Court Opinion

ID: 9931582
Source: CourtListenerOpinion
Date Created: 2024-02-09 15:04:50.208106+00
Date Added: 2024-06-11T12:24:24.801571
License: Public Domain

IN THE SUPREME COURT OF IOWA

                                  No. 22–1421

            Submitted December 13, 2023—Filed February 9, 2024

P.M. LATTNER MANUFACTURING CO. and ACCIDENT FUND GENERAL
INSURANCE CO.,

      Appellees,

vs.

MICHAEL RIFE,

      Appellant.

      On review from the Iowa Court of Appeals.

      Appeal from the Iowa District Court for Polk County, Michael D. Huppert,

Judge.

      A workers’ compensation claimant challenges a district court ruling

reversing a commission award of permanent partial disability benefits and

reimbursement of expenses for independent medical examination. DECISION OF

COURT OF APPEALS AFFIRMED IN PART AND REVERSED IN PART; DISTRICT
COURT JUDGMENT REVERSED AND CASE REMANDED WITH INSTRUCTIONS.
      McDonald, J., delivered the opinion of the court, in which all justices join.

      Anthony J. Olson of Rush & Nicholson, P.L.C., Cedar Rapids, for appellant.

      Laura J. Ostrander, General Counsel, Accident Fund Holdings, Inc. d/b/a

AF Group, Lansing, Michigan, for appellee.
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MCDONALD, Justice.
      Michael Rife worked as a welder for P.M. Lattner Manufacturing Company.

In 2009, Rife sustained an injury to his shoulder arising out of and in the course

of his employment with P.M. Lattner and sought workers’ compensation benefits.

Rife and P.M. Lattner entered into a commutation settlement agreement for that

injury. In 2018, Rife sustained another injury to his shoulder arising out of and

in the course of his employment and sought workers’ compensation benefits. The

commissioner found the injury caused a new permanent partial disability and

awarded Rife benefits. There are two questions presented in this appeal. First,

how should Rife’s benefits for his second permanent partial disability be

determined to “prevent all double recoveries and all double reductions in

workers’ compensation benefits for permanent partial disability.” 2004 Iowa Acts

1st Extraordinary Sess. ch. 1001, § 20. Second, whether and to what extent is

Rife entitled to reimbursement for an independent medical examination he

obtained while pursuing his claim for benefits.

                                        I.

      In 2009, Rife sustained an injury to his right shoulder in the course of his

employment with P.M. Lattner. Three doctors assessed the injury and issued
impairment ratings. One doctor issued an impairment rating of 14% to the right

shoulder, or 8% to the body as a whole. Another doctor issued an impairment

rating of 12% to the right shoulder, or 7% to the body as a whole. A third doctor

issued an impairment rating of 15% to the right shoulder, or 9% to the body as

a whole. The commissioner never made a finding regarding the impairment

rating because the parties entered into a commutation settlement agreement in

September 2010. The commutation settlement stipulated that Rife sustained a

permanent partial disability of 29.6% to the body as a whole.
      At the time of the 2009 injury, permanent partial disability arising out of
                                         3

an injury to the shoulder was a nonscheduled disability. See Iowa Code

§ 85.34(2)(u)   (2009).   As   a   nonscheduled   permanent    partial   disability,

compensation was determined by the percentage loss in the “employee’s earning

capacity caused by the disability.” Id. Determining the amount of compensation

for a permanent partial disability based on the employee’s reduction in earning

capacity was and is known as the industrial method for calculating an industrial

disability. See Sherman v. Pella Corp., 576 N.W.2d 312, 320–21 (Iowa 1998)

(“[U]nscheduled injuries are compensated by determining the employee’s

industrial disability. One arrives at industrial disability by determining the loss

to the employee’s earning capacity.”); Second Inj. Fund of Iowa v. Shank, 516

N.W.2d 808, 813 (Iowa 1994) (“Industrial disability goes beyond body

impairment and measures the extent to which the injury impairs the employee’s

earning capacity.”); Mortimer v. Fruehauf Corp., 502 N.W.2d 12, 14 (Iowa 1993)

(stating the industrial method measures “the loss to the employee’s earning

capacity”).

