BARBARA MAGLIO, Applicant
TRANSPORTATION INSURANCE CO, Insurer
The applicant submitted a petition for commission review alleging error in the administrative law judge's Findings and Order issued in this matter on March 25, 2004. Briefs were submitted by the parties. At issue is whether Transportation Insurance Company withheld payment of compensation in bad faith, within the meaning of Wis. Stat. § 102.18(1)(bp).
The commission has carefully reviewed the entire record in this matter and hereby reverses the administrative law judge's Findings and Order. The commission makes the following:
The insurer assigned a claims specialist, Stephen Gardner, to investigate the fall. He directed another claims specialist, Judith Laufer, to go inspect the area where the fall occurred, and to interview the applicant. Laufer found nothing unusual with the carpet or the office surroundings where the fall occurred, and she interviewed the applicant on December 5, 2001. In that interview the applicant indicated:
. . . My foot just like stuck to the carpeting, which, you know, caused me to, you know, kind of lunge forward. And I didn't gather, couldn't gather my balance back and I just fell."
Laufer testified that when she was walking around the employer's office with two of the employer's employees:
"I looked at the carpeting and the location as we were walking around, and my recollection is that one or both of the employees, um, said something about, um, someone slipping or stumbling before this accident happened, um, but they didn't really make any sort of big deal about it."
The insurer denied the claim, and Laufer testified:
"Um, basically what I told him was I really couldn't understand, um, how the fall happened, and the claimant didn't seem to have any idea really either.
I couldn't see that she had any explanation for something about the carpeting or the building that caused her to have an accident."
Gardner testified that he had a few telephone conversations with the applicant and:
"Um, in speaking with the employer, I found that or in speaking with the employer, we just knew she fell. Um, and there didn't seem to be any reason for the fall."
"There was nothing on the floor, carpet looked like, I mean, it was normal carpet. There was no snags. There was no seams or anything like that to cause her to fall on it. It didn't look like--it didn't appear that the fall was caused other than her tripping over possibly her own feet. There was an unexplained fall."
Later in his testimony, Gardner referred to the fall as "idiopathic." The administrative law judge (ALJ) then asked him whether he was advancing two theories, idiopathic and unexplained, and Gardner agreed that he was. On December 11, 2001, Gardner sent the applicant a letter informing her that her claim was denied because the insurer considered her fall to have been idiopathic. On February 27, 2003, a different ALJ had issued a decision finding that the applicant sustained a work injury when she walked across the carpet and her foot stuck to the carpet fabric, causing her to trip and fall. That decision was not appealed and subsequently the bad faith claim was filed. In the decision finding no bad faith, the ALJ found that the insurer had "a valid question as to why an ordinary sort of shoe the applicant was wearing would stick on that ordinary carpet." The ALJ added in his decision that the applicant indicated at the hearing that she and others had almost fallen on the carpet previously, but that this was "a new fact." However, it was not a new fact, given Laufer's testimony that co-workers had informed her about previous slipping or stumbling.
The standard for bad faith is set forth in North American Mechanical v. LIRC, 157 Wis. 2d 801, 808, 460 N.W.2d 835 (Ct. App. 1990):
"We conclude that . . . in order to show bad faith a claimant must make a showing that the employer acted with: (1) a lack of reasonable basis for the delay which occurred and (2) knowledge or a reckless disregard of the lack of a reasonable basis for the delay."
Further judicial comment on that standard was made in Kelly Brown v. LIRC, 2003 WI 142, ¶ 25, 267 Wis. 2d 31, 671 N.W.2d 279. There the court stated:
"The test for determining that an insurer has a reasonable basis to suspend payment on the claim is whether the insurer properly investigated the claim and whether the results of the investigation were subject to a reasonable evaluation and review. The reasonable or unreasonable character of the insurer's conduct is gauged by examining the circumstances existing when the insurer made its decision to deny benefits.
The focus for determining whether an insurer is liable for bad faith is the sufficiency or strength of its reasoning."
After examining the circumstances existing at the time Gardner and Laufer made their decision to deny compensation to the applicant, the commission finds that those claims specialists failed to employ sufficient or strong reasoning, and engaged in speculation leading to a denial of the applicant's claim without a reasonable basis. The applicant's description of the incident was consistent and credible, and everyday experience supports the fact that it is not unusual for an individual walking on carpet to have his/her shoe stick or catch in the carpet fabric. It is more unusual for such an incident to cause a fall, but falls do occur, and in the applicant's case she was carrying a pile of folders in her arms which clearly would have affected her balance. In addition, the insurer's own investigation revealed that this was not the first incident of someone stumbling on the employer's carpet. There was never any evidence of a medical or other condition personal to the applicant which could have supported an inference that the fall was idiopathic, and the applicant gave an entirely logical explanation of how the fall occurred. The assertion that the applicant may have tripped over her own feet was pure speculation that ignored the applicant's credible explanation of the fall. (1) The insurer's reckless disregard for reason is further evidenced by its waffling between two theories of denial; namely, idiopathic and unexplained, neither of which had a reasonable basis in fact.
