In the Matter of the Compensation of Hobby L. Brooks, Claimant.
TUBE SPECIALTIES - TSCO INTERNATIONAL and Travelers Insurance Company, Respondents. Hobby L. BROOKS, Petitioner,
and submitted December 12, 2017
Workers' Compensation Board 1500886;
Quinn argued the cause and fled the briefs for petitioner.
Benjamin C. Debney argued the cause and fled the brief for
Aoyagi, Presiding Judge, and Egan, Chief Judge, and DeHoog,
Or.App. 362] Case Summary: In this workers' compensation
case, insurer initially denied claimant's claim for a
right knee injury but, before hearing, rescinded the denial.
The Workers' Compensation Board subsequently issued an
order on penalties and attorney fees. The board denied
claimant's request to impose a penalty against insurer
under ORS 656.262(11), because it found that insurer had a
legitimate doubt as to its liability when it denied the
claim. The board also denied claimant's request for an
attorney fee under ORS 656.386(1)(a), on the basis that
claimant's attorney was not "instrumental" in
obtaining rescission of the denial. On review, claimant
challenges both aspects of the board's order.
Held: The board erred in failing to address the
reasonableness of insurer's pre-denial investigation, as
relevant to whether insurer had a legitimate doubt as to its
liability when it denied the claim, for purposes of deciding
whether to impose a penalty under ORS 656.262(11). As for the
attorney fee, upon consideration of the text, context, and
legislative history of ORS 656.386(1)(a), the board did not
err in denying a fee on this record. Accordingly, the court
reversed and remanded on the penalty issue but not the
attorney fee issue.
Or.App. 363] AOYAGI, P. J.
workers' compensation case, insurer initially denied
claimant's claim for a knee injury but, before hearing,
rescinded the denial. The Workers' Compensation Board
subsequently issued an order on penalties and attorney fees.
The board denied claimant's request to impose a penalty
against insurer under ORS 656.262(11). The board also
determined that claimant's attorney was not
"instrumental" in obtaining rescission of the
denial and, on that basis, did not award an attorney fee
under ORS 656.386 (1)(a). On review, claimant challenges both
aspects of the board's order. We conclude that the board
erred in failing to address the reasonableness of
insurer's investigation as part of its penalty analysis,
so we reverse and remand on that issue, but we conclude that
the board did not err in its application of the attorney fee
state the facts consistently with the board's
unchallenged factual findings. SAIF v. Durant, 271
Or.App. 216, 218, 350 P.3d 489, rev den, 358 Or. 69
December 2014, claimant hit his right foot against a table
leg at work and twisted his right knee. He did not
immediately report the incident to employer or seek medical
January 2015, about three weeks after the incident, claimant
sought medical treatment. The doctor, Dales, diagnosed
bilateral osteoarthritis. Dales recorded that claimant had a
"several-week history of right knee pain, mostly at the
medial aspect of the knee"; had "developed a
clicking and pain to the medial aspect of the knee with
bending or twisting of the knee"; was "starting to
become limited with his activities of daily living"; and
had had "no improvement with conservative treatment and
time." Dales recorded nothing in his chart notes about
the injury being work-related.
weeks later, Dales saw claimant again. Based on MRI results,
Dales diagnosed claimant with a right knee medial meniscal
tear and recommended surgery. According [300 Or.App. 364] to
the chart notes, the MRI "showed a large tear of the
posterior horn of the medial meniscus" and also
"some generalized degenerative changes about the
knee." Again, Dales did not indicate in the chart
whether the condition was work-related.
January, about five weeks after the incident (and shortly
after claimant saw Dales the second time), claimant and
employer completed a Form 801, entitled "Report of Job
Injury or Illness," in which claimant asserted a
worker's compensation claim. On the form, claimant stated
that the injury had occurred on December 23, 2014, at 1:00
p.m.; that he had worked from 8:00 a.m. to 2:30 p.m. that
day; and that the affected body part was his right knee. In
response to the question "What caused it? What were you
doing?" claimant wrote, "Twisted knee by hitting
inside of toe on table leg."
denied the claim five days after receiving it, apparently
based on the Form 801 and Dales's chart notes from
claimant's two visits. As the reason for the denial,
insurer stated, "There is insufficient evidence to
establish that [claimant] sustained a compensable injury
arising out of and in the course of employment."
mid-February, claimant requested a hearing to challenge the
denial, and the hearing was set for May 18.
March, insurer scheduled an independent medical examination
(IME) and requested "initial and ongoing" discovery
April 2, claimant retained an attorney, who, on April 6, sent
a letter to insurer, giving notice of his representation and
April 10, the IME took place. After examining claimant, Dr.
