that employment.

As a result of this injury, the applicant sustained a permanent partial disability of three percent of the body as a whole payable at a weekly rate of $179.00 for 30 weeks for a total of $5,370.00. This entire amount was accrued and payable.

As another result of this injury, the applicant incurred the reasonable and necessary medical expense of $525.00 for treatment by Dr. Charles Shoham to cure and relieve the effects of the work injury.

The fee of the applicant's attorney is set at $1,074.00 pursuant to a request under section 102.26, Stats. The attorney had costs of $30.90. The disability compensation remaining to be paid to the applicant equals $4,265.10.

As the applicant has other claims, jurisdiction will be reserved without limitation.

NOW THEREFORE, the Labor and Industry Review Commission makes this

INTERLOCUTORY ORDER

Within 30 days from the date of this order, the employer and its insurer shall pay all of the following:

1. To applicant, Jose Lazcano, four thousand two hundred sixty-five dollars and ten cents ($4,265.10) in disability compensation.

2. To the applicant's attorney, Brian Henderson, the sum of one thousand seventy-four dollars ($1,074.00) as attorney fees, and thirty dollars and ninety cents ($30.90) as reimbursement for costs.

3. To Dr. Charles Shoham, the sum of five hundred twenty-five dollars ($525.00) in medical treatment expense.

4. Jurisdiction is reserved for such further findings, orders or awards as may be necessary.

Dated and mailed November 19, 2001
lascano . wrr : 101 : 8  ND § 8.8  § 8.9 

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner



MEMORANDUM OPINION

In its brief, the respondent cites two prior decisions of the commission for the proposition that the WC Division must formally warn a respondent that a default order is imminent before issuing a default order. See, Kraus v. Repco and American Mutual of Boston, WC Claim No. 1988-067182 (LIRC, July 2, 1990) and Richard L. Luedke v. Lakewood Filters, Inc., WC Claim No. 89-040356(LIRC, March 27, 1990).

In this case, the commission is satisfied that the WC Division expressly provided two such warnings, and cannot credit the insurer's contentions it received neither of the two warning letters sent by ALJ Endter. Again, the letters were properly addressed, they were not returned by the U.S. Postal Service, and the insurer offers no explanation about why these two properly-addressed letters were not delivered. Further, the insurer's credibility on this point is undercut by its additional claim it did not receive yet another letter on the same subject from a third source: specifically, Attorney Henderson's June 1, 2001, letter seeking a default order.

Beyond that, Kraus was a case where no application for hearing had been filed; rather, the department was pursuing the claim under its general investigatory powers. The commission has consistently held that the WC Division must provide advance notice of default in cases where no formal hearing application has been filed. See, Enus Brown v. Select Staff, WC Claim No. 89-043390 (LIRC, July 2, 1990). Luedke similarly involved the distinguishable situation where the WC Division attempted to impose an unreasonable refusal to rehire penalty against an employer by default. In such cases, an employer, who ordinarily relies on its insurer to defend worker's compensation claims against it, must file its own answer. This case, by contrast, involves the failure to answer a hearing application seeking disability compensation by an insurer familiar with worker's compensation procedure.

cc: 
Attorney Brian J. Henderson
Attorney Matthew C. Siderits


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