Clifford Ayers Vs. D & N Fence Company, Inc. And Emc Insurance Companies

IN THE SUPREME COURT OF IOWA
No. 27 / 05-1400
Filed April 13, 2007
CLIFFORD AYERS,
Appellant,
vs.
D & N FENCE COMPANY, INC.
and EMC INSURANCE COMPANIES,
Appellees,
UNITED FIRE AND CASUALTY COMPANY,
Intervenor-Appellee.
Appeal from the Iowa District Court for Linn County, Denver D.
Dillard, Judge.
Employer and employee appeal the judgment of the district court
affirming the decision of the workers’ compensation commissioner.
AFFIRMED.
David A. O’Brien of Willey, O’Brien, L.C., Cedar Rapids, for
appellant.
Michael L. Mock of Bradshaw, Fowler, Proctor & Fairgrave, P.C.,
Des Moines, for appellee D & N Fence Company.
Anne L. Clark of Hopkins & Huebner, P.C., Des Moines, for
appellee EMC Insurance Companies.
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Chris Scheldrup and Charles A. Blades of Scheldrup Law Firm,
P.C., Cedar Rapids, for appellee United Fire & Casualty Company.
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STREIT, Justice.
Be careful what you wish for because it just might come true.
Clifford Ayers injured his right knee in 1987 while working for D & N
Fence Company. He was paid for an eighteen percent permanent
disability to that lower extremity. In 2002, while still in the employ of D
& N, Ayers injured his knee again. He filed a petition for workers’
compensation alleging the 2002 injury caused additional disability to his
right leg and resulted in a knee replacement surgery. D & N denied the
allegations claiming Ayers’s current disability was the result of his 1987
injury and had little or nothing to do with the 2002 injury. The
commissioner agreed with D & N and awarded Ayers medical benefits.
D & N cried foul claiming the commissioner should not have imposed
liability upon D & N for additional medical expenses based on the 1987
injury when Ayers’s petition alleged those expenses were necessitated by
the 2002 injury.
We conclude the commissioner did not abuse his discretion when
he imposed liability for the 1987 injury. D & N was well aware of the
earlier injury and even made it the focus of the hearing. Moreover, we
find D & N’s insurer in 1987 did not have a constitutional right to notice
regarding the possible imposition of liability based upon the 1987 injury.
Any obligation to notify the insurer was that of D & N. Accordingly, we
affirm the district court.
I. Facts and Prior Proceedings
Ayers was fifty-six years old at the time of the hearing. He had
been working for his brother’s company, D & N, for twenty-six years. He
began his career as a fence installer and was promoted to foreman, yard
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foreman, and finally manager of commercial sales, a position he has held
since 1989.
Ayers’s claim in this case involves an injury to his right knee.
Ayers first injured his knee in 1987. He was carrying some materials
through a doorway at work when he fell. This injury ultimately required
arthroscopic surgery resulting in the removal of a significant amount of
cartilage. Ayers was found to have sustained an eighteen percent
impairment to his right leg, and accordingly was paid permanent partial
disability benefits. In 2002, Ayers injured his right knee at a D & N job
site when he stepped in a hole. He twisted his knee and felt significant
pain. Ayers immediately left the job site and reported the injury to D &
N. A few days later, Ayers saw his family doctor who referred him to Dr.
Fabiano, an orthopedic surgeon.
Dr. Fabiano concluded Ayers suffered from a medial collateral
ligament (MCL) strain. X-rays showed degenerative arthritis. Dr.
Fabiano opined the MCL strain may have “aggravate[d] and startle[d]”
Ayers’s degenerative arthritis. He performed knee replacement surgery
after more conservative treatments did not alleviate Ayers’s pain. The
surgery was a success and Ayers returned to work after seven weeks of
recovery.
In April 2003, Ayers filed a workers’ compensation claim for his
March 2002 injury. Ayers sought reimbursement for his medical
expenses ($51,174.62), seven weeks of healing period benefits at $599.97
per week, and 110 weeks of permanent partial disability benefits at the
same rate. D & N and its insurer, EMC, disputed whether Ayers’s 2002
injury caused any new permanent disability and the knee replacement
surgery.