      In 2017, the general assembly changed the method of calculating

permanent partial disability benefits for an injury to the shoulder. 2017 Iowa

Acts ch. 23, § 7 (codified at Iowa Code § 85.34(2)(n) (2018)). The 2017
amendment reclassified a permanent partial disability arising out of an injury to

the shoulder as a scheduled disability. See id. Compensation for a scheduled

disability was and is based on the percentage of functional impairment to the

scheduled member in relation to a set number of weeks. See Iowa Code

§ 85.34(2)(a)–(v) (2018). With respect to a shoulder injury resulting in permanent

partial disability, specifically, compensation is now based on the percentage of

functional impairment to the shoulder in relation “four hundred weeks” of

compensation. See id. § 85.34(2)(n).
      Rife sustained a second work-related injury to his right shoulder in August
                                        4

2018 and filed this claim for workers’ compensation benefits against P.M. Lattner

and its insurer, Accident Fund General Insurance Co. (collectively, “P.M.

Lattner”). After treating with several physicians, Rife sought an independent

medical examination with Dr. Sunny Kim. Dr. Kim had performed an

impairment rating for Rife’s prior injury. On this occasion, Dr. Kim assessed Rife

with a 19% impairment to the shoulder, or 11% to the body as a whole. Dr. Kim

did not distinguish between the 2009 and 2018 shoulder injuries when assessing

Rife’s permanent functional impairment.

      The matter proceeded to an arbitration proceeding. The deputy

commissioner found Rife suffered a 19% functional impairment to his right

shoulder and would be entitled to 19% of 400 weeks’ compensation. P.M. Lattner

argued that it was entitled to an apportionment of liability pursuant to Iowa Code

section 85.34(7) and sought an offset or credit for its prior partial disability

payment. Section 85.34(7) provides that an “employer is not liable for

compensating an employee’s preexisting disability that arose out of and in the

course of employment from a prior injury with the employer, to the extent that

the employee’s preexisting disability has already been compensated.” Id.

§ 85.34(7). P.M. Lattner argued that because Rife’s 29.6% loss of earning
capacity caused by the prior injury was greater than Rife’s 19% functional

impairment to his shoulder caused by the subsequent injury, then Rife was not

entitled to any compensation.

      The deputy commissioner rejected P.M. Lattner’s apportionment argument

under section 85.34(7) on two grounds. First, as a legal matter, the deputy

commission concluded it “would be absurd to provide defendants a credit against

a scheduled award for prior industrial disability benefits paid.” The two awards

were based on wholly different criteria. The deputy commissioner concluded that
P.M. Lattner might be entitled to an offset or credit “based upon the impairment
                                         5

ratings attributed to the first injury.” Second, as a factual matter, P.M. Lattner

did not produce evidence to establish the impairment rating attributable to the

first injury for which they might be given credit.

      At the arbitration hearing, Rife sought reimbursement for the costs of

Dr. Kim’s independent medical examination (IME). The deputy commissioner

concluded that Rife was entitled to seek an IME and ordered P.M. Lattner to

reimburse Rife in the amount of $2,250 for the same. The deputy commissioner

found the fee was reasonable based on Dr. Kim’s opinion that the cost was

“reasonable and customary in his geographic area.”

      P.M. Lattner filed an intra-agency appeal of the arbitration decision. The

commissioner affirmed the deputy’s conclusions and findings regarding the

compensation to be paid for Rife’s permanent partial disability. On the question

of apportionment, the commissioner concluded that P.M. Lattner’s theory and

method of apportionment were not supported by the statutory text or the general

body of workers’ compensation law governing permanent partial disabilities. The

commissioner reasoned that to conclude otherwise would be to compare apples

and oranges. The commissioner’s reasoning was persuasive, and we quote it at

length:

            Not only is there no mechanism in the statute for apportioning
      past compensation for industrial disability against compensation for
      a scheduled member, . . . but the statute, as amended, does not
      support such an apportionment. . . .

             Because claimant’s prior shoulder injury occurred before the
      legislature’s 2017 overhaul of chapter 85, it was not compensated
      as a scheduled member. Instead, claimant’s pre-existing disability
      was compensated under former Iowa Code section 85.34(2)(u) (now
      subsection (2)(v)), which is the section for unscheduled losses that
      provides compensation based on a reduction in earning capacity.

