Title: SAIF v. Sprague
Citation: N/A
Docket Number: S056541
State: Oregon
Issuer: Oregon Supreme Court
Date: August 27, 2009

FILED: August 27, 2009
IN THE SUPREME COURT OF THE STATE OF OREGON
In the Matter of the Compensation
of
Edward G. Sprague, Claimant.
SAIF CORPORATION
and JERRY'S SPECIALIZED SALES, 
Petitioners
on Review, 
v. 
EDWARD G. SPRAGUE
and UNITED STATES BAKERY, 
Respondents
on Review.
(Agency
Nos. 00-07404, 01-01561; CA A133701; SC S056541)
On review from the
Court of Appeals.*
Argued and submitted
May 18, 2009.
 David L. Runner,
Salem, argued the cause and filed the brief for petitioners on review.
Christopher Moore,
Malagon, Moore and Jensen, Eugene, argued the cause and filed the brief for
respondent on review Edward G. Sprague.
E. Jay Perry,
Employers Defense Counsel, Eugene, argued the cause and filed the brief for
respondent on review United States Bakery.
Before De Muniz, Chief
Justice, and Gillette, Durham, Balmer, Walters, and Kistler, Justices.**
BALMER, J.
The decision of the
Court of Appeals and the order of the Workers' Compensation Board are affirmed.
*On judicial review
from an order of the Workers' Compensation Board. 221 Or App 413, 190
P3d 443 (2008).
**Linder, J., did not
participate in the consideration or decision of this case.
BALMER, J. 
This workers' compensation case
requires us to review the statutory classifications for medical conditions and,
in particular, to determine when an insurer is responsible for medical services
necessary to treat those conditions.  Claimant sustained a workplace knee
injury in 1976 and received treatment for that injury.  Nearly twenty-five
years later, his knee had deteriorated to the point that a physician
recommended knee replacement surgery.  Before that surgery could be undertaken,
however, claimant had to lose weight.  Claimant's doctor recommended gastric
bypass surgery, without which the knee replacement surgery would not be effective,
and that surgery was performed in 2000.  The insurer rejected the claim for the
gastric bypass surgery.  The Court of Appeals, in a series of opinions, eventually
concluded that the surgery was compensable.  On review, we affirm the decision
of the Court of Appeals, although our analysis of the controlling statutes
differs in some respects.
STATUTORY OVERVIEW
A brief overview will be helpful in
understanding the key statutory terms.  ORS 656.245(1)(a), which we quote in
full below, makes employers (or their insurers) responsible, in certain
circumstances, for "medical services" necessary to treat "conditions"
that result from compensable workplace injuries.  Whether the expenses for those
medical services are compensable depends, in part, on characterizing the medical
conditions.  Roughly speaking, the workers' compensation statutes divide
medical conditions into four categories:  (1) ordinary conditions; (2) preexisting
conditions; (3) consequential conditions; and (4) combined conditions.  
ORS 656.245(1)(a) prescribes
generally when expenses for medical services are compensable and deals with each
of those conditions:  
"For every compensable injury, the insurer
or the self-insured employer shall cause to be provided medical services for
conditions caused in material part by the injury for such period as the nature
of the injury or the process of the recovery requires, subject to the
limitations in ORS 656.225, [which deals with preexisting conditions,]
including such medical services as may be required after a determination of
permanent disability.  In addition, for consequential and combined conditions
described in ORS 656.005(7), the insurer or the self-insured employer shall
cause to be provided only those medical services directed to medical conditions
caused in major part by the injury."
Thus, insurers generally are responsible for medical services
"for" conditions -- that is, ordinary "conditions" -- that
are "caused in material part" by compensable workplace injuries.  However,
the statute sets different standards for compensability of the other three
subsets of "conditions" described above -- preexisting,
consequential, and combined. 
As noted, ORS 656.245(1)(a)
incorporates the limitations on compensability of preexisting conditions --
that is, conditions that preexisted the workplace injury(1)
-- that are provided in ORS 656.225.  Under ORS 656.225, medical services
directed at treating only a preexisting condition generally are not
compensable:
"In accepted injury or occupational disease
claims, * * * medical services solely directed to a worker's preexisting
condition are not compensable unless:
"(1) In occupational disease or injury
claims other than those involving a preexisting mental disorder, work
conditions or events constitute the major contributing cause of a pathological
worsening of the preexisting condition.