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A deputy workers’ compensation commissioner conducted a
hearing concerning Ayers’s claim. Ayers pursued two theories of
recovery. First, he argued the March 2002 injury aggravated or
accelerated a preexisting condition (degenerative arthritis) and caused
both the knee replacement surgery and additional disability to his right
leg. Alternatively, Ayers argued the knee replacement surgery and the
additional disability were proximately caused by the cumulative effect of
the 1988 surgery and fifteen years of walking over uneven terrain while
working for D & N.
At the beginning of the hearing, the attorney for D & N and EMC
stated:
I believe there will be testimony . . . in this case that Mr.
Ayers’ problems with his right knee were ongoing from 1987
to 1988, and that essentially what we’re looking at here is
not a new injury, but it’s simply a continuation of the ’87,
’88 injury. And it’s our position, Your Honor, that all of this
is really an ongoing part of the ’87, ’88 injury. And if you
look at—It’s really more analogous to Smithart [654 N.W.2d
891 (Iowa 2002)], where everything should be looked at as
part of the first injury as opposed to any ongoing injury that
we have.
The deputy commissioner ruled in favor of D & N finding Ayers
“clearly had serious degenerative joint disease prior to March 25, 2002”
and that he “failed to prove that the proximate cause of his need for the
knee arthroplasty surgery was the work injury.”
Ayers appealed the deputy’s decision to the commissioner arguing
inter alia:
Even if the court concludes that Ayers’ knee replacement
surgery was not caused by trauma or cumulative trauma,
the medical expenses related to the knee replacement
surgery should still be paid . . . [because] the 1987 work
related injury was a cause of Ayers’ degenerative arthritis
condition.
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In his appeal decision, the commissioner succinctly ruled:
Claimant alleged and the parties stipulated that the claimant
sustained a traumatic injury on March 25, 2002, when he
stepped in a hole. In 1988 claimant had surgery and
cartilage was removed from his right knee as a result of a
1987 work-related injury with this same employer for which
weekly compensation was paid. All the physicians in this
case attribute the knee replacement surgery to the 1988
surgery for the 1987 injury. None clearly attribute the
surgery to the 2002 injury. Claimant proved convincingly
that the surgery was causally related to the 1987 injury but
failed to carry the burden of proving that the 2002 injury
was a substantial factor in the need for the surgery.
Accordingly, claimant is entitled to recover the requested
[medical] benefits under section 85.26(2) for the 1987 injury
. . . but he is not entitled to recover weekly compensation for
the 2002 injury.
The motion to reconsider filed by D & N and EMC alerted the
commissioner to the fact United Fire & Casualty Company insured D & N
at the time of the 1987 injury. D & N and EMC noted Ayers’s petition did
not allege entitlement to medical benefits arising from the 1987 injury,
and urged any liability for such medical benefits should be relitigated by
the proper parties. Ayers also requested a rehearing arguing the
commissioner failed to address the issue of cumulative trauma.
In his decision on rehearing, the commissioner modified the
decision by relieving EMC from liability and affirmed the remainder of his
decision.
Ayers filed a petition for judicial review in Linn County. D & N filed
a cross-petition for judicial review and United Fire filed a petition to
intervene. After United Fire was allowed to intervene, it filed a motion to
present additional evidence concerning insurance coverage and
causation of Ayers’s current disability and knee replacement surgery.
The district court denied United Fire’s motion and dismissed all issues
pertaining to insurance coverage without prejudice.
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Thereafter, the district court upheld the commissioner’s ruling. It
found the commissioner’s findings of facts were supported by substantial
evidence. The court rejected D & N’s argument that the commissioner
erred in ordering payment of medical benefits resulting from the 1987
injury when Ayers’s petition alleged a 2002 injury date. The court also
rejected United Fire’s claim it had a right to notice and an opportunity to
defend against the imposition of liability based upon the 1987 injury.
The court agreed with the commissioner that any obligation to notify
United Fire was D & N’s obligation pursuant to Iowa Code section 87.10
(2001). The court stated Ayers
is entitled to compensation and any dispute between his
employer and the employer’s insurance companies should
not be a basis for delaying his rights. There was no
“surprise development” which prejudiced D & N Fence . . . .
