Denmark appealed, asserting that the trial Court erred in failing to award him compensation for the partial loss of use of his leg as opposed to just his foot, and that it further erred in failing to award double compensation pursuant to § 25-5-34 after finding that IMS employed him in violation of child labor laws. Denmark argued that since his ankle is above his foot and the pain extended to his leg, he should be compensated for the partial loss of use of his leg. Denmark argued that the Court’s holdings in Boise Cascade Corp. v. Jackson, 997 So.2d 1026, 1032 n. 8 (Ala.Civ.App. 2000), Wolfe v. Dunlop Tire Corp., 660 So.2d 1345 (Ala.Civ.App. 2005), and Simpson v. Dallas Selma Cmty. Action Agency, 637 So.2d 1360 (1994) dictated that an injury extending from a larger scheduled member into a smaller scheduled member must be compensated as an injury to the larger member. However, the Court noted that according to § 25-5-57(a)(3)a.15 of the Act, the amputation of a leg between then knee and ankle shall be considered the equivalent of the loss of the foot. Since there was no evidence that Denmark’s pain extended up his leg beyond his knee, and based on the logic of § 25-5-57(a)(3)a.15, the trial Court properly found that Denmark’s injury was one limited to the foot, and not the leg.

However, the appellate Court reversed the trial Court’s decision regarding double compensation. There was no dispute that minors are prohibited from operating saws, and there was no dispute that moving large pieces of bar stock to put them into the saw was part of Denmark’s job. As such, the Court found that although Denmark was not actually operating the band saw at the time of the accident, Denmark was entitled to double compensation because he was working at a job that he was prohibited from doing due to his age.

While the § 25-5-51 statutory defense relieves the employer of its obligation to pay compensation benefits (indemnity and vocational benefits), the Alabama Courts have not directly addressed whether medical benefits must still be paid when the employer successfully asserts the judicially created misrepresentation defense. However, based on the judicial history of that defense, it only stands to reason that medical benefits would not be owed. To arrive at this conclusion, we need to look no further than the Court’s opinion in Ex parte Southern Energy Homes. In that case, the employer’s core argument was that the Court should extend to cases involving accidental injuries the application of the workers’ compensation statute providing that an employee who misrepresents his physical condition regarding an occupational disease is barred from recovering all benefits. That statute, which is currently codified at § 25-5-115, is clear that an employee who falsely represents to his employer that he has never been compensated for an occupational disease will be barred from recovering compensation or other benefits under the Act or at common law. The Court in Ex parte Southern Energy Homes reasoned that it would not be a usurpation of the legislature to extend this defense to accidental injury cases, since it has long been a part of the common law that fraud in the inducement is a good defense to an action on a contract by one of the contracting parties, and that workers’ compensation is founded on the contractual relationship of the employer and employee. From this, one can infer that the Court found that when the employee is guilty of fraud in the inducement to the employment relationship (i.e., misrepresents his physical condition and he would not have been hired but for the misrepresentation), the employment contract between the employer and employee is voidable by the employer. Since The Alabama Workers’ Compensation Act only applies to employers and their employees, as those terms are defined in § 25-5-1, no benefits of any kind would be owed if there is no employer-employee relationship.

This of course leads to other interesting scenarios. Notwithstanding an employee’s misrepresentation providing a defense for the employer, an employer could also assert the employee’s fraud as a counterclaim to a lawsuit against the employer or even pursue that claim as a stand-alone action. While The Alabama Workers’ Compensation Act provides that an action for benefits is to be decided by a judge, an employer can demand a jury trial on its fraud claim. Additionally, in an action for fraud, punitive damages may even be available if a jury finds that the employee acted in a willful manner with the intent to defraud the employer.

MY TWO CENTS:

When facts are discovered that support a misrepresentation defense, it is important to determine, early on, whether or not the employer relied on the fraudulent representation. Although the § 25-5-51 affirmative defense, with no reliance element, is easier to prove, the common law defense offers more potential reward.

The Court of Appeals held that there was substantial evidence from which the trial Court could find a causal connection between the work and the injury. The appellate court cited Ex parte Byrom, 895 So.2d 942 (Ala., 2004), stating that in order to recover, a claimant must ‘establish a definite causal connection between the work and the injury such that a rational mind is able to trace the resultant personal injury to a proximate cause set in motion by the employment, and not by some other agency.’ The Court noted that the walkway was used by other employees, and the two-way radio was a "required tool of Hollinghead’s work." The Court further pointed to Benoit Coal Mining Co. v. Moore, 215 Ala. 220, 222-23, 109 So. 878, 880 (1926), which held ‘the movement of the employee in entering, at the appropriate time, the employer’s premises to discharge his function and his preparation to begin....his actual service are deemed naturally related and incidental acts in the course of the employment.’

