United Parcel Service, Inc. v. Ilg

COURT OF APPEALS OF VIRGINIA

Present: Judges Humphreys, Haley and Alston
Argued at Alexandria, Virginia

UNITED PARCEL SERVICE, INC. AND
LIBERTY INSURANCE CORPORATION
OPINION BY
v. Record No. 2831-08-4 JUDGE JAMES W. HALEY, JR.
JULY 21, 2009
JOHN A. ILG

FROM THE VIRGINIA WORKERS’ COMPENSATION COMMISSION

Patricia C. Arrighi (PennStuart, on brief), for appellants.

Craig A. Brown (Ashcraft & Gerel, on brief), for appellee.

United Parcel Service, Inc. and Liberty Insurance Corporation (collectively “employer”)

appeal an order of the Workers’ Compensation Commission (“commission”) rejecting

employer’s application for a hearing on the question of whether to suspend benefits previously

awarded to John A. Ilg (“employee”), pursuant to the parties’ agreement to pay benefits to

compensate him for a work-related injury to his right knee. Employer’s hearing application

included a doctor’s report that employee’s knee injury no longer prevented employee from doing

certain restricted work. The commission denied employer’s application because the same doctor

opined that a medical condition affecting employee’s right hand prevented him from working in

any capacity. But, at the time the commission rejected employer’s hearing application, the

commission had not held a hearing on whether the hand condition had been caused by the

work-related accident. Nor had the commission accepted any agreement to pay benefits with

respect to the hand condition. We agree with employer that the commission erred in rejecting
the hearing application under these circumstances. The commission’s decision is reversed, and

this case is remanded for further proceedings.

FACTS

While working as a delivery truck driver, employee fell from a truck on February 12,

2007 and suffered injuries. On April 26 of the same year, he filed a claim for benefits form with

the commission. On that form is a blank space next to the words “Nature of the injury.” On that

space employee apparently wrote, “injury to right hand and right knee.” The commission issued

an order, dated May 9, requiring that employer complete attached forms and return them to the

commission. Employer’s insurance carrier responded to this order with a letter. According to

the letter “[employee’s] claim was accepted as compensable but the following issues were

unresolved. We have agreed to pay benefits from 2/13/07 and ongoing. We have paid TPD

[temporary partial disability] for 2/13/07, TTD [temporary total disability] 2/14-2/15, TPD

2/16/07 and TTD 2/17/07 ongoing.” On June 5, the commission sent a letter to both parties

“acknowledging receipt of the carrier’s position that temporary total and temporary partial wage

loss benefits have been paid voluntarily.” The letter also announced that employee’s application

for hearing would be placed on “administrative hold for the executed Agreement to Pay Benefits

form.”

On June 29, 2007, the agreement to pay benefits form, signed by both parties, was filed

with the commission. Next to the form’s pre-printed language “Nature of injury or illness,

including body parts affected” is only “Pain in Right Knee.” The form does not refer to the hand

injury mentioned on employee’s original claim for benefits form. The commission approved this

agreement to pay benefits by an award order dated July 12. The award order provides that,

“Lifetime Medical benefits are hereby awarded for reasonable, necessary and authorized medical

treatment causally related to the 2/12/2007 injury.”

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 After the filing of the award order, employee hired a lawyer, who sent a letter to the

commission, dated November 6, 2007. This letter announced that employee had retained counsel

and requested copies of the employer’s accident report as well as any medical records or signed

statements of the employee in the commission’s file. The letter also stated that, as a result of his

February 12 work-related fall from the truck, employee had suffered injuries to his right hand,

right knee, and to his head. The letter reads, in part: “Please treat this letter as Claimant’s

Application for Hearing, by counsel, based upon the injuries described above. Claimant seeks

all benefits to which he may be entitled under the Virginia Workers’ Compensation Act.” The

commission’s response to the letter, dated November 9, states that the requested documents are

enclosed, but it does not mention employee’s hearing request at all. Nor does it contain any

acknowledgement that employee’s hearing request alleges injuries to body parts (right hand and

head) that were not included in the earlier agreement to pay benefits. Instead, the commission

noted: “No further action will be taken on this file until requested by the parties. If we can be of

any further assistance to you, please so advise.”

On February 25, 2008, Dr. Randall Peyton, who treated employee’s knee injury, signed

two forms, each labeled “fitness for duty evaluation.” Each form listed employee’s name. One

had a diagnosis of “knee pain” and indicated that employee’s fitness for duty was “restricted.”