Ayers filed a notice of appeal. D & N and United Fire filed a notice
of cross appeal. Ayers contends the commissioner erred in finding the
2002 injury did not cause permanent disability and the knee
replacement surgery. He argues the commissioner erred by applying the
wrong standards to determine whether the 2002 injury aggravated a
preexisting condition or was a cumulative injury. He also claims the
commissioner erred by admitting into evidence a second report by D &
N’s expert because it was created and produced after the case
preparation completion date established in the agency’s hearing
assignment order. D & N and United Fire both argue the commissioner
erred by awarding Ayers medical benefits for the 1987 injury because the
issue was not properly presented to the commissioner for consideration.
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II. Scope of Review
“ ‘We review the district court decision by applying the standards of
the [Iowa] Administrative Procedure Act to the agency action to determine
if our conclusions are the same reached by the district court.’ ” Univ. of
Iowa Hosp. & Clinics v. Waters, 674 N.W.2d 92, 95 (Iowa 2004) (quoting
Locate.Plus.Com, Inc. v. Iowa Dep’t of Transp., 650 N.W.2d 609, 612 (Iowa
2002)). The Iowa Administrative Procedure Act provides fourteen
grounds upon which a reviewing court may reverse the decision of the
workers’ compensation commissioner. Iowa Code § 17A.19(10). The
relevant grounds for this appeal are (1) the agency action is
unconstitutional, (2) the agency action is not supported by substantial
evidence, and (3) the agency action is an abuse of discretion. Id.
§ 17A.19(10)(a), (f), and (n). “The burden of demonstrating the required
prejudice and the invalidity of agency action is on the party asserting
invalidity.” Id. § 17A.19(8)(a).
III. Merits
A. Whether Substantial Evidence Supports the
Commissioner’s Finding that Ayers’s Knee Replacement
Surgery was not Causally Related to the 2002 Injury
The commissioner found Ayers failed to prove the 2002 injury was
a proximate cause of his disability and the knee replacement surgery.
The commissioner also found Ayers’s current disability was not the result
of cumulative trauma because “[t]he record does not show that claimant
could have avoided the knee replacement surgery if he had not worked
for the employer after 1988.”
Substantial evidence supports the commissioner’s findings. See
Waters, 674 N.W.2d at 95 (noting we may reverse the commissioner’s
findings only if they are not supported by substantial evidence in the
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record); Iowa Code § 17A.19(10)(f)(1) (stating a decision of the
commissioner is supported by substantial evidence if the evidence is of
the “quantity and quality of evidence that would be deemed sufficient by
a neutral, detached, and reasonable person, to establish the fact at issue
when the consequences resulting from the establishment of that fact are
understood to be serious and of great importance”). Three physicians
rendered opinions on the cause of Ayers’s disability and knee
replacement surgery: Dr. Fabiano, Dr. Riggins, and Dr. Stenberg.
Causal connection is essentially within the domain of expert testimony.
Bradshaw v. Iowa Methodist Hosp., 251 Iowa 375, 383, 101 N.W.2d 167,
171 (1960). Dr. Fabiano was Ayers’s treating physician and has a
specialty in orthopedics. In the days following Ayers’s 2002 injury, Dr.
Fabiano diagnosed Ayers as having preexisting degenerative joint disease
with an MCL strain. Dr. Fabiano noted x-rays showed significant
degeneration with “near bone on bone” changes in the knee. On
September 9, 2002, Dr. Fabiano performed Ayers’s knee replacement
surgery and his postoperative diagnosis was end-stage degenerative joint
disease. Dr. Fabiano concluded the cause of the knee replacement
surgery was Ayers’s degenerative arthritis, not the 2002 injury. Dr.
Riggins reviewed Ayers’s medical records and agreed with Dr. Fabiano’s
conclusions.
Dr. Stenberg conducted an independent medical evaluation. His
report opined “[t]he most likely cause of Mr. Ayers’ degenerative arthritis
condition would be his morbid obesity.” Although Dr. Stenberg did later
provide the only testimony supporting the claim that Ayers’s disability
and knee replacement surgery were causally related to the 2002 injury,
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he did so only after Ayers’s counsel inquired whether that injury
exacerbated Ayers’s preexisting degenerative arthritis.
