ROBERT HOFFMEYER, Employee, v. RALPH DAVEY CONSTR. and ALLSTATE INS. CO./ITT SPECIALTY RISK SERVS., INC., Employer-Insurer/Petitioners, and SPECIAL COMPENSATION FUND.
WORKERS= COMPENSATION COURT OF APPEALS
DECEMBER 22, 2003
VACATION OF AWARD - SUBSTANTIAL CHANGE IN CONDITION; VACATION OF AWARD - FRAUD. Because the evidence regarding the employee=s current medical condition and disability status was conflicting, the matter was referred to the Office of Administrative Hearings for creation of a record and factual findings on the issues of causation and whether the employee has misrepresented his ability to work. Following issuance of the compensation judge=s decision, the matter is to be returned to the WCCA for consideration of the employer and insurer=s petition.
Petition to vacate referred to OAH.
Determined by Rykken, J., Pederson, J., and Johnson, C.J.
Attorneys: John H. Guthmann, Hanson, Dordell, Bradt, Odlaug & Bradt, St. Paul, MN, for Petitioners. John G. Brian, Felhaber, Larson, Fenlon & Vogt, St. Paul, MN, for Respondent.
MIRIAM P. RYKKEN, Judge
The employer and insurer petition to set aside the Findings and Order served and filed October 27, 1980, and petition to discontinue permanent total disability benefits on the basis of the employee=s substantial change in medical condition and fraud. We refer the matter to the Office of Administrative Hearings for an evidentiary hearing and findings as to whether the employee=s low back condition is causally related to the employee=s 1969 work injury and whether the employee has misrepresented his ability to work.
Robert Hoffmeyer, the employee, sustained an admitted injury on May 26, 1969, while employed as a carpenter with Ralph Davey Construction, the employer. At the time of his injury, the employee was 34 years old and earned a weekly wage of $178.00. On that date, the employer was insured for workers= compensation liability by Allstate Insurance Company, now administered by ITT Specialty Risk Services, Inc. He sustained an injury to his back on that date and, by 1971, claimed that his low back injury had resulted in consequential traumatic neurosis (conversion hysteria). The employer and insurer admitted liability for that condition and paid benefits to and on behalf of the employee.
Following an initial hearing on this matter, a compensation judge issued findings and order on July 2, 1975, awarding the employee ongoing temporary total disability benefits and benefits based upon a 35% permanent partial disability of the back. The employer and insurer paid the statutory maximum of 350 weeks of temporary total disability benefits between May 26, 1969, and February 7, 1976. Following the second hearing in 1980, a compensation judge issued findings and order on October 27, 1980, finding that the employee had been permanently totally disabled since February 8, 1976, as a result of his 1969 work injury and his consequential traumatic neurosis. The employer and insurer have paid permanent total disability benefits on an ongoing basis since that time.
The employee has received social security disability income (SSDI) benefits which by now, according to the employer and insurer, completely offset the permanent total disability benefits being paid by the employer and insurer. As a result, the employee=s current workers= compensation benefits consist entirely of supplementary benefits that are paid by the employer and insurer and reimbursed by the Special Compensation Fund.
The record contains limited medical records dated between 1995 and 2003. There is a reference in the employee=s medical records to an examination he underwent in September 2002 at the Spine Center of the Mayo Clinic, for low back and leg symptoms. Dr. Jeffrey Brault stated in his later chart notes that in September 2002 the employee had Asymptoms consistent with multiple lumbar radiculopathies, status post multiple decompressive laminectomies, mild central canal stenosis and what appeared to be arachnoiditis@ and that he had prescribed physical therapy at that time. On November 26, 2002, Dr. Paul Wicklund examined the employee at the employer and insurer=s request. According to Dr. Wicklund=s report, the employee advised that he always has low back pain and leg pain at a level of 8 to 9/10, along with numbness in his low back. The employee advised Dr. Wicklund that his daily activities included working in his shop, visiting contractors at various construction sites, having lunch, watching television and driving to see his friends in his pickup truck. Dr. Wicklund concluded that the employee had fully recovered from any episodes of conversion hysteria and that he demonstrated symptom magnification. Dr. Wicklund also determined that the employee was capable of working full-time within restrictions of avoiding repeated bending at the waist or lifting more than 40 pounds.
On April 16, 2003, the employer and insurer filed a petition to vacate the findings and order served and filed on October 27, 1980, on the grounds that the employee=s medical condition has substantially improved since the time of the award, and also on the grounds that the employee has misrepresented his ability to work, thereby committing fraud. In their petition to vacate, the employer and insurer advised that as part of routine file administration and requirements of the Special Compensation Fund, set out in Minn. Stat. ' 176.129, they have documented the employee=s activities from time to time and have discovered through investigation that the employee has worked on various construction projects for many years. In support of their petition to vacate, the employer and insurer submitted videotaped surveillance of the employee=s activities on construction sites in November and December 2000 and October 2002. Those videotapes document, among other things, the employee standing at and performing various tasks at construction sites, including carrying equipment, cutting wood, carrying lumber and windows, loading and unloading lumber from the back of a pickup truck, carrying various tools and a ladder, and loading tools into a pickup truck.
In response to the petition to vacate, the employee submitted an affidavit stating that his low back and general health conditions have worsened over the years, that he experiences constant low back pain and limitation of motion, chronic pain in his legs and numbness in his feet, and that he has been diagnosed and treated for severe obstructive sleep apnea, high blood pressure, high cholesterol and other cardiac-related problems. The employee also addressed the surveillance videotapes and stated in his affidavit that the videotapes fairly accurately represent the types of activities he performs for Hoffmeyer Construction Company. He also identified the projects depicted in the videotapes and described the type of work he performed on those projects. In addition, the employee submitted chart notes from the Spine Center at the Mayo Clinic, documenting examinations the employee underwent in February, March and April 2003. At those examinations, the employee reported ongoing low back and leg pain, and was diagnosed as having peripheral neuropathy and radiculopathy, as well as neck pain and bilateral carpal tunnel syndrome, and was prescribed tricyclic medication.
