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

WILLIAM LARSEN, Applicant

LARSEN LABORATORIES INC, Employer

ACUITY INSURANCE CO, Insurer

WORKER'S COMPENSATION DECISION
Claim No. 1996-021617


The applicant is currently being paid compensation for 828.55 weeks of permanent partial disability, determined under Wis. Stat. § 102.52 to 102.55, at the monthly rate of $732.22. In February 2003, the applicant filed an application for hearing seeking, among other things, compensation for disfigurement. In its answer, the employer and its insurer conceded jurisdictional facts, a compensable injury on January 31, 1996, and an average weekly wage of $576.92 as of such date.

An administrative law judge (ALJ) for the Worker's Compensation Division of the Department of Workforce Development decided the matter on stipulation of facts in lieu of hearing. The terms of the stipulation are set out below. The ALJ issued his findings and interlocutory order on the stipulation of facts on February 19, 2004. Both parties have submitted timely petitions for review.

The commission has considered the petitions and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The applicant sustained a compensable injury on January 31, 1996. The department's records indicate the applicant was paid temporary total disability continuously from that date to November 13, 1997. In addition, the applicant is entitled to permanent partial disability as calculated under Wis. Stat. § § 102.52 to 102.55 at 828.55 weeks. Under Wis. Stat. § 102.55(3), the compensation for permanent partial disability began to accrue as of the end of the healing period, or November 13, 1997.

This matter arises on the applicant's claim for compensation for disfigurement under Wis. Stat. § 102.56. On this issue, the parties stipulated to an award for disfigurement of $27,000. Since this is a stipulation, not a compromise, it does not fully resolve the disfigurement claim. The parties only agreed to the amount. The manner is which the disfigurement compensation should be paid was not stipulated.

The ALJ determined the disfigurement award should not be paid in lump sum, but instead should begin to be paid in monthly installments after the 828.55 weeks of permanent partial disability under Wis. Stat. § § 102.52 to 102.55 have accrued and been paid. The department determined the 828.55 weeks will have fully accrued on November 1, 2013, allowing for a first monthly payment for disfigurement on December 1, 2013. Accordingly, the ALJ ordered the payment of the disfigurement award beginning on December 1, 2013, at the monthly rate paid for permanent partial disability as provided in Wis. Stat. § 102.32(6), or $732.33 per month in this case. The ALJ also authorized the deduction of an attorney fee at twenty percent, or $5,400, for immediate payment subject to an interest credit of $527.48, leaving a net fee of $4872.52. Both parties appealed.

The applicant asks the commission to reverse the ALJ's decision and award a lump sum payment. The applicant contends that the full stipulated amount for the disfigurement award should be paid immediately in lump sum because there is no specific statutory authority authorizing payment of the disfigurement award over time at the weekly rate for permanent partial disability, and because Wis. Stat. § 102.56 specifically uses the word "sum." (1)   The applicant further contends that paying the award on an accrual basis over time makes it impossible, as a practical matter, to pay the maximum amount allowed by statute (the worker's average annual earnings) due to loss of present value.

The respondent seeks affirmance of the ALJ's decision to pay the disfigurement compensation as it accrues over time after the payment of the 828.55 weeks of permanent partial disability currently being paid. The respondent asserts that a  disfigurement award under Wis. Stat. § 102.56 is "compensation" by definition,(2)   that disfigurement compensation, like permanent partial disability compensation, is awarded to compensate future wage, and that accordingly the disfigurement award should be paid over time on a monthly basis under the rules governing the payment of permanent partial disability in Wis. Stat. § 102.32(6).

This issue has arisen before the Worker's Compensation Division and the commission in the past. The position of both agencies is that the disfigurement award begins to accrue at the permanent partial disability rate after a previously-awarded or conceded permanent partial disability award is paid out. The Worker's Compensation Division's position was stated in a March 12, 1985 letter from Harry F. Benkert, then the division's legal services director. Mr. Benkert wrote:

"Concerning payment of compensation for disfigurement, this is paid in percisely [sic] the same fashion that compensation for permanent disability is paid. In other words, it is paid on a periodic basis and becomes part of the money due for permanent disability. It is not the policy of the department that disfigurement is paid in lump sum." (3)

Thereafter, the commission affirmed an ALJ decision reaching the same result, explaining:

"The applicant contends that there is no basis for awarding compensation in a disfigurement claim in anything other than a lump sum payment. However, a close reading of the pertinent statutory provisions indicates that the legislature intended that compensation for disfigurement claims be made in periodic payments. Section 102.44 (3), Stats., states that for permanent partial disability not covered by sections 102.52 to 102.56, the aggregate number of weeks of indemnity shall bear such relation to 1000 weeks as the nature of the injury bears to one causing permanent total disability. The statute clearly indicates that section 102.56 provides coverage for permanent disability. In addition, the language in section 102.56, Stats., specifically refers to compensation for 'permanent' disfigurement. Since section 102.56 provides for compensation for permanent disability, it is subject to section 102.32 (6), Stats., which provides that where compensation is due for permanent disability, payments shall be made to the employe or a dependant on a monthly basis. Pursuant to the provisions of section 102.32 (6), Stats., the Administrative Law Judge appropriately awarded compensation payable on a monthly basis for the applicant's claim for permanent disfigurement."