Additionally, Advantage argued that the evidence presented at trial, namely the deposition testimony of three doctors and the live testimony of Hollinghead, was insufficient to establish medical causation. In support of this argument, Advantage presented evidence that Hollinghead had suffered a neck injury several years before the alleged accident, as well as medical records indicating that Hollinghead’s pain was arthritic in nature. Quoting Ex parte McInish, 47 So. 3d 767, 779 (Ala. 2008), the Court held that ‘it is the overall substance and effect of the whole of evidence, when viewed in the full context of all the lay and expert evidence, and not in the witness’s use of any magical words or phrases, that the causation test finds its application." Additionally, the appellate Court noted that in order to establish medical causation, a claimant need not prove that the work-accident is the sole cause or even the dominant cause of the injury, but that it is sufficient to establish that it was a contributing cause. Based on this, the Court of Appeals affirmed the trial Court’s ruling.

It was further alleged that after returning to work in January of 2007, an altered gait as a result of the foot injury, and bouncing created by the use of a tractor to mow the grass for the employer resulted in the aggravation of a pre-existing degenerative low back condition. The employee also alleged that in December of 2007, while working through the pain in his back and foot, he was operating the tractor and ran over a hole causing him to experience searing pain in his low back. It was determined by the authorized treating physician, who implanted the stimulator, that the jolt from this incident caused the stimulator leads to migrate out of the epidural space preventing it from providing any pain control. The stimulator was reimplanted and the employee continued various forms of treatment but never returned to work. The authorized treating physician opined that the altered gait and traumatic jolt of the 2007 tractor accident combined to aggravate or accelerate the pre-existing degenerative disc disease. An IME was done and the opinion was given that the degenerative disc disease was natural wear and tear and neither the implantation nor the dislodging of the stimulator could have aggravated the degenerative condition. The IME doctor did agree that the 2007 tractor jolt could have aggravated the pre-existing condition.

On August 12, 2009, the employee filed a complaint seeking benefits for a September 2007 foot injury. On March 19, 2010, the employee amended the complaint asserting that the foot injury occurred on March 31, 2006 and after which he suffered an injury to his back in the latter part of 2007 or early 2008 that aggravated his preexisting degenerative disc disease. The employer answered and acknowledged the March 31, 2006 foot injury but denied notice of the second alleged occurrence causing the aggravation of the pre-existing disc disease.

The trial court ruled that the employee suffered a compensable foot injury that resulted in an altered gait and contributed to the low-back pain. The trial court further noted that the employee had a second work-related injury to his low back in December of 2007, of which the employer received notice. The trial court ruled that the employee’s pre-existing degenerative disc disease in his low back was aggravated or accelerated by the combination of the altered gait, created by the foot injury, and the traumatic jolt in December of 2007.

On appeal the employer asserted the following issues: 1. The back injury was barred by the applicable statute of limitations, 2. The finding that the employer had notice of the 2007 tractor accident was not supported by substantial evidence and 3. The back injury was a cumulative stress injury and compensable only if proven by clear and convincing evidence that it arose out of and in the course of the employment.

1. Statute of Limitations

The employer argued that the December 2007 back injury was a separate injury and did not relate back to the original complaint. Therefore, when it was asserted on March 19, 2010 for the first time the statute of limitations had run. The trial court ruled that the back injury resulted from not only the 2007 incident but also the altered gait created by the foot injury. Due to the altered gait and resulting back injury being the natural consequence of the foot injury, the back injury was not barred even though the December 2007 incident occurred more than 2 years before the claim was asserted.

The Court of Appeals ruled that while the claim seeking compensation of the 2007 incident was not timely asserted, the 2006 foot injury was also a contributing cause of the back injury. Due to evidence presented at trial establishing that the back injury was also caused by the foot injury, i.e. the altered gait, the back injury claim was not barred. The Court of Civil Appeals stated that it was immaterial that the authorized treating physician stated that had it not been for the 2007 tractor incident the rate of degenerative change would not have been the same because the altered gait only had to contribute to the aggravation or acceleration.

2. Notice

The Court of Civil Appeals agreed with the trial court on two issues dealing with notice in this matter:

(1) That by telling the workers’ compensation adjustor handling the foot injury about the 2007 tractor incident and then the surgery to reimplant the stimulator being approved as a result of the incident, there was sufficient evidence to support a finding that the employer’s representative had actual knowledge of the 2007 work related tractor incident that resulted in injury.

