TIMOTHY DERSE, Applicant

ERNST & YOUNG US LLP, Employer

AMERICAN MUTUAL OF BOSTON, Insurer
c/o Wisconsin Insurance Security Fund

On August 16, 2001 an administrative law judge (ALJ) for the Worker's Compensation Division of the Department of Workforce Development (the department) held a hearing in this matter. Neither the insurer, which has apparently been liquidated, nor the employer, appeared at the hearing.

On September 4, 2001, the ALJ issued a decision in favor of the applicant. Thereafter, the employer filed a petition for review. The commission has considered the petition, the positions of the parties, and the evidence submitted to the ALJ. Based on its review, the commission makes this

The September 4, 2001, decision of the Administrative Law Judge is set aside. The case is remanded to Worker's Compensation Division for further appropriate proceedings, including a hearing and decision on the merits.

Dated and mailed March 6, 2002
derseti . wpr : 101 : 8   ND § 8.18  § 8.19

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

/s/ Laurie R. McCallum, Commissioner

1. Facts and posture.

This case arises on the employer's request for a new hearing, following its failure to appear at the initial hearing on the applicant's claim. Based on documents in the department's record and correspondence from the department submitted with employer's petition which the commission has no reason to question, the commission assumes for the limited purposes of disposition of this procedural matter the following facts:

The applicant claims disability from an injury alleged to have occurred from occupational exposure from his employment with the employer in 1981-1982. However, he did not file his application for hearing until 1991. By that time, the insurer, American Mutual of Boston (American Mutual), had been liquidated.

The employer's general counsel's office learned of the applicant's claim at some point after the application was filed. Indeed, Assistant General Counsel Elizabeth Healy participated in the prehearing procedure between 1991 and 1994. In February 1994, ALJ Roberta Arnold wrote a letter to the applicant and the employer's Milwaukee office, pointing out that claims against the American Mutual were barred, and that the employer would be liable. ALJ Arnold also explained that the department would not process the claim unless further documentation (specifically a supporting WKC-16-B practitioner's report on cause and nature of disability and a WKC-3 medical treatment expense itemization) were provided. ALJ Arnold concluded her letter by informing the parties she would close the file within 90 days (but not dismiss the application) unless the required forms were filed.

Apparently, the department received subsequently some documents from the applicant but they did not support the claim. In any event, the case remained in a "not ready" status by June 1994. In 1995, the department received a supporting practitioner's medical report. ALJ Arnold provided the applicant and the employer's Milwaukee office copies of practitioner's report. However, ALJ Arnold declined to process the claim until the applicant submitted a medical itemization form. This was apparently not done; in any event, no further action was taken until 2000.

On October 25, 2000, the applicant wrote to the department and asked that his claim be reopened. An amended application was filed, and sent to the employer's Milwaukee office and American Mutual, in care of Wisconsin Insurance Security Fund (WISF), an agency that deals with claims against defunct insurers.

The WISF responded to the hearing application by letter dated November 27, 2000. It disavowed any liability in the case, without much explanation, and concluded that "if a valid claim should exist, it would be solely a matter between the employee and the employer." The WISF sent copies of the letter to the applicant, the employer's Milwaukee office, and the department.

Thereafter, the department sent numerous letters and notices to the employer, at its Milwaukee office, concerning the applicant's claim. The employer acknowledges receiving most of this correspondence.

One exception was a letter ALJ Krueger wrote to the employer in March 2001, explaining that since American Mutual had been liquidated, the employer itself would be liable. ALJ Krueger inquired whether the employer intended to pay or deny the claim, and asked for the employer's response as soon as possible. Unfortunately, ALJ Krueger's letter was misaddressed to "Hilbourn," not "Kilbourn," Avenue in Milwaukee. The employer denies receiving that letter.

Finally, in July 2001, a hearing notice went out, it was addressed to the employer's Milwaukee office. The employer admits receiving this letter. However, the employer did not appear at the August 2001 hearing before ALJ Lake. Following the hearing, ALJ Lake issued a decision in favor of the applicant, which the employer has appealed.

