Opinion
BOARD No. 01721789
Filed: October 30, 1997
REVIEWING BOARD
(Judges Wilson, Fischel and Levine)
APPEARANCES
John F. Trefethen, Jr., Esq. for the employee at hearing
James N. Ellis, Jr., Esq., for the employee on appeal
The employee's attorneys completed the work in this case long before James N. Ellis, Jr. was suspended from the practice of law. See In re Ellis, 425 Mass. 332 (1997).
James M. Manitsas, Esq. for the insurer
The employee appeals from a decision in which an administrative judge denied his claim for further incapacity benefits, after an unappealed conference order discontinued benefits for his accepted industrial injury. We summarily affirm the decision in all respects but one. We agree with the employee that his successful defense against the insurer's complaint, joined at hearing and alleging frivolous claim and fraud penalties under § 14, warrants the award of a § 13A(5) attorney's fee. We accordingly award the appropriate fee. In so doing, however, we are unable to apply the departmental regulation, 452 CMR 1.19 (4), because its enforcement would make impossible the application of § 13A (5) to this proceeding. We therefore report the contradiction between the regulation and the statute to the commissioner. See Appendix A.
We recount only a brief statement of the proceedings relevant to the fee issue. The employee filed a claim for further incapacity benefits under § 35, which claim was denied at the § 10A conference on March 8, 1995. (Dec. 1, 2.) The employee appealed to a hearing de novo at which the insurer, under § 14 (1) and (2) of the Act, raised the issue of the employee's unreasonable and/or fraudulent conduct in bringing his claim. (Dec. 2.) In his decision filed October 2, 1995, the judge denied both the employee's § 35 claim and the insurer's § 14 complaint. The judge did not award an attorney's fee under § 13A(5). (Dec. 3-4.)
The employee's successful defense against the insurer's allegation of frivolous or fraudulent claim under § 14 entitles him to an attorney's fee as a "prevailing" party in the litigation. General Laws c. 152, § 13A(5), provides in relevant part:
Whenever an insurer files a complaint or contests a claim for benefits and then either (i) accepts the employee's claim or withdraws its own complaint within five days of the date set for a hearing pursuant to section eleven; or (ii) the employee prevails at such hearing the insurer shall pay a fee to the employee's attorney. . . .
(emphasis added). An employee who has convinced the judge that he has brought his claim with reasonable grounds, and without fraudulent intent, has "prevailed" on a major issue by avoiding the serious penalties that would be assessed if the insurer had proved otherwise. An employee's success in defeating an insurer's attempt to impose the significant monetary and criminal sanctions available under § 14 against an employee thus is well within the concept of "prevailing."
Those penalties are as stated in the pertinent parts of G.L.c. 152, § 14 (1) and (2):
If any administrative judge or administrative law judge determines that any proceedings have been brought or defended by an employee or counsel without reasonable grounds, the whole cost of the proceedings shall be assessed against the employee or counsel, whomever is responsible.
(2) If it is determined that in any proceeding within the division of dispute resolution, a party . . . engaged in conduct that such party knew to be illegal or fraudulent, the party's conduct shall be reported to the general counsel of the insurance fraud bureau. Notwithstanding any action the insurance fraud bureau may take, the party shall be assessed, in addition to the whole costs of such proceedings and attorney's fees, a penalty payable to the aggrieved insurer or employee, in an amount not less than the average weekly wage in the commonwealth multiplied by six.
We take direction from the recent Appeals Court holding that an employee's successful defense of a conference order of a closed period of benefits, against an insurer's appeal to a de novo hearing challenging such award, entitles the employee to a § 13A(5) fee. Connolly's Case, 41 Mass. App. Ct. 35, 37 (1996). The rationale of the Appeals Court in reaching that conclusion was that, in proving his entitlement to the benefits already awarded, the employee has "prevailed" at the de novo hearing by defeating the possibility of an insurer's recoupment of those benefits, pursuant to § 11D(3). Id. at 37-38. That rationale applies here where the employee was faced with the possibility of a substantial assessment of costs and penalties, together with potential criminal prosecution, in the event the insurer prevailed on its § 14 complaint. Indeed, to interpret "the employee prevails" in § 13A(5) as being inapposite to this case seems to fly in the face of common sense. "[T]he employee falls within the typical 'prevailing party' formulation of one who succeeds on any significant litigation issue, achieving 'some of the benefit' sought in the controversy." Connolly's Case, supra at 38, quotingNadeau v. Helgemoe, 581 F.2d 275, 278-279 (1st Cir. 1978). If the employee's avoiding thousands of dollars of costs and penalties and criminal prosecution is not "'some of the benefit' sought in the controversy," we do not know what is.
General Laws c. 152, § 11D(3), provides:
An insurer that has paid compensation pursuant to a conference order, shall, upon receipt of a decision of an administrative judge or a court of the commonwealth which indicates that overpayments have been made be entitled to recover such overpayments by unilateral reduction of weekly benefits, by no more than thirty percent per week, of any remaining compensation owed the employee. Where overpayments have been made that cannot be recovered in this manner, recoupment may be ordered pursuant to the filing of a complaint pursuant to section ten or by bringing an action against the employee in superior court.
We are now faced, however, with an explicit contradiction between § 13A(5) and its cognate regulation, 452 CMR 1.19 (4). That regulation provides in its entirety:
In any proceeding before the Division of Dispute Resolution, the claimant shall be deemed to have prevailed, for the purposes of M.G.L.c. 152, § 13A (1) through (3) [now (5)], when compensation is ordered or is not discontinued at such proceeding, except where the claimant has appealed a conference order for which there is no pending appeal from the insurer and the decision of the administrative judge does not direct a payment of weekly or other compensation benefits exceeding that being paid by the insurer prior to such decision[.]
