DAROLD ZWIEG, deceased, Employee/Appellant, v. POPE DOUGLAS SOLID WASTE and MINNESOTA COUNTIES INS. TRUST, Employer-Insurer, and MEDICARE/NORIDIAN, BLUE CROSS/BLUE SHIELD OF MINN., ST. WILLIAM=S LIVING CTR., CENTER FOR DIAGNOSTIC IMAGING, ALEXANDRIA CLINIC, and REGIONAL DIAGNOSTIC RADIOLOGY, Intervenors.

 

WORKERS= COMPENSATION COURT OF APPEALS

MARCH 28, 2005

 

No. WC04-256

 

HEADNOTES

 

PENALTIES - SUBSTANTIAL EVIDENCE.  Substantial evidence supports the compensation judge=s findings that until receipt of a medical report from an independent medical record review, there was no medical opinion causally relating the employee=s July 2002 surgery to his work injury,  that the employer and insurer had a reasonable basis to deny liability for temporary total disability benefits claimed in relation to the July 2002 surgery, and that there was no basis for penalties, prior to the receipt of the report from the independent medical record review, for the delayed payment of benefits.

 

PENALTIES; STATUTES CONSTRUED - MINN. STAT. ' 176.221.  Where the employer and insurer no longer had any defense to the employee=s claims once they received a medical report from an independent medical record review, and where the employer and insurer delayed payment of benefits after the 14-day period required by Minn. Stat.' 176.221, a penalty is owed for the delay in payment of benefits and the matter is remanded to the compensation judge for determination of the amount of penalty owed.

 

PENALTIES - HEIRS; STATUTES CONSTRUED - MINN. STAT. '176.225.   A deceased employee=s heirs may assert a claim for penalties under Minn. Stat. '176.225.

 

Affirmed in part, reversed in part, and remanded in part.

 

Determined en banc.

Compensation Judge: Catherine A. Dallner

 

Attorneys: Raymond R. Peterson, McCoy Peterson Jorstad, Minneapolis, MN, for the Appellant.  Luke M. Seifert, Quinlivan & Hughes, St. Cloud, MN, for the Respondents.

 

 

MAJORITY OPINION

 

MIRIAM P. RYKKEN, Judge

 

The employee, represented by the personal representative of his estate, appeals the compensation judge=s denial of a penalty claim for delayed payment of temporary total disability benefits.  We affirm in part, reverse in part and remand in part.

 

BACKGROUND

 

On February 11, 2002, Darold Zwieg, the employee, sustained an admitted work injury in the nature of a right-sided hernia while working for Pope Douglas Solid Waste, the employer, which was insured for workers= compensation liability by Minnesota Counties Insurance Trust, the insurer.  The employer and insurer paid various workers= compensation benefits, including temporary total disability benefits, based on an admitted wage of $581.42, and payment of medical expenses.  The employee underwent surgery to repair a right inguinal hernia, and remained off work from February 12, 2002, through April 1, 2002, when he returned to light-duty work.

 

On April 6, 2002, the employer and insurer served the employee with a notice of intention to discontinue benefits (NOID), advising that temporary total disability benefits were discontinued as of April 2, 2002, the date he returned to work.  According to the employee=s deposition testimony, he returned to light-duty work for approximately two months, and eventually returned to his full-duty job.  On May 3, 2002, the employer and insurer served the employee with a notice of maximum medical improvement (MMI) along with a copy of Dr. Gary Paulson=s report advising that the employee had reached MMI as of March 25, 2002.  The employee continued working through July 12, 2002; on that date, he treated at the Douglas County Hospital, reporting increasing pain in his abdomen.  The employee underwent a second surgery on July 15, 2002, in the nature of a repair of a right inguinal hernia and a segmental small bowel resection with anastomosis.  He received additional medical treatment for this condition through  September 2002.  The employee did not return to work for the employer after this surgery.  The employer and insurer did not reinstate payment of temporary total disability benefits after this second surgery.