"(2) In
occupational disease or injury claims involving a preexisting mental disorder,
work conditions or events constitute the major contributing cause of an actual
worsening of the preexisting condition and not just of its symptoms.
"(3) In medical service claims, the medical
service is prescribed to treat a change in the preexisting condition as
specified in subsection (1) or (2) of this section, and not merely as an
incident to the treatment of a compensable injury or occupational disease."
Similarly, ORS 656.245(1)(a)
incorporates the limitations related to consequential and combined conditions
provided in another statute, ORS 656.005(7)(a).  ORS 656.005(7)(a) both defines
"compensable injury" and provides limits on the compensability of
consequential and combined conditions:
"A 'compensable injury' is an accidental
injury, or accidental injury to prosthetic appliances, arising out of and in
the course of employment requiring medical services or resulting in disability
or death; an injury is accidental if the result is an accident, whether or not
due to accidental means, if it is established by medical evidence supported by
objective findings, subject to the following limitations: 
"(A) No injury or disease is compensable as
a consequence of a compensable injury unless the compensable injury is the major
contributing cause of the consequential condition.
"(B) If an otherwise compensable injury combines
at any time with a preexisting condition to cause or prolong disability
or a need for treatment, the combined condition is compensable only if, so long
as and to the extent that the otherwise compensable injury is the major
contributing cause of the disability of the combined condition or
the major contributing cause of the need for treatment of the combined
condition."
(Emphases added.)  ORS 656.245(1)(a) incorporates those
limits into the compensability of medical services claims by providing that, in
the case of consequential and combined conditions, the insurer is responsible
for only those medical services that are "directed to medical conditions
caused in major part by the [compensable] injury."  
FACTS
Claimant compensably injured his left
knee in 1976, while working for Jerry's Specialized Sales, an employer insured
by SAIF.  At that time, claimant weighed 225 pounds.  SAIF accepted claimant's
claim, and in December 1976, claimant underwent a meniscectomy to repair a torn
left lateral meniscus.  SAIF ultimately closed the claim with an award of 10
percent scheduled disability.
By 1996, claimant weighed approximately
320 pounds, and by 1998, his left knee had become symptomatic again.  In
February 1999, claimant again injured his left knee while working for United
States Bakery, a self-insured employer.  In November 1999, Gates McDonald, which
administered United States Bakery's workers' compensation claims, accepted
claimant's claim for his new injury -- "disabling cartilaginous fragments
of the left knee."  In January 2000, Gates McDonald modified its
acceptance to specify that the accepted claim was a combined condition
involving claimant's preexisting left knee problems; Gates McDonald later denied
compensation for that combined condition.
In April 2000, claimant's doctor
sought preapproval from Gates McDonald for gastric bypass surgery to treat claimant's
"severe morbid obesity."  In May 2000, claimant underwent the gastric
bypass surgery, at which time he weighed approximately 350 pounds.(2) 
However, Gates McDonald denied claimant's gastric bypass claim, asserting that
claimant's 1999 injury was not the major cause of claimant's current knee
condition or his need for gastric bypass.  Claimant then requested that SAIF
expand its acceptance of his original 1976 injury claim to include "pre-morbid
obesity and the need to perform gastric bypass."  Claimant also had previously
requested that SAIF expand its acceptance to include several other knee
conditions.  SAIF amended its acceptance to include "consequential
arthritis of the lateral compartment, left knee."  However, it denied
claimant's request to include the need for gastric bypass, asserting that
claimant's obesity preexisted the 1976 injury and that, as a result, the claim
was not compensable under ORS 656.225.  As noted, ORS 656.225 provides that
medical services "solely directed to a worker's preexisting condition"
generally "are not compensable." 
Claimant sought a hearing.  The administrative
law judge (ALJ) concluded that claimant's morbid obesity was not a preexisting
condition because there was "no persuasive evidence that claimant's weight
played a contributory role in his left knee condition until he became morbidly
obese after the 1976 injury."  After determining that claimant did not
have a preexisting condition, the ALJ noted that claimant could not, "by
definition," have a combined condition because a "combined
condition" involves the combination of a compensable injury with a
preexisting condition.  See ORS 656.005(7)(a)(B) (describing
"combined condition").  After concluding that neither ORS 656.225 nor
ORS 656.005(7)(a)(B) applied, the ALJ stated that the relevant determination
was whether the gastric bypass was "necessary to allow for more
directly-related treatment for [the 1976] injury," citing Williams v.
