Maine Employers' Mutual Ins. Co.
v. D'Andrea-Tripp
Kenn.Sup. AP-03-29, 03/25/2004
MARDEN
Further findings of fact are not automatically waived if an appellant fails to request them on appeal.
Where hearing officer failed to make specific findings regarding fraud or intentional misrepresentation, he failed to articulate a basis for a penalty assessment.
Hearing officer abused his discretion in not ordering repayment of benefits, or explaining failure to do so, where officer found intentional misrepresentation and assessed the maximum penalty.
The Board assessed a penalty against an employee for intentional misrepresentation, but did not order the employee to repay the compensation paid. The insurer, Maine Employers' Mutual Insurance Company (MEMIC), appealed for repayment as well.
The employee suffered a compensable injury in 1996, for which she received benefits until 2001. The employer then filed a §360 petition for fraud and misrepresentation on the ground that, at the time of the injury, the employee had failed to reveal her extensive history of preexisting back problems to her treating physicians, though she did to her physical therapist. The Chief Hearing Officer found the employee guilty of intentional misrepresentation and fined her $1,000, but did not order her to repay benefits. The insurer, MEMIC, filed a petition for review of final agency action for legal error, abuse of discretion, lack of evidence, and insufficient findings.
The court observed that it must uphold agency decisions if supported by competent, substantial evidence, even if a different result can be found, as it should "not attempt to second-guess the agency on matters falling within its realm of expertise, "Imagineering v. Superintendent of Ins. (593 A.2d 1050, Me.1991). The petitioner has the burden of proving a lack of evidence. The court gives great deference, in particular, to an agency's interpretation of its own statutes. The court first addressed the insurer's assertion that the Board did not make sufficient findings for meaningful review. In particular, while the Board established that the employee's failure to disclose her preexisting problems was not truthful, it then failed to make a specific finding of fraud. The employee responded that the insurer waived this argument by not filing a motion for findings of fact and conclusions of law, and absent such findings, the court must assume that the hearing officer understood and applied the law correctly.
The employee also asserted that the Board's findings were sufficient for review because the standards for misrepresentation are not nearly as high as those for fraud. Meanwhile, the Board denoted factors-such as that the work injury exacerbated a preexisting injury and the employee's substance abuse history-to support finding misrepresentation rather than fraud.
The court responded that further findings of fact are not automatically waived if an appellant fails to request them on appeal. It then concluded that the hearing officer had failed to make any specific findings regarding fraud or intentional misrepresentation; therefore, the decision failed to articulate a basis for the officer's penalty assessment. The court implied that such conclusions were especially needed where the employee's testimony was inconsistent and contradicted medical evidence. On remand, the Board was to make such findings.
The court next addressed the significance of the employee's preexisting history. The hearing officer had found that the employee's disclosure of her preexisting pain to a physical therapist was a mitigating factor to finding fraud or misrepresentation, but the insurer asserted that it had no knowledge of this disclosure before it began making payments. The employee argued that the existence of a preexisting condition was not central to determining her entitlement to benefits.
Justice Marden stated that the existence of a preexisting injury is crucial to workers' comp cases in two regards. First, it affects the diagnosis and treatment, which may be charged to the insurer. Secondly, preexisting conditions are compensable if employment aggravated them significantly. The court then concluded that the hearing officer abused his discretion in not ordering repayment of benefits, or explaining why it would not do so, when it had found intentional misrepresentation and assessed the maximum penalty. The explication of some mitigating factors did not justify the failure to order repayment, the court stated. Meanwhile, the hearing officer's decision failed to properly address whether or not the employee committed fraud, which the court considered a possibility.
On remand, the hearing officer was to determine any effect of the preexisting injury on the level of benefits and whether or not the employee committed fraud.
Knapp v. Maine WC Board
Cum.Sup. AP-02-72, 06/25/2004
HUMPHREY
Hearing officers are authorized to hold full hearings on abuse allegations. Court upheld hearing officer's refusal to assess penalties against employer for abuse, where employee failed to meet her burden of proving fraud or misrepresentation.
The court affirmed that the employer had not committed fraud. Following a 1993 fall at work, the employee was awarded closed-end benefits in 1977 (adjusted in 1999). The Law court declined to hear her appeal for ongoing benefits. Subsequently, the employee petitioned the Workers' Compensation Board on the ground of fraud. She alleged that, during a Board hearing, her employer had lied about her average weekly wage. The Abuse Investigation Unit referred the matter to a hearing officer pursuant to §360(2), which provides penalties for fraud or misrepresentation during the compensation process.
The employee raised four potential instances of fraudulent misrepresentation by the employer regarding: (1) The amount of preinjury earnings; (2) The employer's reasons for firing the employee; (3) The amount of vocational counseling and rehabilitation the employee had received; and (4) The employer's payment of medical bills. The employee also questioned whether the employer's actions as a whole constituted fraud. The issue of whether the employer improperly referred to a §207 exam as an independent medical examination (IME) was later added. The hearing officer denied all these claims.
The employee appealed several issues to the Superior Court. The court first stated that it must uphold Board decisions if supported by competent evidence and not legally erroneous. Following this standard, the court upheld the hearing officer's refusal to assess penalties against the employer, agreeing that the employee had not met her burden of proof on any issues.
