P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)




Claim No. 92049655

An administrative law judge for the Department of Industry Labor and Human Relations (hereafter the "department") issued his findings of fact, conclusions of law and order in this case on July 20, 1995. No hearing was held as the order was issued under sec. 102.18 (1)(a), Stats., on default by the insurer. The insurer submitted a petition for commission review of the administrative law judge's findings and order. A briefing schedule was not requested and no briefs were filed, although the insurer makes several detailed arguments in its petition.

The primary issue in this case is whether a default order under sec. 102.18 (1)(a), Stats., is appropriate in this case. If a default order is appropriate, the commission (like the department) may proceed without hearing to enter an order in favor of the applicant on his disability claim. The final issue is whether to assess a penalty against the insurer for inexcusable delay.

The commission has carefully reviewed the entire record in this case, including the briefs submitted by the parties. The commission hereby modifies the administrative law judge's findings of fact, conclusions of law and order, to conform to the following:


a. The department's file.

Because the primary issue in this case is whether it is appropriate to issue a default order based on inadequate action or response by the insurer, the record is based on the materials in the department's file and the insurer's brief.

The department's file for this case indicates that the applicant suffered a compensable work injury on August 5, 1992. The earliest document in the file is a June 23, 1993 letter from the insurer to McClean County Orthopedics asking for a final medical report on the employe's work injury. The letter states it is sent at the department's request.

Jerald J. Bratberg, M.D., responded on behalf of McClean County Orthopedics on August 2, 1993. The doctor reported that the applicant was diagnosed by a radiologist as having a torn medical meniscus, and may also have suffered an anterior cruciate ligament tear. The doctor noted that further treatment might be required but that surgery would not be necessary absent additional symptoms. The doctor did note that the applicant would have permanent disability.

Dr. Bratberg's response was forwarded to the department. The department then wrote the insurer on September 20, 1993, requesting an estimate from the doctor of permanent partial disability in percentage terms. The insurer responded by forwarding a letter from Dr. Bratberg dated October 13, 1993. Dr. Bratberg described the work injury as the result of a truck accident causing laceration to the leg and fractured ribs, and leaving the applicant with some residual knee instability. The doctor reiterated that an MRI showed a torn medical meniscus, and that the applicant probably suffered a torn anterior cruciate ligament when the accident occurred. The doctor also reiterated his opinion that an arthroscopy or reconstructive surgery were not necessary.

Dr. Bratberg went on to opine:

"This patient, by disability ratings from the state of Wisconsin , would have very minimal disability because these ratings are based primarily on range of motion and on the removal of torn meniscus. The patient has not had a meniscus removed. He has a good range of motion present but he does have a torn anterior cruciate ligament. He will have some instability in the knee and will have some permanent disability because of this and may at a later date need an arthroscopy and possible anterior cruciate reconstruction for this knee injury."

On November 19, 1993, the department sent a letter to the insurer pointing out that the insurer's doctor indicated the applicant had permanent disability, but did not give a percentage rating. The department's letter concluded by asking for a percentage rating. The insurer did not respond.

On January 26, 1994, DILHR sent a follow up letter. This time the insurer responded by returning a copy of the letter, with annotations and attachments, on or about February 8, 1994. The first attachment was the October 13, 1993 report of Dr. Bratberg described above. Also attached was a letter from the insurer's claims representative Nancy Kvorka to Dr. Bratberg dated December 27, 1993. Ms. Kvorka again asked the doctor whether there was any permanent disability, and suggested that since there was no surgery there would be no disability. Dr. Bratberg apparently did not respond; at least no response was attached. Finally, a worker from the insurer, Amy, wrote postscript dated February 8, 1994, stating:

"Please find attached Dr. Bratberg's response to our request for a percentage of PPD -- we provided the physician with a copy of the handbook on how to evaluate permanent disability -- this is his response. What further should we request? Can you provide a final work sheet based on this report? Do we need to request further information from the physician? Please advise."

[Emphasis supplied.]