(2) That Alabama law supported the trial court’s finding that notice of the tractor incident was not required because the employer had notice of the foot injury and evidence supported that the altered gait, resulting from the foot injury, contributed to the aggravation of the pre-existing degenerative disc disease.

3. Burden of Proof for Cumulative Stress Injuries

The employer argued that because the employee alleged the back injury was the result of an altered gait, it was a cumulative stress disorder and subject to the clear and convincing evidence standard, which was not met. The Court of Civil Appeals agreed with this argument but stated that the burden was met. The Court of Civil Appeals pointed out that 3 witnesses testified that the employee did not have a limp (two treating physicians and the FCE evaluator) while 6 different sources of evidence supported that the employee did have a limp (the employee, 1 treating physician’s testimony, 2 treating physicians’ medical records, the employee’s supervisor and the trial court’s observations at trial). The Court of Civil Appeals stated that the trial court could have resolved the conflict by determining that the witnesses who did not see the limp only saw the plaintiff early in the day or while seated, when the limp was not present or was less pronounced.

In regards to the burden of proof and medical causation, the Court of Civil Appeals stated there was no conflict that the altered gait had developed as a natural consequence of the foot injury and was a contributing cause of the disc derangements. As a result, the Court of Civil Appeals opined that the finding was based upon evidence that would produce a firm conviction in the mind of the trial court as to each element of the claim and a high probability that the conclusion is correct, as required with the clear and convincing evidence standard.

In its appeal, Maxim relied on the holdings of three particular cases: Ex parte Southern Energy Homes, Inc., 873 So. 2d 1116 (Ala. Civ. App. 2003); Jackson Landscaping, Inc. v. Hooks, 844 So. 2d 1267 (Ala. Civ. App. 2002); and Valtex, Inc. v. Brown, 897 So. 2d 332 (Ala. Civ. App. 2004).

In its decision in Freeman, the Court noted that although the Court in Ex parte Southern Energy Homes had previously found that a worker’s testimony standing alone did not constitute substantial evidence of medical causation, the facts of Freeman were different in that the testimony of Freeman’s primary care physician established a causal link between the December 2008 accident and Freeman’s complaints of back pain. The Court also differentiated the facts in Freeman from those in Hooks by stating that in Hooks, one of the doctors testified that the workers’ back injury was not related to his on the job accident and the other doctor testified that there was a possibility that there could have been a causal relationship between the accident and the injury. In contrast, one of Freeman’s physicians testified that he could state within a reasonable degree of medical certainty that Freeman’s back pain was the result of the accident. Additionally, the Court noted that, in Hooks, the employee did not complain of back pain until almost sixteen months after the alleged accident, whereas Freeman began complaining of back pain immediately following her accident. Finally, the Court in Freeman differentiated this case from the facts of Brown, in that Brown was a non-accidental injury case where the worker was required to produce clear and convincing evidence of medical causation. The Court in Freeman held that since Freeman had established that an accident occurred, she only had to establish medical causation by a preponderance of the evidence, and that her primary care physician’s testimony, along with her own testimony, was sufficient to meet that burden of proof. Based on these findings, the Court of Appeals affirmed the trial Court’s judgment.

The employee in McDaniel lived in Louisiana but had been assigned to work in Mobile County, Alabama, to move an oil rig from one drilling site to another. The employer offered McDaniel lodging at a crew trailer at the site where the rig would be moved. On the morning of January 10, 2008, McDaniel woke up in the crew trailer and began driving to the site where the rig was being disassembled. However, along his route, McDaniel was injured in car accident. It was undisputed that the employer did not provide McDaniel with a vehicle, per diem for food, mileage, gas reimbursement, a cellphone, or any other benefits common to traveling employees. As such, the employer argued that the traveling employee exception to the coming and going rule did not apply, and therefore, McDaniel’s accident was not compensable. The trial Court agreed, but McDaniel appealed, arguing that travel was an integral part of his job and was for the benefit of his employer. The Court of Appeals held that since McDaniel was required by his employer to drive from his home in Louisiana to report to the oil rig sites in Mobile County, he was "geographically limited by the necessity of being available for work on the employer’s job site" and therefore, "encountered special hazards on the road that could be avoided were travel not a necessary component of the employment."

