EZELL JONES, Employee/Appellant, v. CBIZ, INC. and THE HARTFORD INS. CO., Employer-Insurer/Respondents.

The employee appeals from a decision of a compensation judge denying his claim for penalties sought under Minn. Stat. § 176.225, subds. 1 and 5.  We affirm.

The employee, Ezell Jones, was injured in the course and scope of his employment with his employer, CBIZ, Inc. on April 18, 2017.  The employee worked as an insurance salesman for the employer.  He had been an insurance representative for over 40 years, working in a variety of capacities and selling various policies to individuals and businesses.  The employee worked for a business, AIA, before AIA was purchased by CBIZ.  He had also started his own business, Fifth Quarter Enterprise, which focused on insurance services, rather than sales.

After the purchase of AIA, all CBIZ employees, including the employee, were given phones and assigned phone numbers with a 763 area code.  The employee already had another phone which he used for business and which had a 612 area code.  He used one or both phones for several years, doing business for the employer and for his own company.

The employee believed he could be more efficient with only one phone to manage.  Because of confidentiality issues, the employer could not merge both phones.  Consequently, the employee visited an AT&T store on April 17, 2018, seeking assistance to have all calls from both phones numbers routed to only one phone.  While waiting at the store, the chair on which the employee was sitting broke and he suffered an injury.

The employer neither instructed nor prohibited the employee to go to the AT&T store.  The employee was not required to accomplish this task; he did so for his own convenience and to increase efficiency in his work.

The employee reported his injury the following day and a First Report of Injury was completed.  It read that the employee was “at AT&T store to move something from personal phone to Company phone when he fell.  Possible concussion.”  (Ex. A.)

On May 1, 2017, the insurer completed a Notice of Primary Liability Determination (NOPLD), denying the claim.  The form read:

After the claim was denied, the employee retained counsel.  On May 23, 2017, the employee’s attorney spoke with the insurer’s claims adjuster, and explained that the employee was at the AT&T store to merge his two phones in order to receive all business calls on a single phone.  The next day, the employee’s attorney memorialized the conversation in a letter to the claim’s adjuster, stating:

After receiving no response, the employee’s attorney sent another letter and email on June 8, 2017.  One week later, the claims adjuster responded, “I will have my supervisor review this information to determine if our compensability decision will be adjusted.”  (Ex. E.)

After one month with no response from the insurer, the employee filed a claim petition.  An answer to the claim petition was filed, and discovery, including the employee’s deposition, was completed.^[1]

On January 8, 2018, the employee’s attorney sent a letter to the counsel for the employer and insurer referring to an email in which she suggested that the insurer was changing its position and was admitting primary liability.  This letter concludes, “I appreciate your email and your client’s decision to accept liability on this claim.  My client appreciates that, as well.”  (Ex. 3.)  On January 26, 2018, the insurer amended its NOPLD and made payments six days later.

On August 6, 2018, the employee filed another claim petition seeking penalties under Minn. Stat § 176.225, subds. 1(1), (2), and (5), and Minn. Stat. § 176.225, subd. 5.  The penalties claim came on for hearing.  The employee testified, as did an IT professional on behalf of the employer.  The claims adjuster was not called as a witness and her file was not offered as an exhibit.  Following the hearing, the compensation judge issued a Findings and Order, determining that the employer and insurer did not interpose a defense which was frivolous or for the purpose of delay, did not frivolously deny the employee’s claims, and did not unreasonably or vexatiously delay payment.  Instead, the compensation judge determined that the employer and insurer had a colorable defense that was asserted in good faith.  Consequently, the compensation judge denied the employee’s claims for penalties.  The employee appeals.

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).

The employee appeals the compensation judge’s denial of his claim for penalties sought under Minn. Stat. § 176.225, subds. 1(1), (2), and (5), and Minn. Stat. § 176.255, subd. 5.

The Workers’ Compensation Act allows for an award of up to 30 percent of the total amount of compensation if the employer and insurer has “instituted a proceeding or interposed a defense which does not present a real controversy but which is frivolous or for the purpose of delay.”  Minn. Stat § 176.225, subd. 1(1).  The Act similarly penalizes frivolous denials of claims.  Minn. Stat. § 176.225, subd. 1(5) (defining “frivolously” as “without a good faith investigation of the facts or on a basis that is clearly contrary to fact or law.”)  See also Minn. R. 5220.2570, subp. 10A (a frivolous denial is one which “does not state facts indicating that an investigation has been completed or that a good faith effort to investigate has been attempted.”)

The Workers’ Compensation Act also provides for a penalty of up to 30 percent if the employer and insurer “unreasonably or vexatiously delayed [making] payment.”  Minn. Stat. § 176.225, subd. 1(2).  It also provides for a penalty of 25 percent where the employer “is guilty of inexcusable delay in making payments.”  Minn. Stat. § 176.225, subd. 5.

The employee asserts that the employer and insurer interposed a frivolous defense prior to its change in its primary liability determination in January 2018.  He argues that the claim was obviously compensable, and that there was no basis for the denial because the claim’s adjuster conducted no investigation.  It is his position that he is entitled to penalties under subdivisions 1 and 5 of Minn. Stat. § 176.225 for a frivolous denial and resulting delay in payment.

The determination of whether a penalty should be imposed under Minn. Stat. § 176.225, is within the sound discretion of the compensation judge.  Carroll v. Allina Mercy Hosp., 74 W.C.D. 567, 578 (W.C.C.A. 2014).  Where it is alleged that an employer and insurer frivolously denied a claim, they need only raise a colorable defense to avoid penalties.  Id. at 579.  The fact that an employer and insurer do not ultimately prevail on their defense does not mean that a penalty is appropriate.  Crowley v. Plehal Blacktopping, Inc., 66 W.C.D. 135, 139 (W.C.C.A. 2006).  Instead, employers and insurers are penalized for patently ill-founded and unwarranted refusals to pay claims.  Id.

The employee argues that the employer and insurer failed to do any meaningful investigation, and further, that once the claims adjuster was provided with some basic information from the employee’s attorney, the claim should have been admitted.  While penalties may be awarded for a lack of a good faith investigation, the evidence did not establish a lack of investigation during the eight months that elapsed before the amended NOPLD was filed on January 26, 2018.

Further, as the compensation judge noted in his memorandum, this case presented a complicated set of circumstances.  The employee had two phones.  One phone was used exclusively for the purpose of work with the employer.  The other phone may have been used for work with the employer, but it was also used for other things not directly related to work with the employer.  There were technical issues relating to privacy of software on the employer-provided phone and whether information on one phone could be transferred.  These facts did not present a clear-cut case of liability for the employee’s injury.

We agree with the compensation judge that the employer and insurer had a colorable defense as to whether the employee was or was not engaged in work activities at the time of his injury.  The finding of no frivolous denial is well supported by the record.

Similarly, the compensation judge did not err in finding that the denial was not made for purposes of delay, as no evidence was offered as to the purpose of the claims adjuster’s actions.  Finally, penalties under Minn. Stat. § 176.225, subds. 1(2) and 5 are not appropriate.  There was no evidence that the insurer delayed, as defined by the statute, making payments once liability was accepted.  To the contrary, payments were made within six days of the filing of the amended NOPLD, which is well within the statutory requirement.  See Minn. Stat. § 176.221, subd. 1 (employers and insurers shall pay wage loss benefits within 14 days of acknowledgment of compensability).

We affirm the compensation judge’s denial of penalties.