JOHN BLASIUS, Applicant

CENTRAL CONTRACTORS CORP, Employer

HAWKEYE SECURITY INS CO, Insurer

An administrative law judge (ALJ) for the Worker's Compensation Division of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.

The commission has considered the petition 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:

John Blasius, the applicant in this action, was employed by the respondent, Central Contractors Corporation, as a carpenter.

On May 21, 1998, the applicant sustained an injury to his left knee as he descended a ladder and slipped on stacked concrete blocks resulting in a torn medial meniscus that was surgically repaired on June 24, 1998, by Dr. Michael Dussault.

The respondent employer and its insurance carrier, Hawkeye Security Insurance Company, conceded liability and paid temporary total disability benefits, associated medical expenses and eight percent permanent partial disability, as compared to amputation.

Experiencing continuing complaints with his left knee, the applicant returned to Dr. Dussault who recommended additional surgery. To that end, Dr. Dussault performed an arthroscopic debridement of the medial femoral condyle. The insurer conceded liability and paid attendant benefits for lost time and medical expenses.

Not achieving the desired result, Dr. Dussault recommended and the applicant agreed to undergo a left total knee replacement on October 22, 1999. Once again, the insurer conceded liability and paid temporary total disability benefits and medical expenses.

In May of 2000, the insurer secured an independent medical examination from Dr. Richard Lemon who opined that the injury of May 21, 1998, precipitated, aggravated and accelerated the applicant's pre-existing degenerative knee condition beyond normal progression and necessitated the arthroscopic surgery of June of 1998.

Dr. Lemon further opined that the applicant reached an end of healing on September 22, 1998, and sustained five percent permanent partial disability, as compared to amputation of the left knee. Most importantly, Dr. Lemon opined that any disability after September 22, 1998, was due to a historical long-term non-industrial degenerative knee condition and concluded that the second arthroscopy and total knee replacement were not necessitated by the work injury.

The insurer, in reliance upon Dr. Lemon's opinions, amended its position and limited its concession of temporary total disability benefits to the period ending September 21, 1998, and only five percent permanent partial disability, as compared to amputation. The insurer additionally denied liability for any compensation beyond September 21, 1998, and the five percent permanent partial disability and claimed an overpayment for benefits paid beyond that concession.

The applicant filed an application for hearing and a hearing was held on February 19, 2001. On May 21, 2001, the department issued an Order finding that the injury of May 21, 1998, necessitated all surgeries to date and awarded all past claims for compensation as well as temporary total disability benefits from October 22, 1999, to May 31, 2000, and 50 percent permanent partial disability, as compared to amputation and imposed liability for medical expenses claimed. The insurer did not appeal the department's Order to the commission.

The applicant's multiple surgical procedures failed to provide the relief expected and on February 10, 2003, he underwent a total knee revision replacement arthroplasty with revision tibial component and patellar replacement.

The insurer was notified on January 6, 2003, of the applicant's need for a second total left knee replacement. On that same day, the analyst in charge of the applicant's file suspended payment of medical treatment expenses. Specifically, the insurer suspended payment of medical treatment expenses in the amount of $759.00 to Aurora Medical Group-Burlington and for $547.00 for treatment expenses incurred at Memorial Hospital of Burlington.

On January 15, 2003, the analyst asked the applicant's attorney if the analyst could take a recorded statement from the applicant. The applicant's attorney would not permit such interview, but indicated the applicant would respond to written questions.

On January 15, 2003, the analyst consulted with Dr. Borkowski about applicant's need for additional surgery. Dr. Borkowski indicated that additional information about the failure rate of knee replacements, the failure of the graft material and information regarding the type of cement used was needed. Dr. Borkowski thereafter became unavailable for consult.

On January 25, 2003, the analyst asked applicant's treating doctor why a second surgery was scheduled. The doctor indicated there was a failure of bony ingrowth in the tibial component. The analyst also asked applicant's doctor if there had been any intervening infection, slip and fall, or any other accident that may have aggravated, accelerated and progressed applicant's previous surgery beyond normal progression. The applicant's doctor responded in the negative. The analyst received these responses on February 10, 2003.

On February 10, 2003, the analyst mailed written interrogatories to applicant's attorney. Applicant never answered those interrogatories.

On March 24, 2003, the insurer suspended payment of $325.00 in medical expenses to Great Lake Pathologists and $31,891.08 for medical expenses for treatment provided by Memorial Hospital of Burlington. On March 26, 2003, the insurer suspended payments to Southeastern Wisconsin Anesthesiology in the amount of $1,745.00 and to Aurora Medical Group in the amount of $6,863.00. The insurer further delayed in paying $700.85 to Southeastern Wisconsin Anesthesiology and $70.00 to Dr. Sharon Smith.

