HENRY E PODOLAK, Applicant

UTILITY ENTERPRISES LTD, Employer

NATIONAL SURETY CORP, Insure

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, except as modified herein:

1. After the 10th paragraph of the ALJ's Findings of Fact (the fourth paragraph on page 4 of the ALJ's decision), insert:

"Although the respondent is obligated to pay permanent partial disability as set out herein, its liability for that payment prior to this order may be regarded as fairly debatable, particularly in light of ALJ Lawrence's orders. The respondent's refusal to pay the permanent partial disability until finally ordered to do so cannot be regarded as inexcusable or in bad faith. The applicant's claims under Wis Stat. § § 102.18(1)(bp) and 102.22(1)--based on the respondent's failure to pay at least the statutory minimum in permanent partial disability after ALJ Lawrence resolved the issue of causation in his first decision--are dismissed."

2. After the first paragraph of the ALJ's Interlocutory Order, insert:

"The applicant's claims under Wis. Stat. § § 102.18(1)(bp) and 102.22 are dismissed."

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

Dated and mailed December 18, 2001
podolak . wsd : 101 : 8  ND § 8.19 § 7.20 

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

1. Posture.

At the initial hearing held before ALJ Lawrence in October 1998, ALJ Lawrence identified the issues as whether the applicant was performing services growing out of and incidental to his employment with the employer at the time of his injury, whether his injury arose out of such employment, the nature and extent of disability from his injury, and the insurer's liability for medical expenses. Further fleshing out the issues, ALJ Lawrence noted also that the applicant specifically sought: temporary total disability from November 28, 1988 to May 28, 1989; permanent partial disability at 35 percent on a functional basis (1), and permanent total disability as of July 10, 1997.

ALJ Lawrence's first order in this matter (dated November 30, 1998), simply awarded temporary total disability and permanent total disability; his order did not address the applicant's intervening permanent partial disability claim at all. However, ALJ Lawrence's order did include a broadly-worded reservation of jurisdiction. The employer and its insurer (collectively, the respondent) appealed the first order, arguing the disability was not caused by work, but this commission affirmed ALJ Lawrence's first order.

The applicant then filed a second application, again claiming permanent partial disability at 35 percent, and also seeking penalties for bad faith and inexcusable delay in payment of the permanent partial disability. ALJ Lawrence, after holding a second hearing where no testimony was taken, dismissed the application entirely in his second order in this matter (dated November 8, 1999). On appeal by the applicant, this commission, however, set aside ALJ Lawrence's dismissal order, and remanded the case to ALJ Lawrence to make a finding on the permanent partial disability issue.

ALJ Lawrence subsequently retired from state service. On remand and without further hearing, Chief ALJ O'Malley issued a decision (dated May 30, 2001) awarding a permanent partial disability at 35 percent accruing as of the May 28, 1989 healing plateau. The respondent petitioned the commission for review of ALJ O'Malley's order; that appeal is now before the commission.

On appeal, the respondent asserts:

1. It was denied due process because ALJ O'Malley issued an order without a hearing and without conferring with ALJ Lawrence.

2. The department should have allowed the respondent another independent medical examination.

3. Dr. Zondag's opinion was not more credible than Dr. Lemon's.

4. The claim for permanent partial disability at 35 percent on a functional basis is barred by res judicata.

5. In any event, an award for permanent partial disability may not be made, given the finding of permanent total disability.

2. Discussion.

a. Due process and fair play.

Due process was not denied because Chief ALJ O'Malley decided the applicant's claim for permanent partial disability on a functional basis without further hearing. The issue had been noticed (both in the hearing application and a notice of hearing) prior to the first hearing before ALJ Lawrence in October 1998. ALJ Lawrence stated on the record that the functional permanent partial disability claim was at issue.

At the hearing, both sides had a chance to question the applicant, and his wife, about the applicant's physical condition following the surgery in 1988. More importantly, both sides had a chance to put in expert medical opinion on the extent of disability. The applicant put in Dr. Zondag's report which rated permanent partial disability on a functional basis at 35 percent. Under Wis. Stat. § 102.17(1)(d), by offering such an opinion, Dr. Zondag made himself available at the hearing for cross-examination by the respondent.