Dr. Peyton checked a box next to the words “Medium work – lifting 50lbs maximum with

frequent lifting and/or carrying objects weighing up to 25lbs.” Under “comments” Dr. Peyton

wrote “unable to perform stair climbing [longer than] 4.5 minutes.” The second form, also dated

February 25, has a diagnosis of “R knee/R hand.” On this form, Dr. Peyton circled the words

“unable to work in any capacity.” The inconsistency in the forms is explained in follow-up notes

also written by Dr. Peyton. According to the notes, “[w]e have gone through his exam and gone

through the work-hardening notes and stated that the hand apparently is worsening from lifting.

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He is supposed to have this operated on. We talked about a work release in relation only to the

knee.”

After receiving the form that declared employee fit for restricted duty in relation to his

knee injury, employer apparently sought employee’s participation in vocational rehabilitation.

Employee’s counsel responded by letter on May 29, 2008. This letter referred to the form that

stated that employee was unable to work in any capacity. It also reads “[s]ince Mr. Ilg has met

his responsibility to participate in an initial vocational assessment, please be advised that he will

not now violate his doctor’s orders that he remain off work.” On June 10, 2008, employer filed

an application for a hearing. The application included a copy of the fitness for duty evaluation

releasing employee for restricted work. Employee wrote a response to the application, including

the form signed by Dr. Peyton stating that employee was unable to work in any capacity because

of his hand condition.

Senior Claims Examiner Linda deLamorton issued a letter opinion for the commission,

dated July 7, 2008, denying employer’s application for a hearing. The opinion reads, in part:

The original agreement does not (likely due to poor preparation)
include the right hand as part of the injuries in this case.
Interestingly, the treatment notes from the onset included the right
hand. In any event, the employer/carrier did not raise causation on
the face of the employer’s application, and this discrepancy is not
part of my consideration. It is apparent the employee is totally
disabled from both the right knee and right hand, and unable to
participate in vocational rehabilitation. At best, the reports from
Dr. Peyton are ambiguous.

Under these circumstances, probable cause does not exist to
grant a hearing to the employer/carrier.

Employer argued that the full commission should reverse Ms. deLamorton’s ruling

because the hand condition that kept employee from working was “not related to the

compensable injury.” The full commission issued an opinion on October 30, 2008, affirming the

earlier ruling. The commission found that:

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 On July 7, 2008, the Senior Claims Examiner determined
that the defendants had not alleged causation in their application
and that the claimant was totally disabled from both the right knee
and the right hand and therefore was unable to participate in
vocational rehabilitation.

* * * * * * *

Here, the documentation does not show that the claimant
refused to cooperate with vocational rehabilitation efforts. The
medical records indicate that the claimant suffered Dupuytren’s
contractions, a middle finger MCP joint sprain and carpal tunnel
syndrome. The defendants did not present sufficient evidence that
these conditions were pre-existing, such that they did not have to
take them into account in conducting vocational placement, or, if
they arose after the accident, that they were unrelated to it. See
American Furniture Co. v. Doane, 230 Va. 39, 334 S.E.2d 548
(1985). Hence, the documentation did not warrant the docketing of
the application.

(Emphasis added).

This appeal followed.

ANALYSIS

The commission has the power to make and enforce rules to carry out the purposes of the

Workers’ Compensation Act provided that such rules are not inconsistent with the Act. Rusty’s

Welding Serv., Inc. v. Gibson, 29 Va. App. 119, 129 n.2, 510 S.E.2d 255, 260 n.2 (1999) (en

banc). “When a challenge is made to the commission’s construction of its rules, the appellate

court’s review is limited to a determination of whether the commission’s interpretation was

reasonable.” Id.

Commission Rule 1.4 sets out requirements for the employer’s application for a hearing

to review compensation previously awarded. See also Code § 65.2-708 (authorizing hearings to

review compensation previously awarded on change in condition). This Court has previously

held that the employer must establish probable cause that a change in condition has occurred

before the employer’s hearing application will be accepted. Circuit City Stores, Inc. v. Scotece,

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28 Va. App. 383, 386, 504 S.E.2d 881, 883 (1998). “The commission has defined the standard

of ‘probable cause’ as ‘[a] reasonable ground for belief in the existence of facts warranting the

proceeding complained of.’” Id. at 387, 504 S.E.2d at 883 (quoting Black’s Law Dictionary

1081 (5th ed. 1979)). “[The predecessor to current Rule 1.4] is designed to serve as a screening

device for eliminating obviously unmeritorious applications for hearings filed by insurers and

employers.” Dillard v. Industrial Comm’n of Virginia, 416 U.S. 783, 795 (1974).