The commissioner found Ayers had serious degenerative joint
disease that had been symptomatic prior to March 25, 2002. Although
Ayers sustained an injury on March 25, 2002, the commissioner found
he failed to prove the injury materially aggravated his preexisting
condition. Likewise, the commissioner rejected Ayers’s cumulative injury
argument. He found “[t]he record does not show that [Ayers] could have
avoided the knee replacement if he had not worked for the employer after
1988. The cumulative trauma exposure was incidental in this case and
did not materially change the outcome.”
There is substantial evidence in the record to support the
commissioner’s factual findings. Moreover, the commissioner applied the
correct legal standards in making these determinations. Ayers finds
fault with the commissioner’s statement that Ayers failed to prove “the
2002 injury significantly changed the course of the preexisting injury to
bring about the need for knee replacement surgery.” Ayers claims the
commissioner applied “a higher, hyper-technical, and incorrect standard”
in determining whether the 2002 injury materially aggravated his
preexisting condition. Ayers is grasping at straws. A claimant has the
burden of proving his work-related injury was a proximate cause of his
disability. Meyer v. IBP, Inc., 710 N.W.2d 213, 220 n.2 (Iowa 2006)
(quoting Freeman v. Luppes Transp. Co., 227 N.W.2d 143, 148 (Iowa
1975)). In order for a cause to be proximate, it must be a “substantial
factor.” Kelly v. Sinclair Oil Corp., 476 N.W.2d 341, 349 (Iowa 1991). The
commissioner applied the correct standard and we have no quarrel with
his analysis.
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Likewise, we find the commissioner applied the correct standard in
determining whether Ayers suffered a cumulative injury. The
commissioner found Ayers failed to prove he “could have avoided the
knee replacement if he had not worked for the employer after [his first
knee surgery].” In order to be compensable, the cumulative trauma must
be work related. Ayers offered no medical evidence supporting his
contention that his disability was caused by work-related repetitive
trauma.
B. Whether Substantial Evidence Supports the
Commissioner’s Finding that Ayers’s Knee Replacement
Surgery was the Result of the 1987 Injury
Substantial evidence supports the commissioner’s finding that
Ayers “proved convincingly” his disability and knee replacement surgery
were causally related to his 1987 work-related injury. Dr. Riggins opined
Ayers’s degenerative arthritis was the expected result of the 1988
arthroscopic surgery, which was required after Ayers’s 1987 injury. Dr.
Stenberg agreed Ayers’s earlier surgery “played a factor” in his
degenerative arthritis. Dr. Bickel, who performed the arthroscopic
surgery after the 1987 injury, predicted Ayers would continue to have
problems with his right knee and eventually require knee replacement
surgery.
Having found substantial evidence to support the commissioner’s
ruling, we turn now to the consequences of his findings.
C. Whether the Commissioner Abused his Discretion in
Considering the 1987 Injury as a Cause When Ayers Pled
2002 as the Date of Injury
D & N argues the commissioner erred in awarding Ayers benefits
for his 1987 injury because the issue was not properly presented to the
commissioner for consideration. Whether Ayers’s application for
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workers’ compensation benefits sufficiently informed his employer of the
possibility of an award for the 1987 injury is a matter within the agency’s
discretion. Waters, 674 N.W.2d at 96. Thus, the proper standard of
review is an abuse of discretion. Id.Ayers’s application for benefits alleged an injury date of “[o]n or
about March 25, 2002.” D & N argues Ayers should have been required
to file a new application for benefits alleging 1987 as the date of the
injury. In Waters, we reiterated “[a]n application for arbitration is not a
formal pleading and is not to be judged by the technical rules of
pleading.” Id. at 96–97 (quoting Coghlan v. Quinn Wire & Iron Works, 164
N.W.2d 848, 850 (Iowa 1969)). Instead, “[t]he key to pleading in an
administrative process is nothing more than opportunity to prepare and
defend. The employer is to be afforded a substantive right to be at least
generally informed as to the basic material facts upon which the
employee relies as a basis for compensation.” Id. at 97 (quoting James R.
Lawyer and Judith Ann Graves Higgs, Iowa Workers’ Compensation—
Law & Practice § 21-7, at 231 (3d ed. 1999)).