This matter was heard at oral argument and, for the reasons outlined below, we refer this matter to the Office of Administrative Hearings, for an evidentiary hearing.
This court=s authority to consider petitions to set aside an award is governed by Minn. Stat. '' 176.461. For this court to vacate an award, the petitioner must show good cause. The law in effect on the date of the settlement is controlling for purposes of determining what constitutes good cause. Franke v. Fabcon, Inc., 509 N.W.2d 373, 49 W.C.D. 520 (Minn. 1993). For awards issued before July 1, 1992, Acause@ is limited to the following: (1) mutual mistake of fact; (2) newly discovered evidence; (3) fraud; or (4) a substantial change in medical condition since the time of the award. Stewart v. Rahr Malting Co., 435 N.W.2d 538, 41 W.C.D. 648 (Minn. 1989). The employer and insurer seek a vacation of the award of permanent total disability benefits, set forth in the findings and order served and filed October 27, 1980, based upon an alleged substantial change in medical condition, and alternatively based on alleged fraud.
In determining whether a substantial change in the employee=s medical condition has occurred, which is the primary basis for the employer and insurer=s petition, this court in the past has examined such factors as (1) change in diagnosis; (2) change in the employee=s ability to work; (3) additional permanent partial disability; (4) necessity of more costly and extensive medical care/nursing services than initially anticipated; (5) causal relationship between the injury covered by the settlement and the current worsened condition; and (6) contemplation of the parties at the time of settlement (or, as in this case, at the time of the award and the findings and order that the employer and insurer now seek to vacate). Fodness v. Standard Café, 41 W.C.D. 1054, 1060-62 (W.C.C.A. 1989) (citations omitted). Fodness and the decisions upon which the Fodness factors were based generally involved cases in which an employee was requesting vacation of a settlement on the basis of a worsening of his or her medical condition. The case at hand, however, involves a less common situation, a petition by an employer and insurer asserting an improvement in the employee=s medical condition. As a result, not all of the Fodness factors are applicable.
To establish fraud, which is the second basis for the employer and insurer=s petition, there must be (1) a false representation of facts; (2) the representation must deal with a past or present fact; (3) the fact must be material and susceptible of knowledge; (4) the representing person must know the fact is false; (5) the representing party must intend that another be induced to act based on the false representation; (6) the other person must in fact act on the false representation; and (7) the misrepresentation must be the proximate cause of actual damages. Weise v. Red Owl Stores, Inc., 286 Minn. 199, 202, 175 N.W.2d 184 (1970). To prevail on a claim of fraud regarding the award, the petitioner must establish that the employee made false representations regarding his ability to work. Boileau v. A-Plus Indus., 58 W.C.D. 549, 555 (W.C.C.A. 1998)
The employer and insurer contend that the employee has experienced a substantial improvement in his medical condition since the award in 1980. They refer to the employee=s diagnosis at the time of the hearing in July 1980 which was a low back injury and conversion hysteria that required the employee to lie down for 4-6 hours per day due to his pain and that combined to produce a total disability. The employer and insurer now contend that the employee is able to work throughout an entire day. The employer and insurer allege that the employee has worked for a construction company since 1983, and that by at least 2000, the employee worked on various construction projects performing activities well in excess of his medical limitations. In support of their contentions, the employer and insurer submitted medical records, videotaped surveillance of the employee=s construction-related activities on November 28-29, 2000, December 8 and 12, 2000, and October 3, 2002, videotaped surveillance of the employee=s general activities in January and March 2001, and reports prepared by an investigator.
The employee disputes the allegations set forth by the employer and insurer. He admitted, in his affidavit, that despite his low back condition he has performed very limited duties for Hoffmeyer Construction Company, a company which he and two siblings inherited from their father. The employee has an ownership interest in the company and admits that he has on occasion provided intermittent light duty services, tools, equipment and vehicles for the company, although he is not paid a wage, does not keep track of hours he is present on a job site and is only paid out of the profits of the business. He contends that his actual participation in physical and productive activities is limited and that the videotaped surveillance shows activities performed by the employee that are extremely limited in their physical nature as well as their scope and duration.
Finally, the employee argues that the activities performed on the job sites for Hoffmeyer Construction Company do not constitute employment that would be available in a competitive labor market, and that he works on those job sites solely because of his familial relationship with the principal owner of the business and his minority ownership of the business. The employee argues that his distribution from the profits of that company are insubstantial, do not constitute substantial gainful employment and do not preclude a determination of permanent total disability status. For that reason, the employee denies that his activities demonstrate a substantial change in his medical condition and that such activities rise to the level of fraud. The employee argues that the employer and insurer have provided no supporting documentation of false representation of facts made by the employee, as he has never denied either his ownership interest in Hoffmeyer Construction Company or his occasional assistance provided to his brother in light carpentry activities.
The evidence presented by the employer and insurer raises significant factual questions concerning the employee=s current medical status and ability to work at sustained gainful employment. Because the evidence is conflicting, we refer this matter to the Office of Administrative Hearings for an evidentiary hearing and findings of fact. Specifically, the compensation judge shall make findings regarding whether the employee is currently permanently totally disabled from employment as a substantial result of his May 26, 1969, work injury. Discovery necessary for resolution of this question should be allowed, and either party may appeal from the factual findings made by the compensation judge following the hearing. When these findings have been made, the matter shall be returned to the Workers= Compensation Court of Appeals for a final determination of the employer and insurer=s petition to vacate.