ROBERT E BAKER, Applicant

SUPERIOR SERVICES, Employer

THE INSURANCE COMPANY OF STATE OF PA AIG CLAIM SERVICES, Insurer

An administrative law judge (ALJ) for the Worker's Compensation Division (the WC Division) of the Department of Workforce Development issued a default order in this matter. The employer filed a timely petition for review.

The commission has considered the petition and reviewed the material in the file forwarded from the WC Division in this case. Based on its review, the commission makes the following:

On August 8, 2001, Superior Services's operations manager completed an "Employer's First Report of Injury or Disease" form in connection with the applicant's injury. The form states that Superior Services was notified of the injury on April 12, 2001, and that the date of injury was January 5, 2001. On September 4, 2001, the insurer paid the applicant temporary total disability compensation.

An employer ordinarily must notify its workers compensation insurer within seven days after a worker sustains disability from an occupational disease or suffers an accident. Wis. Admin. Code § DWD 80.02(1). Within 14 days after the date of the injury or disability, the insurer ordinarily must either begin payment of disability compensation or submit a written explanation to the WC Division why it has not begun payment. Wis. Admin. Code § DWD 80.02(2)(h). In other words, the WC Division expects that in a simple conceded case requiring limited investigation, the employee will receive the first payment of compensation within fourteen days. If not, the WC Division may assess a ten percent penalty for inexcusable delay under Wis. Stat. § 102.22(1) if no reasonable excuse is provided. See Neal & Danas, Workers Compensation Handbook § 7.24 (4th ed. 1997).

On September 14, 2001, the WC Division sent the Superior Services a letter stating that "it appears payment of compensation . was delayed due to your failure to promptly report injury and disability to your insurance carrier." The WC Division's letter went on to inform Superior Services that inexcusable delay in payment would result in a ten percent penalty, equaling $57.50 in this case, under Wis. Stat. § 102.22(1). The letter demanded either payment of the penalty, or an explanation of the delay, and stated that a failure to do either would result in an enforceable default order.

When Superior Services did not respond, the ALJ issued a default order assessing the inexcusable delay penalty on March 4, 2002. Superior Services then filed a petition for commission review of the ALJ's default order.

If Superior Services first reported the injury to the insurer on August 8, 2001, four months after learning of it on April 12, 2001, Superior Service's notification would be late under Wis. Admin. Code, § 80.02(1). On appeal to the commission, however, Superior Services claims that it actually reported the applicant's injury to its insurer shortly after Superior Services learned of the applicant's disability in April 2001; that the insurer denied the claim back in May 2001 because the applicant claimed the disability arose from a November 1999 injury; that the insurer then advised the applicant to refile the claim; that the applicant then re- reported the injury to the employer, this time with the January 2001 date of injury; and that thereafter Superior Services sent the August 2001 "First Report." In other words, Superior Services contends that it acted promptly by reporting the disability when it occurred in April 2001, and the August 2001 report of injury was actually a second report.

In support of this contention, Superior Services's representative, Lori Oestreich, attached to Superior Services's petition for review a June 22, 2001, letter from the claims adjuster handling the claim for the insurer stating:

"This follows our May 14, 2001 denial letter.

"Since that time we have obtained additional medical records. However, in reviewing these records, we still fail to see any medical support linking your most recent neck problems to your initial 11-23-99 work injury.

"Consequently, the denial position taken in the May 14, 2001 letter stands."

The fact that the insurer initially denied the claim in mid-May 2001 indicates that Superior Services must necessarily have reported the injury, or at least some injury, before August 2001. The commission realizes that Superior Services did not provide this explanation in response to the WC Division's September 2001 demand letter preceding the ALJ's March 2002 default order. The commission has previously upheld default orders assessing a penalty where an insurer fails to respond to a WC Division demand letter concerning inexcusable delay in payment, but on appeal to the commission offers an excuse justifying an underlying delay in payment but not the failure to respond to the demand letter. In such cases, a late, though arguably adequate, excuse justifying an insurer's failure to pay when required does not obviate the default in responding to the WC Division's inquiries about the failure to pay.

However, the commission has also noted an exception when the insurer shows, albeit late and after failing to respond to the WC Division's demand letter, that it actually did pay the claim on time. In such a case, there is no prejudice to the injured from a delay in payment followed by a further delay in explaining the delayed payment, since the payment in fact was never delayed. (1)    In other words, the commission recognizes a distinction between (a) a late, albeit arguably valid excuse for an employer's or insurer's failure to pay or notify within the statutory and regulatory deadlines, and (b) a late showing that the employer or insurer did in fact pay or notify within the statutory and regulatory deadlines. The former alone may not justify setting aside an ALJ's default order, but the latter may.

In this case, there is evidence that Superior Services notified its insurer of the applicant's injury well before August 2001, and in time to permit the insurer to deny the applicant's initial claim in May 2001. Thus, there appears to be no prejudice to the worker here from the Superior Services's failure to respond to the WC Division's inquiries concerning its late report of injury since it does not appear that Superior Services actually was late in notifying the insurer of the injury. Accordingly, the commission concludes that this is not an appropriate case for imposition of a penalty against Superior Services by default.

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

The findings and order of the administrative law judge are reversed. The case is remanded to the WC Division for further appropriate action.

Dated and mailed June 6, 2002
baker . wrr : 101 : 8  ND § 7.24

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

/s/ Laurie R. McCallum, Commissioner

cc: Lori Oestreich

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

(1)( Back ) See, Ballard v Tower Automotive, WC Claim No. 2000040657 (August 10, 2001), where the commission stated: 

"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. 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." 

In Ballard, the commission relied on 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 insurer's tardiness and the reasons, if any, advanced for the tardiness. 

uploaded 2002/06/13