Gates, McDonald &amp; Co., 300 Or 278, 709 P2d 712 (1985).(3) 
Applying that standard, the ALJ concluded that claimant's gastric bypass was
compensable because it was necessary for his anticipated knee replacement
surgery to be successful.  
The Workers' Compensation Board reversed
the ALJ's order concerning claimant's medical services claim for the gastric
bypass.(4) 
The board agreed that ORS 656.225, the exclusion for preexisting conditions,
did not apply, but for a different reason than the ALJ.  The board noted that
the medical evidence demonstrated that claimant's 1976 injury contributed, at
least in part, to his need for gastric bypass.  Thus, claimant's obesity was
not the "sole[]" cause of the need for gastric bypass, and ORS
656.225 did not apply.  See ORS 656.225 ("[M]edical services solely
directed to a worker's preexisting condition [ordinarily] are not compensable *
* *." (Emphasis added.)).  Indeed, the board appears to have determined,
contrary to the ALJ, that claimant's obesity did preexist the 1976
injury; it supplemented the ALJ's findings of fact in part by noting that
"[c]laimant is genetically predisposed to obesity."  
Further, the board concluded that the
gastric bypass was not compensable under ORS 656.245(1)(a).  The board
characterized claimant's medical services claim as one involving a
"consequential condition" and stated that, as a result,
"claimant must prove that his compensable knee injury was the major
contributing cause of his need for gastric surgery."  The board
acknowledged that the gastric bypass surgery "was performed in part to
treat [claimant's] left knee condition (which is due largely to the 1976 work
injury * * *)."  (Footnote omitted.)  The board also acknowledged that two
doctors had opined that "the major contributing cause of his need for
[gastric bypass] surgery * * * was his left knee condition," but
determined that those opinions were "unpersuasive" because they were
"inadequately explained"; that is, the doctors "never explained why
[they] believe[d] that the knee condition contributed more to the need for
gastric surgery than did the preexisting genetically determined obesity." 
(Emphasis in original.)  Lacking any "persuasive" evidence that
claimant's knee condition was the "major cause" of his need for
gastric bypass, the board concluded that claimant had failed to demonstrate
that the gastric bypass was "directed to medical conditions caused in
major part by the [compensable] injury," as required by the second
sentence of ORS 656.245(1)(a).
Claimant sought judicial review.  The
Court of Appeals disagreed with the board's characterization of the claim as
one for a consequential condition:
"[A] consequential condition is a separate condition
that arises from the compensable injury, for example, when a worker suffers a
compensable foot injury that results in an altered gait that, in turn, results
in back strain. Here,
claimant's obesity is a separate condition, but the board found that claimant
was 'genetically predisposed to obesity.'  Moreover, it did not find that
claimant's obesity arose from claimant's knee condition, which is required for
it to be a consequential condition of an accepted condition.  The statutory
definition of a 'consequential condition' is not satisfied, as the board
reasoned, simply because the gastric bypass surgery was performed, in part, to
treat claimant's obesity and, in part, to treat his knee condition."
Sprague v. United States Bakery, 199 Or App 435, 440,
112 P3d 362 (2005) (Sprague I) (internal quotation marks omitted).  Instead,
the court concluded that "the 1976 knee injury and the development of
arthritis in that knee constitute an accepted combined condition that
now requires total knee replacement surgery."  Id. (emphasis in
original).  The court determined that the first sentence of ORS
656.245(1)(a), rather than the second sentence, applied, so that the issue on
remand actually was whether the gastric bypass was a medical service for a
condition that was "caused in material part" by the 1976 knee injury. 
Id. at 440-41.
