Williams v. Rush Masonry, Inc.Williams v. Rush Masonry, Inc.
LEMMON, Justice.*
In this workers’ compensation action, the lower courts determined that plaintiff had injured his back while lifting materials on his employer‘s job site and had been disabled for approximately four months. We granted certiorari for the limited purpose of determining the correctness of the awards by the lower courts of penalties and attorney‘s fees based on the employer‘s discontinuance of benefits after three weekly compensation payments. Because we conclude that the employer was not arbitrary and capricious or without probable cause in discontinuing the payment of benefits, we reverse the awards of penalties and attorney‘s fees.
Facts
Plaintiff had worked for defendant as a laborer and mason tender for approximately four years before the incident at issue. Within minutes of reporting to work on the morning of June 12, 1996, plaintiff told his foreman that his back was hurting. The foreman suggested to plaintiff that drinking too many cold drinks sometimes causes back pain, but plaintiff did not at that time specifically mention that he had injured his back on the job that same morning. When the foreman offered plaintiff a back support belt, plaintiff said he was unable to continue working and went home. Plaintiff also was unable to work his second job in the dish room of a restaurant that evening.
The next day, plaintiff called the employer and asked for a physician referral, stating that he been hurt on the job the previous day.
On June 16, plaintiff consulted a physician, who wrote in his notes that plaintiff stated he injured himself at work while lifting heavy angle irons.1 The initial medical examination revealed a soft-tissue injury, for which the doctor prescribed medication and physical therapy. The doctor further advised plaintiff not to work for the time being.
In late June, the employer paid plaintiff‘s medical bills and three weeks of workers’ compensation benefits. On July
At trial, the foreman and the supervisor on plaintiff‘s job testified, consistently with their statements taken on June 21 (nine days after the initial incident), that plaintiff did not lift any angle iron on the day of the incident. The foreman asserted that he and another employee moved the angle iron while plaintiff was standing behind them.
The workers’ compensation judge, accepting plaintiff‘s testimony, found that plaintiff sustained a compensable injury on June 12, 1996 and was disabled from that date through September, 1996. Accordingly, the judge awarded temporary total disability benefits for that period, along with medical and travel expenses. Because of the employer‘s discontinuance of benefits and refusal to pay medical expenses while plaintiff was “still disabled,” the judge also awarded plaintiff statutory penalties, as well as attorney‘s fees of $8,450.
The court of appeal affirmed the award of benefits in an unpublished opinion, finding no manifest error in the workers’ compensation judge‘s credibility determinations. The court also affirmed the awards of penalties and attorney‘s fees, but reduced the fee award from $8,450 to $5,625. The court of appeal then added $1,500 in attorney‘s fees for the appeal, as requested in plaintiff‘s answer to the employer‘s appeal.
This court granted certiorari solely to address the issue of penalties and attorney‘s fees.3 98-2271 (La. 11/25/98), 729 So.2d 580.
Penalties and Attorney‘s Fees in Workers’ Compensation Actions
This court in Brown v. Texas-LA Cartage, Inc., 98-1063 (La.12/1/98), 721 So.2d 885, traced the statutory and jurisprudential history of awards of penalties and attorney‘s fees in workers’ compensation actions. The Brown case, however, involved awards of penalties and attorney‘s fees for the employer‘s and insurer‘s failure to commence payment of compensation benefits timely, while the present case (in which the employer is self-insured) involves the employer‘s discontinuance of benefits that were commenced timely. Accordingly, at the outset of the analysis in this case, we again review the legislative changes that led up to the distinction, as to penalties and attorney‘s fees, between timely commencement of payment of compensation benefits and timely payment of continuing benefits, on the one hand, and discontinuance of such payments, on the other hand.
