JAMES R. HIESERICH, Employee, v. BREITBACH CONSTR. and STATE FUND MUT. INS. CO., Employer-Insurer, and BREITBACH CONSTR. and CNA COMMERCIAL INS. CO., Employer-Insurer/Appellants.
WORKERS= COMPENSATION COURT OF APPEALS
SEPTEMBER 4, 2003
PENALTIES. The compensation judge=s award of a 15 percent penalty under Minn. Stat. ' 176.225, subd. 1, on the basis of interposing a frivolous defense or unreasonably delaying payment, is not supported by the evidence, nor is CNA liable for a penalty for failure to pay benefits under a temporary order when no such order was issued.
APPORTIONMENT - EQUITABLE. Where the employee=s current permanency rating results in part from a single surgical procedure to which both the 1990 and the 2000 injuries contributed, the compensation judge=s application of equitable apportionment was not clearly erroneous. Where the judge apportioned liability for the employee=s 20 percent permanency equally between the insurers, and CNA had previously paid 7 percent permanent partial disability benefits, we modify the award so that CNA pays an additional 3 percent, and State Farm Mutual is liable for the remaining half, or a 10 percent whole body disability.
Affirmed in part, as modified, and reversed in part.
Determined by Johnson, C.J., Wilson, J., and Pederson, J.
Compensation Judge: Gary P. Mesna
THOMAS L. JOHNSON, Judge
The employer and CNA Commercial Insurance Company appeal from the compensation judge=s award of a 15 percent penalty for nonpayment of benefits, and from the judge=s equitable apportionment of permanent partial disability benefits between CNA and State Farm Mutual Insurance Company. We affirm in part, as modified, and reverse in part.
On September 6, 1990, James R. Hieserich, the employee, sustained a personal injury while working for Breitbach Construction, the employer, then insured by CNA Commercial Insurance Company. The employee=s weekly wage was $522.50. The employer and its insurer admitted liability for the employee=s personal injury.
The employee was hospitalized at St. Cloud Hospital immediately following this injury. The employee underwent a reduction of a right hip dislocation and a repair of a right periorbital laceration of the face. Thereafter, the employee also received treatment for his low back. In a Findings and Order filed March 8, 1994, Compensation Judge Harold W. Schultz found the employee injured his low back on September 6, 1990, and found the employee had a 7 percent whole body disability by reason of his low back injury. CNA paid the permanent partial disability award.
The employee returned to work for the employer in December 1990. From 1990 to 2000, he performed all of his regular work duties without any restrictions. The employee performed ironwork, welding, concrete work and demolition, and each job required heavy lifting and working in awkward positions. The employee=s job required some climbing, bending, stooping, kneeling and crouching. During this 10-year period, he experienced gradually increasing low back and hip pain. Between 1993 and August 2000, the employee treated on three occasions with a chiropractor.
In August 2000, the employee=s back and right hip pain became more frequent and severe. The employee had surgery in October 2000 for a right-sided L5-S1 disc herniation and a right L4-5 lateral recess stenosis. The employee was totally disabled from October 2 through December 3, 2000. The employer was then insured by State Fund Mutual Insurance Company.
The employee filed a claim petition seeking benefits from both CNA and State Fund as a result of the September 1990 injury. In its answer, CNA denied liability for the claimed benefits, asserting the employee sustained a Gillette injury during the coverage of State Fund and State Fund was solely responsible for any benefits to which the employee might be entitled. State Fund denied the employee sustained a personal injury during its coverage of the employer.
In a Findings and Order filed March 19, 2003, the compensation judge found the employee sustained a Gillette-type personal injury to his back on August 2, 2000. His weekly wage was at least $796.90. The judge found the September 6, 1990 and August 2, 2000 injuries were each substantial contributing causes of the employee=s disability and need for surgery and apportioned liability equally between the two injuries. The compensation judge found the employee had a 20 percent permanent partial disability as a result of the work injuries. The employee was previously paid for a 7 percent permanent disability, leaving 13 percent owing, which the compensation judge apportioned equally between the two injuries. Finally, the compensation judge found CNA unreasonably delayed payment of benefits and awarded a penalty of 15 percent of the benefits due. CNA appeals the penalty award and the compensation judge=s allocation of permanent partial disability between the insurers.