SAIF petitioned for reconsideration,
arguing that, because the Court of Appeals had labeled claimant's condition a
"combined" condition, the second sentence of ORS 656.245(1)(a) still
applied.  See ORS 656.245(1)(a) (second sentence describes consequential
and combined conditions).  The Court of Appeals issued another opinion to
clarify its reasoning.  Sprague v. United States Bakery, 200 Or App 569,
116 P3d 251 (2005) (Sprague II).  The court began by explaining that the
"condition" that the court was classifying was "claimant's knee
condition, i.e., the need for a total knee replacement."  Id.
at 572.  The court then withdrew any wording from its prior decision implying
that claimant's obesity condition was a combined condition.  Finally, the court
explained its reasoning again:
"To summarize, we read the two sentences in ORS 656.245(1)(a)
to mean the following: They describe three categories of conditions for which
medical expenses are compensable.  In the first category, employers and
insurers are responsible for medical services for conditions caused in material
part by the compensable injury.  In the second and third categories, they are
also responsible for medical services for consequential and combined conditions
so long as the [need for] medical services [is] caused in major part by the
compensable injury.  The second sentence of the statute does not apply to
claimant's circumstances because claimant's obesity
is neither a combined condition nor a consequential condition as defined by ORS 656.005(7)(a). That is why we said in our former
opinion that, on remand, the board must consider whether claimant's medical
services claim was for a condition (claimant's obesity)
that was caused in material part by his compensable injury.  It is also why
SAIF's harmless error argument based on the second sentence of the statute is
misplaced.  It may be that the board will ultimately conclude that the medical
services were not for a condition that was 'caused in material part' by his
compensable condition, but it must make that determination without conflating
the requirements of the two sentences in the statute."
Id. at 573-74 (footnote omitted).
On remand, the board ruled in favor
of claimant, holding that his medical services claim for the gastric bypass surgery
was compensable.  The board adopted the ALJ's findings of fact, supplemented by
a finding that claimant's compensable 1976 left knee injury was a material
cause of his need for gastric bypass.  In making that determination, the board
relied on the opinions of two doctors that "the major contributing cause
of [claimant's] need for [gastric bypass] surgery * * * was his left knee
condition."  (Internal quotation marks omitted.)  The board also noted the
opinion of a third doctor that gastric bypass was "a well indicated and
reasonable treatment for [claimant's] left knee condition."  (Internal
quotation marks omitted; bracketed material in original.)  Because the board
found that claimant's compensable left knee injury was a "material
cause" of his need for gastric bypass, the board held that claimant's
medical services claim was compensable.
SAIF and Jerry's Specialized Sales sought
judicial review, and the Court of Appeals issued a third opinion.  SAIF v. Sprague, 221 Or App 413, 190 P3d 443 (2008) (Sprague III).  The
majority concluded that the board had complied with the remand instructions and
affirmed the board's decision.  The majority reiterated its earlier conclusion
that services for treating a noncompensable condition are, nevertheless,
compensable under the first sentence of ORS 656.245(1)(a) "if the
treatment of the noncompensable condition is necessary to the treatment of a
condition materially caused by the compensable injury."  Id. at
426.  Because the board had concluded that the treatment of the obesity
condition was necessary to the treatment of the knee condition, it was
compensable.
Chief Judge Brewer agreed with the
majority's holding, but wrote a concurring opinion in which he stated that the
court's application of the first sentence of ORS 656.245(1)(a) might be wrong. 
He first explained that the relevant "condition" was claimant's current
arthritic knee condition -- not claimant's obesity.  He then noted that the
majority incorrectly had characterized that condition merely as an ordinary
"condition" rather than as a "consequential condition."  He
explained that the arthritic knee condition was a consequential condition "because
the arthritis developed as a consequence of claimant's compensable 1976 injury." 
Id. at 429 (Brewer, C. J., concurring).  Thus, the second sentence of
ORS 656.245(1)(a) applied, and claimant was required to show that the medical
condition -- claimant's current arthritic knee condition -- was "caused in
major part by" the compensable injury -- claimant's 1976 injury.  Chief
Judge Brewer then concluded that "the board correctly analyzed the matter
in its first order in this case by requiring proof that claimant's 1976 knee
injury is the major contributing cause of his current arthritic knee
condition."  Id. at 430.  Nonetheless, he agreed with the result
reached by the majority, because the court's earlier decisions had become the
law of the case.  Id. at 432.
SAIF and Jerry's Specialized Sales
sought review in this court, which we allowed.