In this case, the employer’s application alleged employee failed to cooperate with

vocational rehabilitation. The statutory basis for a suspension of benefits under such

circumstances is found in Code § 65.2-603(B), which provides that:

The unjustified refusal of the employee to accept . . . vocational
rehabilitation services when provided by the employer shall bar the
employee from further compensation until such refusal ceases and
no compensation shall at any time be paid for the period of
suspension unless, in the opinion of the Commission, the
circumstances justified the refusal.

The commission’s opinion argues that the medical evidence did not show probable cause

that employee made an “unjustified refusal” to accept vocational rehabilitation in light of

Dr. Peyton’s undisputed opinion that employee’s hand condition prevented him from working in

any capacity. The commission further argues that employer’s application did not introduce any

evidence that employee’s hand condition was not a result of employee’s work-related accident.

Relying on American Furniture Co. v. Doane, 230 Va. 39, 334 S.E.2d 548 (1985), employer

responds that the commission erred in assigning to employer the burden of showing probable

cause that employee’s hand condition was the result of the work-related accident because the

parties’ original agreement mentioned only the knee injury.

In Doane, the employee suffered a back injury at work and was awarded compensation.

Id. at 41, 334 S.E.2d at 549. Almost two years later, the doctor who performed surgery on the

employee’s back recommended that she return to “lighter work.” Id. at 41, 334 S.E.2d at 550.

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Employer offered her a new job, a description of which was approved by the doctor, but

employee could not perform the light work because “pain, numbness, weakness, and loss of grip

in her right hand” had developed since her back surgery. Id. The employer applied for a

suspension of benefits “on the ground of unjustified refusal of selective employment.” Id. After

holding a hearing on the issue, a deputy commissioner suspended benefits because the evidence

did not show a causal connection between the employee’s hand impairment and the compensable

back injury. Id. at 42, 334 S.E.2d at 550. The full commission reversed the deputy

commissioner’s decision, construing former Code § 65.1-63 (now Code § 65.2-510) 1 to mean

that “selective employment must be within the employee’s capacity at the time such employment

is offered and that refusal based on an unrelated physical condition is not unjustified.” Id. Our

Supreme Court reversed the full commission:

In our view, employment “suitable to [the employee’s] capacity”
means employment within the employee’s residual capacity
resulting from the industrial accident. The Act is based upon the
premise that an employer is liable for the condition of an employee
resulting from an industrial accident. But an employer is not liable
for conditions not causally related to the employee’s work.

Id. “An employer, therefore, is absolved of liability for compensation if the employee refuses

selective employment because of a physical condition unrelated to the original industrial accident

and arising since the accident.” Id. at 43, 334 S.E.2d at 550.

We hold that this principle applies with equal force to cases involving a refusal to

cooperate with vocational rehabilitation pursuant to Code § 65.2-603. When an employee cannot

cooperate with vocational rehabilitation because of a medical condition not causally related to

1
Though this case concerns an alleged refusal to cooperate with vocational rehabilitation
as described in Code § 65.2-603 rather than a refusal of selective employment under former
Code § 65.1-63 (currently Code § 65.2-510) as in Doane, the text of each statute provides that
benefits be suspended during the period of such refusal unless such refusal was “justified.”
Former Code § 65.1-63 also included similar language at the time of the decision in Doane. See
Doane, 230 Va. at 41 n.1, 334 S.E.2d at 549 n.1.

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the work-related accidental injury for which benefits were originally awarded, the employee’s

refusal to cooperate is “unjustified” for the purposes of Code § 65.2-603, and the employer is

absolved of liability for compensation for the duration of the refusal.

In this case, the record includes medical evidence providing probable cause that, with

respect to his right knee injury, employee was capable of performing certain restricted work

duties. Thus, employer’s application to suspend benefits should have been granted unless

employee’s hand condition, which prevented his cooperation with vocational rehabilitation, was

the subject of an enforceable award finding that the hand condition was the result of the

work-related accident.

We, therefore, turn to the question: did the senior claims examiner’s finding that the

parties’ original agreement to pay benefits failed to mention the hand injury “likely due to poor

preparation” constitute an enforceable award of benefits with respect to the hand injury? Having

reviewed the statutory provisions governing the award of workers’ compensation benefits and

our cases interpreting them, we conclude that it did not.