 

According to testimony at the hearing, as corroborated by documentary evidence in  the record, the employee=s nephew, Gary Zweig, serves as the personal representative for the employee=s estate and, since 2002, held a medical power of attorney on behalf of the employee.  Gary Zweig, on behalf of his uncle, contacted representatives from the employer and insurer after the employee=s second surgery regarding payment of medical expenses related to that surgery.  Mr. Zweig testified that those representatives advised him that the medical payments would not be processed through workers= compensation insurance as they felt the second surgery did not result from the original injury.  He also testified that, aside from his telephone calls to the employer and insurer, he did not submit documentation of the claim, such as copies of the medical bills, to the employer and insurer.

 

On May 20, 2003, the employee filed a claim petition, seeking temporary total disability benefits continuing from February 12, 2002, based on a weekly wage of $650.00;^[1] medical expenses related to his second surgery; and penalties under Minn. Stat. ' 176.225, for a Afrivolous refusal to process his continuing claim.@  The employer and insurer denied liability for the claimed benefits, and, after obtaining an extension of time for filing a report from an independent medical examination, scheduled such an examination to be held on November 5, 2003.  They postponed that exam due to the employee=s illness.  On November 23, 2003, before the matter had proceeded to a hearing, the employee died as a result of an acute myocardial infarction, a non-work-related condition.

 

In May 2004, Dr. Nolan Segal conducted an independent medical records review at the employer and insurer=s request.  In his report, issued on May 20, 2004, Dr. Segal concluded that the employee=s second hernia in July 2002, and his second surgery, were causally related to the employee=s February 11, 2002, injury and initial surgery.^[2]

 

A hearing was held on June 11, 2004, to address the employee=s claim petition.  The employee claimed entitlement to an underpayment of temporary disability benefits earlier paid from February 12 through April 1, 2002, and sought payment of temporary total or temporary partial disability benefits from April 2, 2002, through November 23, 2003, based on a higher weekly wage rate than had been admitted by the employer and insurer.  In addition, the employee sought payment for medical expenses as well as penalties for delayed payment of temporary total disability benefits from July 12, 2002, through November 23, 2003.

 

At the hearing, the employer and insurer stipulated that they would pay wage loss benefits, including temporary total disability benefits and temporary partial disability benefits, from February 12, 2002, through September 26, 2002, the period when the employee was recuperating from his surgeries; the employee=s medical expenses through September 26, 2002; and medical transportation expenses.

 

In her findings and order served and filed August 17, 2004, the compensation judge awarded additional wage loss compensation based on a higher weekly wage of $604.40; denied the claim for temporary total disability benefits after September 26, 2002; awarded a portion of the claimed medical expenses; and awarded payment of partial reimbursement of attorney fees pursuant to Minn. Stat. ' 176.081, subd. 7, as well as payment of statutory interest and costs.  The compensation judge also denied the employee=s claim for penalties under Minn. Stat. ' 176.225, subd. 1 or 5.  The employee appeals the compensation judge=s denial of penalties.

 

DECISION

 

In his May 2003 claim petition, the employee claimed penalties, under Minn. Stat. ' 176.225, for Afrivolous refusal to process his continuing claim.@  Minn. Stat. ' 176.225, subd. 1, provides for a penalty for delayed payment, in addition to the total amount of compensation awarded, of up to 30 percent of that total amount, where an employer or insurer has Aunreasonably or vexatiously delayed payment,@Aneglected or refused to pay compensation,@ or Afrivolously denied a claim.@  Minn. Stat ' 176.225, subd. 5, provides for a penalty of 25 percent for Ainexcusable delay in making payments.@  Whether a penalty is appropriate under Minn. Stat. ' 176.225 Anormally rests within the sound discretion of the compensation judge.@  Maxfield v. Stremel Mfg. Co., slip op. at 5, 7 (W.C.C.A. Jan. 6, 1999).  On appeal, the Workers' Compensation Court of Appeals must determine whether "the findings of fact and order [are] clearly erroneous and unsupported by substantial evidence in view of the entire record as submitted."  Minn. Stat. ' 176.421, subd. 1 (2004).

 

The compensation judge found that the employer and insurer Adid not unreasonably or vexatiously delay payment of, refuse to pay, frivolously deny payment of or inexcusably delay payment of temporary total disability benefits for the period from July 12, 2002, through September 26, 2002.@  In her memorandum, the compensation judge noted that

 

The employee=s contemporaneous medical records regarding his care and treatment, including the hospitalization and surgery, in July of 2002, do not contain any indication that this second surgery which the employee underwent in July of 2002 is causally related to his work-related hernia of February 11, 2002.  The employer and insurer reasonably denied liability for this second surgery and the resulting period of temporary total disability based upon the medical records of the employee=s treating physicians.