The Court noted that the primary reason for the distinction between a commuter and a traveling employee is that the travel undertaken by a traveling employee provides substantial benefit to both the employee and the employer. The Court further noted that in order for the traveling employee exception to apply to the coming and going rule, the activity giving rise to the injury must confer some benefit upon the employer, although the benefit need not be pecuniary, but instead may be as intangible as a well-fed and well-rested employee. Although the evidence at trial indicated that McDaniel was not required to stay in the crew trailer the night before the accident, the fact that the trailer was rented and provided by the employer at the job site indicated that the employer was deriving a substantial benefit from McDaniel staying there and then traveling to another job site. The Court further noted that there was no evidence that McDaniel was performing a special or personal errand or mission at the time of the accident, and was therefore carrying on his employer’s business at the time of the wreck. Based on these findings the Court of Appeals reversed the Trial Court’s judgment and remanded the case to the Trial Court to enter a judgment finding that McDaniel’s accident arose out of and in the course of his employment.

The U.S. Tax Court recently addressed this issue in Sherar v. IRS. Even though the decision creates no binding authority or precedent, it did contain some startling revelations involving the tax status of workers’ compensation benefits for a claimant also receiving SSDI payments. The Court ruled that the set-off amount of workers’ compensation benefits is treated as though it were a SSDI benefit and, therefore, taxable. The Court’s rationale behind the decision was the legislative intent behind the relevant portion of the tax code, which the Court determined to be "to equalize the Federal tax treatment of Social Security benefits that are received by taxpayers who may or may not be eligible to receive workers’ compensation benefits."

My Two Cents:

Part of the set-off calculation contains a threshold that the total benefits must reach before the set-off must occur. If a claimant’s settlement is structured correctly, the claimant could, in theory, avoid the set-off completely. If not, claimants currently on disability or who wish to apply for disability will have to consider the tax implications and interplay between workers’ compensation and SSDI benefits.

Released March 16, 2012

The Alabama Court of Civil Appeals addressed discovery issues in an outrage claim when it ruled on Liberty Mutual’s Petition for Writ of Mandamus seeking relief from the Trial Court’s order. The Mobile Circuit Court had directed Liberty Mutual to produce the following documents in an outrage case: 1) lawsuits filed against Liberty Mutual alleging outrage or similar claims in Alabama, Georgia, Mississippi, Florida, Texas, and Tennessee, covering the 10-year period preceding the date of the subject injury; 2) personnel files for employees handling workers’ compensation claims, including their certificates, licenses, resumes and complaints or reprimands; and 3) policy and procedure manuals related to or involving peer review.

The basis for the outrage was denial of medical treatment recommended by the authorized treating physician in violation of Alabama law related to the utilization review process. Brunson alleged that Liberty Mutual developed a scheme to deny medical treatment recommended by the authorized treating physician by selecting peer review doctors that would use Liberty Mutual’s criteria for determining medical necessity. The Court pointed out that outrage claims have failed when the denial of medical treatment is based on the carrier merely asserting their legal rights in a permissible way. Garvin v. Shewbert, 564 So. 2d 428, 431 (Ala. 1990). Based on this, the court pointed out that Brunson would first have to show that the denial of his claim, or the manner in which it was denied, did not comply with the law.

The Court of Civil Appeals ruled Liberty Mutual should only have to produce lawsuits filed in Alabama that alleged that medical benefits, otherwise payable under the Act, were denied as the result of Liberty Mutual directing the course of medical treatment through some scheme of denying treatment for lack of reasonable medical necessity using criteria other than that set out in Alabama’s utilization review statutes and administrative regulations. Since Brunson’s claim was based on compliance with Alabama law, the lawsuits in other states were irrelevant and were not reasonably calculated to lead to the discovery of admissible evidence.

The Court of Appeals also ruled that personnel files are generally deemed protected from disclosure. However, there is a "rule-of-reason" test that has been applied to "public records," i.e. records of publicly employed persons. The Court of Appeals felt that privately employed persons should be afforded at least the same level and expectation of privacy afforded under this test. Therefore, the material sought must be clearly relevant and the need for discovery must be compelling because the information is not otherwise readily obtainable. While the Court of Appeals ruled that all employees’ resumes, credentials, general training, education etc . . . were not relevant, they did require Liberty Mutual to produce certain personnel records. The Court of Appeals stated that the following personnel documents would be discoverable: any information in employees’ personnel files that handled Brunson’s claim, any information regarding any training they received to assess medical necessity or deny worker’s compensation claims in Alabama on grounds other than that set out under Alabama law, and any information they received regarding incentives or the like for furthering the alleged unlawful scheme.

The Court of Appeals also order Liberty Mutual to produce the policy and procedure manuals related to the peer review process because they could contain directions for employees to determine medical necessity in a manner other than provided by Alabama utilization-review process.

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