The compensation judge found the payment of benefits to the employee was Aunreasonably delayed.@ (Finding 10.) In his memorandum, the judge concluded there was no genuine dispute over the employee=s entitlement to benefits so the employee should have been paid benefits under a temporary order until liability between the two insurers could be determined. That there was a legitimate dispute over which insurer was responsible for benefits was not, the judge stated, a justification for not paying benefits to the employee. Since CNA had an admitted injury, the compensation judge concluded it should have paid benefits to the employee but failed to do so. Accordingly, the compensation judge awarded a 15 percent penalty.
CNA contends the compensation judge=s award of a penalty is legally erroneous. In its answer, CNA denied liability for the benefits claimed by the employee. Dr. Gary Wyard opined the employee sustained a Gillette-type personal injury in August 2000 and opined the September 6, 1990 injury was not a substantial contributing, aggravating or accelerating factor in the employee=s disability and need for medical treatment after August 16, 2000. Thus, CNA argues it had a valid basis for denying liability for the claimed benefits. CNA further argues there was no temporary order in effect nor was a temporary order appropriate in this case. Accordingly, CNA asks that the compensation judge=s award of penalties be reversed.
Minn. Stat. ' 176.225, subd. 1, provides that a compensation judge shall:
award compensation, in addition to the total amount of compensation award, of up to 30 percent of that total amount where an employer or insurer has:
(a) instituted a proceeding or interposed a defense which does not present a real controversy but which is frivolous or for the purpose of delay; or
(b) unreasonably or vexatiously delayed payment . . . .@
It is unclear from the compensation judge=s decision whether the judge awarded a penalty under subdivision (a) based upon a frivolous defense or under subdivision (b) for an unreasonable delay of payment. In either event, we conclude an award of penalties is unsupported by the evidence.
In Hines v. Kobiela, 308 Minn. 320, 241 N.W.2d 814, 28 W.C.D. 400 (1976), the supreme court held a penalty under Minn. Stat. ' 176.225 may be imposed where the reason for the neglect and refusal to pay compensation is patently ill-founded and unwarranted. A defense is frivolous when it is unsupported by any positive evidence. Jackson v. Eveleth Mines, 49 W.C.D. 591 (W.C.C.A. 1993). An award of penalties is not appropriate, however, where the employer and insurer interpose a good-faith defense. Heise v. Honeywell, Inc., 48 W.C.D. 523 (W.C.C.A. 1993). The fact that an employer and insurer do not ultimately prevail in their defense does not necessarily create a basis for the imposition of penalties. Greene v. Independent Sch. Dist. #202, 36 W.C.D. 601 (W.C.C.A. 1984).
In this case, CNA denied liability for benefits based upon the assertions that it had no continuing liability and State Fund was solely liable for any benefits to which the employee might be entitled. In support of these assertions, CNA had the opinion of Dr. Wyard that the September 6, 1990 injury was not a substantial contributing cause of the employee=s disability or need for medical care after August 2000. Dr. Wyard further opined the employee sustained a Gillette-type personal injury in August 2000, which injury was a substantial contributing cause of the employee=s back condition. Dr. Wyard=s medical report and deposition testimony was positive evidence which supported CNA=s defense and presented a real controversy. Accordingly, the defense of CNA was not frivolous or for the purpose of delay. See Sass v. Fraser Constr. Co., 44 W.C.D. 447 (W.C.C.A. 1991); Gerulli v. USX Corp., slip op. (W.C.C.A. Nov. 14, 2000).
