RICHARD W. OSELAND (DECEASED) BY TERRENCE OSELAND, RICHARD OSELAND, and KAREN HAYHOE, Employee/Appellant v. CROW WING CNTY. and AUTO-OWNERS INS. GROUP, Employer-Insurer/Cross-Appellants, and SPECIAL COMP. FUND.

The employee’s heirs have appealed the compensation judge’s decision as to the amount of interest owed by the insurer for an underpayment of permanent total disability benefits, the finding that the cost of obtaining a decree of descent was not a taxable cost, and the denial of a claim for penalties. The employer and insurer have cross-appealed the compensation judge’s determination of the date from which interest on the underpayment of benefits is owed. We affirm in part and reverse in part.

The employer and insurer have also filed a motion to dismiss the appeal of the employee’s heirs. We deny the motion.

The employee, Richard Oseland, sustained a work-related injury while in the employ of Crow Wing County on January 10, 1980. Auto-Owners Insurance was the insurer for the employer. Liability for the injury was accepted by the insurer and benefits were paid. The employee also received retirement benefits from his employer through the Public Employees Retirement Association (PERA). The employee was determined to be permanently and totally disabled as of July 1, 1987, as the result of his work injury. Payment of permanent total disability (PTD) benefits was initiated by Auto-Owners. Pursuant to Minn. R. 5222.0100, subp. 4, the insurer took an offset under Minn. Stat. § 176.101, subd. 4, for the employee’s PERA benefits after $25,000.00 in PTD benefits had been paid.^[1] The employee died on February 22, 2013, and PTD benefits ceased as of that date.

On August 13, 2014, the Minnesota Supreme Court issued its decisions in Ekdahl v. Indep. Sch. Dist. No. 213, 851 N.W.2d 874, 74 W.C.D. 463 (Minn. 2014) and Hartwig v. Traverse Care Ctr., 852 N.W.2d 251, 74 W.C.D. 795 (Minn. 2014). In those decisions, the court held that the offset referred to in Minn. Stat. § 176.101, subd. 4, for an employee’s receipt of “any old age and survivor’s insurance benefits” applied only to the receipt of social security benefits.

No action was taken by the Department of Labor and Industry (“DLI”) in response to these decisions until September 29, 2015, when it alerted workers’ compensation insurers that “time sensitive” correspondence would be sent out advising insurers as to DLI’s position on the application of Hartwig and Ekdahl to files in which an offset against PTD benefits had been taken. In the letter to insurers, DLI advised that its position was that Hartwig and Ekdahl applied both prospectively and retroactively to all files with dates of injury either before or after October 1, 1995. DLI stated that as a “result of these decisions, there are employees who have been underpaid PTD benefits. Also, prior supplementary benefit reimbursements to you [the insurer] have resulted in an overpayment by the Special Compensation Fund.” The Special Compensation Fund elected not to pursue collection of its overpayment at that time but reserved the right to consider recovery in the future. DLI advised insurers that it expected insurers to audit each file individually, to pay employees any underpayment of past PTD benefits, and to pay appropriate benefits going forward. Insurers were told to identify within 45 days all claimants affected by this decision.

Auto-Owners responded to DLI within two weeks, advising that it would review open files first, that many of its closed files were in storage, and that the review of its files would take longer to complete than 45 days referred to in DLI’s letter. DLI responded on October 13, 2015, that Auto-Owner’s plan was “appropriate and workable.” On November 16, 2015, Auto-Owners notified DLI that it had identified two files in which an offset no longer allowed under the Hartwig and Ekdahl decisions had been taken, and in which the employee was now deceased. Richard Oseland’s file was one of those two files. At that time, the amount of underpayment to Mr. Oseland had not been determined.

On June 16, 2016, DLI sent Auto-Owners its calculation of the amount of underpayment in Mr. Oseland’s case and of the amount of over-reimbursement of supplementary benefits Auto-Owners had received from the Special Compensation Fund. Auto-Owners notified Gail Oseland, the employee’s daughter-in-law, on July 13 and 15, 2016, that the company was reviewing DLI’s calculations to see if it agreed with those numbers. On September 7, 2016, Auto-Owners responded to DLI that its own calculation of the underpayment of permanent total disability benefits was approximately $10,000.00 less. DLI replied on September 20, 2016, agreeing with Auto-Owners’ calculations.