Fellar s opined that claimant had a work-related medial
meniscus tear of the right knee, combined with preexisting
osteoarthritis, and that claimant's work injury had
ceased to be the major contributing cause of his ongoing
disability or need for treatment. (That is, Fellars indicated
that claimant's work injury had once been, but had ceased
to be, the major contributing cause of his ongoing disability
or need for treatment.) Insurer received Fellars's report
on [300 Or.App. 365] April 14. A week later, on April 23,
insurer rescinded its denial and accepted a "right knee
complex tear of the posterior horn of the medial meniscus
combined with preexisting non-compensable right knee
18, the parties appeared before an administrative law judge
(ALJ) for the scheduled hearing. Because insurer had
rescinded its denial, the only issues for the ALJ to decide
were (1) whether to assess a penalty against insurer under
ORS 656.262(11), and (2) whether to award an attorney fee to
claimant's attorney under ORS 656.386 (1)(a). The ALJ
found that insurer had a legitimate doubt as to its liability
when it denied the claim and therefore was not subject to a
penalty under ORS 656.262(11). As for the attorney fee, the
ALJ awarded a fee to claimant's attorney in the amount of
$3, 000, on the basis that "insurer's actions placed
claimant's attorney in the position of having to prepare
for hearing" and that the attorney therefore "was
instrumental in obtaining the rescission of the denial"
and was entitled to a fee under ORS 656.386(1)(a).
appealed the attorney fee award to the board, and claimant
cross-appealed on the penalty issue. Like the ALJ, the board
found that insurer had had a legitimate doubt as to its
liability on the claim and therefore did not order a penalty
under ORS 656.262(11). The board differed from the ALJ on the
fee issue, however, concluding that claimant's attorney
had not been instrumental in achieving the rescission of the
denial, as required to trigger a fee award under ORS
656.386(1)(a). In the board's view, the record was
"devoid of any action taken by claimant's counsel
that could have influenced the insurer, save the submission
of a retainer agreement and notice of representation."
While recognizing that "[s]uch limited action may be
sufficient in some cases, depending on their specific
facts," the board concluded that claimant's attorney
was not entitled to a fee in this case, where insurer had
ordered an IME before claimant retained an attorney,
the IME "establish[ed] the compensability of the
claim," and insurer's acceptance of the claim
"coincided" with its receipt of the IME report.
now seeks judicial review of the board's order.
Or.App. 366] PENALTY UNDER ORS 656.262(11)
first assignment of error, claimant argues that the board
erred in not assessing a penalty against insurer under ORS
656.262(11). Under ORS 656.262(11)(a), if an insurer
"unreasonably delays or unreasonably refuses to pay
compensation, attorney fees or costs, or unreasonably delays
acceptance or denial of a claim," the insurer
"shall be liable for an additional amount up to 25
percent of the amounts then due plus any attorney fees
assessed under this section." Claimant argues that
insurer did not reasonably investigate his claim before
denying it and that, consequently, insurer's denial was
unreasonable and the board should have imposed a penalty.
a denial or delay is unreasonable involves both legal and
factual questions." Brown v. Argonaut Insurance
Company, 93 Or.App. 588, 591, 763 P.2d 408 (1988).
Legally, the reasonableness of a denial turns on whether,
when the insurer denied the claim, it "had a legitimate
doubt as to its liability"-if so, the denial was
reasonable, and, if not, it was unreasonable. Id.
Underlying that legal question is a factual inquiry regarding
the basis of the insurer's ostensible doubt, which
requires the board to consider "all the evidence
available to the insurer" at the time of the denial.
Snyder v. SAIF, 287 Or.App. 361, 367, 402 P.3d 743
(2017) (citation omitted). Considering that evidence, the
board applies the above legal standard to determine whether
the insurer's denial of the claim was based on a
"legitimate" doubt as to its liability and
therefore reasonable. We review for errors of law whether the
board applied the correct legal standard, and we review the
board's factual findings for substantial evidence.
Brown, 93 Or.App. at 591; ORS 183.482 (8)(a), (c).
preliminary matter, we note that claimant's first
assignment of error depends on a legal premise that the board
itself articulated in its order and which insurer does not
contest: that an insurer who fails to conduct a reasonable
investigation of a claim cannot maintain a
"legitimate" doubt as to its liability. In its
order, the board included as part of its general statement of
the applicable law that "[a] 'legitimate doubt'
does not exist when the carrier denies a claim without [300
Or.App. 367] conducting a reasonable investigation." For
that proposition, the board cited OAR
436-060-0140(1) and two prior board
decisions. OAR 436-060-0140(1) provides, "The
insurer is required to conduct a 'reasonable'
investigation based on all available information in
determining whether to deny a claim." 'A reasonable
investigation is whatever steps a reasonably prudent person
with knowledge of the legal standards for determining
compensability would take in a good faith effort to ascertain
the facts underlying a ...