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I recently wrote about the Iowa Supreme Court's October 5, 2007 decision in City of Madrid v. Blasnitz. In my October 9th article, I explained my perception of the Iowa Supreme Court's recent penalty benefit decision and its potential impact on worker's compensation cases in Iowa.
Then, on October 11, 2007, I received a decision from the Iowa Workers' Compensation Commissioner in a case in which I am defending an employer and insurance carrier in a claim for post-hearing penalty benefits, which challenges my interpretation and understanding of Blasnitz. In his Millenkamp Appeal Decision, the Iowa Workers' Compensation Commissioner penalizes my clients for withholding payment of disputed weekly benefits during a period of time in which my clients were seeking an intra-agency appeal.
I write this article not in an attempt to complain about the Commissioner's decision or to express "sour grapes." Instead, I have concerns about the practical ramifications of this decision and offer my humble suggestions to employers, insurance carriers, and defense counsel facing a scenario in which they receive an Arbitration Decision they desire to appeal.
The legal standard established by the Workers' Compensation Commisisoner in Millenkamp requires that the employer be able to prove that it has a reasonable expectation of reversal by the Commissioner. It is apparently not sufficient for the employer to rely upon the underlying contrary evidence and to attempt to convince the Commissioner to reverse the Arbitration Decision. Instead, if an employer desire to appeal to the Commissioner without paying the accrued benefits and ongoing benefits through the date of the Commissioner's Appeal Decision, the employer must somehow be able to prove a reasonable expectation of reversal.
In the Millenkamp case, my clients introduced copies of prior agency decisions in which the Commissioner did reverse Arbitration Decisions both as a result of different analysis pertaining to medical opinions as well as on credibility grounds for lay witnesses. My clients also cited Iowa appellate cases in which the Commissioner had reversed and that reversal was affirmed. Accordingly, it is apparently insufficient to prove that the Commissioner can and does reverse Arbitration Decision. Instead, the employer is going to be required to produce some other evidence to establish a reasonable expectation of reversal.
In my mind, this standard is almost impossible. Unless the Commissioner actually reverses the Arbitration Decision on appeal, it will be virtually impossible to prove that there was a reasonable expectation of reversal on appeal. The only practical advice I have if you find yourself in this situation is to perhaps retain the services of a defense attorney as a expert witenss. Then, as the employer, perhaps it is sufficient to have that attorney review the record anew and opine that there is a reasonable expectation of reversal by the Commissioner. At least this would provide some basis or evidence to be introduced into a post-hearing penalty claim. In my judgment, this type of evidence is prohibited or at least unnecessary under the holding of the Iowa Supreme Court in City of Blasnitz v. Madrid. Yet, from a practical standpoint, employers cannot sit back and simply assume that the Millenkamp standard will be reversed on appeal.
Of course, there is no guarantee that the proposed expert evidence will be admitted or ultimately prevail. Therefore, any employer who receives an adverse Arbitration Decision should now ponder whether it should/must pay the accrued benefits unless and until the Commissioner reverses the decision.
The one drawback or significant detriment to payment of the Arbitration Decision is that any payments made are likely forfeited. Iowa Code section 85.34(5) precludes an employer from seeking reimbursement of any overpayments. In other words, if an employer attempts to acknowledge the Millenkamp case and voluntarily pays accrued benefits during the appellate process, that employer essentially forfeits those benefits even if the employer ultimately prevails on appeal.
This leaves employers in a quandary. The employer will either be forced to pay the accrued benefits and waive any entitlement to reimbursement of those even if they were never owed. Or, the employer can appeal the decision, decline to pay the benefits, and pay a likely 50% penalty on all accrued benefits if the Commissioner does not reverse the decison on appeal. It seems to me that the employer is being penalized under either scenario.
Moreover, I have concerns about the case in which all benefits are accrued as of the date of the Arbitration Hearing. In other words, all benefits would be immediately payable to the claimant if the Arbitration Decision is paid prior to appeal. In this scenario, if the employer pays the award, there is no practical reason to pursue the appeal. After all, even if the employer prevails on appeal, the full award will have been paid. If the award is paid, the claimant may also contend that there are no longer any viable disputes to be appealed. After all, why waste the Commissioner's time and efforts on an appeal that will have no practical effect on either of the parties' rights?