In the context of this case, the regulation is crafted too narrowly to apply. First, as compensation was neither ordered nor discontinued, no fee would be due. Moreover, in this decision on the employee's appeal from the conference order, no "compensation benefits exceeding that being paid by the insurer prior to such decision" were ordered; none were being paid in the first place. (Dec. 1-2.) We conclude that the enforcement of regulation 1.19 (4) makes impossible the otherwise clearly applicable provisions of § 13A(5) to this proceeding, as discussed supra.
In so determining, we are aware of the recent deference accorded this regulation by the Appeals Court in Gonzalez's Case, 41 Mass. App. Ct. 39 (1996):
'Ordinarily an agency's interpretation of its own rule is entitled to great weight.' Finkelstein v. Board of Registration in Optometry, 370 Mass. 476, 478 (1976).
. . .
The statutory language ties the award of attorney's fees to the concept of 'prevail.' The language of 452 Code Mass. Regs. § 1.19 (4) establishes that, except when an insurer is ordered to pay benefits or an employee defeats the insurer's effort to discontinue benefits, statutory attorney's fees are not owed. Thus [the employee] did not prevail within the meaning of § 1.19 (4) and G.L.c. 152, § 13A[5].
Gonzalez's Case, supra at 41 (footnote omitted). The employee inGonzalez's Case brought an initial liability claim for workers' compensation benefits. Id. at 39. As a result of the hearing the employee won no compensation benefits, but did establish that the insurer was liable for the work event in the sense of damnum absque injuria. The Appeals Court rejected the employee's argument that he had "prevailed" for the purposes of a § 13A(5) attorney's fee. "Under the Workers' Compensation Act, the most significant aspect of a claim is the payment of compensation. We decline to interpret the statute as providing attorney's fees in cases where no workers' compensation has been ordered at any stage of the statutory proceedings." Id. at 42.
The court turned to Black's Law Dictionary 1188 (6th ed. 1990) and wrote that it
defines prevail as '[t]o be or become effective or effectual, to be in force, to obtain' and defines prevailing party as '[t]he party to a suit who successfully prosecutes the action or successfully defends against it, prevailing on the main issue, even though not necessarily to the extent of his original contention. The one whose favor the decision or verdict is rendered and judgment entered.'
Gonzalez's Case, supra at 41 n. 3 (emphasis supplied).
"Injury without damage."
We think that Gonzalez's Case is distinguishable from the present case. We acknowledge the utility of regulation 1.19 (4) for interpreting § 13A(5) in ordinary compensation claims and discontinuance complaints. Nonetheless, that does not change the fact that the regulation is in "explicit contradiction" to the statute, with respect to this insurer's complaint under § 14 of the Act as discussed above. See G.L.c. 152, § 5. The very definition of "prevailing party" relied upon in Gonzalez's Case, supra at 41 n. 3, includes one who "successfully defends" against an action, prevailing on "the main issue[.]" The avoidance of the assessment of penalties, costs and criminal prosecution is the converse of a penalty award, to which an attorney's fee clearly can attach. See Alliy v. Travelers Ins. Co., 39 Mass. App. Ct. 688, 690-691 (1996) (attorney's fee due in claim for penalty on late payment of compensation to employee). Moreover, theGonzalez holding does not contemplate an insurer's complaint that, by its very seriousness, is the constructive equivalent of "the main issue," which heretobefore has involved only issues of payment or discontinuance of compensation benefits. Gonzalez's Case, supra at 41 and n. 3. In our view, therefore, the reliance placed on the regulation by the Gonzalez court does not contravene our decision to report the regulation as unenforceable in this case.
General Laws c. 152, § 5 provides, in pertinent part:
[I]f in any proceeding within the division of dispute resolution it is found that the application of any section of this chapter is made impossible by the enforcement of any particular regulation, the administrative judge or reviewing board shall not apply such regulation during such proceeding only. In any case in which a regulation is not applied as herein provided, the administrative judge or reviewing board shall, on or before the date of the issuance of the decision, inform the commissioner in writing of the explicit contradiction found between the regulation and this chapter.
The same issue might very well arise in an insurer's complaint for recoupment, successfully defended by the employee.
The insurer shall pay a fee of $3,500 plus necessary expenses under the provisions of § 13A(5), as the employee prevailed against the insurer's complaint under § 14.
So ordered.
_________________________________ Sara Holmes Wilson Administrative Law Judge
_________________________________ Carolynn N. Fischel Administrative Law Judge
_________________________________ Fredrick E. Levine Administrative Law Judge
Filed: October 30, 1997
APPENDIX "A"
October 29, 1997
James J. Campbell Commissioner Department of Industrial Accidents 600 Washington Street Boston, MA 02111
RE: Employee: Russell Talbot Employer: Stanton Tool Manufacturing Company Insurer: Middlesex/Sentry Insurance Company D.I.A.#: 01721789
Dear Commissioner Campbell:
The reviewing board will soon issue its decision in the above named case. In the course of deciding the issues raised on appeal, we determined that the application of § 13A(5) of c. 152 is made impossible if 452 CMR 1.19 (4) is enforced. Accordingly, we do not apply that regulation in the instant case.
Pursuant to G.L. 152, § 5, please be advised that in our opinion there is an explicit contradiction between the cited regulation and § 13 (A)5. The regulation appears to define the term "prevail" too narrowly to allow the proper application of § 13A(5) to the circumstances of this case.
Sincerely,
____________________________ Sara Holmes Wilson Administrative Law Judge
____________________________ Carolynn N. Fischel Administrative Law Judge
____________________________ Frederick E. Levine Administrative Law Judge
SHW/amt cc: Joseph W. Jennings III Senior Judge