However, the respondent did not examine Dr. Zondag. Nor did its independent medical examiner, Dr. Lemon, offer a contrary rating. Rather, Dr. Lemon only said the applicant had no permanent disability caused by work exposure. Dr. Lemon quite evidently was only disputing the cause, not the extent, of the disability. Dr. Lemon noted the surgery had occurred (which itself would occasion functional permanent partial disability at least at the code-minimum under Wis. Admin. Code § DWD 80.32(11), and that the applicant had unusually severe symptoms. Moreover, Dr. Lemon specifically reviewed Dr. Zondag's July 10, 1997 treatment note in which Dr. Zondag rated functional permanent partial disability at 35 percent, but did not dispute it.

In short, the respondent had ample notice, and ample chance, to litigate functional permanent partial disability at the first hearing before ALJ Lawrence when the applicant put on his proof. The respondent correctly observes that due process and fair play require that it have the right to reasonably know the claims, the right to meet the claims with competent evidence, and the right to be heard by counsel on the probative force of the evidence on the applicable law. Wright v. LIRC, 210 Wis. 2d 289, 296 (Ct. App. 1997). However, these requirements were met at the first hearing.

Chief ALJ O'Malley evidently did not consult with ALJ Lawrence about witness credibility before issuing his decision. To remedy any due process problem arising from that omission, the commission conferred with ALJ Lawrence in its consideration of this appeal. In spite of the passage of time since the hearing, ALJ Lawrence recalled the case, and the applicant, quite well. He informed the commission that he found credible the testimony of the applicant and his wife regarding the applicant's condition immediately following the surgery in 1988. Indeed, the ALJ informed the commission it was his impression that the applicant was quite disabled in 1989 upon reaching a plateau from the 1988 surgery. In light of ALJ Lawrence's credibility impression, and the record at the first hearing he held, the commission finds that Chief ALJ O'Malley properly concluded the applicant had reached a healing plateau in 1989 with permanent partial disability on a functional basis at 35 percent compared to permanent total disability.

b. Denial of a second IME.

For the reasons discussed above, specifically that the respondent had ample opportunity to present evidence on functional permanent partial disability at the first hearing, the Worker's Compensation Division reasonably denied the respondent the chance to get another independent medical examiner. The commission is not certain why Dr. Lemon did not rate the applicant's functional permanent partial disability following the November 1988 surgery, regardless of whether work exposure caused the need for the surgery, when he wrote his report in September 1997. The omission might have been strategic, or perhaps the doctor simply agreed with Dr. Zondag's permanent disability rating though not Dr. Zondag's opinion about what caused the permanent disability. In any event, Dr. Lemon simply opined that the applicant had no permanent partial disability caused by the work injury. Certainly, as Dr. Lemon examined the applicant and had access to his medical records, there is no reason he could not have rated functional permanent partial disability from the 1988 surgery when he wrote his report in September 1997.

c. Zondag's credibility on functional PPD.

The applicant's brief offers perhaps the best rejoinder to the respondent's assertion that Dr. Zondag's 35 percent rating was not credible: "Credible compared to what?" Dr. Lemon offers no competing rating.

True, the record might suggest that the applicant's condition was worse in 1997 when Dr. Zondag examined him than in 1989 after the applicant plateaued from the November 1988 surgery. The applicant apparently made such a statement to the vocational expert, and he told Dr. Lemon his symptoms progressed. But this does not mean that his physical condition after reaching a plateau from the surgery was good. Certainly, it would be hard to equate the applicant's condition in 1989 with the good result that a code-minimum rating contemplates. Indeed, IME Lemon's report, as well as the applicant's testimony, indicates the November 1988 surgery really did very little to improve the applicant's condition.

In light of ALJ Lawrence's credibility impressions about the testimony of the applicant and his wife about the applicant's condition in 1989 and the lack of the competing permanency rating, the commission sees little reason to reduce the permanency rating given by Dr. Zondag.

d. Res judicata.

