Court Opinion

ID: 5173450
Source: CourtListenerOpinion
Date Created: 2022-01-02 05:13:24.304038+00
Date Added: 2024-06-11T08:26:11.199804
License: Public Domain

BISTLINE, Justice,
dissenting.
I concur in Justice Huntley’s dissent and write only to discuss two additional reasons why this Court should reverse the Industrial Commission’s approval of the lump sum settlement between the parties. Those reasons are as follows:
(1) The Industrial Commission abused its discretion in approving the settlement which it initially rejected. The Commission initially and correctly found the settlement amount of $500 insufficient to cover Harmon’s future medical payments, which later amounted to over $17,000. The Commission received no further information to justify reversing its finding.
(2) Don MacMillan, the claims examiner for Industrial Indemnity, procured the commission’s approval of the set*303tlement through an act of constructive fraud. In order to persuade the Commission to reverse itself, he solicited a doctor’s opinion of Harmon’s condition based not on an actual examination, but on his own biased assurance, related over the phone, that Harmon was much improved.
I.
The language of I.C. § 72-404 establishes a discretionary standard when the commission is asked to approve a lump sum settlement:
72-404. Lump sum payments. — Whenever the commission determines that it is for the best interest of all parties, the liability of the employer for compensation may, on application to the commission by any party interested, be discharged in whole or in part by the payment of one or more lump sums to be determined, with the approval of the commission. (Emphasis added.)
A reviewing court may overturn commission approval upon a showing that its discretion has been abused. Kaylor v. Callahan Zinc-Lead Co., 43 Idaho 477, 253 P. 132 (1927). This is such a case.
The commission initially denied approval of the agreement negotiated between Don MacMillan and Mr. Harmon on November 6, 1981. The commission’s order of that date did not specify why it denied approval. However, the record reveals the reason. MacMillan’s daily log of his activity on Harmon’s claim relates that Commissioner Diefenbach considered the agreement not to be in the best interests of Harmon since there was insufficient justification for the low amount ($500) of future medical payments.
I have no quarrel with the fact that Harmon, by and large, got what he bargained for. He consistently expressed his desire for a lump sum so that he could set himself up in business. However, he also consistently testified that he was under the impression that the specific lump sum option left medical payments open for five years. My contention is that the commission abused its discretion in approving the small amount for future medical expenses, not in approving a lump sum agreement per se.
The only basis the commission had for reversing itself was a letter from Dr. Burton [see appendix] to MacMillan dated November 9, 1981. Dr. Burton was the surety’s suggested consultant, a specific finding of fact in the commission order here appealed. MacMillan solicited this letter to bolster his position with the commission. However, the letter does not say that $500 is a reasonable amount for Harmon’s future medical expense. It merely expresses the opinion that additional surgery was not indicated and that settlement might be appropriate. Those opinions were based not on any further examination of Harmon, but merely on MacMillan’s opinion that Harmon looked improved. They conflicted with the opinions of Dr. Porter, Harmon’s treating physician. MacMillan did not contact Dr. Porter to ask whether $500 was reasonable. If the agreement was insufficient medically as the commission initially found, I sée nothing in this letter that justifies approval of the settlement. It adds nothing additional to that which was before the Commission when it rejected the agreement a scant ten days earlier. Therefore, I respectfully submit that its approval was an abuse of discretion.
Significantly, the reconsideration of the agreement was done in a totally ex parte context. Harmon was not represented by counsel. It is true that Harmon chose not to retain counsel. However, this was after MacMillan informed him that the Company would not change its position even if he did hire an attorney, and that attorney's fees would only reduce Harmon’s recovery. This is a fact scenario fraught with overreaching and not uncommon in successful bad faith actions against insurers.
In direct testimony, MacMillan said he informed Harmon of the Commission’s rejection of the agreement, but there is nothing to indicate that he told Harmon the reason for the rejection. Harmon himself testified as follows:
*304Q. Let me ask you the questions.
After — did Mr. MacMillan call you after you signed the compensation Agreement advising you there had been some problem concerning its approval?
A. Yes.
Q. And what was stated in that conversation by Mr. MacMillan to you?
A. That the Industrial Board wanted to talk to me about some problem with the agreement and that they were going to call me.
Q. All right. Did you receive a later phone call from Mr. MacMillan?
A. Yes, I did.
Q. What was told to you in that conversation?
A. Straightened up everything that was wrong with it and not for me to worry about it anymore. It was all settled.
Q. That was the content of those two telephone conversations?
A. Yes.
Q. And do you ever recall being advised that you could or should contact the Industrial Commission concerning the content of your settlement?
A. No.
Q. Did you ever get any phone call from the Industrial Commission concerning that settlement?
A. No, I did not. (Emphasis added.)