Dequaine v. Morning Glory Farms, WC Claim no. 86022944, 1992 WI Wrk Comp LEXIS 553 (LIRC, April 7, 1992).

More recently, the commission stated "disfigurement is considered permanent partial disability, which at least arguably may be considered to accrue on a periodic basis." Randy Mueller v. Wisconsin Tissue Mills, WC Claim No. 1996-032216 (LIRC, May 28, 2004). To explain why disfigurement is permanent partial disability, the commission followed the course taken in Dequaine, pointing out that disfigurement is paid under Wis. Stat. § 102.56, and that Wis. Stat. § 102.44(3) and (6)(h) describe unscheduled permanent disability as "permanent disability not covered by s. 102.52 to 102.56." The commission went on to observe that in Mueller "even when added to the 151.65 weeks of permanent partial disability awarded for functional loss, the disfigurement award would be fully accrued."

In this case, the commission gave careful consideration to the applicant's argument that a payment over time is contrary to the legislative directive in Wis. Stat. § 102.56(1) allowing payments up to the disfigured worker's average annual earnings. However, death benefits, too, are based on average annual earnings, Wis. Stat. § 102.46, but nonetheless are made in monthly payments as they accrue under Wis. Stat. § 102.32(6). Likewise, because disfigurement is a type of permanent partial disability, it may be ordered paid monthly as it accrues under Wis. Stat. § 102.32(6).

To sum up, compensation for disfigurement is by statute considered permanent partial disability compensation. Wisconsin Stat. § 102.32(6) provides for the payment of permanent disability following injury on a monthly basis rather than in lump sum. ALJ Mitchell's decision correctly finds that the compensation for disfigurement should be added to the 828.55 weeks of permanent partial disability awarded under Wis. Stat § § 102.52 to 102.55, and paid at a monthly rate under Wis. Stat. § 102.32(6).

The next issue arises on the respondent's appeal. It contends that the department miscalculated the date on which the disfigurement award will begin to accrue, suggesting it is even later than the December 1, 2013 date that ALJ Mitchell set in his order. The respondent seems to suggest that because it paid compensation subject to the 15 percent/$15,000 reduction under Wis. Stat. § 102.58 (4), it has not paid as much permanent partial disability as the department and ALJ Mitchell assumed, thus changing the final payment date.

The commission does not agree with the respondent's argument insofar as it is based on Wis. Stat. § 102.58. That statute reduces by 15 percent the dollar amount of compensation paid under Wis. Stat., ch. 102 up to a total of $15,000. In other words, the statute may operate to reduce the dollar amount paid in some of the weeks of permanent partial disability. However, the statute does not change the total number of weeks that are due for compensation for permanent partial disability, or where those weeks fall on the calendar.

The applicant's healing period and compensation for temporary disability ended on November 13, 1997 according to the employer's supplementary report on form WKC-13 and the department's records. The 828.55 weeks of permanent partial disability under Wis. Stat. § § 102.52 to 102.55 began accruing as of that date. The commission calculates that October 1, 2013 is 828 weeks and four days after November 13, 1997. Technically, then, the disfigurement award begins to accrue after October 1, 2013, with a first payment a month later. (5)

However, the commission declines to set out a specific date on which the insurer shall begin to pay the disfigurement award. When the department pays permanent partial disability to a worker on a monthly basis, it does so at the worker's full rate until the entire amount outstanding is paid, without deducting any already-advanced attorney fees from the rate. (6)   In effect, then, permanent partial disability is paid faster under Wis. Stat. § 102.32(6) than it actually accrues, at least in cases where an attorney fee has already been advanced. Stated directly, the total dollar amount due the applicant for the 828.55 weeks permanent partial disability under Wis. Stat. § § 102.52 to 102.55 may be fully paid before 828.55 weeks actually have passed from the end of healing on November 13, 1997. Therefore, the insurer shall begin paying the compensation for disfigurement at the point when all the permanent partial disability under Wis. Stat. § 102.52 to 102.55 has been paid, even though that date may occur before the date it will fully accrue, October 1, 2013.

The last issue involves the attorney fee. The ALJ reasonably set the fee at twenty percent of the total disfigurement award, or $5,400. See Wis. Stat. § 102.26. However, the fee, which is part of the disfigurement award, is attributable to weeks of disability compensation that will not begin to accrue until October 1, 2013. Accordingly, the fee -- though paid in advance in lump sum -- is subject to an interest credit for advance payment. Wisconsin Stat. § 102.32(6m) and Wis. Admin. Code § DWD 80.39. (7)   The respondent suggests the interest credit set by the ALJ in this case, $527.48, is too small.