Prior to 1983, awards of penalties and attorney‘s fees against employers in workers’ compensation cases were governed by
The 1983 revisions also amended
Thus, as of 1983, Section 1201 set out several time periods within which an employer must commence payment of installment benefits or timely pay continuing benefits, but Section 1201.2 set a period of sixty days from the receipt of written notice for the employer to pay the amount of any claim due. Moreover, Section 1201 provided only for penalties in the event of a failure to timely commence or timely pay benefits, while Section 1201.2 provided only for attorney‘s fees in the event of a failure to timely pay any claim due or a discontinuance of payments.5 Additionally, the standard for excusing penalties under Section 1201 when the employer or insurer failed to pay installment benefits within the applicable time period was the employer‘s or insurer‘s reasonably controverting the employee‘s right to such benefits (or a condition over which the employer or insurer had no control), while the standard for awarding attorney‘s fees under Section 1201.2 was the employer‘s or insurer‘s arbitrary or capricious failure to timely pay a claim due or an arbitrary or capricious discontinuance of payment of claims due.6
There were apparent inconsistencies between Section 1201 and 1201.2 in that Section 1201 addressed the timely commencement of payment and timely continued payment of installment benefits, while Section 1201.2 addressed both timely commencement of payment and discontinuance of payment of claims due; Sections 1201 and 1201.2 provided different time periods for commencing payment of benefits; and Section 1201 provided for penalties under one standard, while Section 1201.2 provided for attorney‘s fees under a differently worded standard.
A 1995 amendment to both statutes eliminated some of the inconsistencies.
The 1995 amendment also added to Section 1201 the authorization, in addition to specified penalties, of reasonable attorney‘s fees for each disputed claim under “this Section,” which sets the time periods for commencement or continuation of benefits.7
Since the 1995 amendment, Section 1201 now generally governs the time period for commencing payment of compensation benefits and the timeliness of payment of continued benefits, as well as the time period for paying medical benefits; Section 1201 now also authorizes the award of both penalties and attorney‘s fees if payment of compensation benefits is not commenced timely, if continued benefits are not paid timely, or if medical benefits are not paid timely, unless “the claim is reasonably controverted” (or the nonpayment results from conditions over which the employer and insurer have no control); and Section 1201.2 now governs the discontinuance of payment of claims due and arising under the Act,8 with an award of attorney‘s fees authorized when the discontinuance is arbitrary, capricious or without probable cause, as well as penalties only against the insurer in limited situations.
In summary, both penalties and attorney‘s fees are now recoverable under Section 1201 F if the employer or insurer fails to commence payments of benefits timely or to pay continued installments timely (or to pay medical benefits timely) unless the claim is reasonably controverted. However, only attorney‘s fees generally are now recoverable under Section 1201.2 if the employer or insurer arbitrarily discontinues payment of benefits due.
Penalties and Attorney‘s Fees in this Case
In the present case, the self-insured employer commenced paying compensation and medical benefits, apparently in good faith,9 soon after plaintiff notified the employer he had injured his back on the job. Thus benefits were commenced timely as required by
Accordingly, the only inquiry is whether the employer acted arbitrarily, capriciously and without probable cause in discontinuing the payment of compensation and medical benefits so as to warrant imposition of attorney‘s fees under Section 1201.2. “Arbitrary and capricious behavior
Awards of penalties and attorney‘s fees in workers’ compensation are essentially penal in nature, being imposed to discourage indifference and undesirable conduct by employers and insurers. Sharbono v. Steve Lang & Son Loggers, 97-0110 (La.7/1/97), 696 So.2d 1382. Although the Workers’ Compensation Act is to be liberally construed in regard to benefits, penal statutes are to be strictly construed. See International Harvester Credit v. Seale, 518 So.2d 1039, 1041 (La. 1988).