The department responded to Amy's February 8, 1994 postscript by letter dated March 11, 1994. The letter stated: "Please ask the doctor for an estimate of the percentage of permanent disability..." The file contains no response and the insurer admits it did not respond.

On May 23, 1994, the department sent a follow up letter, referring to the March 11, 1994 letter and asking for a prompt response. Again, the file contains no response, and the insurer admits it did not respond.

Next, the department sent a letter to the insurer dated August 4, 1994. The department's letter stated that it computed permanent partial disability at 5% to the knee which worked out to 21.15 weeks of disability totaling $3,060, all of which was accrued and none of which had been paid. The department asked the insurer to inform it immediately if it did not make payment as shown. No payment or response was made.

The department then sent a letter dated January 5, 1995 reiterating the terms of the August 4 letter in detail and again demanding payment or explanation. Again, neither payment nor response was made.

The insurer did not admit receipt of these demand letters of August 4 or January 5 in its brief. However, the insurer does acknowledge receipt of a March 3, 1995 demand letter captioned "SECOND REQUEST." This letter reiterated the demand for payment and calculations set out in the earlier demand letters. The insurer admits it did not respond, apparently because it was in the process of moving its offices.

The fourth and final demand letter from the department was dated May 24, 1995, and was written by administrative assistant Ken Spaude. Mr. Spaude stated:

"This is our third notice that there is a $3,060.01 balance owing in compensation. Please send us immediately an amended WC-13 showing payment of that amount or an explanation for nonpayment.

"Failure to comply with this request within 30 days may result in an Administrative Law Judge's issuance of a default order, without hearing, for balance due plus a penalty."

The department's records contain no response to this demand letter. On July 20, 1995, ALJ Clarke issued his order assessing the $3,060.01 in permanent disability and $306 penalty for increased compensation for inexcusable delay.

According to the insurer, however, it did in fact respond to Mr. Spaude's May 24 demand letter by letter dated June 25, 1995. The alleged response is signed by Jim Kremer, claims supervisor, and appears to have been written on blank paper rather than the insurer's stationary. The response states that the insurer did attempt to obtain a final report, but that the treating physician had yet to clarify that any permanent partial disability was sustained by the applicant. The response went on to deny liability for permanent partial disability and questioned the worksheets.

However, the department either never received the letter when it was sent, or never filed it if it did receive it. The only copy of Mr. Kremer's alleged response in the department's file is the one attached to the insurer's petition for review of ALJ Clarke's decision. In any event, June 25, 1995 was a Sunday, and fell 32 days after May 24 (the 30th day would have been Friday, June 23). Thus, Mr. Kremer's response would have been mailed after the thirty day period specified in Mr. Spaude's final demand letter, even assuming the response was sent when dated.

b. Discussion.

The insurer failed to respond adequately to numerous letters from the department requesting payment of the amounts assessed or an explanation why the insurer chose not to pay. The final demand letter, particularly, provided a sufficient basis for a default order, given the lack of adequate response. As explained in the memorandum opinion attached to this decision, the commission concludes a default order under sec. 102.18 (1)(a), Stats., is appropriate for the amount of permanent partial disability assessed by the department in its demand letters, $3,060.01.

The final issue is whether to assess also the 10 percent delay penalty under sec. 102.22 (1), Stats. Section 102.22 (1), Stats., states that where an employer or insurer is guilty of "inexcusable delay," the compensation payments delayed shall be increased by 10 percent. Generally, inexcusable delay means one without good faith justification or mitigation determined by a realistic appraisal of the facts at the time of the alleged delay. Milwaukee County v. ILHR Department, 48 Wis. 2d 392, 399 (1970).

"Inexcusable delay" must be distinguished from the "bad faith delay" subject to a potentially higher penalty under sec. 102.19 (1)(bp), Stats. The general distinction is that inexcusable delay lacks a reasonable basis for the delay, while bad faith delay not only lacks a reasonable basis but also is done recklessly or with the knowledge that the delay is unreasonable. See North American Mechanical, Inc., v. LIRC, 157 Wis. 2d 801, 808 (Ct. App., 1990).