Thus, it appears approval was gained while Harmon was totally unaware that the commission was concerned specifically about the sufficiency of the future medical expenses.
II.
I contend that Mr. MacMillan procured the commission’s approval of the lump sum settlement through an act of constructive fraud. The Commission concluded that no fraud had been demonstrated. However, since this is a conclusion of law, not a finding of fact, we are not bound by the deferential substantial evidence standard of review.
MacMillan’s strategy early on was to ob: tain a lump sum agreement. His daily log contained a note dated 4-13-82: “aim for lump” by 12-15-81. A 6-9-81 note in his log stated in part:
Plan: . . .
(4) Look for opportunity to lump: cultivate.
Exposure Two surgeries, heavy, no education, or training, questionable modi tivation, loose life-style, poor work history.
Assessment: Friend a previous back case. Apparent low threshold of pain. . .
Industrial Indemnity’s rehabilitation nurse reported early in July 1981, as follows:
Jim Spooner visited with Tom just before I arrived and I talked with Jim about it after we had both completed our visits. Jim and I both feel that having had two back surgeries within six months and having the residual that he is having that we are in definite trouble with this claim. (Emphasis added.)
Thus, MacMillan was faced with a potentially very expensive claim. Settling cheap was obviously in the best interest of his employer Industrial Indemnity. The first denial of the settlement was a set back for him but only a temporary one. His log on 11-9-81 indicates that the commission wanted something from a doctor saying that the settlement was in the best interest of the claimant. The same day MacMillan reached Dr. Burton, Industrial Indemnity’s consultant, on the phone. The result was the critical letter that induced the commission to reverse itself.
The letter parrotted MacMillan’s assessment that Harmon had improved considerably. However, this view was not based on a medical examination, but only on MacMillan’s subjective opinion that Harmon looked well when they discussed the lump sum agreement. Three days before his visit with Harmon, MacMillan received a report from Dr. Porter, Hannon’s treating physician, that the patient had not improved over the past several months.
“Dr. MacMillan’s diagnosis1 that Harmon was much improved found its way into *305Dr. Burton’s letter of November 9, 1981. MacMillan received this document on November 16,1981, hand-carried it to the commission, and the case was closed all on the same day, all without full disclosure to, much less a hearing for, Harmon.
While the efficiency of the procedure employed here is evident, one can only wonder if Harmon’s interest was adequately safeguarded.
In my view, the commission abdicated its responsibility in this case by allowing itself to become the tool of MacMillan. It appears that the fears of Professor Larson, the leading authority on workmen’s compensation, are on their way to being realized in Idaho:
In some jurisdictions, the excessive and indiscriminate use of the lump-summing device has reached a point at which it threatens to undermine the real purposes of the compensation system. Since compensation is a segment of a total income insurance system, it ordinarily does its share of the job only if it can be depended on to supply periodic income benefits replacing a portion of lost earnings. If a partially or totally disabled worker gives up these reliable periodic payments in exchange for a large sum of cash immediately in hand, experience has shown that in many cases the lump sum is soon dissipated and the workman is right back where he would have been if workmen’s compensation had never existed. On reason for the persistence of this problem is that practically everyone associated with the system has an incentive — at least a highly visible short-term incentive — to resort to lump-summing, the employer and the carrier are glad to get the case off their books once and for all. The claimant is dazzled by the vision of perhaps the largest sum of money he had ever seen in one piece. The claimant’s lawyer finds it much more convenient to get his full fee promptly out of a lump sum than protractedly out of small weekly payments. The claimant’s doctor, and his other creditors and his wife and family, all typically line up on the side of encouraging a lump-sum settlement. Who then is to hold the line against turning the entire income-protection system into a mere mechanism for handing over cash damages as retribution for industrial injury? It should be the administrator, but even he all too often is relieved to get the case completely removed from his docket. With all these pressures pushing in the direction of lump-summing, it is perhaps surprising that the practice has not become even more prevalent than it already has.
The only solution lies in conscientious administration, with unrelenting insistence that lump-summing be restricted to those exceptional cases in which it can be demonstrated that the purpose of the Act will best be served by a lump-sum award. 3 Larson’s Workmen’s Compensation Law (1983), pp. 15-594 through 15-596 (emphasis added).
Constructive fraud sufficient to reopen a case may be based upon even innocent misrepresentations made by the insurer’s physician, Larson, supra, vol. 3, pp. 15-554.-100, 15-554.102. Dr. Burton’s adoption of MacMillan’s bogus diagnosis that Harmon had improved considerably, together with MacMillan’s successful counsel against Harmon’s hiring of an attorney in the ex parte context in which this sorry tale was written, all make out, at a minimum, a case of over-reaching, probably bad faith, and, I am persuaded, constructive fraud, such that the Commission’s approval of the lump sum settlement should be reversed.

. MacMillan is a Ph.D. historian, not an M.D.