The respondent's next argument on appeal of Chief ALJ O'Malley's order is that the award for permanent partial disability on a functional basis is barred by the doctrine of res judicata. The respondent cites various cases for the propositions that when an issue is resolved in final order, it cannot be relitigated; that when a final order is issued, it resolves all claims; and that when a finding is made concerning an ultimate issue, the issue may not be relitigated despite a broadly-worded reservation of jurisdiction that does not specifically refer to the issue. (2)

The commission agrees with each of these propositions, so far as they go. However, in this case ALJ Lawrence not only issued a broadly-worded reservation of jurisdiction in his first order, he also did not purport to decide the functional permanent partial disability claim in his first order in any fashion and certainly did not specifically say it was denied. While ALJ Lawrence did address the issue in his second order, the commission on review set aside his findings on the issue and directed the remand hearing undertaken by ALJ O'Malley.

A similar situation was addressed in American Motors Corp. v. Industrial Commission, 26 Wis. 2d 165 (1965). That involved the question of whether a first administrative decision on causation and temporary disability, which reserved jurisdiction only on permanent partial disability, permitted subsequent administrative decisions on temporary disability. The court held that it did, explaining that the parties intended to retain jurisdiction on both temporary disability and permanent disability after the first hearing, and that the interlocutory order on permanent disability only was the result of an inapt or incomplete phraseology used by a busy and harassed examiner. Id., at 26 Wis. 2d 172-73.

More to the point, the court also pointed out that the examiner in American Motor Corp. had never made an express finding that a healing plateau had been reached. Since sec. 102.18 (1), Stats., requires that the rights of a party be spelled out, the court reasoned, an express severing of the claimant's right to temporary disability was necessary; it could not be done by silence. Id., at 26 Wis. 2d 172.

Obviously, then, it may be persuasively argued that the applicant's functional permanent partial disability claim here could not have been finally resolved by ALJ Lawrence's silence on that claim in his first interlocutory order.

e. Awarding more than total disability?

As the applicant observes in his brief, the commission has previously addressed the question of whether the permanent partial disability claim is barred under the theory that a worker cannot receive more compensation than that due for permanent total disability. The respondent does point out, accurately, that the case relied upon by the commission in its remand order, Penta Woods Product v. DILHR, Case No. 80-CV-669 (Wis. Cir. Ct. Burnett County, March 2, 1981), involved a holding that previously-paid permanent partial disability benefits did not have to be repaid when a worker was subsequently found permanently and totally disabled. Penta Woods did not involve a case where, as here, the injured worker sought compensation for permanent partial disability and permanent total disability in the same order.

However, the commission does not believe the reasoning applied in the Penta Woods case is limited to previously-paid compensation. First, of course, it is quite possible to recover an erroneous prior payment of benefits by offsetting it against future accrued, or even accruing, benefits. The commission frequently applies offsets to permanent disability awards to permit the recovery of overpaid temporary total disability, and does so with the imprimatur of the supreme court. McCune v. Industrial Commission, 260 Wis. 499 (1952). Thus, if it is improper for a worker to get both permanent partial disability and permanent total disability in different weeks for the same injury, even previously-paid permanent partial disability benefits could be deducted from accrued or accruing permanent total disability benefits.

Beyond that, of course, LIRC has expressly stated that:

"While the respondent suggests that a worker may not be permanently partially disabled and later permanently totally disabled from the same injury, the commission disagrees. Indeed, the possibility that an injured worker may sustain additional permanent disability after reaching a healing plateau is one reason why orders resolving workers compensation disputes are left interlocutory. Larsen Co. v. Industrial Commission, 9 Wis. 2d 386, 392 (1960)."

Michael Molitor v. Pepsi Cola Co., WC case Nos. 91072459 and 93021071 (LIRC, August 28, 1997).

In another case where causation and extent of disability was disputed, the commission awarded both permanent partial disability and permanent total disability (rather than simply declining to apply an offset for previously paid and conceded permanent partial disability against newly-awarded permanent total disability.) Bernice Jentsch v. Cramer Coil Transformer, WC Claim No. 1990-000661 (March 20, 2001.)