ANALYSIS
We begin by reviewing the relevant
facts using the terminology of the statutes.  The "compensable
injury" here is claimant's original meniscus tear, caused by a workplace
accident in 1976.  As a result of that injury, claimant underwent surgery,
which later caused arthritis to develop in his knee.  His current arthritic
knee -- not his obesity -- is the "condition" with which we are
concerned.  On the other hand, the specific "medical service" for
which claimant seeks compensation is the gastric bypass surgery.(5) 
The true question here is whether the surgery is a compensable medical expense
for the treatment of the condition.
As discussed above, the statute
governing claimant's medical services claim, ORS 656.245(1)(a), treats ordinary
"conditions" differently than consequential and combined conditions;
as a result, we next must classify claimant's arthritic knee condition.  Claimant
presented his claim for the arthritic knee condition as a consequential
condition, and SAIF accepted the claim as "consequential arthritis
of the lateral compartment, left knee."  (Emphasis added.)  The board
similarly classified claimant's claim as "a claim for medical services for
a consequential condition" and noted that his current arthritic knee condition
was "due largely to the 1976 work injury."  We agree with the board
and the parties that claimant's arthritic knee condition is best classified as
a consequential condition.  The medical evidence in the record supports the
board's conclusion that claimant's current arthritic knee condition is "a
consequence of" claimant's original 1976 surgery, which in turn was
performed as "a consequence of" his compensable 1976 injury.  See ORS
656.005(7)(a)(A) (describing "consequential condition").  
Because claimant's arthritic knee
condition is a consequential condition, the second sentence of ORS 656.245(1)(a)
governs the compensability of the medical services here.  As described above,
that sentence provides that, for consequential conditions, "the insurer or
the self-insured employer shall cause to be provided only those medical
services directed to medical conditions caused in major part by the injury."
(Emphasis added.)  In other words, two requirements must be met for claimant's
medical services to be compensable:  claimant must demonstrate that (1) his
current arthritic knee condition was "caused in major part" by his
compensable 1976 injury, and (2) the gastric bypass surgery was "directed
to" his current arthritic knee condition.  
Much of the dispute in this case has
centered around the applicable causation standard -- "material" cause
(from the first sentence of ORS 656.245(1)(a)) or "major" cause (from
the second sentence of ORS 656.245(1)(a)).  SAIF argues that claimant's medical
services claim must fail because he has not demonstrated that "his
'condition' of morbid obesity was 'caused in major part' by his
'compensable injury.'"  (Emphasis added.)  The board similarly focused on
the applicable standard of causation.  In its original order, the board stated
that, to qualify for compensation, "claimant must prove that his
compensable knee injury was the major contributing cause of his need for
gastric surgery."  (Emphasis added.)  On remand, the board, following the
Court of Appeals, altered its terminology by describing the first sentence of
ORS 656.245(1)(a) as requiring proof that "claimant's compensable left
knee injury was a material cause of his need for gastric bypass
surgery."  (Emphasis added.)  In our view, however, neither the board's analysis
nor SAIF's analysis accurately describes either the condition at issue here or the
wording of the statute.  
As we have noted, the "condition"
at issue here is claimant's arthritic knee, not his morbid obesity.  The board
rejected claimant's "new medical condition claim" for his obesity,
claimant did not appeal that order, and it is not before us on review.  Thus,
SAIF's argument that claimant must show that his obesity was caused by
his compensable 1976 injury is misplaced.  Instead, claimant must demonstrate
that his current arthritic knee condition was caused by his compensable
1976 injury.
The board's orders were incorrect for
a different reason.  The board incorrectly required that claimant's compensable
injury be the major contributing cause of claimant's need for medical
services.  That is not what the statute requires.  The plain wording of the
statute requires that the compensable injury be the major cause of the relevant
medical condition.  ORS 656.245(1)(a).  The medical services, in turn,
must be "directed to" that medical condition.  Id.  There is
no requirement that the need for medical services be directly "caused
by" the original compensable injury at all.