            In determining a claimant’s reduction of earning capacity,
      functional impairment is an element to be considered, but
      consideration must also be given to the injured employee’s age,
                                         6

      education, qualifications, experience, motivation, loss of earnings,
      severity and situs of the injury, work restrictions, inability to engage
      in employment for which the employee is fitted and the employer’s
      offer of work or failure to so offer. Before the 2017 amendments, this
      agency stated in countless decisions over several decades that
      “[t]here are no weighting guidelines that indicate how each of the
      industrial disability factors is to be considered.” See, e.g., Logan v.
      ABF Freight System, Inc., File No. 5047979 (App. April 25, 2018).

            In this case, the parties agreed upon a settlement for
      claimant’s prior right shoulder injury. While part of the settlement
      was certainly for claimant’s functional impairment, the agreed-upon
      compensation exceeded what would have been payable for
      claimant’s functional impairment alone. In other words, the parties
      considered other industrial disability factors when arriving at their
      settlement.

            Claimant’s current right shoulder injury, however, is a
      scheduled member under the newly added Iowa Code
      section 85.34(2)(n). Claimant’s compensation under this section is
      limited only to the extent of loss or permanent impairment of the
      shoulder itself. . . .

             Thus, if defendants in this case were entitled to a credit for
      the entirety of their settlement, which was for industrial disability,
      against claimant’s current scheduled member injury, they would
      receive an unfair excess credit for considerations and factors that
      are not applicable to claimant’s current injury. Put differently, their
      credit would be for apples against an award for oranges.

            I agree with the deputy commissioner that defendants could
      arguably be entitled to a credit based solely upon the functional
      impairment attributable to claimant’s preexisting shoulder injury—
      a credit for oranges against an award for oranges.

(Citations omitted.) Like the deputy commissioner, the commissioner also

concluded that if P.M. Lattner were entitled to a credit based on the prior

functional impairment, it failed to carry its burden of proving the amount of the

credit. P.M. Lattner “did not identify which impairment ratings the parties

adopted . . . nor did they offer any evidence (expert opinions or otherwise) to shed

light on which of the impairment ratings was more persuasive than the others.”

      On the question of reimbursement for the costs of Dr. Kim’s IME, the
commissioner stated that P.M. Lattner contested only that the costs of Dr. Kim’s
                                         7

IME included expenses for an examination of an unrelated right ankle injury.

The commissioner rejected that argument. The commissioner affirmed the

deputy commissioner’s decision that P.M. Lattner was required to reimburse Rife

$2,250 for the IME.

      P.M. Lattner appealed the decision to the district court. The district court

concluded that the commissioner’s ruling on the apportionment issue was

erroneous. In the district court’s view, the commissioner failed to address and

interpret the relevant statutes and the commutation settlement. The district

court concluded that this legal failure was a failure “to consider all the evidence.”

Although the district court concluded the agency failed to “consider all the

evidence,” the district court remanded the case back to the agency to consider

the law. Specifically, the district court remanded the case to the agency to

“reevaluate . . . the intent and language of subsection 7; the full commutation

statutes, caselaw, and terms.” On the question of the IME, the district court

concluded that Rife was not entitled to any reimbursement and reversed the

agency’s decision.

      Rife appealed the decision of the district court, and we transferred the

appeal to the court of appeals. On the apportionment issue, Rife argued that
apportionment under section 85.34(7) was not applicable because the statute

did not specify the method of apportionment. The court of appeals, citing our

decision in Warren Properties v. Stewart, 864 N.W.2d 307 (Iowa 2015), rejected

the argument. In its view, “the lack of express means to apportion benefits does

not preclude the application of section 85.34(7).” The court of appeals concluded

that pursuant to section 85.34(7), P.M. Lattner was entitled to some credit for

its disability payments made under the prior commutation settlement. The court

of appeals concluded that it could not determine the amount of the credit on this
record, and it remanded the case to the commissioner to apportion liability
                                          8

pursuant to section 85.34(7).

      On the question of the IME, the court of appeals held that the district court

erred in concluding that Rife was not entitled to reimbursement for the IME. The

court of appeals concluded, however, that Rife could only be reimbursed for the

cost of the impairment rating rather than the cost for the entire examination.