On September 20, 2016, Auto-Owners, contacted Terrence Oseland, one of the employee’s sons, and notified him that Auto-Owners had calculated an underpayment of approximately $159,000.00. The employee’s son was also told that Auto-Owners needed the name of the employee’s estate, the name of its personal representative, and its estate tax number and address. After no response was received, Auto-Owners sent a follow-up email on October 24, 2016, again asking for that information.

On September 28, 2016, the employee’s heirs retained an attorney to represent them in this workers’ compensation matter. A claim petition was filed on November 3, 2016, claiming an underpayment of permanent total disability benefits and interest on that amount. The employer and insurer answered, admitting an underpayment of permanent total disability benefits. The employer and insurer stated that they were willing to make payment of the underpayment upon receipt of the estate tax information, including the identity of the personal representative of the estate.

On January 31, 2017, a decree of descent was issued in Crow Wing County District Court. The decree named Richard Lee Oseland, Karen Jean Hayhoe, and Terrence Eugene Oseland as the employee’s heirs and owners of the employee’s personal property, identified as “any workers [sic] compensation benefits or claim.”

In their claim petition, the employee’s heirs, through their attorney, claimed entitlement to the amount of underpayment initially calculated by DLI, rather than the amount as later revised. After a settlement conference, the parties entered into a partial settlement in March 2017. The insurer agreed to pay the amount it had calculated as owing. The claim of the employee’s heirs for an additional payment, and for interest and penalties, remained unresolved.

The claim petition was heard by a compensation judge on August 21, 2017, and a Findings and Order was issued on October 5, 2017. The compensation judge determined that the employer and insurer had accurately calculated the amount of underpayment and that no additional payment was due. Interest was allowed on the underpayment “from the date the original benefits were owed” with the interest rate to be determined by the statute in effect at the time the benefit was to have been paid. The employee’s claim for penalties was denied. The employee’s claim for taxable costs associated with obtaining the decree of descent was denied. The employee appealed and the employer and insurer cross-appealed. The employer and insurer have also filed a motion to dismiss the employee’s appeal.

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(3). Substantial evidence supports the findings if, in the context of the entire record, “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). Where evidence conflicts or more than one inference may reasonably be drawn from the evidence, the findings are to be affirmed. Id. at 60, 37 W.C.D. at 240. Similarly, findings of fact should not be disturbed, even though the reviewing court might disagree with them, “unless they are clearly erroneous in the sense that they are manifestly contrary to the weight of evidence or not reasonably supported by the evidence as a whole.” Northern States Power Co. v. Lyon Food Prods., Inc., 304 Minn. 196, 201, 229 N.W.2d 521, 524 (1975).

A decision which rests upon the application of a statute or rule to essentially undisputed facts generally involves a question of law which the Workers’ Compensation Court of Appeals may consider de novo. Krovchuk v. Koch Oil Refinery, 48 W.C.D. 607, 608 (W.C.C.A. 1993), summarily aff’d (Minn. June 3, 1993).

Interest is payable on any payment of compensation from the due date of the compensation until payment is made. Minn. Stat. § 176.221, subd. 7. The issue before us is what date constitutes the due date of compensation in the present case.

One of the earliest cases to consider the issue of interest in workers’ compensation is Lappinen v. Union Ore Co., 224 Minn. 395, 29 N.W.2d 8, 15 W.C.D. 19 (1947). In that case, the employee had sustained an admitted work injury and had received benefits. Pursuant to the statute at that time, the employer filed a “final receipt” indicating the employee had received all benefits to which he was entitled. As was allowed under the statute, the employee filed a claim petition twelve years later seeking additional benefits from the date of the final receipt. The claimed benefits and interest were awarded in a decision by the Industrial Commission. The Minnesota Supreme Court affirmed the award of benefits but reversed the award of interest from the date of the filing of the final receipt. The court held that interest was owed from the date of the filing of the claim petition and stated in its decision, “Where the amount of a liability has not been ascertained, there is no liability for interest thereon prior to the time of its ascertainment.” Lappinen, 224 Minn. at 413, 29 N.W.2d at 20, 15 W.C.D. at 37.