We return to the issue of the
characterization and cause of claimaint's current condition.  As noted, claimant's
current arthritic knee condition is a consequential condition.  Therefore, for
the medical services to be compensable under ORS 656.245(1)(a), that condition
must have been "caused in major part by" claimant's compensable 1976
injury.  See ORS 656.245(1)(a) (stating requirement).  SAIF does not
dispute that claimant's current arthritic knee condition was caused in major
part by his 1976 injury.  Indeed, SAIF acknowledged that claimant's arthritic
knee condition was caused in major part by his compensable 1976 injury when it accepted
the arthritic knee as a compensable consequential condition.  See ORS 656.005(7)(a)(A)
("No injury or disease is compensable as a consequence of a compensable
injury unless the compensable injury is the major contributing cause of the
consequential condition.").
The only remaining issue is whether
the "medical services" at issue here -- the gastric bypass surgery --
were "directed to" claimant's current arthritic knee condition.  On
remand, the board pointed to the "unrebutted" opinions of several
doctors that claimant's gastric bypass was performed for the purpose of
treating his knee condition.  One doctor, for example, described gastric bypass
as a "well indicated and reasonable treatment for [claimant's] left knee
condition."  The board also accepted, in its original order, "the
undisputed evidence" that the gastric bypass was necessary for the success
of claimant's knee replacement surgery.  The evidence relied upon by the board
demonstrates that the bypass surgery was "directed to" claimant's current
arthritic knee condition:  the surgery was performed as part of the treatment
intended to ameliorate the worsening condition of claimant's knee, and the
weight loss was necessary to the effective treatment of claimant's knee.  Substantial
evidence supported the board's factual findings.  Therefore, the claim for
bypass surgery should have been allowed.
We emphasize that the sole question
before us is whether the gastric bypass surgery was "directed to"
claimant's current arthritic knee condition, which was caused in major part by
his compensable 1976 injury.  ORS 656.245(1)(a) does not limit the
compensability of medical services simply because those services also provide
incidental benefits or help to treat other medical conditions that were not
caused by the compensable injury.  The fact that the gastric bypass also
treated claimant's morbid obesity as a necessary incident of effectively
treating his knee condition does not affect the resolution of the
compensability of his medical services claim.  Because the gastric bypass was "directed
to" claimant's current arthritic knee condition, we need not express an
opinion as to the classification or cause of claimant's morbid obesity.  It is
not relevant to the issue before us.
The decision of the Court of Appeals
and the order of the Workers' Compensation Board are affirmed.
1. ORS
656.005(24) defines "preexisting condition":
"(a) 'Preexisting condition' means, for all
industrial injury claims, any injury, disease, congenital abnormality,
personality disorder or similar condition that contributes to disability or
need for treatment, provided that:
"(A) Except for claims in which a
preexisting condition is arthritis or an arthritic condition, the worker has
been diagnosed with such condition, or has obtained medical services for the
symptoms of the condition regardless of diagnosis; and
"(B)(i) In claims for an initial injury or
omitted condition, the diagnosis or treatment precedes the initial injury;
"(ii) In claims for a new medical
condition, the diagnosis or treatment precedes the onset of the new medical
condition; or
"(iii) In claims for a worsening pursuant
to ORS 656.273 or 656.278, the diagnosis or treatment precedes the onset of the
worsened condition.
"(b) 'Preexisting condition' means, for all
occupational disease claims, any injury, disease, congenital abnormality,
personality disorder or similar condition that contributes to disability or
need for treatment and that precedes the onset of the claimed occupational
disease, or precedes a claim for worsening in such claims pursuant to ORS
656.273 or 656.278.
"(c) For the purposes of industrial injury
claims, a condition does not contribute to disability or need for treatment if
the condition merely renders the worker more susceptible to the injury."
2. The
Court of Appeals stated that the gastric bypass was performed in January 2001,
most likely because the board's order states that the surgery was performed in
January 2001.  SAIF notes that the surgery actually occurred in May 2000.  The
record supports SAIF's assertion, and the contrary statement in the Court of
Appeals opinion and the board's order appears to be a mistake.  In any event,
the date of the surgery is not relevant to the issue on review, except to
provide factual context.
3. The
ALJ did not mention ORS 656.245(1)(a).
4. In
a separate order issued the same day, the board also denied claimant's
"new medical condition claim" for obesity.  Claimant did not seek
review of that order.  
5. The
record does not disclose whether claimant had knee replacement surgery to treat
his arthritic knee.  However, no party disputes that such surgery would have
been compensable.