The senior claims examiner made her finding with respect to the hand injury in the course

of addressing employer’s application for a hearing pursuant to Commission Rule 1.4. According

to the text of Rule 1.4, its requirements apply to “[e]ach change in condition application filed by

an employer under § 65.2-708 of the Code of Virginia . . . .” But we have previously held that

Code § 65.2-708 applies only to the review of claims where there has already been an award of

benefits; the statute does not create a procedure for granting new awards. See Williams v.

Virginia Elec. & Power Co., 18 Va. App. 569, 575, 445 S.E.2d 693, 697 (1994) (“This case

arises pursuant to Code § 65.2-708, not Code § 65.2-704, as is asserted in claimant’s brief. The

Supreme Court has held that ‘after the Commission has made its award and it has become final

the procedure for review of disputes which may arise in connection with the award must be

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under [Code § 65.2-708].’” (quoting Manchester Board & Paper Co. v. Parker, 201 Va. 328,

330, 111 S.E.2d 453, 455 (1959))). Because the commission has issued no award ordering

compensation for employee’s hand injury, the commission erred in finding that employer had the

burden of raising the issue of causation in a hearing application pursuant to Code § 65.2-708.

The statutory procedures for enforcing the obligation to pay benefits to an injured

employee under the Workers’ Compensation Act support this conclusion. An agreement

between the parties in regard to compensation or in compromise of a claim for compensation

becomes enforceable if the commission approves the agreement. See Code § 65.2-701(A) (“If

approved, the agreement shall be binding, and an award of compensation entered upon such

agreement shall be for all purposes enforceable as provided by Code § 65.2-710.”). See also

Strong v. Old Dominion Power Co., 35 Va. App. 119, 127, 543 S.E.2d 598, 602 (2001)

(“Moreover, without commission approval, a memorandum of agreement is null and void.”). If

the parties do not reach agreement, either may seek an award order from the commission by

applying for a hearing. See Code §§ 65.2-702, -704(A). If not reviewed in due time upon a

petition for rehearing, or review by the full commission, see Code § 65.2-705(A), the award or

ruling deciding the disputed issues raised at the hearing becomes “conclusive and binding as to

all questions of fact.” Code § 65.2-706(A). In short, whether or not the parties agree on the

terms of compensation, the text of the Workers’ Compensation Act provides no procedure for

obtaining an enforceable right to benefits without requesting an award from the commission.

There are two judicially created exceptions to the requirement that enforceable

compensation awards must be obtained in accordance with the statutory procedures described

above; but the record in this case does not support their application. The first of these exceptions

is the doctrine of de facto awards. See National Linen Service v. McGuinn, 5 Va. App. 265, 362

S.E.2d 187 (1987) (en banc). In McGuinn, the employer voluntarily paid compensation to

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employee for thirteen months, failed to contest that employee’s injury was compensable, and

failed to file the memorandum of agreement required by former Code § 65.1-93 (now Code

§ 65.2-701). Id. at 272-73, 362 S.E.2d at 191. This Court applied estoppel principles, holding

that employee’s reasonable reliance on employer’s actions created an enforceable de facto award

of benefits. Id.

It is true that, in this case, employer did not expressly dispute employee’s original claim

for benefits alleging “injury to right hand and right knee.” 2 However, the record is unclear about

the existence of a fact even more important to the existence of reasonable reliance: the payment

of compensation for employee’s hand injury. The weekly sum paid to employee pursuant to the

agreement to compensate him for the total incapacity caused by his knee injury – 66 and two

thirds percent of employee’s pre-injury average weekly wage – would have been the same

whether the employer was paying benefits for the hand condition, the knee injury, or both. See

Code § 65.2-500(A).

Even without clear evidence of weekly payments, a de facto award might still be

appropriate if employer consistently paid for medical care for employee’s hand. The senior

claims examiner’s opinion states, correctly, that treatment notes in the record describe the

progress of therapy for the hand. However, Dr. Evans, who treated employee’s hand, noted on

January 31, 2008 that: “[employee] has just elected to bypass the workmen’s compensation

system and have the surgery done under his private insurance and let his attorney sort things out

once his hand recovers.” As early as February 19, 2007, only one week after the accident,

2
Employer’s argument, i.e., that the agreement to pay benefits form signed by the parties
and accepting only the knee injury as compensable operated as a denial of employee’s earlier
claim for compensation with respect to his hand injury, suggests that employer may have
violated Commission Rule 4.1, which requires that: “If the claim is denied the employer shall
notify the employee and the Commission promptly in writing.” However, the procedural posture
of this case restricts the scope of our review to whether the commission erred in denying
employer’s hearing application.

