KAREN KJELL, Applicant

PRENT CORPORATION, Employer

AMERICAN PROTECTION INSURANCE CORPORATION, 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 by the employer.

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 agrees with the decision of the ALJ, and it adopts the findings and order in that decision as its own.

The findings and order of the administrative law judge are affirmed.

Dated and mailed June 14, 2005
kjellka . wsd : 175 : 4  ND § 7.22  § 7.23  § 7.24

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

The employer and its insurer contend in their petition for commission review the administrative law judge erred in determining the employer and its insurer were guilty of bad faith pursuant to Wis. Stat. § 102.18(1)(bp) and awarded the applicant a penalty in the amount of $9,874.67. The employer states it has not ever disputed the 138.78 weeks of benefits due to the applicant. The employer states that as soon as the employer and insurer received Dr. Weiner's report in August 2002, it began issuing payments for permanent disability and there has been no denial of benefits in this case, but at worst, the employer and its insurer are guilty of a six-month delay in payment, for which the applicant has received consideration due to a subsequent limited compromise agreement.

However, the evidence indicates the department sent the employer and its insurer a worksheet on October 16, 2002, which showed that based on Dr. Weiner's opinions on permanency, the applicant was entitled to 138.78 weeks of permanent partial disability at $184 per week or a total of $25,535.52, of which 62.33 weeks totaling $11,469.33 had accrued as of October 16, 2002. The insurer did not make payment to the applicant until May 3, 2003 for accrued permanent partial disability. The insurer had paid the applicant $184 per week for her ongoing permanent partial disability, but had failed to pay for the accrued permanent disability between August 6, 2001 and August 22, 2002, until May 5, 2003. The insurer stated in the letter accompanying payment on May 5, 2003 that it appeared that it failed to pay the amount that was due and accrued for applicant's return to work date of August 6, 2002, which the parties agreed was a typographical error and referred to August 6, 2001.

The administrative law judge appropriately noted that at the hearing the employer and its insurer offered no explanation for its failure to timely pay the accrued permanent partial disability, and no one testified on behalf of the employer. The administrative law judge appropriately noted that after receiving Dr. Weiner's report in August 2002, the insurer knew or should have known that it was liable for at least 88.6 weeks of accrued permanent partial disability based on Dr. Weiner's report. The department's worksheet in October 2002 clearly contemplated that the insurer would make prompt payment. The insurer did not contact the department and request any clarification or relay any problems in making payments. Further, the insurer's letter accompanying the lump sum payment in May 2003 clearly states that it is for accrued permanent partial disability dating back to August 6, 2001. Therefore, the insurer was clearly aware that it had a duty to make payments for accrued permanent partial disability. The letter admitted that it appeared the insurer failed to pay the amount that was due and accrued.

Given the fact that the employer and its insurer were aware, as of October 16, 2002, for the need for payment of accrued permanent partial disability, and given the lack of any reasonable basis for failing to make such payment, and a knowledge of a lack of reasonable basis, the applicant has established that the insurer was guilty of bad faith for failing to pay for accrued permanent partial disability between August 6, 2001 and August 16, 2002. The applicant credibly testified to the hardships caused by the failure to pay the accrued permanent partial disability following her termination with the employer in October 2002.

The applicant requests, in a cross petition, that the amount of the penalty for bad faith be increased to the maximum of $15,000, given the circumstances in this case. However, the commission notes that the employer and its insurer continued making the payments of $184 per week, beginning in August 2002, during the period in which accrued permanent partial disability was left unpaid. The commission finds that the administrative law judge awarded the appropriate amount for bad faith in the amount of a 100 percent penalty for the accrued permanent partial disability. Clearly, the failure to make such a lump sum payment caused hardship for the applicant in her ability to find work subsequent to being terminated by the employer in October 2002. However, the employer was continuing to make consistent payments for the ongoing permanent partial disability beginning in August 2002. The commission agrees with the administrative law judge that the appropriate award in this case was for a 100 percent penalty in the amount of $9,874.67 less attorney's fees.

cc:
Attorney John D. Neal
Attorney Sean Spencer

Appealed to Circuit Court.  Affirmed February 14, 2006.

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