Wetch v. Crum & Forster Commercial Ins., CIV. 17-5033-JLV

• Decision Date: 25 February 2020
• Docket Number: CIV. 17-5033-JLV
• Parties: DAVID WETCH, Plaintiff, v. CRUM & FORSTER COMMERCIAL INS.; NORTH RIVER INSURANCE COMPANY; and UNITED STATES FIRE INSURANCE COMPANY, Defendants.
• Court: U.S. District Court — District of South Dakota

DAVID WETCH, Plaintiff, v. CRUM & FORSTER COMMERCIAL INS.; NORTH RIVER INSURANCE COMPANY;and UNITED STATES FIRE INSURANCE COMPANY, Defendants.

CIV. 17-5033-JLV

UNITED STATES DISTRICT COURT DISTRICT OF SOUTH DAKOTA WESTERN DIVISION

February 25, 2020

ORDER

INTRODUCTION

United States Magistrate Judge Veronica L. Duffy filed a report and recommendation ("R&R"). (Docket 131). Both parties filed objections to the R&R. (Dockets 136 & 137). Both parties also filed responses to the opposing party's objections. (Dockets 143 & 144).

For the reasons given below, defendants' objections are sustained in part and overruled in part and plaintiff's objections are sustained in part and overruled in part. The court adopts in part, rejects in part and modifies in part the R&R consistent with this order.

ANALYSIS

Defendants' objections to the R&R are summarized as follows:

1. The R&R erroneously concluded, based on Dr. Wojciehoski's opinion, that the defendants " 'acted contrary' to pre-Hayes¹ law." (Docket 136 at pp. 2-3).

2. The R&R erroneously concluded the statute of limitations was not debatable at the time of defendants' "decision to delay or deny medical benefits." Id. at pp. 3-4.

3. The R&R erroneously fails to acknowledge the rebuttable presumption of SDCL § 62-4-1 is a question of fact. Id. at pp. 4-5.

4. The R&R erroneously fails to acknowledge that the materiality issue is a question of fact. Id. at pp. 5-6.

5. The R&R "unfairly minimizes" defendants' assertions regarding plaintiff's claim for hydrotherapy expenses and its effect on the question of bad faith. Id. at pp. 6-7.

Plaintiff's objections to the R&R are summarized as follows:

1. The R&R misinterpreted the stipulated agreement. (Docket 137 at pp. 1-7).

2. The R&R misinterpreted South Dakota's worker's compensation procedure. Id. at pp. 7-12.

3. The R&R "errs in its analysis of the 'retroactive effect' of Hayes." Id. at pp. 12-14.

4. The R&R misinterpreted the defendants' denial letter. Id. at pp. 14-15.

5. The R&R "errs by considering [defendants'] arguments that reject the rulings of the DOL² and the Circuit Court.³" Id. at pp. 15-17.

6. The R&R "errs by failing to distinguish between the [DOL's] orders' 'effectiveness,' 'appealability,' and 'finality.' " Id. at pp. 17-22.

7. The R&R "errs by failing to consider the preclusive effect of res judicata and collateral estoppel as they relate to the Order of Contempt." Id. at pp. 22-23.

8. The R&R "errs by failing to apply judicial estoppel to the Defendants' representations before the DOL on the fourth Motion for Partial Summary Judgment." Id. at pp. 23-24 (emphasis omitted).

9. The R&R "errs by failing to apply res judicata, collateral estoppel, or judicial estoppel to the decisions and payments of the Subsequent Injury Fund." Id. at pp. 24-26.

10. The R&R "makes clearly erroneous findings of fact relating to Dr. Goodhope's opinions." Id. at pp. 26-27.

11. The R&R misinterpreted and misapplied the January 28, 2016, Order. Id. at pp. 27-28.

12. The R&R fails to evaluate the defendants' denials of benefits "given the facts and law available to the Defendants 'at the time' of the denial, delay, or failure to process or pay." Id. at pp. 28-29.

13. The R&R misinterpreted and misapplied plaintiff's Due Process Clause arguments. Id. at pp. 29-31.

14. The R&R "errs in its analysis of Herr v. Dakotah, Inc.⁴" Id. at pp. 31-32.

15. The R&R "fails to consider the legal implications of Defendants' Motion to Dismiss the proceedings before the Circuit Court." Id. at p. 32.

Under the Federal Magistrate Act, 28 U.S.C. § 636(b)(1), if a party files written objections to the magistrate judge's proposed findings and recommendations, the district court is required to "make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." Id. The court may "accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." Id. Fed. R. Civ. P. 72 further clarifies the court's role when objections are made to a R&R. "The district court may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed. R. Civ. P. 72(b)(3).