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Dr. Kahn’s notes indicate that employee: “[t]old Dr. Kahn about hand but was advised that it

was separate injury and Dr. Kahn could not treat as part of the accident.” Moreover, our prior

published cases approving de facto awards each affirmed the commission’s finding that a de

facto award existed. See Henrico (County of) Pub. Util. v. Taylor, 34 Va. App. 233, 236, 540

S.E.2d 501, 503 (2001); Ryan’s Family Steak Houses, Inc. v. Gowan, 32 Va. App. 459, 462, 528

S.E.2d 720, 721-22 (2000); McGuinn, 5 Va. App. at 272-73, 362 S.E.2d at 191. In this case, the

commission based its decision, not on a finding of a de facto award, but on the erroneous

assumption that the employer had the burden of showing that the hand injury had not been

caused by the accident. While there may be a future case in which it is appropriate to find a de

facto award as part of a “right result, wrong reason” analysis, we are reluctant to do so for the

first time in a case where the record is unclear on the question of payment, which is very

important to the related question of reasonable reliance.

The other exception is the commission’s equitable power “to do full and complete justice

in every case.” Harris v. Diamond Construction Co., 184 Va. 711, 720, 36 S.E.2d 573, 577

(1946). This power allows the commission to set aside an award in the event of “fraud, mistake

or imposition.” Id. Yet there is no evidence in the record as to why employee’s hand injury was

omitted from the agreement to pay benefits form. Thus, it would be speculative to find that the

reason was fraud or mistake. The related doctrine of imposition “focuses on a party’s or the

commission’s ‘use of superior knowledge [of, or] experience with[,] the . . . Act or use of

economic leverage which results in an unjust deprivation’ of benefits under the Act or an unjust

application of the Act’s provisions.” Overhead Door Co. v. Lewis, 29 Va. App. 52, 60, 509

S.E.2d 535, 538-39 (1999) (quoting Butler v. City of Virginia Beach, 22 Va. App. 601, 605, 471

S.E.2d 830, 832 (1996)).

In every case in which this Court or the Virginia Supreme Court
has applied the doctrine of imposition, however, the commission

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 either (1) could have exercised jurisdiction under the Act to render
the requested result but did not formally obtain it due to the failure
of a party to perform some act in a timely fashion or (2) actually
exercised its jurisdiction under the Act to enter an award but later
learned that the award was erroneous due to some misinformation.

Id. at 60, 509 S.E.2d at 539. The record similarly fails to show that the award accepting the

parties’ agreement to pay benefits was erroneous due to misinformation; nor is there evidence

that a failure to perform some act in a timely fashion has deprived the commission of

jurisdiction. Finally, the medical evidence in the record does not clearly indicate that the denial

of benefits for employee’s hand problem has resulted in “an unjust deprivation under the Act.”

For example, Dr. Evans opined that employee’s Dupuytren’s disease was exacerbated by the

work-related accident, but according to Dr. Innis, “[h]is Dupuytren’s problem is unrelated to the

work accident.” Moreover, his carpal tunnel syndrome is classified as an “ordinary disease of

life” by Code § 65.2-401, which requires clear and convincing evidence, rather than a mere

probability, that the disease arose in the course of the employment. Without a hearing or

agreement on this question, we cannot say that the commission could have exercised its equitable

powers to alter the agreement that the parties actually made.

In sum, the senior claims examiner made an unwarranted assumption that employee’s

right hand injury was causally related to the industrial accident. No award or agreement

supported that conclusion. Moreover, that issue was never raised, or addressed, by the parties for

her consideration. The commission compounded this error by placing on the employer, in

contradiction to Doane, the burden of presenting medical evidence in their application showing

the hand injury was “pre-existing” or was “unrelated to” the industrial accident.

CONCLUSION

We find as a matter of law that employer’s evidence established probable cause that a

change in condition occurred with respect to the compensable injury acknowledged in the

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parties’ agreement to pay benefits. We, therefore, reverse the commission’s decision and remand

with instructions to place this case on the hearing docket.

Reversed and remanded.

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