It seems to me that the Commissioner's standard and decision in Millenkamp have limited, and in many cases eliminated, an employer's right to appeal without a significant risk of incurring penalty benefits and/or bad faith claims. While the Millenkamp case may ultimately resolve this issue on appeal, employers must contemplate these issues and preserve their rights at the present time.
My humble suggestions to employers, insurance carriers, and defense counsel facing this scenario are as follows:
1. Consider the benefits and risks of appeal without payment. Appeals often take a year to be resolved. If weekly benefits are not brought current and paid throughout that year of appeal time, the employer will likely face an additional 25 weeks (or potentially more) of penalty benefits. Is this case or the amount involved sufficient to warrant the risk of the additional penalty benefits? Will the employer have sufficient risk tolerance to pursue the appeal without paying the award?
2. If the employer decides to pay the Arbitration Decision, is it worth the time and expense involved to appeal the case? Some cases are appealed on principle or as an effort to change the law. However, in many cases, appeal after payment is meaningless and the employer may as well cut their losses and forego the appeal.
3. If the employer decides to appeal and forego payment throughout the appellate process, I would recommend retention of an expert witness immediately upon making that decision (or perhaps prior to making that decision). The employer likely will not want to rely upon the opinions of trial counsel because trial counsel serves as the client's attorney and use of the trial attorney as an expert witness may waive any attorney-client privilege. Therefore, retention of a second attorney to conduct an independent review is likely necessary.
If the employer desires to appeal and wishes to forego payment, it appears that the employer will have to prove that there is a reasonable expectation of reversal by the Commissioner on appeal to justify that decision. Given the legal standard and burden of proof established in Millenkamp, I deem it important to secure a legal opinion from an Iowa attorney that handles worker's compensation cases that it is reasonable to expect a reversal of the Arbitration Decision for enumerated reasons. To date, at least to my knowledge, this approach has not been pursued to defend a post-hearing penalty claim, and it is the only manner that I can identify in which an employer can expect to prove a reasonable expectation of reversal by the Commissioner. Again, there is no guarantee that this evidence will ultimately be admitted or prevail, but the Millenkamp Appeal Decision appears to put the burden on the employer to produce some type of evidence.
4. The employer must preserve all potential error for appellate purposes. I do not proclaim to be the only attorney that can or has thought about these issues. However, I am willing to share my attempts with other defense counsel so they can preserve error in the event that my cleints ultimately prevail in the Millenkamp file.
The defendants in Millenkamp have preserved error and challenged the award of post-hearing penalty benefits on the following grounds:
a. That the reasonable expectation of reversal by the Commissioner is an incorrect legal standard;
b. That the employer had three medical opinions and admissions from the claimant, which supported their position, and that it is reasonable to rely upon that type of evidence to seek reversal by the Commissioner;
c. That the interpretation of the penalty statute requiring payment of disputed benefits during an intra-agency appeal results in a violation of statutory due process rights guaranteed by the Iowa Administrative Procedure Act (because intra-agency de novo appeal rights are being significnatly curtailed or eliminated);
d. That the interpretation and implementation of the penalty benefit statute is a violation of constitutional due process principles
e. That a stay of the Arbitration Decision is required pending the outcome of the intra-agency appeal.
I do not proclaim to have all the answers. In fact, as noted at the beginning of this article, I have been on the losing end of this issue. At least to date, the arguments I have been making have not convinced the Commissioner.
Yet, I have serious concerns about where this new agency principle and position will ultimately take us. It seems to me that the Millenkamp decision and similar recent decisions will lead to scenarios in which employers are either forced to waive their appeal rights or are forced to take significant leaps of faith in the face of some serious and stiff penalties if they lose on appeal.
This is an issue that needs resolution and perhaps that resolution will come in the Millenkamp case I am currently defending. In the meantime, I am happy to discuss this issue and the ramifications of the Millenkamp post-hearing penalty decision with interested persons, employers, carriers, and/or defense counsel. I am open for any suggestions and invite a spirited debate from all parties as to how to rectify what seems to me to be a whittling away of the employer's right to appeal.
Posted by William H. Grell on October 26, 2007 1:42 PM
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