Missouri: Hospital Sanctioned for Boiler-Plate Denial of Treatment

An employer owes attorney’s fees as a sanction for an unreasonable defense when it sent claimant a letter denying medical treatment without any explanation and never bothered to contact claimant before denying the claim, according to a recent Commission decision, Nouraie v Mo Baptist Hospital, 2013 Mo WCLR Lexis 52 (3-13-2013).

A 56-year old hospital worker reported to her employer that during the past 1 1/2 months she hurt her back on 3 specific occasions moving heavy patients and hauling laundry. The administrative law found an occupational disease to her back from repetitive lifting and awarded benefits. The issue on appeal by the claimant was a denial of attorney’s fees for an unreasonable defense.

The day before reporting the injury claimant had been seen once at the employer’s occupational health clinic which informed the clinic would contact W/C and gave her W/C information. Claimant never had any other treatment of any kind. She declined to use ibuprofen. Whether any more specific treatment was suggested is not clear from the opinion.

The employer sent her a letter indicating: “We have reviewed your report of injury of 12/22/2009 and multiple unknown dates of injury and the records of Missouri Baptist Medical Center Occupational Health on your back. Based on the review of these records, we are denying any Workers’ Compensation Benefits as outlined under Missouri State Law.”

Section 287.560 provides that the Commission may assess costs when an employer defends a case without reasonable ground. The Commission concluded the decision to deny benefits to provide medical care under §287.140 was unreasonable, and granted attorney’s fees as sanctions.

The case appears to set a bright line test that the failure to attempt to contact the employee directly before denying a case subjects the employer to sanctions. When “the worker is available to discuss the injury, we think any reasonable employer conducting an investigation designed to determine whether an injury is work-related would discuss the alleged injury with the worker.”

The basis for sanctions appears to be two-fold: the failure to investigate and the failure to explain the basis for denial. “That employer later articulated a colorable ground for denying employee’s claim for compensation during formal proceedings before the Division of Workers’ Compensation does not cure employer’s earlier baseless denial.”

"We do not believe the legislature intended to craft a system wherein an employer possessed of the knowledge that a worker claims she suffered a work-related injury can sit idly by, refuse to investigate a worker’s claimed injury through inquiry and/or medical examination, and then later offer up its willful ignorance as the reasonable ground for denying benefits. In other words, we do not believe the legislature intended to craft a workers’ compensation law that permits an employer to deny a claim with impunity without conducting even the barest of investigations."

Why is this decision important?

Section 287.560 provides a statutory basis to award fees for an unreasonable defense “in a proceeding.” The Commission notes the employer later asserted a colorable defense in a proceeding. It was not the action in the proceeding which the Commission relied upon, it was the pre-suit investigation (or lack thereof) when the claim was denied. The Commission never interprets why a “proceeding” means claims handling conduct prior to suit.

This is not the first time the Commission has awarded sanctions for claims handling outside the context of a proceeding. In Wilson v Allied/Midwest Waste, 2009 MO WCLR Lexis 86, the Commission referred the matter to the fraud unit noting a pattern of willful neglect of the claim and failing to respond to claimant’s attorney. “Employer should not benefit from its willful neglect of court dates or from its failure to respond to numerous letters from Claimant's attorney, its failure to timely answer the claim, and its failure to hire an attorney.” (emphasis added)

In Clark v Hart’s Auto, 274 S.W.3d 612 (Mo. App. 2009) the Commission found the refusal to make any settlement offers unreasonable when its own expert assessed disability. “Employer's attorney admitted that Employer would not respond to his phone calls when he sought authority to make a settlement offer to Mr. Clark. Employer's attorney further admitted that Employer refused to accept calls when he tried to relay settlement demands from Mr. Clark. After the court directed the parties to mediate the case on the morning of the hearing, Employer prevented any meaningful mediation, refusing to accept Employer's attorney's phone calls. The ALJ concluded that the refusal to provide any settlement authority where Employer had not only admitted accident and liability, but its own evidence was clearly contrary to the "zero offer" position it took in the case, amounted to an unreasonable defense.” (emphasis added)

The implication is that any conduct involved in claims handling may result in an award of sanctions whether it occurs in a proceeding or not or even if a claim has never been filed.

The other important issue is when the employer has a duty to act to tender treatment. The employer argued that claimant carries the burden of proof. The Commission’s decision suggests, by implication, there is a lighter burden of proof to show an obligation to provide treatment (claimant provided a history of accident plus symptoms) than the burden of proof to prove disability (typically requiring medical evidence). In this case, the Commission essentially concludes claimant more likely than not has shown a compensable claim by a history of accident and a request for care and the employer had the obligation to act or carry the burden why it was more likely than not that there was no obligation to provide benefits. It has been long established that in a claim for disability benefits that there is no affirmative obligation for SIF defense counsel to do anything. Seifner v Treasurer of Mo., 362 S.W.3d 59 (Mo. App 2012)

The third important issue is that if the employer is going to put something in writing, it must articulate a valid reason for its position. In this case, the citation to the Worker’s Compensation Act did not meet that standard. Later discovered facts are irrelevant to this determination was reasonable. This imposes a very high standard, as pleading requirements generally allow denials without this level of specificity and affirmative defenses can occur after discovery.

The case may also be explained, in part, by the employer being hoisted by its own petard. The employer is a hospital which is a unique position to provide medical services immediately unlike other employers. It has greater access to medical records and findings from its own doctors, unlike other medical providers. The employer’s own occupational medicine department arguably appears to seek comp approval to treat the claimant. Presumably, the employee would have gone first to her own doctor, rather than occ med, unless she was sent there in the first place by her employer. The “colorable” reason for denying the claim is never reported by the Commission in its award.

Source: Martin Klug, Huck, Howe & Tobin. Read Martin Klug's Mo. Workers' Comp Alerts.

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