The fact that an employer is subjectively motivated to avoid paying compensation is not determinative. Neither is the fact that an employer loses a disputed claim. Sharbono, 97-0110 at 11, 696 So.2d at 1389 (penalties and fees are never assessed automatically against the losing party); Winters v. City of Shreveport, 257 La. 245, 242 So.2d 236 (1970); Eaves v. Louisiana Cypress Lumber Co., 253 La. 741, 219 So.2d 771 (1969). On the other hand, the fact that no witnesses saw the alleged accident or that there was no immediate report of an accident by the plaintiff does not necessarily justify the denial of benefits. The employer must adequately investigate the claim, and the crucial inquiry is whether the employer had an articulable and objective reason for denying or discontinuing benefits at the time it took that action.
In the present case, the employer disputed whether plaintiff‘s injury was job-related. Though there was significant medical testimony as to the extent of his injury, the only support for plaintiff‘s claim that he sustained an injury on the job was his own testimony.
The investigator for the employer stated the following reasons for terminating benefits: (1) plaintiff did not report an accident when he initially reported backache, although the foreman suggested excessive cold drinks as a possible cause; (2) plaintiff‘s foreman and his supervisor gave statements, shortly after plaintiff notified his employer of an on-the-job accident, that the foreman moved the angle iron that day and that plaintiff did not lift any angle iron that day; and (3) plaintiff told the doctor that the angle iron weighed eighty pounds, while the foreman official averred that the iron weighed about twelve to fifteen pounds. The investigator, relying principally on statements of the two co-employees who said—“emphatically,” in the words of the workers’ compensation judge—that plaintiff had no occasion to lift any angle iron on the morning of the incident and that they had not seen him lift any angle iron, decided to contest whether the back problem was work-related.
The workers’ compensation judge decided the merits of the compensation claim on the basis of her assessment of the credibility and accuracy of the defense witnesses. The judge observed that the defense witnesses did not exclude the possibility that plaintiff might have lifted angle iron while his supervisors were not looking, noting that the witnesses disagreed about plaintiff‘s location when the angle iron was moved. Further commenting that it would have been consistent with plaintiff‘s favorable work history for him to have done a task without being instructed to do it, the judge found that plaintiff had injured himself on the job, either by lifting angle iron or in some other manner.
The worker‘s compensation judge also found, despite the emphatic statements by plaintiff‘s foreman and supervisor shortly after the incident, that the employer‘s reasons for terminating benefits were “implausible,” and she accordingly awarded penalties and attorney‘s fees.
Louisiana workers’ compensation decisions have historically and properly declined to award attorney‘s fees in cases in
The employer‘s witnesses articulated a clear and objective defense to plaintiffs claim. On the basis of the witnesses’ statements of the facts and circumstances after adequate investigation, the employer concluded that there was a reasonably objective basis for doubting whether plaintiffs injury had occurred on the job. The employer therefore did not act in an arbitrary or capricious manner by discontinuing benefits in reliance on the reasonable statements of its employees who emphatically denied that this accident occurred as plaintiff described.
Significantly, the workers’ compensation judge apparently rested her decision to award attorney‘s fees, at least in part, on the fact that the investigator had the statements of the two co-employees before commencing payment of benefits and later stopped the payments. The judge apparently viewed the payment of benefits as somehow estopping the employer from reconsidering the causation issue. Such a view would prevent an employer from giving the employee the benefit of the doubt, pending a thorough assessment of plaintiffs claim of an accident which was reported sometime after the initial report of backache. To punish an employer for initially paying benefits in the employee‘s best interest is to provide a counterproductive incentive for employers to refuse to start benefits or to hastily terminate them. Payment of initial benefits does not stop the employer from discontinuing benefits upon completion of investigation or upon reconsideration of the causation evidence, as long as there is a reasonable basis for such action.
In summary, the record establishes that the employer was not arbitrary or capricious or without probable cause in discontinuing compensation and medical benefits. The employer should not be penalized for contesting the close factual issue of the disputed occurrence of a work-related accident.
Decree
We accordingly reverse the judgments of the lower courts insofar as they awarded penalties and attorney‘s fees, and plaintiffs demands for penalties and attorney‘s fees are dismissed.