Moreover, the statute that ALJ Lawrence cited as support for his conclusion that no more than 100 percent may be awarded, Wis. Stat. 102.44(4), applies to cases where "permanent disability is covered by ss. 102.52, 102.53, and 102.55;" in other words, cases of scheduled permanent partial disability. The supreme court recently recognized that Wis. Stat. § 102.44(4) does not apply to permanent total disability. Mireles v. LIRC, 2000 WI 96, ¶¶ 59-66. Rather, Wis. Stat. 102.44(4) prevents a permanently partially disabled person from receiving an award determined on percentage of more than 100 percent to the whole body. It does not limit the weeks a person may receive permanent total disability or state that permanent total disability and permanent partial disability cannot both be awarded for different time periods for the same injury.

Indeed, attempting to apply a "no-award-over-100-percent" rule to cases involving permanent partial disability and permanent total disability benefits from the same injury ignores the fundamental scheme of benefit payments under Wis. Stat. Ch. 102. Permanent total disability benefits are not paid in a lump sum, but rather are weekly payments, often for life, at a specific weekly rate. How much permanent total disability compensation an injured worker receives depends upon when he or she becomes permanently and totally disabled, and how many weeks the person lives.

Permanent partial disability is paid at a lower rate and, as is clear from the commission's decision in Molitor, only may be paid in weeks when the worker is not getting temporary disability or permanent total disability. Since a worker's weekly indemnity payment never exceeds the permanent total disability rate in any given week, he or she never gets "more than the maximum" even if permanent partial disability is paid in earlier weeks and permanent total disability is paid in later weeks for the same injury.

The point may be simply illustrated: Worker A and B are both injured on January 1, 1989, and both reach a healing plateau on the same day, June 1, 1989. Worker A is immediately permanently and totally disabled and begins to draw the maximum permanent total disability benefit of $348 per week in June 1989. Worker B plateaus with a 35 percent permanent partial disability, which gives him $121 per week for 350 weeks ending sometime in 1996. In 1997, Worker B becomes permanently and totally disabled from the progression of his work injury, and starts receiving compensation for permanent total disability at $348 per week. Under these facts, worker A gets more, in fact much more, and worker B's award may not reasonably be considered "more than the maximum" or "over 100 percent of PTD" simply because he collected permanent partial disability and permanent total disability in different weeks.

The rule followed by the commission (and applied by ALJ O'Malley) -- that the maximum weekly benefit payment rate for permanent total disability may not be exceeded, but that there is no bar on receiving first permanent partial disability then later permanent total disability as long as the weeks of payment do not overlap -- follows the majority rule on the related question of maximum limits in successive or concurrent injuries:

"The three kinds of maximum limit that may give rise to question in case of successive or concurrent injuries are maximum dollar limits on weekly benefits, maximum number of weeks allowable for certain injuries, and overall maximum dollar limits on benefits.

"There is both a theoretical and a practical reason for the holding that awards for successive or concurrent permanent injuries may not take the form of weekly payment than the weekly maxima for total disability. The theoretical reason is that, at a given moment in time, a person can be no more than totally disabled. The practical reason is that if the worker is allowed to draw weekly benefits simultaneously from a permanent total and permanent partial award, it may be more profitable for him or her to be disabled than to be well."

5 Larson's Workers' Compensation Law § 92.01[1] (MB, 2001).

"As to [maximum-number-of-weeks limits], there is no cause for concern about benefits in particular week exceeding wages; the policy involved in the preceding subsection does not come into play. The only question is whether, when a claimant receives, concurrently or successively, injuries entitling him or her to separately designated periods of benefits, the maximum allowances for these injuries can, so to speak, be laid end-to-end. The great majority of decisions have held that they can."

Larson, supra, at 92.02.

"A familiar combination is permanent partial followed by permanent total. The usual holding is that the permanent partial award need not be deducted from the subsequent permanent total award."

Larson, supra, at 92.02[3].

f. Bad faith/inexcusable delay.

Finally, the commission observes that it technically set aside ALJ Lawrence's dismissal of the penalty claims when it set aside his November 1999 order in March 2000. For the sake of completeness, the commission turns finally to the issue of the penalty claims brought by the applicant prior to the second hearing.