The court of appeals remanded the matter to the commissioner “to determine

what portion of Dr. Kim’s examination related to the impairment rating of Rife’s

right shoulder.”

                                          II.

      We    granted     Rife’s   application    for   further   review.   Iowa   Code

section 17A.19(10) “governs judicial review of administrative agency decisions.”

Coffey v. Mid Seven Transp. Co., 831 N.W.2d 81, 88 (Iowa 2013). Our standard

of review for the commissioner’s interpretation of statutes is contingent. If “the

legislature clearly vested the agency with the authority to interpret the statute

at issue,” we give deference to the agency’s interpretation and will reverse the

agency’s decision only when its interpretation is “irrational, illogical, or wholly

unjustifiable.” NextEra Energy Res. LLC v. Iowa Utils. Bd., 815 N.W.2d 30, 36–37

(Iowa 2012) (quoting Doe v. Iowa Dep’t of Hum. Servs., 786 N.W.2d 853, 857
(Iowa 2010)). If the legislature did not clearly vest the agency with interpretive

authority over the statute at issue, we review the agency’s decision for the

correction of errors at law. Id. at 37. We have previously concluded the legislature

has not vested the workers’ compensation commissioner with interpretive

authority regarding Iowa Code chapter 85. Waldinger Corp. v. Mettler, 817

N.W.2d 1, 4–5 (Iowa 2012). Therefore, we “review the commissioner’s

interpretation of Iowa Code chapter 85 for correction of errors at law instead of

deferring to the agency’s interpretation.” Brewer-Strong v. HNI Corp., 913 N.W.2d
235, 243 (Iowa 2018).
                                        9

                                       A.

      We first address the commissioner’s ruling regarding the apportionment

of liability pursuant to section 85.34(7). Section 85.34(7) provides that an

“employer is not liable for compensating an employee’s preexisting disability that

arose out of and in the course of employment from a prior injury with the

employer, to the extent that the employee’s preexisting disability has already

been compensated.” Iowa Code § 85.34(7). The legislature’s stated purpose in

enacting section 85.34(7) was to “prevent all double recoveries and all double

reductions in workers’ compensation benefits for permanent partial disability.”

2004 Iowa Acts 1st Extraordinary Sess. Ch. 1001, § 20. “The general assembly

intend[ed] that an employer shall fully compensate all of an injured employee’s

disability that is caused by work-related injuries with the employer without

compensating the same disability more than once.” Id.

      This case is resolved by Loew v. Menard, Inc., ___ N.W.3d ___ (Iowa 2024).

In that case, we addressed the question of how the commissioner should

apportion liability when compensation for the employee’s first injury resulting in

permanent partial disability was based on a loss of earning capacity and

compensation for the second injury resulting in permanent partial disability was
to be compensated based on a loss of functional impairment. See id. at ___. Like

the commissioner and the court of appeals in this case, we concluded that

offsetting an award based on functional impairment against a prior award based

on loss of earning capacity was an improper comparison of apples to oranges.

See id. at ___. Rather than comparing these incommensurables, the employer is

entitled to an offset or credit for the functional impairment caused by the first

injury. See id. at ___. Stated differently, section 85.34(7) requires that the

employer can only be liable for the marginal increase in functional impairment
caused by the second injury. See id. at ___ (concluding that employee was
                                              10

entitled to compensation for the 8% marginal increase in functional impairment

caused by the second injury). Distinguishing marginal increases in functional

impairment caused by different injuries is a factual inquiry well within the

agency’s expertise. See, e.g., Floyd v. Quaker Oats, 646 N.W.2d 105, 110 (Iowa

2002) (discussing agency finding distinguishing permanent impairment caused

by work injury and additional impairment caused by subsequent aggravation).

       Although the commissioner in this case articulated the correct framework

for apportioning the employer’s liability for the second injury,1 the commissioner

declined to apportion liability on the ground that P.M. Lattner failed to provide

evidence on the extent of the prior impairment. “When there has been a failure

of a required record, we frequently must decide whether it is appropriate to

remand a case in order to supply the missing record. The answer most often is

no; in view of limited judicial resources, we can ordinarily accord but one trial

for each controversy.” Murillo v. Blackhawk Foundry, 571 N.W.2d 16, 19 (Iowa

1997). In administrative appeals, however, “[i]f it is shown to the satisfaction of

the court that the additional evidence is material and that there were good

reasons for failure to present it in the contested case proceeding before the

agency, the court may order that the additional evidence be taken before the
agency upon conditions determined by the court.” Iowa Code § 17A.19(7).