Lappinen was applied by this court in Hop v. Northern States Power Co., 56 W.C.D. 73 (W.C.C.A. 1996), summarily aff’d (Minn. Jan. 7, 1997). The employee had a work injury in 1976 and had been paid benefits. A subsequent claim petition was filed in February 1993 and the compensation judge awarded wage loss benefits from 1986 to 1994. On a separate and new claim for interest, the compensation judge awarded interest from the date the claim petition was filed in 1993 and not from 1986, when the employee was found to have been eligible for benefits. The employee appealed and this court affirmed the compensation judge, noting that the employer had no notice of any wage loss claim until the claim petition was filed in 1993. Citing Lappinen, this court concluded that there was no obligation to pay benefits until the claim petition was filed, stating, “There can be no default and thus no accrual of interest until the obligation to pay is both fixed and ascertainable by the obligor.” Hop, 56 W.C.D. at 77.

A similar result was reached in Myers v. Minn. Vikings Football Club, Inc., 69 W.C.D. 367 (W.C.C.A. 2009). The employee sustained work injuries in the 1978, 1979, and 1980 football seasons. Benefits were paid in 1985 pursuant to a stipulation. Another claim for additional wage loss benefits resulting from the earlier injuries was filed in 2003. The compensation judge awarded portions of the employee’s claims with interest from the date the claim petition was filed in 2003. The employee appealed to this court, arguing that interest was owed from the date the employer was aware of the employee’s injuries. This court affirmed the compensation judge and, in citing Hop and Lappinen, stated “there can be…no accrual of interest until the obligation to pay is both fixed and ascertainable by the obligor.” Id. at 376.

More recently, this court decided Fishback v. Am. Steel & Indus. Supply, 77 W.C.D. 269 (W.C.C.A. 2017). The insurer had not paid dependency benefits because it did not have the information necessary to make full payment. However, because the insurer had sufficient information that would have enabled it to make at least partial payment, this court held that partial payment should have been made, and since the amount of the underpayment was ascertainable, interest was due on the underpaid amount.

We read these cases to establish three criteria for determining when interest is due: 1) the employer and/or insurer must be aware of the claim for benefits; 2) there must be an obligation to pay benefits; and 3) the amount of the benefits owed must be “fixed and ascertainable.”

Under the present circumstances, there are a number of possible due dates. The earliest possible due date is the date the initial offset was taken by the insurer in 1987. A second possible due date is August 13, 2014, the date the supreme court decided Hartwig and Ekdahl. A third possible due date is February 13, 2017, when Auto-Owners received the decree of descent issued by Crow Wing County, identifying the persons to whom the underpayment of benefits should be paid. The fourth and final possible due date is the date set forth in Minn. Stat. § 176.1292.

The compensation judge concluded that interest is due on the withheld offset amounts going back to the dates the offsets were initially taken beginning in 1987. We disagree, as none of the criteria set out by case law are met by this possible due date. The insurer was not aware of any claim for additional benefits as no claim existed under the law at that time. The insurer had no obligation to pay additional benefits in 1987 and the amount of any potential additional benefits was not fixed and ascertainable.

With respect to the second possible due date, the date of the Hartwig and Ekdahl decisions, we are of the opinion that this is not an appropriate due date. In Hartwig and Ekdahl, the court determined that the correct interpretation of Minn. Stat. § 176.101, subd. 4, was that offsets could not be taken against PTD benefits for retirement benefits other than social security. The court’s decisions outlined what the interpretation of the statute should have been and, accordingly, a retroactive application of the decisions is appropriate. However, the decisions had complicated consequences, including, but not limited to, exactly how the amount of an underpayment should be calculated when an employee received both supplementary benefits and PTD, whether employers and insurers had been improperly reimbursed for supplementary benefits by the Special Compensation Fund, and whether assessments paid by insurers to finance those benefits for decades would have to be retroactively adjusted. While insurers were aware of potential claims at the time the court’s decisions were issued, the amount of any retroactive payment was not fixed and ascertainable in 2014.

The third possible due date is February 13, 2017, when the decree of descent was provided to the insurer, identifying the legal heirs of the employee. This was the first date the insurer had that information. As of that date, however, the amount of underpayment of PTD benefits continued to be disputed by the parties, although DLI agreed with the calculations of Auto-Owners as to the amount. Further, the issues regarding calculations and supplementary benefits that we noted as not being determined by the Hartwig and Ekdahl decisions remained unanswered.