 

(Memo., p. 10.)  The compensation judge further noted that until Dr. Segal=s report was received in May 2004, there was no medical opinion that directly causally related the employee=s second surgery to his work injury, and that, based on the medical records of the employee from July 12, 2002, through the date of his death on November 23, 2003, the employer and insurer had a reasonable basis to deny liability for temporary total disability benefits claimed in relation to the second surgery.  On those grounds, the compensation judge denied the employee=s claim that he was entitled to penalties since 2002 for the delayed payment of temporary total disability benefits.

 

The employee=s medical records that are contemporaneous with his July 2002 surgery include references to his February 2002 hernia surgery.  However, upon review of the medical records, we conclude that the compensation judge could reasonably determine that, until Dr. Segal issued his IME report, there was no medical opinion causally relating the employee=s July 2002 hernia and surgery to his work injury.  On that basis, the compensation judge could reasonably conclude that, up to the time that employer and insurer received Dr. Segal=s report, the employer and insurer did not unreasonably, vexatiously or inexcusably delay payment of temporary total disability benefits from July 12, 2002, through September 26, 2002.  Substantial evidence supports the compensation judge=s findings as "they are supported by evidence that a reasonable mind might accept as adequate."  Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984).  We therefore affirm the denial of penalties claimed for the failure to pay temporary total disability benefits prior to receipt of Dr. Segal=s medical report.

 

The appellant, the employee=s heir, argues that the employer and insurer remain liable for penalties  because they delayed payment even after receiving Dr Segal=s May 2004, report, and even after stipulating to certain payments during the hearing.  We agree.

 

Once the employer and insurer received Dr. Segal=s report, they no longer had a defense to payment of temporary total disability benefits.  Although the employer and insurer stipulated at the June 11, 2004, hearing that the employee was entitled to temporary disability benefits from February 12, 2002, through September 26, 2002, they did not issue payment for such benefits prior to or at the time of the hearing.^[3]  Under Minn. Stat. ' 176.221, payment for the temporary total disability benefits was due within 14 days of receipt of the IME report, or by June 7, 2004, see Borgan v. Bob Hegland, Inc., slip op. (W.C.C.A. July 8, 2004), and we find no basis under the statute to deny a penalty where, as here, there has been a failure to pay within 14 days of receipt of Dr. Segal=s report.^[4]  For this reason, we conclude that a penalty is owed for the delay in payment after June 7, 2004.  We therefore reverse the compensation judge=s denial of penalties against the employer and insurer for delay in payment after receipt of Dr. Segal=s report.  We  remand this matter to the compensation judge for determination of the amount of penalty owed between June 7, 2004, and the date that benefits ultimately were paid.

 

Citing to McDowell v. Parsons Elec. Co., 62 W.C.D. 434 (W.C.C.A. 2002), the employer and insurer argue that no legal basis exists for an award of penalties to the employee=s heirs.  We recognize that in McDowell, this court held that an employee=s heirs do not have a statutory basis or standing to assert a claim to penalties.  Upon further consideration, however, we conclude a deceased employee=s heirs may assert a claim for penalties.

 

The McDowell decision, we now conclude, draws an artificial legal distinction between heirs and employees solely on the basis that a penalty is not a benefit specifically enumerated in Minn. Stat. ' 176.021, subd. 3.  We note that neither interest under section 176.221, subdivision 7, nor attorney fee reimbursement under section 176.081, subdivision 7, is specifically enumerated in Minn. Stat. ' 176.021, subd. 3.  Nor are penalties, interest or attorney fee reimbursement specifically contained in Minn. Stat. ' 176.111 which specifies the benefits to which dependents are entitled.  Arguably, under McDowell, all such claims are barred because they are not specifically enumerated in the respective statute.^[5]

 