The commissioner did not abuse his discretion in considering the
1987 injury as the cause of Ayers’s disability and knee replacement
surgery because D & N was well aware of Ayers’s long-standing history of
knee problems. In fact, D & N made the 1987 injury and subsequent
surgery in 1988 an integral part of the hearing. Its attorney stated “what
we’re looking at here is not a new injury, but it’s simply a continuation of
the ’87, ’88 injury. And it’s our position Your Honor, that all of this is
really an ongoing part of the ’87, ’88 injury.” D & N generated expert
opinion testimony from Dr. Riggins to support this claim. Dr. Riggins
was asked by defense counsel to review the Ayers file and opined “the
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osteoarthritis present in [Ayers’s] right knee was the expected result of
the earlier [1988] surgical procedure.” Defense counsel was so
persuasive the commissioner adopted her argument. What D & N wished
for came true. This is not a “surprise development” that prejudiced the
employer. Eberhart Constr. v. Curtin, 674 N.W.2d 123, 125 (Iowa 2004).
The commissioner correctly pointed out “[n]othing would be gained by
requiring another proceeding explicitly based on the 1987 injury.” While
D & N may have been surprised by the consequences of its argument,
this is not Ayers’s problem. Even if we were to order a new hearing, D &
N would be barred from arguing the 1987 injury did not cause Ayers’s
disability and knee replacement surgery because it already proved this
very matter. See generally Winnebago Indus., Inc. v. Haverly, 727 N.W.2d
567, 573–75 (Iowa 2006) (discussing doctrine of judicial estoppel).
In 1988, Ayers was paid for an eighteen percent permanent partial
disability to his lower right leg. Since he proved the knee replacement
surgery performed in 2002 was necessary to treat the 1987 injury, Ayers
is entitled to be reimbursed for the reasonable cost of that treatment.
Iowa Code § 85.26(2). He is not entitled to any additional temporary or
permanent disability payments because more than three years have
passed since he received his last disability payments for the 1987
injury. 1 Id. § 85.26(1).
1On appeal, Ayers argues the commissioner erred by admitting into evidence a
second report by Dr. Riggins which was produced after the deadline for discovery.
Ayers complained the late-produced report was prejudicial because it “for the first time
offers expert testimony with regard to the issue of apportionment” of disability between
the 1987 injury and the 2002 injury. According to the report, Ayers’s current 50%
impairment of his lower right extremity should be reduced by 18%, which was the
amount of his impairment prior to March 25, 2002. In other words, D & N used this
report to argue any award of disability payments should be based on 32% impairment
rather than 50%. Because we affirm the commissioner’s determination Ayers is not
entitled to additional compensation for disability, this issue is moot.
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D. Whether United Fire’s Due Process Rights were
Violated
Finally, United Fire argues the commissioner violated its
constitutional right to due process when it considered the 1987 injury.
We review constitutional claims de novo. Consumer Advocate v.
Commerce Comm'n, 465 N.W.2d 280, 281 (Iowa 1991).
United Fire did not participate in the hearing. It claims it had a
right to notice and an opportunity to defend against Ayers’s claim for
additional workers’ compensation benefits for the 1987 injury. See Carr
v. Iowa Employment Sec. Comm’n, 256 N.W.2d 211, 214 (Iowa 1977)
(stating the essential elements of due process are notice and an
opportunity to defend). However, the insurer does not have a statutory
or constitutional right to notice from the employee. The employee is only
required to notify the employer of his claim. Iowa Code §§ 85.23, .24.
The commissioner correctly stated any obligation to notify United Fire
was that of D & N’s. See id. § 87.10. The district court aptly held:
Whether United Fire & Casualty Company must pay the
medical expenses is not an issue which should be a concern
for [Ayers]. He is entitled to compensation and any dispute
between his employer and the employer’s insurance
companies should not be a basis for delaying his rights.
We agree. The commissioner did not violate United Fire’s due process
rights.
IV. Conclusion
Substantial evidence supports the commissioner’s findings that
Ayers’s disability and knee replacement surgery were caused by the 1987
injury and not the 2002 injury. Consequently, Ayers is entitled to
reimbursement for his medical expenses. The commissioner did not
abuse his discretion in considering the 1987 injury when Ayers pled
2002 as the date of injury because D & N raised the 1987 injury as the
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cause of Ayers’s disability and knee replacement surgery. Finally, the
commissioner did not violate United Fire’s due process rights because
any obligation to notify United Fire was that of D & N.
AFFIRMED.