Meyers v. Western Auto

• Decision Date: 06 June 2002
• Docket Number: No. 22,083.,22,083.
• Citation: 54 P.3d 79,132 N.M. 675,2002 NMCA 89
• Parties: John L. MEYERS, Worker-Appellant, v. WESTERN AUTO and CNA Insurance Companies, Employer/Insurer-Appellees.
• Court: Court of Appeals of New Mexico

54 P.3d 79

132 N.M. 675

2002 NMCA 89

John L. MEYERS, Worker-Appellant, v. WESTERN AUTO and CNA Insurance Companies, Employer/Insurer-Appellees.

No. 22,083.

Court of Appeals of New Mexico.

June 6, 2002.

Certiorari Denied August 12, 2002.

Gerald A. Hanrahan, Albuquerque, NM, for Appellant.

Kimberly A. Syra, Hatch, Allen & Shepherd, P.A., Albuquerque, NM, for Appellees.

Certiorari Denied, No. 27,579, August 12, 2002.

OPINION

CASTILLO, Judge.

{1} In this workers' compensation case, we address the consequences of bad faith handling of a worker's claim and the award of attorney fees. John L. Meyers (Worker) appeals from orders awarding him medical benefits and attorney fees, and imposing bad faith sanctions against Employer/Insurer Western Auto and CNA Insurance Companies (hereinafter collectively referred to as CNA). On appeal, Worker claims that: (1) the Workers' Compensation Judge (WCJ) should have included future medical benefits and attorney fees in calculating the bad faith sanction; (2) the statute imposing the sanction should not be the exclusive remedy available to a claimant; (3) the WCJ should have awarded additional sanctions for conduct that took place in proceedings before the Workers' Compensation Administration (WCA); (4) CNA should be responsible for payment of all of Worker's attorney fees; (5) Worker's present claim for the reinstatement of medical benefits should not have been treated as a part of his original claim for purposes of calculating the amount of attorney fees; and (6) the cap on attorney fees is unconstitutional. We affirm on all issues except the fourth issue, payment of attorney fees. Because Worker's total award was more than his settlement offer before the hearing, we hold that NMSA 1978, § 52-1-54(F)(4) (1993) requires CNA to pay all of Worker's attorney fees.

FACTUAL AND PROCEDURAL BACKGROUND

{2} Worker suffered a back injury in November 1991 while employed with Western Auto in Hobbs, New Mexico. After Worker underwent surgery in December 1991, he relocated to Las Vegas, Nevada, where he was treated by Edson O. Parker, M.D. Dr. Parker reported that Worker reached maximum medical improvement in December 1992. Worker thereafter filed a complaint for benefits under the Workers' Compensation Act (Act). A compensation order filed in September 1994 resolved Worker's claim by awarding him permanent partial disability benefits and attorney fees in the amount of $5800. Worker continued to receive medical treatment pursuant to the Act.

{3} On September 11, 1998, Worker suffered injuries to his neck and right shoulder while performing maintenance for a Las Vegas property management company. Although these injuries were serious enough to require surgery, they did not affect Worker's pre-existing back injury. Worker was notified that he needed additional back surgery just five days after he suffered the injuries to his neck and shoulder. CNA initially denied authorization for back surgery, advising Worker that he would first have to attend an independent medical exam (IME) with a panel of specialists in Albuquerque. The IME was scheduled for November 20, 1998. However, on November 17, 1998, an orthopedic specialist evaluated Worker's September 11 injuries and diagnosed them as a cervical strain and right shoulder impairment. The orthopedic specialist ordered a magnetic resonance imaging (MRI) scan and instructed Worker not to travel to Albuquerque until he stabilized. On November 17 or 18 Worker's wife informed CNA that Worker would be unable to travel to Albuquerque for the IME. In a letter dated December 3, 1998, a new CNA claims adjuster, Greg Ramirez, informed Worker that he was placing a hold on medical benefits because it appeared that Worker had suffered a separate injury, and worker had failed to submit to an IME as mandated by the Act. Worker's wife contacted Ramirez after receipt of the letter, and the IME was reset for December 18, 1998.

{4} On December 9, 1998, the MRI scan of Worker's back revealed cervical disc extrusion at the C3-4 level. Worker was referred to an orthopedic surgeon and restricted from flying to Albuquerque for at least six weeks. Worker underwent back surgery on December 17, 1998. Just prior to the surgery, Worker's wife informed Ramirez that the IME would have to be rescheduled once again. Ramirez told her that after December 31, 1998, CNA would terminate medical benefits until an IME report was received.