In this case, the commission concludes that the delay was unreasonable. The insurer submitted documents indicating that the applicant would be left with permanent residuals from his injury, but never had the disability rated by a physician despite requests from the department it do so. Instead, the insurer apparently chose to rely on the inaccurate position that because surgery was not immediately necessary, permanent partial disability could not be rated. More importantly, the insurer did not respond to the substantial number of letters it received from the division regarding permanent partial disability. The applicant is therefore also entitled to the sum of $306 as increased compensation under sec. 102.22, Stats.

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


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

Within thirty days from the date of this decision, the insurer shall pay to the applicant, Keith Perry, the sum of Three thousand sixty dollars and one cent ($3,060.01) for permanent partial disability.

The insurer shall also pay the applicant the sum of Three hundred six dollars ($306) as increased compensation.

Dated and mailed September 29, 1995
ND 7.24 8.9

Pamela I. Anderson, Chairman

Richard T. Kreul, Commissioner

David B. Falstad, Commissioner


In its petition for commission review, the insurer raises several arguments for reversing ALJ Clarke's default order requiring it to pay the permanent partial disability and the penalty:

(a) that the department lacks authority to issue a default order before an application for hearing has been filed;

(b) that the insurer actually responded to the final demand letter and so did not default; and

(c) that the department lacked authority to issue the worksheet assessing a 5 percent permanent partial disability award which underlies the default order in this case.

a. May DILHR act if no application is filed?

The first issue is the employer's argument that the department has no authority to issue a default order before an application for hearing has been filed. This argument is not supported by the law.

The supreme court has previously upheld the department's authority to issue a decision requiring payment of compensation, even if no application has been filed, under sec. 102.17 (2), Stats. Valentine v. Industrial Commission, 246 Wis. 297 (1944). Section 102.17 (2), Stats., which has remained substantially unchanged since the Valentine decision states:

"102.17 (2) If the department shall have reason to believe that the payment of compensation has not been made, it may on its own motion give notice to the parties, in the manner provided for the service of an application, of a time and place when a hearing will be had for the purposes of determining the facts. Such notice shall contain a statement of the matter to be considered. Thereafter all other provisions governing proceedings on application shall attach insofar as the same may be applicable."

Interpreting this section, the supreme court wrote:

"Defendant contends that sec. 102.17 (2), Stats., does not obviate the necessity for any application, but covers a situation where compensation has already been ordered by reason of previous proceedings initiated by an application.

"There is nothing in sec. 102.17 (2), Stats., to indicate that it is so limited. It provides in so many words that the [industrial] commission may order hearings on its own motion if it has reason to believe that compensation has not been paid. That was the situation here. The following annotation of the workmen's compensation pamphlet for 1921, explanatory of the legislation, throws light upon its proper construction if, indeed, the section is open to construction:

'In the past the [industrial] commission was without authority to initiate any proceeding for the purpose of determining the rights and liabilities of the parties. Employees have many times elected to forego their rights to the whole or part of their compensation because in order to secure such right it was necessary for them to institute a proceeding against their own employer. Other conditions made it quite as embarrassing for one or the other of the parties to start a proceeding. The end result was a failure in the particular case to have the rights and liabilities of the parties adjusted according to the law. This amendment ... makes it possible for the commission, on its own motion, to cite the parties to appear, and upon the proofs make such findings and award as the facts warrant. [Citations omitted.]'

"It is plain to us, both from the language of the section and from the spirit and general purpose of the act, that the commission may act upon its own motion in any case where compensation has not been paid."

Valentine, supra, at 246 Wis. 300-01.

Thus, even if no application has been filed, the department may, on its own motion, schedule a hearing and issuing findings and orders (whether default or otherwise) under sec. 102.17 (2), Stats. Strictly speaking, therefore, an application is not a necessary condition precedent to a default order as the insurer asserts.