Minn. Stat. ' 176.225, subd. 1, provides that when an employer or insurer engages in certain specified misconduct, Aa compensation judge, or upon appeal, the court of appeals or the supreme court shall award compensation@ (emphasis added).  Thus, the statute is mandatory and requires the imposition of a penalty when an employer or insurer has engaged in certain prohibited practices.  In Brown v. Northern States Power Co., slip op. (W.C.C.A. Aug. 31, 1999), this court held the obligation to pay medical expenses incurred on behalf of an employee who died is required by Minn. Stat. ' 176.135 and need not be specifically referenced in Minn. Stat. ' 176.021, subd. 3.  Upon further reflection, we now conclude the same principle must apply to a penalty.  An employer or insurer=s  obligation to pay a penalty for certain misconduct is mandated by Minn. Stat. ' 176.225,  subd. 1, and need not be referenced in Minn. Stat. ' 176.021, subd. 3, to survive the employee=s death.

 

The dissent argues that a penalty claim is a separate and independent cause of action which may not be brought by the employee=s heirs in the absence of specific statutory language authorizing such a claim.  We disagree.  A claim for penalties is not a separate claim but is part of and grows out of the underlying claim for benefits.  The right of the heirs to maintain a claim for temporary total disability benefits carries with it a right to maintain a claim for penalties when, as here, the employer and insurer fail to comply with the statute in the payment of temporary total disability benefits.

 

The purpose of Minn. Stat. ' 176.225, subd. 1, is to facilitate the prompt and expedient resolution of disputes and payment of claims.  This is good policy whether the claim is one asserted by the employee or his heirs or dependents.  The efficient administration of the workers= compensation system is best served by holding an employer and insurer to the standards of Minn. Stat. ' 176.225 in all cases.  For these reasons and policy considerations, the court overrules its decision in McDowell.

 

 

DISSENTING OPINION

 

WILLIAM R. PEDERSON, Judge

 

I respectfully dissent.  I find no statutory authority for an award of penalties to an employee=s heirs, especially under the circumstances of this case.  Therefore, I would not remand this matter to the compensation judge for additional findings.

 

One issue potentially raised by the majority=s remand to the compensation judge is whether an employee=s penalty claim may survive the employee=s death.  The repeated pronouncement of early cases addressing the survivability of an employee=s workers= compensation claim was that, in the absence of any statutory provision authorizing distribution of benefits to dependents or heirs, the death of the employee terminated all rights to compensation that accrue thereafter.  Tierney v. Tierney & Co., 176 Minn. 464, 223 N.W. 773, 5 W.C.D. 185 (1929); Umbreit v. Quality Tool Co., 302 Minn. 376, 225 N.W.2d 10, 27 W.C.D. 688 (1975); Rozales v. Peerless Welder, Inc., 311 Minn. 6, 246 N.W.2d 851, 29 W.C.D. 176 (1976); Mattson v. Prospect Foundry, 255 N.W.2d 381, 29 W.C.D. 591 (Minn. 1977); Lackics v. Lane Bryant Dep't Store, 263 N.W.2d 608, 30 W.C.D. 264 (Minn. 1978).  By 1981, Minnesota Statutes ' 176.021, subdivision 3, had essentially come to allow an employee=s claim for temporary total, temporary partial, permanent total, and permanent partial disability benefits to survive the employee=s death, with potential payment to the employee=s dependents or legal heirs.  The statute does not, however, address the survival of an employee=s claim for penalties.  Given the statutory and case law history on the issue, I find no grounds to confer upon heirs and dependents the right to benefits not expressly authorized by the legislature.  Perhaps more importantly, even if the statute might be read to imply the survivability of an employee=s penalty claim - - and this is doubtful - - the conduct giving rise to the penalty claim that is the subject of the majority=s remand took place about six months after the employee=s death.  Thus, what the majority is saying is that heirs and dependents have a totally independent right to seek penalties, even if the employee did not do so or could not have done so. There is simply no legal basis for such a claim under the statute, regardless of the question of survivability.

 

Because I believe the employee=s claim for penalties terminated at his death, and because I find no statutory authority allowing the heirs or dependents of the employee to advance either the employee=s claim or to assert their own independent claim, I would affirm the decision of the compensation judge.

 

 

CONCURRING OPINION

 

DEBRA A. WILSON, Judge

 

I concur with the dissenting opinion of Judge William R. Pederson.