       “We think the record here calls for a remand for additional evidence.”

Murillo, 571 N.W.2d at 19. The application of section 85.34(7) under the

       1We note that after the district court reversed the commissioner’s decision in this case,

the commissioner changed course and offered different interpretations of section 85.34(7) on
similar apportionment questions. See Reeves v. Plymouth Cnty. Solid Waste, Iowa Workers’
Comp. Comm’n No. 21006846.02, 2023 WL 6953980, at *28 (Oct. 16, 2023); Brunk v. Glenwood
Res. Ctr., Iowa Workers’ Comp. Comm’n No. 19003535.02, 2023 WL 2376894, at *3–*4 (Feb. 27,
2023) (noting uncertainty in law after district court decision in this case). For the reasons
expressed in Loew and in this opinion, we conclude the commissioner’s interpretation of
section 85.34(7) as expressed in this case was correct.
                                       11

circumstances presented here was unclear. Under section 85.34(7), P.M. Lattner

is required to compensate Rife only for the marginal increase in the functional

impairment of his right shoulder caused by the 2018 injury. To ascertain that

amount, it must be determined whether Dr. Kim’s 19% functional impairment

rating was in addition to, or inclusive of, Rife’s preexisting functional

impairment. P.M. Lattner should be afforded the opportunity to present evidence

under the correct standard as set forth in Loew and this opinion. See id.

(remanding for additional evidence after clarification of workers’ compensation

provision).

                                       B.

      We next address the question of whether Rife was entitled to

reimbursement for the expense of Dr. Kim’s IME. The deputy commissioner

found Rife was entitled to reimbursement and found the fee of $2,250 was

reasonable based on Dr. Kim’s opinion that the cost was “reasonable and

customary in his geographic area.” The commissioner affirmed this finding. The

district court concluded that Rife was not entitled to any reimbursement. The

court of appeals concluded that the district court erred and Rife was entitled to

reimbursement. The court of appeals concluded, however, that Rife was entitled
to reimbursement only for the costs of the impairment rating and not for the

entire examination.

      We agree with the court of appeals that the district court erred in

concluding Rife was not entitled to reimbursement for the cost of the IME.

However, we conclude the court of appeals erred in holding that Rife was entitled

to reimbursement only for the cost of the impairment rating and not the cost of

the examination. “[T]he employee is entitled to the reasonable cost of the

examination accompanying the physician’s determination of the impairment
rating, not merely the component cost of the impairment rating itself.” Mid Am.
                                       12

Constr. LLC v. Sandlin, ___ N.W.3d ___, ____ (Iowa 2024). The Code “provides for

reimbursement of the reasonable cost of the examination to determine the

impairment rating, and the examination encompasses the records review, the

physical examination and testing, and a written report.” Id. at ___; see also Iowa

Code § 85.39(2).

      We conclude the commissioner’s reimbursement decision should be

affirmed. The reasonableness of the fee for an IME “is to be based on the typical

fee charged in the locale where the examination is performed.” Id. at ___.

“Whether the fee is reasonable is a question of fact, and the commissioner’s

finding of reasonableness is to be affirmed if supported by substantial evidence.”

Id. at ___. Here, the commissioner found the $2,250 fee was reasonable based

on Dr. Kim’s opinion that his fee was the reasonable and customary fee in the

geographic area. The commissioner’s finding is thus supported by substantial

evidence.

                                       III.

      For these reasons, we affirm in part and reverse in part the decision of the

court of appeals. We reverse the judgment of the district court. We remand this

matter to the district court with instructions to remand this matter to the
workers’ compensation commissioner for further proceedings.

      DECISION OF COURT OF APPEALS AFFIRMED IN PART AND REVERSED IN
PART; DISTRICT COURT JUDGMENT REVERSED AND CASE REMANDED WITH
INSTRUCTIONS.