Cervantes v. Liberty Northwest Ins. Corp., 02-09478; A125495.

• Decision Date: 26 April 2006
• Docket Number: 02-09478; A125495.
• Citation: 134 P.3d 1033,205 Or. App. 316
• Parties: In the Matter of the Compensation of Tony Cervantes, Jr., Claimant. Tony CERVANTES, Jr., Petitioner, v. LIBERTY NORTHWEST INSURANCE CORPORATION and Collins Pine Co. LLC., Respondents.
• Court: Oregon Court of Appeals

134 P.3d 1033

205 Or. App. 316

In the Matter of the Compensation of Tony Cervantes, Jr., Claimant Tony CERVANTES, Jr., Petitioner, v. LIBERTY NORTHWEST INSURANCE CORPORATION and Collins Pine Co. LLC., Respondents.

02-09478; A125495.

Court of Appeals of Oregon.

Argued and Submitted May 26, 2005.

Decided April 26, 2006.

Robert F. Webber, Medford, argued the cause for petitioner. With him on the briefs was Black, Chapman, Webber, Stevens & Petersen.

David O. Wilson argued the cause and filed the brief for respondents.

Before HASELTON, Presiding Judge, and ORTEGA, JUDGE, and DEITS, Judge Pro Tempore.

DEITS, J. Pro Tempore.

Claimant seeks review of an order of the Workers' Compensation Board (board), which denied claimant's request for attorney fees. ORS 656.386(1); ORS 656.298 (2003), amended by Or. Laws 2005, ch. 188, § 3. We reverse and remand.

In August 2002, claimant filed a workers' compensation claim for a left groin pain. After an initial medical report indicated that claimant's injury could be a left inguinal hernia, insurer issued a notice of acceptance in October 2002, listing as the accepted condition a nondisabling "left inguinal hernia." Later in October, claimant underwent a laparoscopy, the results of which indicated that claimant did not have a left inguinal hernia. Claimant was then referred to a urologist. On November 7, 2002, insurer sent a letter to claimant, stating that medical records indicated that claimant did not have a hernia and, therefore, claimant's "current condition" was not work related. The letter stated that insurer was denying claimant's claim for benefits, "as your claimed condition did not arise out of and in the course and scope of your employment."

On the same day that insurer sent its denial letter, Dr. Maurer, a urologist, examined claimant and diagnosed claimant's injury as left adductor tendinitis. Claimant then requested a hearing on insurer's November 7 denial. In July 2003, before the requested hearing was held, insurer issued a modified notice of acceptance, listing a disabling left inguinal hernia as the accepted condition.

At the hearing before the administrative law judge (ALJ) in August 2003, claimant asserted that the denial letter raised issues of compensability. Claimant argued that the denial of the compensability of his "current condition" should be set aside because his employment was the major contributing cause of his left adductor strain. He also sought an award of attorney fees if he prevailed against the denial. At that time, insurer appeared to believe that compensability was at issue, arguing that claimant's condition was not compensable. Alternatively, insurer asserted that claimant's request for hearing was premature because claimant had not made a formal claim for the left adductor tendinitis, and that a claim for that specific condition must be made before a hearing may be requested on the compensability of that condition.

The ALJ agreed with insurer that claimant's compensable claim was for left adductor tendinitis and that insurer's "current condition denial" did not relate to the left adductor tendinitis, because claimant had not filed a "new or omitted claim," pursuant to ORS 656.267(1), for the left adductor tendinitis. Consequently, the ALJ concluded that claimant's request for hearing was premature and that the board lacked authority to address the compensability of that condition. The ALJ dismissed claimant's request for hearing with respect to the denial and rejected claimant's request for attorney fees.

Claimant requested board review of the ALJ's decision, arguing that the denial should be set aside because it was either an invalid "back-up" denial of his previously accepted hernia or an invalid "current condition denial." Claimant further argued that, because insurer issued a modified notice of acceptance after he had requested a hearing, its modified acceptance constituted a rescission of its earlier denial, and therefore claimant was entitled to attorney fees under ORS 656.386(1).

The board concluded that it did have authority to consider the validity of insurer's denial of claimant's current condition and reinstated the hearing request. It then refused to address claimant's "back-up" denial argument, on the ground that claimant had not raised it to the ALJ. The board reasoned that insurer's "current condition" denial could not have included claimant's adductor tendinitis because the diagnosis of that condition occurred on the same day as the denial. The board held that the inguinal hernia remained accepted and, accordingly, there was no condition to which the denial could be applied, and the denial was therefore void. The board further concluded that, because the denial was void, claimant did not prevail over a denied claim, and, therefore, claimant was not entitled to attorney fees under ORS 656.386(1). Claimant seeks review of the board's denial of attorney fees.

On appeal, claimant argues, inter alia, that he is entitled to attorney fees under ORS 656.386(1)(a). That statute provides:

"In all cases involving denied claims where a claimant finally prevails against the denial in an appeal to the Court of Appeals or petition for review to the Supreme Court, the court shall allow a reasonable attorney fee to the claimant's attorney. In such cases involving denied claims where the claimant prevails finally in a hearing before an Administrative Law Judge or in a review by the Workers' Compensation Board, then the Administrative Law Judge or board shall allow a reasonable attorney fee. In such cases involving denied claims where an attorney is instrumental in obtaining a rescission of the denial prior to a decision by the Administrative Law Judge, a reasonable attorney fee shall be allowed."

The issue in this case is whether a "denied claim" is involved and, if so, whether claimant did prevail against a denial or whether his attorney was instrumental in obtaining a rescission of a denial prior to a decision by the ALJ. Either ground would entitle claimant to attorney fees under ORS 656.386(1). The wording of insurer's November 7, 2002, denial is critical. Insurer stated:

"You filed a claim for an occupational disease to your left groin area allegedly on or about July 3, 2002, while employed at Fremont Sawmill Division.

"On October 15, 2002 Liberty Mutual accepted this nondisabling claim for left inguinal hernia. You underwent pelvic laparoscopy on October 25, 2002 to confirm and repair a suspected inguinal hernia. Medical records from Dr. McClure indicate that the pelvic laparoscopy was negative, with no hernia found.

"Records reflect that you have now been referred to a Urologist for further treatment. As noted above, medical evidence fails to establish that your current condition is related to your work activities with Fremont Sawmill Division on or about July 3, 2002.

"Without waiving any other defenses, we deny your claim for benefits, as your claimed condition did not arise out of and in the course and scope of your employment."

(Emphasis added.)

Insurer argues on appeal that the board was correct that nothing was denied in the November 7 letter and, therefore, there was no denial for the claimant to overcome. Insurer acknowledges that the wording of the denial letter is confusing and that the denial was "inartful." The denial letter, insurer argues, was intended to deny the referral of the claimant to a urologist. However, insurer explains, because no medical costs relating to the urology referral had yet been incurred, the denial letter was premature. According to insurer, the modified notice of acceptance in July 2003 was merely for the purpose of changing the acceptance from a nondisabling to a disabling claim. Insurer acknowledges that the modified acceptance was an unusual procedure in this case because the medical evidence had established that the accepted condition, the left inguinal hernia, did not exist. Regardless of the unusual procedures that it used, insurer argues, there was no denial of claimant's claim, and claimant is not entitled to attorney fees under the provisions of ORS 656.386.

Claimant argues that, although it is not entirely clear what the November 7, 2002, letter was denying, the words used by the insurer in the denial indicate that it denied something. Claimant points to the language of the denial that states that insurer is denying claimant's "current condition." Claimant asserts that it would make no...