The respondent is correct on this point. The interest credit is 7 percent per annum on a future stream of income that will not begin to accrue until October 1, 2013. However, the department calculated the credit at only $527.48, as if the award were beginning to accrue immediately.

The court of appeals has explained the purpose of the interest credit:

"The statute provides that permanent disability benefits 'shall be made to the employe on a monthly basis' unless advance payments are approved by the Department. When such payments are approved, the interest credit provision compensates the employer or the employer's insurer for lost interest on the money paid in a lump sum- money which would have otherwise been paid out over time.

"Interest compensates for the forbearance of the income-producing ability of money. See Zintek v. Perchik, 163 Wis.2d 439, 479, 471 N.W.2d 522, 538 (Ct. App. 1991), overruled on other grounds by Steinberg v. Jensen, 194 Wis.2d 439, 534 N.W.2d 361 (1995). LIRC's long-standing interpretation of § 102.32(6), Stats., which applies a 7% per annum rate results in appropriate compensation to the employer or the employer's insurer for the time value of money. With this principle in mind, we conclude that LIRC's interpretation of § 102.32(6) is well founded in commonsense principles of economics."

Hamm v. LIRC, 223 Wis. 2d 183, 194 (Ct. App. 1998) (referring to the statute before it was renumbered to Wis. Stat. § 102.32(6m) by 2001 Wis. Act 37, SECTION 27.) On this basis, the commission concludes that the calculation of the interest credit in this case must take into account the actual date on which the disfigurement award begins to accrue.

Assuming an award beginning to accrue after October 1, 2013, the commission calculates that the attorney fee of $5,400 is subject to an interest credit of $2,797.16 as of November 11, 2004, leaving a present value fee of $2,602.84. The respondent, on the other hand, calculated the interest credit at the time of its brief to be only $2,592, leaving a fee of $2,808. The commission shall base its award on the respondent's figures. Deducting the fee ($5,400) from the stipulated amount ($27,000) leaves net amount of $21,600, which shall be paid to the applicant at the monthly rate of $732.33 when the 828.55 weeks of permanent partial disability under Wis. Stat. § 102.52 to 102.55 have been paid.

This order is final as to the disfigurement award, except to allow the department, if necessary, to determine the date of the final payment for the 828.55 weeks of permanent partial disability under Wis. Stat. § 102.52 to 102.55. Otherwise, because the applicant may have further issues stemming from his injury, this order shall be left interlocutory to permit future orders and awards as are appropriate.

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

INTERLOCUTORY ORDER

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

Within 30 days from the date of this decision, the employer and its insurer shall pay the applicant's attorney, Robert T. Ward, Two thousand eight hundred eight dollars and no cents ($2,808) in fees.

Upon the date of the final payment for the 828.55 weeks of permanent partial disability payable to the applicant under Wis. Stat. § 102.52 to 102.55, the employer and its insurer shall begin to pay the applicant compensation for disfigurement each month at the monthly rate of Seven hundred thirty-two dollars and thirty-three cents ($732.33) until the amount of Twenty-one thousand six hundred dollars and no cents ($21,600) has been paid.

Jurisdiction is reserved for further orders and awards as are appropriate.

Dated and mailed November 10, 2004
larsenw . wrr : 101 : 1   ND § 5.36

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

cc:
Attorney Robert T. Ward
Attorney Richard T. Mueller



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Footnotes:

(1)( Back ) Wis. Stat. § 102.56(1) provided in relevant part:

"102.56(1) If an employee is so permanently disfigured as to occasion potential wage loss, the department may allow such sum as it deems just as compensation therefor, not exceeding the employee's average annual earnings.."

(2)( Back ) Wis. Stat. § 102.01(1) provides:

"102.01(1) This chapter may be referred to as the 'Worker's Compensation Act' and allowances, recoveries and liabilities under this chapter constitute 'Worker's Compensation'."

(3)( Back ) This letter is reproduced at <http://www.wawca.org/Docs/Dept_Policies/85-03-12 Benkert - Disfigurement payable periodically.pdf.>

(4)( Back ) Heritage Mutual Ins. Co. v. Larsen, 2001 WI 30, 69-70, 242 Wis. 2d 47, 83-84.

(5)( Back ) This is a month earlier than the dates determined by the department.

(6)( Back ) For example the monthly rate in this case is $732.33, which is the statutory maximum $169 per week multiplied by 52/12 to get a monthly rate.

(7)( Back ) Wisconsin Stat. § 102.32(6m) and Wis. Admin. Code § DWD 80.39 allow for the advancement of compensation, subject to deduction of a 7% interest credit, in the department's discretion. The department usually orders advance payment of the attorney fees on permanent partial disability, subject to the interest credit deduction, as a matter of course. As discussed above, Mr. Larsen is not asking for an advancement of his part of the disfigurement award subject to deduction of the interest credit, but rather claims he should get the full amount immediately.

 


uploaded 2004/11/15