{5} On January 29, 1999, the surgeon who had operated on Worker in December 1998 released Worker to travel. CNA was notified of the release and the IME was scheduled for March 26, 1999. In the meantime, Worker informed his treating physician in Nevada, Dr. Parker, that Worker's benefits had been stopped. Dr. Parker wrote to Ramirez on February 4, 1999, informing him that Worker continued to need medical treatment for his back and that the back condition was not related to the neck and shoulder injuries sustained in September 1998. Dr. Parker urged CNA to reinstate Worker's medical benefits. Thereafter, Worker's wife called Ramirez and informed him that Worker's condition was deteriorating and that Worker could not afford to pay for his medications. Ramirez told her that he did not need to respond to Dr. Parker's letter, and advised her that the benefits remained suspended until after the IME.

{6} In an effort to address his ongoing back pain, Worker underwent a selective nerve root block, performed by Dr. Parker on March 22, 1999. CNA denied payment for this procedure. On March 26, 1999, Worker attended his IME in Albuquerque, with Dr. Theodore Scharf acting as coordinator. The IME report recommended discontinuation of the pain medication oxycontin, to be replaced by methadone. The report also recommended against nerve blocks. By letter dated April 19, 1999, CNA, through Ramirez, notified Worker that his medical benefits would be limited to those authorized by the IME report. In response, Dr. Parker sent a letter dated April 29, 1999, to inform CNA that methadone had proved unsuccessful in treating Worker in the past, that oxycontin was effective and medically necessary, and that Worker had treatment needs beyond those recommended by the IME report. Ramirez did not respond to the letter and later informed Worker's wife that he would restrict benefits to the IME report recommendations unless otherwise authorized by Dr. Scharf.

{7} Worker brought this dispute to the WCA by filing an application for benefits on July 26, 1999. The WCJ referred the matter to mediation and ordered Dr. Sidney Schultz, a board certified orthopedic surgeon, to perform an IME. The IME report was issued on September 15, 1999. The report and Dr. Schultz's subsequent testimony in this case largely concurred with Dr. Parker's opinions on the use of oxycontin and need for on going pain management at Dr. Parker's discretion. Dr. Schultz also agreed that the injuries Worker sustained in September 1998 should not affect treatment for his back condition.

{8} Ramirez was no longer working for CNA by January 1, 2000. In late January, Worker's pharmacist attempted to contact Ramirez for authorization to fill Worker's prescriptions. First, the pharmacist was advised that Ramirez's voice mail was full; then he was advised that Ramirez was no longer with CNA and directed to leave a message. The pharmacist still had not received authorization from CNA by the time of the hearing on Worker's benefit application in August 2000.

{9} Before the hearing, Worker made an offer to settle the claim, which CNA rejected. At the hearing, Ramirez essentially conceded that he had handled Worker's claim improperly and that it had been inappropriate to discontinue Worker's benefits in December 1998. After the hearing, the WCJ entered an order that had the effect of back-dating all medical benefits to December 1998, including most of Dr. Parker's treatments and prescription recommendations. The WCJ found that CNA had engaged in the following bad faith conduct:

46. ... by terminating medical benefits when Insurer knew the failure to appear for an independent medical examination was for medical reasons barring travel.

47. ... by refusing to investigate medical care claims in this cause, and by refusing to take reasonable steps to evaluate the new information.

48. ... by refusing to consider the effects of newly presented information relating to alternatives to oxycontin and by attempting to delegate decision making to a physician, Dr. Scharf, who had not been retained for that purpose.

49. ... by permitting the complete cessation of adjustment activity on this claim by its agents by mid-December, 1999 until February, 2000.

50. ... by failing to inform Worker and his medical providers of a change of adjusters for two months after it occurred, resulting in unreasonable delay in payment of just claims.

51. ... by unreasonably delaying payment of just claims relating to medical care.

52. ... by the failure of its agent, Greg Ramirez, to adequately review and become familiar with the contents of Insurer's own files and records relevant to Worker's medical claims, prior to refusals to pay or not pay medical claims.

53. ... by attempting to usurp control of medical care through the guise of an independent medical examination.

54. ... by attempting to regulate medical care consistent with a one time IME, and without regard to new information or changed circumstances.

{10} The WCJ additionally found that CNA "did not engage in bad faith in proceedings before the Workers' Compensation Administration to warrant further sanctions pursuant to 11 NMAC 4.4.13.2." The WCJ subsequently imposed the statutory twenty-five percent maximum sanction on CNA for its bad faith conduct, which amounted to $1674 of the roughly $6700 amount awarded for unpaid medical costs. The WCJ also awarded an attorney fee of $9000 plus tax. The WCJ found that the recovery could not be meaningfully compared to the offer because of...