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Employment Blog

Fairly Debatable IME Report Defeats Bad Faith Claim in Worker’s Compensation

Authored by Russell W. Wilson
Posted on July 6, 2015
Filed under Employment

This scenario in worker’s compensation is familiar.  A worker has a pre-existing, degenerating, and progressively deteriorating condition, in this case an old injury to his knee.  Later, there’s an accident at work, shortly after which, knee surgery is required.  The treating physician believes the work-injury necessitated the surgery and permanent partial disability.  The independent medical examiner, however, opines the work injury caused only a sprain, a temporary injury that did not necessitate surgery or its attendant permanent partial disability.  Acting in accordance with the IME examiner’s opinion, the worker’s compensation carrier pays temporary total disability benefits from the date of the injury until the IME report was received.  The case goes to hearing, and the administrative law judge (“ALJ”) and the Labor and Industry Review Commission (“LIRC”) choose to adopt the opinion of the treating physician and award the cost for the surgery, temporary total disability through the post-surgical healing period, and permanent partial disability benefits.  A not uncommon course of events.

The employee now claims, however, the carrier acted in bad faith by having terminated on-going indemnity and medical benefits and forcing the case to hearing.  The employee’s argument is that where the employee undergoes treatment in good faith for a work-related injury, the employer and carrier are liable for the consequence of treatment even if it is later determined the treatment was not necessary.  That argument is premised on the holding from Spencer v. DILHR, a Wisconsin Supreme Court case decided in 1972.  The ALJ adopts the employee’s argument and awards $30,000, the maximum penalty for bad faith under Wis. Stat. § 102.18(1)(bp).  The LIRC, however, reverses the ALJ’s award, noting the carrier’s IME report was “fairly debatable.”  While the IME report was not believed, it could have been believed.

This was the situation presented to the Wisconsin Court of Appeals in Coe v. Labor and Industry Review Commission, 2015 WL 3949147, an unpublished decision issued June 30, 2015. The court of appeals made two important points in denying the claim for bad faith.  First, it accorded great weight deference to LIRC’s legal conclusion that existing law does not support the employee’s argument.  Second, the court of appeals observed that the rule in Spencer applies only to cases in which there was an undisputed compensable injury.  Here, however, the IME report put into dispute whether the work-related injury had run its temporary course a few weeks later and whether the need for surgery was unrelated to the work injury.  The court of appeals thus held that the carrier had a reasonable basis on which to deny benefits and force the case to hearing.  While an unpublished decision cannot be cited in court as precedent, the Coe case is nonetheless reassuring because it puts the court of appeals’ approval on common claims handling practice.