The first issue was the employee's complaint that the insurer misled her by referring to a §207 examination as an IME, which would make it binding under §312. The court agreed that the employee failed to show this was a false representation because, while the insurer referred to it as an "independent medical examination," it also made it clear that the exam was being performed under §207 and at the insurer's request. Furthermore, both parties agreed on the doctor.
Additionally, the Board had not established a list of §312 examiners by the time of this exam, thus it could not fall under §312. Finally, the employee did not rely on the exam to her detriment, and a petitioner must show such injury for a misrepresentation to be actionable.
The court next affirmed that it was not fraudulent for the employer to have stated that the employee could earn $27,000 a year, which the employee claims reduced her benefits as she was not making that much. The employer, however, testified that she could make this amount only by working 50 hours per week, while the record showed that she had never worked that many hours, thus clarifying the $27,000 figure. The court also rejected the employee's argument to divide $27,000 by 52 weeks, as she had not worked 200 days prior to her injury, as required by §102(4)(A). Using the number of weeks worked would have also reduced her AWW, as she only worked three days for the employer preinjury.
The court next found no evidence that the employer misled the employee into believing that she had not been fired, in order to deny her a §218 discrimination remedy. Moreover, the employee could seek §218 remedies whether she was laid off or fired; thus she could not have relied on such a misrepresentation to her detriment. The court also found that the employer did not commit fraud or misrepresentation when it agreed to pay medical bills up until mediation and did so, but did not meet the employee's expectations of when the payments would be made.
The court also denied the allegations of fraud overall. It found no evidence of misconduct by the insurer other than a one-time fine assessed for failure to pay interest on payments.
Finally, the court rejected the employee's argument that once the Abuse Unit made the legal determination of fraud, the hearing officer was restricted to deciding whether facts alleged by the employee were true. Instead, under §360(2), hearing officers are authorized to hold full hearings on abuse allegations.
Combined Management, Inc. v. Maine Employers' Mutual Ins. Co. Ken.Sup. AP-03-40/44, 06/25/2004 STUDSTRUP
Court upholds Superintendent of Insurance's finding of violations and assessment of penalties against insurer on numerous grounds.
Where leasing company obtained 90 comp policies for 90 clients, insurer found guilty of policy violations not required to be assessed 90 separate penalties.
The court upheld a decision by the Superintendent of Insurance that assessed a penalty against the insurer for its underwriting methods.
Combined Management, Inc., an employee leasing company with 90 client companies, obtained 90 compensation insurance policies through Maine Employers' Mutual Insurance Company. After making an advance quarterly payment of $250,721.75, CMI switched to another carrier. MEMIC billed CMI an additional $82,859.25, based on pro rata coverage. CMI objected to the bill and initiated a hearing with the Superintendent of Insurance. At the hearing, estimates of the premium due MEMIC ranged from $82,000 to $150,000-plus, or even an estimated $35,940 that MEMIC owed CMI. The Superintendent could only approve or reverse MEMIC's assessment, not calculate it himself.
The Superintendent found MEMIC at fault on several grounds: (1) For performing insufficient underwriting of CMI's lessees; (2) For willfully failing or refusing to apply its rating system to these lessees; and (3) For willfully failing to apply credits available to other insureds. The Superintendent further "estopped" MEMIC from applying more than the 13.3% discount it originally gave CMI.
The Superintendent ordered MEMIC to pay a $3,000 penalty and to file a de novo underwriting report for CMI. That report calculated CMI's final bill as $60,607. CMI responded that MEMIC owed CMI $67.924.25, but the Superintendent approved the final bill. Both parties filed petitions for review, which were consolidated in this case. The court upheld the Superintendent's ruling, rejecting several grounds for appeal.
First, the court found no abuse of discretion when the Superintendent denied CMI's request for documents concerning loss control, where the request was four months late and it involved information deemed "marginal" in the underwriting process.
Secondly, the court ruled that MEMIC had completed its final premium audit within the proscribed 120-day period, and the de novo calculation after that period did not negate that. Furthermore, it was the parties' inability to resolve the dispute that dragged out the case-and the final calculation-for 10 months. While CMI asserted that there were not enough findings to support the final premium, the court noted that the record in the case filled 15 binders and the final decision was 17 pages long.
Thirdly, CMI argued that as the insurance regulations prescribe a penalty "for each violation," MEMIC should have been charged 90 penalties, one for each CMI client. However, as the court explained, the Superintendent ordered a penalty for "violations," not just a single violation. Furthermore, as the statute caps the penalty for nonwillful violations at $1,000, by assessing a $3,000 penalty, the Superintendent clearly intended to cover multiple violations.
The court next rejected CMI's argument for payment of attorney's fees under common law, because under the prevailing American rule, parties pay their own fees, unless a statute designates otherwise.
The court agreed with MEMIC that the Superintendent did not have estoppel power to hold MEMIC to a particular discount rate. However, as the Superintendent's overall analysis was correct, his use of the term "estopped" was harmless error. The court also agreed with MEMIC that the rule for capping premium adjustments can be interpreted to apply to the aggregate amount rather than to each client. However, as MEMIC provided no authority for its position, the court deferred to the agency's interpretation.
Finally, MEMIC argued that no civil penalties should have been applied, because they apply only to rate cases. The court responded that the Superintendent relied on a host of insurance provisions. Moreover, MEMIC's violations ultimately related to its rating system.