Having established that the department may act on its own motion without an application, the next question is the related issue of whether the law authorizes the department's practice of issuing default orders upon failure of insurer to respond adequately to its informal demand letters. In such cases, the underlying demand letters are sent without any formal hearing having been held, even a hearing on the department's own motion.

The commission has previously held that the law authorizes the department's practice in this regard. In Enus Brown V. Select Staff and Fireman's Fund Insurance Company, claim no. 89-043390 (LIRC, July 2, 1990), slip opinion at page 5, the commission wrote:

" [D]espite the availability of the procedures of section 102.17 (2), Stats., it is not the Department's current practice to pursue timely payment of benefits and imposition of the inexcusable delay penalty by way of a formal section 102.17 (2), Stats., 'application' and notice of hearing. The reason for this is a practical one: the hearing caseload is already high, and it is considered by the Department that the volume of cases in which there is an apparently inexcusable delay in payment of benefits is such that it does not permit it to notice these cases for hearing. Therefore, the Department has adopted the less formal but more expeditious method described above, whereby, if an employer or insurer will not comply with a Department representative's request that the penalty be paid, and if it fails to respond or responds 'inadequately' to a request for an explanation, an order for payment is summarily issued by an Administrative Law Judge."

The Enus Brown decision then sets out the minimum requirements of the informal demand letters to be sent to the insurers. The demand letters must provide written notice to the insurer that, unless the insurer makes payment or provides an adequate explanation for its failure to pay during a stated period, a default order may be issued without further notice or hearing. The commission has adhered to Enus Brown in numerous subsequent cases, at times setting aside department orders as inadequately supported by the record, and at times affirming the department default order. See for example: Darryl B. Wessoleck v. Briggs and Stratton, claim no 86036823 (LIRC, April 9, 1992) and Chester H. Dean v. Schneinder National Carriers, claim no. 91023801 (LIRC, October 14, 1994). As set out above, the department has sufficiently complied with the Enus Brown standards in this case.

b. Do the insurer's responses preclude a default order?

The next issue is the insurer's assertion it responded both to the department's inquiries at the outset and to its final demand letter. The insurer contends its response precludes the issuance of a default order.

However, the Enus Brown case requires not simply some response, but an adequate response. The insurer's initial responses to the department's inquiries concerning a disability rating were inadequate and led to repeated requests for more information which were ignored by the insurer. Moreover, as discussed in the body of this decision, the department's file does not contain Mr. Kremer's June 25, 1995 response to the department's final demand letter, and the commission has some doubt that it was actually sent. Finally, even if Mr. Kremer's response was sent when dated, it response would not have been made within the required time period as required under Enus Brown.

c. DILHR's authority to rate PPD.

The final issue in this case is the basis for the department's ultimate assessment of 5 percent permanent partial disability at the knee, which the commission orders paid under this decision. The insurer points out that no doctor has ever rendered a medical opinion specifically rating permanent partial disability. Although Dr. Bratberg opined there would be some permanent disability, he rated it as minimal noting the applicant's mobility in his knee. However, Dr. Bratberg's report also indicates the applicant has suffered considerable damage to his knee leaving it unstable, and he may require surgery in the future.

Moreover, the department was left to make its own rating by the insurer's failure to respond adequately to the department's requests for a permanent partial disability estimate from the doctor. What the insurer did instead was forward Dr. Bratberg's letter indicating there was permanent partial disability in some unspecified degree and a lay opinion from claims representative Kvorka that no disability could be rated since no surgery had been performed. Insurer representative Amy then asked the department if it could issue a final worksheet on that information. After a third and fourth request for more information, which received absolutely no response from the insurer , the department made its own assessment of 5 percent compared to amputation at the knee.

The commission is satisfied that this assessment is in line with Dr. Bratberg's "minimal" rating. In any event, the resulting $3,060 award for a concededly unstable knee with a torn medial meniscus and a probable anterior cruciate ligament tear hardly seems unreasonable. This is especially true since the insurer did not present any other figure.


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