The Minnesota Department of Labor & Industry/Workers’ Compensation Division appeals the compensation judge’s denial of a penalty assessment.  We reverse and reinstate the penalty assessment.

On June 5, 2006, Steinbrecher Painting, Inc., the employer, received notice from Garrett M. Marshall, the employee, claiming an injury to his right arm and shoulder arising out of his employment.  A first report of injury was prepared on that date and forwarded to Meadowbrook Claims Services, the workers’ compensation claims administrator.  The investigation of the claim was assigned to a claims representative, Cheryl Anderberg, who then called the employee and was told he injured his right arm and shoulder picking up a paint bucket.  The employee also told Ms. Anderberg he had prior shoulder injuries resulting in two surgeries with ongoing symptoms for which he treated periodically.  Ms. Anderberg then sent the employee an Injured Worker Questionnaire which the employee completed, dated June 8, 2006, and faxed to the insurer that same day.  On June 12, 2006, Ms. Anderberg prepared a form entitled Notice of Insurer’s Primary Liability Determination (NOPLD) in which the insurer denied primary liability for the employee’s claimed injury.  The form requires a reason for the denial which stated:

In response to the NOPLD, Marion Halvorson, a compliance officer with the department, sent a letter to the insurer dated August 9, 2006, stating the denial of primary liability failed to meet the specificity requirements of Minn. Stat. § 176.84, subd. 1, and Minn. R. 5220.2570, subp. 2.  Ms. Halvorson requested that the insurer

On September 20, 2006, the department issued a Notice of Penalty Assessment assessing a $500.00 penalty against the insurer pursuant to Minn. Stat. § 176.84, subd. 2, and Minn. R. 5220.2570, subp. 11.  The employer and insurer filed an Objection to Penalty Assessment which was heard by a compensation judge on May 31, 2007.  The compensation judge served and filed a Findings and Order on June 4, 2007, denying the penalty assessed against the insurer.  The department appealed.  In a decision served and filed October 31, 2007, this court vacated the compensation judge’s findings and order on procedural grounds and remanded the case to the compensation judge.  On March 7, 2008, the compensation judge served and filed an Order on Remand again denying the penalty assessment against the employer and insurer.  The department again appeals.

The department contends the insurer’s NOPLD was a mere recitation of facts insufficient to meet the statutory requirements for a Notice of Denial of Liability.  In addition to facts, the appellant contends a specific legal defense or a reason for the denial must also be set forth in the NOPLD.  To only set forth facts without clearly specifying the legal reason for the denial, the department argues, is insufficient to explain to the employee the reason the claim is being denied. Accordingly, the department contends the compensation judge’s denial of the penalty assessment was legally erroneous.

Minn. Stat. § 176.221, subd. 1, provides that “[a] notice of denial of liability must state in detail the facts forming the basis for the denial and specific reasons explaining why the claimed injury or occupational disease was determined not to be within the course and scope of employment.”  Minn. Stat. § 176.84, subd. 1, provides that “[n]otices of discontinuance 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.”  Minn. Rule 5220.2570, subp. 2.E., requires that a denial of liability include “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.”

In Seller v. Dura Supreme, Inc., No. WC07-243 (W.C.C.A. Feb. 25, 2008), this court stated the specificity requirements of the above cited statutes and rule are for the benefit of the injured worker.  This court went on to state that an NOPLD “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.”  We conclude the denial here filed by the insurer fails to do so.

The first statement in the NOPLD is that the insurer is denying liability because the claim does not arise out of and in the course and scope of employment.  Minn. Rule 5220.2570, subp. 2.E., requires a specific reason for the denial.  The rule specifically states that “[a] denial which states only that the injury did not arise out of and in the course and scope of employment . . . is not specific within the meaning of this item.”  Accordingly, the first sentence of the denial is insufficient to meet the requirements of the statutes and the rule.

The principal bases for the insurer’s denial of primary liability are three factual statements in the NOPLD.  The first statement is that the employee had a prior medical condition of the right arm and shoulder for which he had multiple surgeries and the second is that the employee stated he had continued pain complaints off and on since the surgeries.  These statements, while factually accurate, do not provide a legal basis for the insurer’s denial.  As this court noted in the Seller case, it is a basic tenet of workers’ compensation law that a work injury need not be the sole cause of disability.  Rather, if the employee’s work substantially aggravates, accelerates or combines with a pre-existing condition to produce a disability, the entire condition is compensable.  Vanda v. Minnesota Mining & Mfg. Co., 218 N.W.2d, 458, 27 W.C.D. 379 (Minn. 1974).  Thus, while both of the these factual statements may be accurate, neither constitutes a legal defense to the employee’s claim.

The third factual statement in the insurer’s NOPLD was that the witness listed on the first report of injury did not actually witness the alleged incident.  Again, while this statement may be accurate, it does not constitute a defense to the employee’s claim.  There is no requirement that an injury be witnessed in order to be compensable.

The statements in the insurer’s NOPLD are not sufficiently specific to convey clearly,  without further inquiry, the basis for insurer’s denial of the employee’s claim.  Accordingly, the decision of the compensation judge is reversed, and the department’s penalty assessment is reinstated.