We reject the determination that CNA is liable for a penalty because it failed to voluntarily pay benefits to the employee under a temporary order. Under Minn. Stat. ' 176.191, subd. 1, the commissioner or a compensation judge may, under certain circumstances, direct that one of two or more employers and insurers make payment of benefits to the employee pending a determination of which employer and insurer has liability. In this case, however, no temporary order was issued requiring CNA to make payment of benefits to the employee. Nothing in Minn. Stat. ' 176.191 required CNA to either make application for a temporary order or voluntarily make payment to the employee without a temporary order. Accordingly, the compensation judge=s award of penalties is reversed.
The compensation judge found the employee sustained a 20 percent whole body disability as a result of his work injuries. CNA previously paid 7 percent so the employee was entitled to an additional 13 percent permanent partial disability which the judge apportioned equally between the two insurers. CNA contends that equitable apportionment of permanent partial disability in this case is contrary to Minn. Stat. ' 176.101, subd. 4(a). Utilizing statutory apportionment, CNA contends it is liable only for the 7 percent permanent partial disability previously rated and paid as a result of the 1990 injury, and argues State Fund is solely liable for the balance of 13 percent.
Minn. Stat. ' 176.101, subd. 4(a), provides in part:
(a) If the personal injury results in a disability which is attributable in part to a preexisting disability that arises from a congenital condition or is the result of a traumatic injury or incident, whether or not compensable under this chapter, the compensation payable for the permanent partial disability pursuant to this section shall be reduced by the proportion of the disability which is attributable only to the preexisting disability.
In Stone v. Lakehead Constructors, 553 N.W.2d 36, 52 W.C.D. 619 (Minn. 1995), the employee sustained a series of injuries during a period of approximately 19 months. Each injury occurred while Stone worked for a different employer. The compensation judge found the employee sustained a 10.5 percent permanent partial disability of the whole body as a result of all of the injuries and equitably apportioned the permanency equally among four employers. The supreme court concluded that, given the facts in the case, the compensation judge appropriately used equitable rather than statutory apportionment where the employee had sustained multiple injuries to the same area of his back, with each injury following so closely that the condition never stabilized, resulting in a single permanency rating representing the cumulative contribution of all four of the employee=s injuries. The supreme court stated, AWhen, as is the situation in this case, benefits are appropriately awarded on the basis of a single permanency rating of the disability resulting from more than one compensable injury, the situation seems to us better served by application of the principles of equitable apportionment.@
In Rauschendorfer v. Q. Carriers, Inc., 56 W.C.D. 241 (W.C.C.A. 1966), the employee sustained three work-related injuries, the last of which lead to a three-level fusion. Although noting the permanency attributable to the first two injuries could be separately ascertained and rated under the permanency schedules, the court concluded the 27.5 percent rating was for a three-level fusion which resulted from the combined cumulative effects of all three injuries. That is, the 27.5 percent rating represented a single permanency rating of the disability resulting from the combined effects of all three injuries rather than an accumulation of three separately ascertainable disabilities that could be independently quantified. Under such circumstances, the court concluded equitable apportionment was consistent with the exception to Minn. Stat. ' 176.101, subd. 4(a), as set forth in the Stone case. See also Gordon v. Ryder Student Transp., 52 W.C.D. 661 (W.C.C.A. 1994), rev=d (Minn. June 28, 1995).
In this case, the compensation judge found the 1990 and 2000 injuries each contributed equally to the employee=s disability and need for the required medical treatment, including the surgery for a herniated disc. The employee=s current 20 percent permanency rating results, in part, from a surgical procedure to which both injuries contributed. The current disability is rated under the permanency schedules effective July 1, 1993, while the permanency resulting from the 1990 injury was rated under the predecessor of the current schedules. Under these circumstances, we cannot conclude the compensation judge=s application of the principles of equitable rather than statutory apportionment was clearly erroneous. We do, however, modify the result. The employee has a 20 percent whole body disability caused equally by both injuries. Accordingly, CNA and State Fund each are liable for a 10 percent permanent partial disability. CNA previously paid the employee for a 7 percent whole body disability, so CNA owes an additional 3 percent to the employee. State Fund is liable to the employee for a 10 percent whole body disability. The compensation judge=s application of equitable apportionment of permanent partial disability is affirmed, as modified.