SAIF Corp. v. Abbott

• Jurisdiction: Oregon
• Parties: In the Matter of the Compensation of David R. Abbott, Claimant. SAIF CORPORATION and Olympic Forest Products, Petitioners, v. David R. ABBOTT, Liberty Northwest Ins. and Pinkertons, Inc., Respondents. WCB 87-13095 to WCB 87-13097; CA A50887.
• Citation: 103 Or.App. 49,796 P.2d 378
• Court: Oregon Court of Appeals
• Decision Date: 08 August 1990

Page 378

796 P.2d 378

103 Or.App. 49

In the Matter of the Compensation of David R. Abbott, ClaimantSAIF CORPORATION and Olympic Forest Products, Petitioners, v.David R. ABBOTT, Liberty Northwest Ins. and Pinkertons Inc., Respondents.

WCB 87-13095 to WCB 87-13097; CA A50887.

Court of Appeals of Oregon.

Argued and Submitted Nov. 22, 1989.

Decided Aug. 8, 1990.

John A. Reuling, Jr., Asst. Atty. Gen., Salem, argued the cause for petitioners.With him on the brief were Dave Frohnmayer, Atty. Gen., Virginia L. Linder, Sol.Gen., Salem, and Scott P. Monfils and Jeffrey Stewart Love, Portland.

Craig A. Staples, Portland, argued the cause for respondents Liberty Northwest Ins. and Pinkertons, Inc.With him on the brief was Roberts, Reinisch & Klor, P.C., Portland.

No appearance for respondentDavid R. Abbott.

Before RICHARDSON, P.J., and NEWMAN and DEITS, JJ.

DEITS, Judge.

Petitioners seek review of an order of the Workers' Compensation Board that set aside SAIF's backup denials of responsibility for claimant's back injury and carpal tunnel syndrome.

Claimant was an employee of Pinkertons Detective Agency, which was hired by Olympic Forest Products to investigate the unusual number of worker's compensation claims that were being filed at one of its sawmills, as well as suspected drug use by employees at that mill.Pinkertons placed an undercover detective, claimant, in the mill to do the investigation.He worked as an entry level mill worker and received a paycheck from Olympic.Olympic paid him its usual hourly rate, and Pinkertons supplemented that to make up his Pinkertons' salary.Olympic made its usual payroll deductions from claimant's checks and paid premiums to SAIF for him.Pinkertons directed his investigative activities.Only the owner and the plant superintendent, Meek, knew of claimant's identity.Meek believed that claimant's was using an assumed name for the investigation.

On November 7, 1986, a week after he began work at the mill, claimant was hit in the chest by a log.He filed an injury claim on November 18, claiming right wrist and right shoulder strain.A plant manager verified the injury and signed the claim.Claimant listed Olympic as his employer on the form and showed his wages as the amount that he was being paid by Olympic.As part of the claim filing process, claimant was required to talk with Meek, whose job it was to investigate compensation claims.Claimant told Meek not to worry about the claim, because it was just a ruse to allow him to talk to Meek about the investigation.Meek knew that the claim had been filed, but took no further action to delay or prevent it from going to SAIF and being approved.On December 15, 1986, SAIF accepted the claim as a non-disabling injury.

On January 6, 1987, claimant was injured again when another employee at the mill threw a 2 X 4 at him.He experienced back pain and numbness on his right side and filed a second injury claim, listing only back pain.He met with Meek concerning the claim.Meek assumed that it was not a real claim, but that claimant was again using it as an excuse to talk with him about the investigation.Again, he knew that the claim had been filed, but did not investigate or take action to delay it from going to SAIF, because he did not think that claimant was really hurt.SAIF accepted the claim on February 5, 1987, as a back strain.Claimant left Olympic in January, 1987.In February, his neurosurgeon informed SAIF that he had a carpal tunnel syndrome and that he might need to have surgery, which he underwent on May 22, 1987.SAIF paid claimant compensation for the time he lost due to the surgery.Claimant filed a claim against Pinkertons on May 29, 1987, for the carpal tunnel damage resulting from the November 7, 1986, injury.

In early 1987, shortly after claimant left the mill, Meek discovered that claimant was receiving compensation for the two injuries.On June 22, 1987, SAIF denied responsibility for both previously accepted claims on the ground that claimant was not Olympic's employee.Liberty Northwest, Pinkertons' insurer, denied compensability on June 25 on the ground the injury did not result from claimant's employment at Pinkertons.

A hearing was held on SAIF's and Liberty's denials on December 22, 1987.The hearings officer approved Liberty's denial and disapproved SAIF's denials under Bauman v. SAIF, 295 Or. 788, 670 P.2d 1027(1983).The hearings officer held that any misrepresentations that claimant had made were not sufficient to allow SAIF's backup denials, because Meek knew that claimant had filed claims and should have followed up on them, even if he had misunderstood why they were filed.The hearings officer also awarded increased time loss payments, based on claimant's entire wages, including the amount paid by Pinkertons, rather than just on the wages from Olympic.The Board affirmed.

Petitioners argue that the Board erred in setting aside SAIF's denial.An insurer may not deny a previously accepted claim more than 60 days after receiving notice of the claim, without a showing of fraud, misrepresentation or other illegal activity.Ebbtide Enterprises v. Tucker, 303 Or. 459, 738 P.2d 194(1987).In order to justify a backup denial, a misrepresentation must have been sufficiently material that the insurer's decision "could reasonably have been affected."Ebbtide Enterprises v. Tucker, supra, 303 Or. at 464, 738 P.2d 194.¹

Petitioners contend that claimant misrepresented his employment status when he listed Olympic as his employer on the claim form and that his statement to Meek that the claims were not real was a...