DEAN SELLER, Employee, v. DURA SUPREME, INC., SELF-INSURED/MEADOWBROOK INS. GROUP, Employer, and MN DEP=T OF LABOR & INDUS./WORKERS= COMPENSATION DIV., Appellants.
WORKERS= COMPENSATION COURT OF APPEALS
FEBRUARY 25, 2008
PENALTIES; STATUTES CONSTRUED - MINN. STAT. ' 176.84, subd. 2; RULES CONSTRUED - MINN. R. 5220.2570. The language of the denial of liability served by the employer and insurer failed to sufficiently specify the factual and legal basis for the denial to meet the requirements of Minn. Stat. ' 176.84, subd. 2, and Minn. R. 5220.2570.
Determined by: Stofferahn, J., Wilson, J., and Pederson, J.
Compensation Judge: Harold W. Schultz II
Attorneys: Michael J. Koshmrl, Heacox, Hartman, Koshmrl & Johnson, Minneapolis, MN, for the Respondent. Mary Miller, Department of Labor & Industry, St. Paul, MN, for the Appellant.
DAVID A. STOFFERAHN, Judge
The Department of Labor & Industry appeals from the compensation judge=s denial of a penalty assessed by the department pursuant to Minn. Stat. '176.84, subd. 2. We reverse.
On January 11, 2006, the employee notified the employer of an incident which had occurred at work on that date. The employer filed a First Report of Injury on January 13, 2006, which described the incident as AEmployee was sanding cabinet parts with the orbital sander. Air hose was wrapped around, co-worker was talking to him, went to leave, got hose caught onto foot, and pulled injured employee back causing pain in groin area right side.@ The employer identified the injury as AAggravation of right side hernia.@ The First Report also indicated that the employee lost time from work beginning on January 12, 2006, because of the incident.
On January 20, 2006, the insurer served and filed a Notice of Insurer=s Primary Liability Determination denying liability for the January 11, 2006, work injury. The reason given for the denial was:
Employee has a long-standing prior history of hernia that needed surgical repair. He reported this to employer at time he was hired. We have no medical information to indicate need for upcoming surgery is related to work incident. Therefore, we are denying primary liability.
A compliance officer with the Department of Labor & Industry reviewed the denial and concluded that it failed to comply with Minn. Stat. ' 176.84, subd. 1, and Minn. R. 5220.2570, subp. 2. E., which require that the language of the denial conveys clearly the facts and legal basis for the denial. On April 25, 2006, the compliance officer sent a letter to the insurer advising that the denial failed to meet the requirements of the rule and statute. The Department identified specific concerns for the insurer:
Are you denying the incident of 1-11-2006 even occurred?
What medical are you relying on for your denial? What attempts
were made to secure the medical records from the doctor
listed on the First Report of Injury?
What facts did you base your denial on that showed
the employee=s pre-existing condition was not aggravated
or accelerated by the work activities?
The letter further noted that a failure to amend the denial within 21 days would subject the insurer to a $500.00 penalty pursuant to ' 176.84, subd. 2.
In a letter dated May 19, 2006, the insurer=s claim supervisor replied, stating that the insurer considered its denial to fully comply with the requirements of the statute. The insurer also disputed the applicability of Minn. R 5220.2570, subp. 2, contending that it applied only to denials of liability filed subsequent to a commencement of benefits. Finally, the insurer did not respond to any of the Department=s concerns but stated that the claim file was available for review if desired.
The Department imposed a penalty, and the insurer filed an objection to the penalty, resulting in a hearing before a compensation judge at the Office of Administrative Hearings. Following the hearing, the judge held that the language of the denial was sufficient and that the imposition of a penalty was unwarranted.
The Department has appealed from the judge=s denial of a penalty.
Once an employer has filed a report of injury, the injured worker has three years to file a claim for workers= compensation benefits. Minn. Stat. ' 176.151. In filing a denial, the employer and insurer are advising the employee that they will not voluntarily initiate the payment of benefits. While the injured worker may not be aware of the precise time limitations involved, the denial serves to put the injured worker on notice that he or she must take further action to receive compensation.
We conclude then that the specificity requirements of the statute being considered here are for the benefit of the injured worker. The insurer=s denial must set forth the facts which the insurer found to be conclusive in making its decision and those facts must provide a legal basis for the denial of benefits. The denial filed by the insurer in the present case fails to do so. According to its denial, the insurer denied liability because Mr. Seller had a pre-existing hernia which had previously been determined to require surgery and because the insurer did not have medical records. While those facts may have been the reason for the insurer=s denial, they do not provide a legal basis for the insurer=s actions.
A basic tenet of workers= compensation law is that the work injury need not be the sole cause of disability. When a work injury or the ordinary work of an employee Asubstantially aggravate, accelerate, or combine with a pre-existing disease or latent condition to produce a disability, the entire condition is compensable, no apportionment being made on the basis of relative causal contribution of the pre-existing condition and the work activities.@ Vanda v. Minnesota Mining & Manufacturing Co., 218 N.W.2d 458, 27 W.C.D. 379 (Minn. 1974); Palmer v. Pro Floor, Inc., No. WC05-245 (W.C.C.A. January 25, 2006). In the present case, the fact that Mr. Seller had a pre-existing hernia or that surgery was being considered for that condition had no legal significance in the absence of further information and could not be the basis for a denial of liability.
The second statement in the denial, that the insurer had no medical information to indicate a connection between the work incident and employee=s upcoming surgery, is also insufficient. Minn. R. 5220.2570, subp. 2.E, specifically provides that the mere statement that a denial was made Afor lack of a medical report@ is insufficient. We see no difference between the example specifically given in the rule and the language of the denial in Mr. Seller=s case.
In its brief urging affirmance of the compensation judge=s decision, the insurer refers to testimony provided at the hearing by a claims administrator which further described the insurer=s investigation and the rationale for its denial. In our view, this testimony was irrelevant and simply demonstrated the inadequacy of the denial filed with the department and served on the employee. A denial which complies with the statute should not need additional explanation or justification. Further, the statute does not state that a denial is in compliance if it can be justified after the fact. We must look to the information actually filed and, here, the denial did not meet the requirements of the statute and rule.
We reverse the decision of the compensation judge and reinstate the assessment of the penalty.
 This subdivision provides:
Specificity required. Notices of discontinuances and denials of liability shall be sufficiently specific to convey clearly, without further inquiry, the basis upon which the party issuing the notice or statement is acting. If the commissioner or compensation judge determines that a notice or statement is not sufficiently specific to meet the standard under this section, the notice or statement may be rejected as unacceptable and the party issuing it shall be informed of this. The rejected notice or statement may be amended to meet the requirement or a new one may be filed.
 Subpart 2. E. of the rule sets forth formal requirements for a denial of liability, including that it contain:
a specific reason for the denial which must be in language easily readable and understandable to a person of average intelligence and education and a clear statement of the facts forming the basis for the denial. A denial which states only that the injury did not arise out of and in the course and scope of employment or that the injury was denied for lack of a medical report, for example, is not specific within the meaning of this item[.]