The last possible due date is the date set forth in Minn. Stat. § 176.1292. It is a basic tenet of workers’ compensation law that workers’ compensation is a creature of statute. Miels by Miels v. Northwestern Bell, 355 N.W.2d 710, 37 W.C.D. 164 (Minn. 1984). The obligation of an employer to pay compensation to an injured worker, or in this case, the injured worker’s heirs, and the amount of that compensation, is also statutory. Minn. Stat. § 176.1292 provides that an insurer or other payer of PTD benefits is excused from “amounts owed to the Special Compensation Fund” if the payer complies with a number of requirements. In the case of a deceased employee, to comply with the statute, a payer must pay to the employee’s dependents or legal heirs the amounts by which PTD benefits were underpaid. Minn. Stat. § 176.1292, subd. 2(d)(3). That payment is to be made “no later than 270 days following May 30, 2017.” We conclude that the statute set the obligation to pay the underpayments pursuant to Hartwig and Ekdahl and that the statute also provided for a way to determine the “fixed and ascertainable” amount of that obligation.

The statutory due date in this case is 270 days from May 30, 2017. Since Auto-Owners made payment to the employee’s heirs well within that date, no interest is owed. The compensation judge’s determination on this issue is reversed.^[2]

The appellant argues that the compensation judge erred in failing to award the cost incurred by the employee’s heirs in hiring a lawyer and obtaining a decree of descent from Crow Wing County District Court as a taxable cost under Minn. Stat. § 176.511. The compensation judge denied this request, finding no authority in the statute for the appellant’s claim. (Finding 23.)

When benefits are owed to a deceased employee, those benefits are paid to the employee’s surviving heir or heirs. Before payment can be made, the heir or heirs must establish their legal right to receive those payments. The cost of verifying a right to inherit is a condition precedent to the receipt of benefits. Even had there been no litigation in this matter, the employee’s heirs would still have had to probate a will from the employee or obtain a decree of descent in order to receive the benefits to which the employee had been entitled.

The compensation judge’s determination on this issue is affirmed.

Penalties may be assessed against an employer or insurer on a number of possible grounds, including when there has been an unreasonable or vexatious delay in payment. Minn. Stat. § 176.225, subd. 1. The issue of whether a penalty is appropriate is a question of fact for the compensation judge. If the determination of the compensation judge is supported by substantial evidence, it is to be affirmed by this court. Carroll v. Allina Mercy Hosp., 74 W.C.D. 567 (W.C.C.A. 2014); Meyers v. K. Byte-Hibbing Mfg., 66 W.C.D. 148 (W.C.C.A. 2005).

Anisa Weldon, the workers’ compensation claims manager for Auto-Owners, testified as to her handling of this case. Based on her testimony, the compensation judge found that penalties were not warranted. While appellants argue that the evidence supported an award of penalties, the compensation judge concluded otherwise.

The compensation judge’s determination in this issue is supported by substantial evidence and is affirmed.

The employer and insurer have filed a motion to dismiss the appeal of the employee’s heirs. They contend that payments were made after the compensation judge’s decision was issued based on an agreement from the heirs’ attorney that there would be no appeal, and argue that the appeal should be dismissed on the grounds of collateral estoppel. The heirs’ attorney has not addressed the employer and insurer’s contentions, but argues this court has no jurisdiction to consider the motion.

In view of our determination on the merits of the appeal and cross-appeal, we have concluded it is unnecessary to address the issues raised in the motion. The motion is denied.

This case presents several issues. I concur with the majority where it has affirmed the compensation judge’s determinations. However, I respectfully dissent as to the majority’s decision modifying the judge’s finding regarding the date when interest is due. I would affirm the compensation judge and hold that the interest is owed to the employee from the dates of the underpayments.

Interest compensates a party who has been deprived of the ability to use their money. The insurer had use of the amount of each underpayment for the full period of underpayment, and therefore the insurer should owe interest accrued during that time. The obligation to repay each underpayment arose at the time of the underpayment, even though the insurer was unaware it had underpaid benefits until August of 2014.^[3] The insurer still had the use of the employee’s money for the entire period, to the benefit of the insurer and to the detriment of the employee.

Unlike the principle of penalties, the commencement of interest is not based on culpability. The simple interest formula applies here and requires the insurer to calculate the interest earned on the benefits from the due date. I believe the compensation judge was correct in her practical arithmetic and conclude that interest is owed to the employee from the date of each underpayment.

I concur in the majority’s decision affirming the compensation judge on her conclusion regarding the denial of penalties and the denial of taxable costs on the expense in obtaining the decree of descent. I dissent on the date interest should commence.