Additionally, neither Gardner nor Laufer indicated he/she performed any legal research or obtained a legal opinion regarding falls in circumstances similar to the applicant's. In fact, they conceded in testimony that they had not looked at any relevant commission or court precedent or obtained a legal opinion before deciding to deny the applicant's claim. It is clear that they labeled the applicant's fall as either idiopathic or unexplained based on pure speculation rather than any coherent reasoning process. Accordingly, the commission finds no basis for reducing the bad faith penalty below 200 percent.
The commission therefore finds that the insurer's failure to make payment of compensation to the applicant was done in bad faith, within the meaning of Wis. Stat. § 102.18(1)(bp). It was conceded that the compensation at issue exceeded $7,500.00, and thus a 200 percent penalty results in the maximum bad faith assessment of $15,000.00. The applicant's attorney is entitled to a 20 percent fee.
Now, therefore, this:
The Findings and Order of the administrative law judge are reversed. Within 30 days from this date, Transportation Insurance Company shall pay to the applicant Twelve thousand dollars ($12,000.00); and to Attorney Aaron N. Halstead, fees in the amount of Three thousand dollars ($3,000.00).
Dated and mailed March 24, 2005
magliba . wrr : 185 : 1 ND § 3.34 § 7.22
/s/ James T. Flynn, Chairman
/s/ David B. Falstad, Commissioner
/s/ Robert Glaser, Commissioner
In consultation with the commission, the administrative law judge offered no credibility/demeanor impressions other than to indicate that he believed the claims specialists had performed an adequate investigation of the applicant's fall. The commission agreed that the investigation was adequate, but as noted in the above findings, did not agree that the investigation provided a reasonable basis for denial of compensation.
Although the parties did not address the "level surface" argument that frequently arises in cases involving a fall, the commission will address that argument in relation to this case, with the hope of clarifying its position regarding falls on level surfaces.
In Kraynick v. Industrial Commission, 34 Wis. 2d 107, 148 N.W.2d 668 (1967), the court stated:
"However, we have held that a level surface is not an area of special danger. Peterson v. Industrial Comm., supra.
There are numerous cases in other jurisdiction which have also denied compensation for idiopathic falls on level floors." Id. at 113.
Mr. Kraynick was an alcoholic with a history of blackouts and nonindustrial falls. On August 9, 1963, he was observed at work standing at the foot of a stairway with one hand on the railing. He gasped for air and fell backward making no effort to catch himself or break his fall to the floor. He died from a brain embolus caused by the fall. In affirming the commission's finding that the injury was idiopathic and did not arise out of Kraynick's employment, the court used the above-quoted language in rejecting Kraynick's widow's theory that the hard tile floor on which Kraynick fell constituted a zone of special danger. The facts of the case reveal that the court was not addressing the question of whether a fall on any level surface could ever be work-related.
The Peterson case (2), cited in Kraynick, involved a 69-year-old woman with chronic arthritis and a heart condition who alighted from a taxi and crossed 8 feet of sidewalk before attempting to traverse three steps leading into the employer's building. On the second step, she waivered as if she were going to fall, and then stepped back down the steps before falling on the sidewalk. She broke her hip, and four months later suffered a stroke that may have been caused by an embolus resulting from the hip fracture. The commission denied compensation finding that the woman's fall had been cause by a personal condition not caused or aggravated by work (idiopathic), and that traversing the steps had nothing to do with the fall. The commission also found it probable that the injury ". . . would have occurred had applicant been on a flat surface at the time she commenced to sway." Id. at 47. In affirming the commission's decision, the court referred to a prior case (3) in which benefits were allowed to an applicant who suffered a heart attack while ascending a flight of stairs, and fractured his skull when he fell from the stairs. The skull fracture, not the heart attack, ultimately killed him. The Peterson court read this decision as indicating ". . . that if the fall had resulted from a heart attack not induced by the employment while the employee was standing on a level surface, recovery of benefits would have been denied." Peterson v. Industrial Commission 269 Wis. at 48.
In Peterson, the court addressed the question of whether or not the applicant's fall was idiopathic. In Milwaukee E. R. & L., the court addressed the question of whether the height of the fall from the employer's steps caused the applicant's skull fracture thus resulting in a compensable death. Again, neither case was concerned with the question of whether any fall on any level surface could be work-related. In order to have a compensable claim, an applicant who falls on a level surface must present credible evidence that the fall was caused by something on that surface, rather than having an idiopathic cause. The cause could involve carpeting, an irregularity such as a crack in the surface, or a slippery substance such as wax or oil. (4) Of course, the facts and circumstances of each case must be carefully examined, particularly with respect to credibility. However, the mere fact that a surface is level does not mean that a fall on that surface may not be compensable.
Had Gardner and Laufer credibly indicated that they were confused by the holding in Kraynick, or by some other court or commission decision, the insurer might have been able to demonstrate that there was no knowledge or reckless disregard of the lack of a reasonable basis for paying the claim. However, as noted in the commission's findings, these individuals conceded in testimony that they made no inquiry into the case law and sought no legal opinion before denying the applicant's claim. Their decision was based on speculation and the employer's interests.
cc:
Attorney Lois Kohl Marks
Attorney Aaron N. Halstead
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