To summarize the employer's position in its petition for review, the employer contends that though it received many of the letters and notices sent by the department concerning this claim after it was reopened, its failure to appear at the hearing ultimately held should be excused. Among the correspondence it received from the department, only ALJ Krueger's March 2001 misaddressed letter clearly outlined the employer's individual liability. However, the employer asserts that it did not receive that letter. The remaining correspondence copied American Mutual, leading the employer's personnel -- including personnel in its general counsel's office who reviewed some of the correspondence -- to conclude that American Mutual would defend the claim.

2. Legal standards.

With respect to failures to appear at a hearing, the commission has previously held:

"In general, a nonappearing party may be entitled to relief in the form of further hearing if his or her failure to appear was a result of excusable neglect. Auclair v. LIRC and Friendly Village, Inc, WC Case No. 83-836 (Wis. Ct. App., May 22, 1984). Excusable neglect is that neglect that might have been the act of a reasonably prudent person under similar circumstances. Auclair, slip opinion at 3, and Hedtcke v. Sentry Insurance Company, 109 Wis. 2d 451, 468 (1982). Excusable neglect is not the same as neglect, carelessness or inattentiveness.

"For the purposes of determining whether to remand for hearing on the failure to appear issue the commission follows a procedure similar to that followed when acting on late petitions. First, the commission assumes that statements offered by the non-appearing party to explain his nonappearance are true, unless something in the record makes the statements appear inherently incredible. The next step is to consider whether, if believed, those statements establish that the failure to appear was from excusable neglect. If the statements, even if believed, do not meet that standard, remand is unnecessary: the commission simply denies further hearing. If the alleged facts do show excusable neglect, the commission may either remand for a hearing to attest whether the facts actually are as alleged or simply remand for testimony on the merits."

Angela M. Brinkley v. Stat Temporary Services, WC Claim No. 2000-028860 (LIRC, December 18, 2001) (applicant's failure to appear) and Gestrich v. Dr. Detail, WC Claim No. 1999-034612 (LIRC, January 24, 2000) (respondent's failure to appear.)

The court of appeals has also 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, the court stated:

"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.

3. Discussion.

In the current case, the commission notes that, because a hearing was held, albeit one at which the employer did not appear, the application technically was not disposed of by "default without hearing" under Wis. Stat. § 102.18(1). However, regardless of whether the commission applies the Auclair excusable neglect standard or the Verhaagh default standard, it concludes the employer should be entitled to another hearing to present a defense.

The commission realizes that the employer received numerous pieces of correspondence from the department, which it essentially ignored in reliance on a defense by American Mutual. The commission realizes, too, that the employer should have known and -- as is evident by Assistant General Counsel Healy's participation in the early 1990s -- knew that American Mutual was in liquidation.

On the other hand, American Mutual's liquidation occurred in the late 1980s and early 1990s. By the time the applicant's claim was "reopened" in 2000, the liquidation had occurred nearly 10 years earlier, his initial application had been filed more than 9 years earlier, and the applicant's alleged injury had occurred nearly 20 years earlier. In the intervening time relatively little action was taken on the application; indeed it spent several years in the department's "closed" or "inactive" status. Nor is this a case where a work injury had been proven, the file put in an inactive status after some payment of compensation, and then reopened upon a worsening of the condition. As of the time his file was reopened in October 2000, the applicant had not yet proven a compensable injury from the 1981-1982 employment exposure.

The commission notes, too, the employer's credible assertion that it did not receive ALJ Krueger's misaddressed March 2001 letter warning the employer of its individual liability. The commission observes also that that any prejudice to the applicant from an additional hearing -- apart from having to prove his case under the normal procedure followed when a respondent disputes a claim -- is minimal. The delay caused by the employer's failure to appear is insignificant in comparison with the 19 years between the applicant's alleged work injury and the August 2001 hearing in this case.

Finally, the commission notes that it explicitly does not decide any of the more substantive issues raised by the employer in its petition. These issues, including the employer's defense under Wis. Stat. § 102.12, must wait for disposition under the terms and procedure set by the department on remand.

cc: 
Attorney Thomas E. Hayes
Attorney Ronald S. Aplin

Appealed to Circuit Court.

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