The court will resolve the parties' objections in the manner deemed most efficient.⁵

SOUTH DAKOTA WORKERS' COMPENSATION

The R&R summarized the format by which workers' compensation claims are presented, resolved and finalized.⁶ (Docket 131 at pp. 22-27). However, the court finds it is necessary for the clarity of this order to revisit the South Dakota's workers' compensation system. Because plaintiff's claims addresshis entitlement to medical benefits, the court will focus on those specific benefits without intending to minimize or diminish the benefits for a permanent, total disability claim.⁷

An employee who suffers a work-related injury is entitled to be provided by the insurer with the "necessary first aid, medical, surgical, and hospital services, or other suitable and proper care including medical and surgical supplies, apparatus, artificial members, and body aids during the disability or treatment of an employee within the provisions of [Title 62]." SDCL § 62-4-1. That section further provided at the time of Mr. Wetch's original injury that "[i]f an injured employee has not required medical treatment for a period of three years, it is presumed that no further medical care with respect to the injury is necessary." Kester v. Colonial Manor of Custer, 571 N.W.2d 376, 384 (S.D. 1997) (citing SDCL § 62-4-1) abrogated on other grounds, Holscher v. Valley Queen Cheese Factory, 713 N.W.2d 555 (S.D. 2006). "It is important to note, however, that SDCL 62-4-1 allows an employee to rebut the presumption by two methods: 'Documentation that the injury is work related by the primary treating or rating physician after three years shall automatically rebut thepresumption. . . . [T]he claimant may [also] present other medical proof to rebut the presumption.' " Id.

"It is in the doctor's province to determine what is necessary or suitable and proper. When a disagreement arises as to the treatment rendered or recommended by the physician, it is for the employer to show that the treatment was not necessary or suitable and proper." Streeter v. Canton School District, 677 N.W.2d 221, 226 (S.D. 2004) (emphasis in original) (citing Krier v. John Morrell & Co., 473 N.W.2d 496, 498 (S.D. 1991)). See also Hanson v. Penrod Construction Co., 425 N.W.2d 396, 399 (S.D. 1988).⁸ An insurer may require an employee to undergo an examination by a qualified medical practitioner or specialist at the insurer's expense ("IME"). SDCL § 62-7-1.

If the employee and insurer reach an agreement as to compensation, the agreement shall be filed with the DOL. SDCL § 62-7-5. If the DOL approves the agreement, either affirmatively or by inaction, the agreement "is enforceable for all purposes under the provisions of [Title 62]." Id. In addition, "after expiration of the time for a petition for review or appeal," any party to the agreement may present the agreement to "the circuit court . . . in which the injury occurred." SDCL § 62-7-31. The circuit court "shall render a judgment in accordance with the [agreement] . . . ." Id. "The judgment shallhave the same effect and in all proceedings in relation thereto be the same as though rendered in an action duly heard and determined by the court except that no appeal may be made on questions of fact." Id.

In the event of contested matters, DOL shall hold a hearing on the record. SDCL § 62-7-13. After the conclusion of the hearing, an administrative law judge ("ALJ") is required to "file its decision, its findings of fact, and conclusions of law and shall serve" the decision on the parties and their attorneys. Id.

"[W]ithin ten days after service on the party of a decision of the department . . . [a party may] file with the department a petition for review of the decision." SDCL § 62-7-16. In the event a petition for review is filed, the ALJ's decision "may not be deemed that the department has made a final decision until there is a final determination on the petition. The final determination shall in that event be deemed the final decision of the department and subject to appeal." SDCL § 62-7-18. A party has only 30 days within which to appeal a final decision of the DOL to circuit court. SDCL § 1-26-31.

As an alternative to review by the Secretary of the DOL, "[a]ny party may elect to treat as final the decision of the department made as provided in § 62-7-13 and appeal therefrom without making any petition for review, in which event the decision provided for in § 62-7-13 shall be treated as the final decision of the department and subject to appeal." SDCL § 62-7-17. Thus,an ALJ's decision under § 62-7-13 which is appealed directly to circuit court constitutes a "final decision of the department." Id. In similar fashion, a direct appeal to circuit court must be made within 30 days of the ALJ's departmental decision. SDCL § 62-7-19 (referencing SDCL Chap.1-26).

Whether by petition for review after a departmental final decision has been entered or by direct appeal from a § 62-7-13 final decision, upon appeal the circuit court is authorized to review "all intermediate orders or decisions affecting substantial rights[.]" SDCL § 62-7-19. Once the circuit court has issued a decision, an appeal to the South Dakota Supreme Court "must be taken within thirty days after the judgment or order shall be signed, attested, filed and written notice of entry thereof shall have been given to the adverse party." SDCL § 15-26A-6.

Material to Mr. Wetch's case, the South Dakota Supreme Court has "consistently held that the law in effect at the time the employee is injured is what controls the rights and duties of the parties in workers' compensation cases." Sopko v. C & R Transfer Co., Inc., 665 N.W.2d 94, 97 (S.D. 2003) ("Sopko II") (internal references omit...