On May 9, 2003, the applicant's attorney sent the analyst a letter stating that if the insurer did not explain the denial within 7 days the applicant would file a bad faith claim. On May 15, 2003, the analyst wrote the applicant's attorney a letter indicating that the bills had been "put in line for payment." The bills were paid in early June of 2003.

The ALJ found that the insurer inexcusably delayed in paying applicant's medical expenses pursuant to Wis. Stat. § 102.22(1). The ALJ found the delayed payments totaled $42,900.93. The ALJ assessed the 10 percent penalty on the total amount, or $4,290.09. The insurer has not petitioned for review of the ALJ's order. The issue is whether the insurer engaged in bad faith in failing to pay the aforementioned expenses.

In Brown v. LIRC, 2003 WI 142, ¶ 52, 267 Wis. 2d 31 671 N.W.2d 279, the Wisconsin Supreme Court noted that suspending benefits after a brief, inconclusive investigation was not an acceptable means of avoiding a bad faith penalty. That is not what occurred in this case. Rather, in the present case the insurer first suspended payment and then conducted an inconclusive investigation.

There was no reasonable basis for suspending benefits on January 6. The insurer has never presented a reasonable basis for suspending payment of medical expenses initially. The analyst's feeling that the matter needed further investigation is not a basis for suspending payment. It may be a basis for the insurer to consult with a medical professional while continuing to pay the applicant's medical expenses. The analyst was seeking a medical opinion. The analyst acknowledged she is not a doctor. The analyst did not follow through with obtaining a medical opinion. Dr. Borkowski never offered a medical opinion that would release the insurer from responsibility for applicant's medical expenses. Dr. Borkowski simply indicated possible avenues to be explored. Further, if for example, malpractice had occurred, that would not be a basis for suspending payment as the insurer would be liable for additional treatment expenses resulting from malpractice.

The applicant's failure to respond to the insurer's interrogatories did not provide the insurer a reasonable basis for suspending benefits. Although the applicant's counsel indicated that applicant would respond, applicant was not legally obligated to do so. The analyst acknowledged at the hearing that she was aware that an applicant's failure to respond to a written request for answers to questions was not a basis to suspend payment. The applicant's doctor had already notified the insurer that there was no new injury. Further, even if applicant had suffered a reinjury, the insurer would need a medical opinion establishing that additional treatment would have been necessary despite the original injury. Lange v. LIRC, 215 Wis. 2d 561, 573 N.W.2d 856 (Ct. App. 1997). Finally, there is no evidence that the insurer received new information or a medical opinion that caused it to finally put the bills in line for payment. The analyst testified that the insurer accepted the compensability of applicant's second knee surgery "after another couple of discussions with our supervisors." Tr. at 38-39. There was no testimony regarding what those discussions entailed.

The applicant requests that the commission assess a 200 percent penalty for each bill that was not paid, rather than calculate the penalty on the total amount at issue. The commission declines to do so. Wis. Stat. § 102.18(1)(bp) provides for an award on the "total compensation due." After considering all the evidence including the lack of any justification for the insurer's suspension of payments, the number and the amount of bills that were not paid, and the various lengths of delay, the commission assesses a penalty of $15,000.00. The applicant's attorney is entitled to a 20 percent fee.

The findings of the administrative law judge with respect to inexcusable delay are affirmed. The findings of the administrative law judge with respect to bad faith are reversed. Within thirty days from the date of this order, Hawkeye Security Insurance Company shall pay to the applicant Fifteen thousand four hundred thirty-two dollars seven cents ($15,432.07); and to Attorney Roland Cafaro, fees in the amount of Three thousand eight hundred fifty-eight dollars and two cents ($3,858.02).

Dated and mailed April 21, 2005
blasijo . wrr : 132 : 1 : ND § 7.22

/s/ James T. Flynn, Chairman

David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

The commission did not consult with the ALJ regarding witness credibility and demeanor. The commission's partial reversal is not based on credibility. The commission does not find the analyst incredible but finds what she knew did not constitute a reasonable basis for suspending benefits. Accepting the testimony on behalf of the insurer establishes that the insurer knew it did not have a reasonable basis to suspend payment of applicant's medical treatment expenses.

The respondent requests that the commission review Dr. Borkowski's report despite the fact that the ALJ excluded that report from evidence. The report was not a certified report by a practitioner and therefore would not have constituted prima facie evidence of the matters contained therein. The ALJ had the authority to exclude the document because it was hearsay. Finally, the commission notes that the gist of the report was placed into evidence by the analyst's testimony. Consideration of the actual report would not have changed the outcome in this case.

cc:
Attorney Ronald C. Cafaro
Attorney Juliette Dahms

[Ed. Note: The decision is reproduced here as modified by an amendment to the Order issued on May 18, 2005]

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