As this court has said in Fishback v. Am. Steel & Indus. Supply, 77 W.C.D. 269 (W.C.C.A. 2017), Myers v. Minn. Vikings Football Club, Inc., 69 W.C.D. 367 (W.C.C.A. 2009), and Hop v. Northern States Power Co., 56 W.C.D. 73 (W.C.C.A. 1996), summarily aff’d (Minn. Jan. 7, 1997), interest commences, regardless of fault, when benefits otherwise due and ascertainable are paid late.

The majority opinion outlines many of the choices of potential dates that could be held to trigger the commencement of interest. One such date, as Chief Judge Milun suggests, could be the date the additional benefits were retroactively found to be due. However, I agree with the majority that this date also should not be used here to commence the owing of interest. The use of this date, over 30 years ago, assumes the employer and insurer had any reason in 1987 to know that a higher amount of benefits were due. This employer and insurer, like every other, and like every employee, assumed benefits for permanent total disability could be offset against the receipt of non-social security retirement benefits. No one then thought a higher amount of benefits were due. As such, although PTD was due starting in 1987, and although benefits were actually paid beginning in 1987, it was only post-Ekdahl/Hartwig,^[4] that the parties learned the amounts paid were inaccurate, based on a previously unknown interpretation of the law, set out by the Ekdahl/Hartwig decisions. Until these two decisions, no one could ascertain the correct amount of the owed benefits.

Another potential date that has been suggested for the commencement of interest is the date DLI determined the effect of Ekdahl/Hartwig after the issuance of these decisions. Other dates might be when DLI notified this employer and insurer of its specific obligation to the employee’s heirs here, when the employer and insurer accepted that obligation, or when DLI and the employer and insurer agreed on an amount. All of these dates, however, ignore the basic requirement of interest. Interest does not start when a third party (DLI in this case) tells an employer and insurer of its obligation, nor when the employer and insurer agree to an amount. Interest starts when benefits are due and ascertainable, yet still not paid.

Likewise, another date interest could commence might be the date the heirs provided documentation to the insurer of the proper recipients for the back benefits. Yet, as I have repeatedly noted here, interest begins when the benefits are due and ascertainable, and still not timely paid; interest does not start when the employee (or heirs in this case) provide the payee’s names. While this documentation may have been necessary before the benefits could legally be paid, the benefits were still due before this paperwork was completed. In fact, the benefits were due since 1987.

The majority concludes the proper date for commencement of interest is provided by Minn. Stat. § 176.1292. While the legislature essentially codified the apparent post-Ekdahl/Hartwig mutual agreements between DLI, the SCF, and the insurance industry, the statute itself did not necessarily require employers and insurers to make payments to employees (or as here, the heirs of this employee). To use this date as the commencement of interest ignores the intent and language of the new statute, as it did not require the payment of benefits in this case.

Moreover, as the employer and insurer have acknowledged throughout this litigation, they admitted owing the heirs some amount of back benefits by at least November 2015, and agreed to the exact amount owed by September of 2016. Both of these events occurred before the passage of the new legislation. As such, using the date from subsequent legislation as the operative date for the beginning of interest conflicts with the very facts of this case.

After the decisions in Ekdahl/Hartwig, there may have been confusion regarding certain aspects of these decisions, including retroactive application. There may have been issues finding old files in storage, and doing complicated mathematical calculations. The insurer might not have known where to send the money. Still, as of the date of these two supreme court decisions, the amount due was ascertainable. Ascertainable means capable of being determined, even if actually determined on a different later date. The insurer had all the information it needed, at least in a technical sense, to do the math as of the date of Ekdahl/Hartwig. It could have calculated the amount, and put the money into some sort of interest bearing account – escrow – until it had greater clarity as to its own legal position on the application of Ekdahl/Hartwig, or that taken by the insurance industry as a whole, by DLI, and/or by the entire workers’ compensation bench and bar. It also could have done the same while it awaited word on the proper people to receive the back benefits check. Nevertheless, as of the date of these supreme court decisions, the insurer owed additional benefits and was capable of calculating the amounts. Perhaps there was justification on the insurer’s part in waiting on further legal clarification and in waiting for the proper descent decree before it issued a check. Yet, interest does not assume anyone is at fault. It simply pays the rightful party for the time it did not enjoy money that was clearly due and owing.

In my opinion, interest on the back benefits begins on August 13, 2014, the date of the Ekdahl/Hartwig decisions. I would affirm the compensation judge’s finding regarding the rate at which such interest should be paid.