Wisconsin Statute § 102.22(1) provides for a 10 percent penalty for inexcusable delay in making payments. Wis. Stat. § 102.18(1)(bp) provides for a penalty of up to 200 percent for a malicious or bad faith suspension, termination, or failure to make payments. Wis. Admin. Code § DWD 80.70(2) defines bad faith as a denial without credible evidence that the claim is "fairly debatable."

The court of appeals has previously discussed the interplay between the "inexcusable delay" penalty under Wis. Stat. § 102.22(1), and the "bad faith" penalty under Wis. Stat. § 102.18(1)(bp):

"Chapter 102 contemplates three types of conduct stemming from a delay in payments: (1) excusable delay; (2) inexcusable delay, though not in bad faith; and (3) bad faith delay.

"Section 102.22(1), Stats., provides that '[w]here the employer or his or her insurer is guilty of inexcusable delay in making payments, the payments as to which the delay is found shall be increased by 10 percent.' (Emphasis added.) The fact that only 'inexcusable' delay is subject to the 10 percent penalty indicates that the legislature contemplated that some delay could be excusable. See, Coleman v. American Universal Ins. Co., 86 Wis. 2d 615, 625-26, 273 N.W.2d 220, 224 (1979).

"The potential 200 percent penalty of sec. 102.18(1)(bp), Stats., is reserved only for cases where the employer or insurer acted in `bad faith.' Thus, the legislature contemplated that there could be a delay in payment that, while inexcusable, did not rise to the level of `bad faith.' We conclude that a finding of the `knowledge' element of the Anderson test is a prerequisite to imposition of `bad faith' penalties under sec. 102.18(1)(bp), Stats.
...
"LIRC should determine first if there was a reasonable basis for delay. See Anderson, 85 Wis. 2d at 691, 271 N.W.2d at 376. If LIRC concludes there was not a reasonable basis for the delay, it should next determine whether the employer had knowledge of the lack of a reasonable basis for delaying payments or if there was a reckless disregard of the lack of a reasonable basis. See Id. If LIRC determines from the record, after finding no reasonable basis for the delay, that the `knowledge' element is satisfied, it may then conclude that the employer's delay of payments was in bad faith."

North American Mechanical, Inc., v. LIRC, 157 Wis. 2d 801, 808-10 (Ct. App. 1990).

In this case, the commission amended ALJ O'Malley's order to dismiss the penalty claims. The commission concluded that no penalties may be assessed under Wis. Stat. § § 102.18(1)(bp) and 102.22(2) based on the respondent's failure to pay the percent functional permanent partial disability, at least to this point. Until the first commission order in April 1999 causation was at issue, so liability for any payment would clearly have been at issue. Since then, the legal issue of paying both functional permanent partial disability and the permanent total disability has been in dispute. Indeed, the respondent got a favorable decision on the issue from ALJ Lawrence in November 1999. In short, the commission concluded the matter was still fairly debatable--in other words there was a reasonable basis for the insurer's delay in payment--even as to the asserted 20 percent code-minimum permanent partial disability rating following the November 1988 surgery, at least until the deadline runs for judicial appeal of this decision.

cc: 
Attorney Michael D. Stotler
Attorney Steve M. Jackson

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(1)( Back ) As opposed to a "vocational" basis for loss of earning capacity due to the restrictions on employment resulting from the work injury, represented in this case by the applicant's successful claim for permanent total disability.

(2)( Back ) Among the cases cited is Borum v. Industrial Commission, 13 Wis. 2d 570, 573 (1961), where the court stated that a worker's right to recover worker's compensation is based on Chapter 102, and that he has only one cause of action for it. When the commission decides a worker's compensation case, it is passing on all compensation payable for the injuries caused by the accident. The Borum court reasoned that the commission therefore cannot, after a final order and expiration of appeal periods, resume consideration of a case upon application for compensation of additional injuries allegedly sustained in the same accident. See also, Kwaterski v. LIRC, 158 Wis. 2d 112 (Ct. App., 1990).