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Oseland v. Crow Wing County

Supreme Court of Minnesota

May 29, 2019

Richard Oseland (deceased) by Terrence Oseland, Richard Oseland, and Karen Hayhoe, Relator,
v.
Crow Wing County and Auto-Owners Insurance Group, Respondents.

          Workers' Compensation Court of Appeals Office of Appellate Courts

          DeAnna M. McCashin, McCashin Law Firm, Chtd., Alexandria, Minnesota, for relator.

          Kelly P. Falsani, Katherine R. Bealka, Fitch, Johnson, Larson, & Held, P.A., Minneapolis, Minnesota, for respondents.

          Keith Ellison, Attorney General, Kelly S. Kemp, Assistant Attorney General, Saint Paul, Minnesota, for amicus curiae Commissioner of the Minnesota Department of Labor and Industry.

         SYLLABUS

         1. Under Minn. Stat. § 176.221, subd. 7 (2018), the "due date" for underpaid compensation benefits is the date of each underpayment, and interest on those underpaid benefits accrues at the statutory rate in effect at the time the payment was due.

         2. The compensation judge's determination that relator is not entitled to penalties under Minn. Stat. § 176.225 (2018) is supported by substantial evidence.

         3. Relator's expense incurred in obtaining a decree of descent is not a taxable disbursement under Minn. Stat. § 176.511, subd. 2 (2018).

         Affirmed in part, reversed in part, and remanded.

          OPINION

          GILDEA, CHIEF JUSTICE.

         This workers' compensation case asks us to decide whether Auto-Owners Insurance Group ("Auto-Owners") owes interest, penalties, and expenses to the heirs of relator Richard Oseland on underpaid disability benefits. The compensation judge determined that the heirs were entitled to interest from the date of each underpayment, but that neither penalties nor expenses were warranted. The Workers' Compensation Court of Appeals ("WCCA") affirmed the compensation judge's denial of penalties and expenses but held that the heirs were not entitled to interest. Because we agree with the compensation judge's determinations regarding interest, penalties, and expenses, we affirm in part, reverse in part, and remand to the compensation judge for proceedings consistent with this opinion.

         FACTS

         On January 10, 1980, Richard Oseland sustained a work-related injury while working as a surveyor for Crow Wing County. At that time, Auto-Owners was Crow Wing County's workers' compensation insurer. Auto-Owners accepted liability for Oseland's injury and began paying him benefits. About 9 years later, the Department of Labor and Industry ("the Department") determined that Oseland had become permanently and totally disabled, and Auto-Owners began paying him permanent total disability benefits.

         On June 1, 1996, Oseland started receiving retirement benefits from the Public Employees Retirement Association. Auto-Owners then began to deduct the amount of retirement benefits Oseland received from the amount of permanent total disability benefits it paid him. WCCA precedent at the time authorized this deduction, [1] and Auto-Owners continued to pay Oseland permanent total disability benefits, reduced by his retirement benefits, until his death in 2013, at which point his benefits ceased.

         On August 13, 2014, we decided Ekdahl v. Independent School District # 213, 851 N.W.2d 874');">851 N.W.2d 874 (Minn. 2014), and Hartwig v. Traverse Care Center, 852 N.W.2d 251 (Minn. 2014). In these cases, we held that the plain language of the Workers' Compensation Act does not allow insurers to reduce the amount of permanent total disability benefits paid by the amount of public employee retirement benefits employees receive. Ekdahl, 851 N.W.2d at 877-78; Hartwig, 852 N.W.2d at 253. In other words, we held that the statute did not permit the reductions that Auto-Owners was taking from its payments to Oseland.[2]

         Believing that Ekdahl and Hartwig have retroactive effect, the Department began contacting insurers who may have paid reduced permanent total disability benefits to injured employees. In September 2015, the Department sent Auto-Owners a letter directing it to audit its files and determine whether it had taken an offset for public employee retirement benefits on any of its claims. Auto-Owners began its audit and asked the Department how it should proceed if it found files in which offsets were taken but the employees were deceased. The Department did not respond to this inquiry. After a two-month audit, Auto-Owners identified two files in which offsets were taken, one of which was Oseland's. Auto-Owners informed the Department of these files, noted that both claimants were deceased, and asked the Department to contact it if anything else was required. The Department did not respond to this letter, and Auto-Owners did not follow up.

         Seven months later, on June 16, 2016, the Department sent a letter to Auto-Owners stating that it had audited Oseland's claim and determined that Auto-Owners had underpaid Oseland $169, 177.32 as a result of its offsets. The Department directed Auto-Owners to pay Oseland's estate these underpaid benefits. In response, Auto-Owners hired a forensic accountant to verify the amount of underpaid benefits. The forensic accountant's audit took approximately two months and revealed that the underpaid benefits were approximately $10, 000 less than what the Department had determined. Auto-Owners sent the results of its audit to the Department on September 7, 2016, and the Department responded that it agreed with the assessment.

         During the second audit, Auto-Owners had been in touch with Terrence Oseland- one of Oseland's heirs. After learning that the Department agreed with Auto-Owners' new calculation of underpaid benefits, Auto-Owners emailed Terrence about the results of its audit and requested the name of Oseland's estate, the estate's personal representative, the estate tax identification number, and the estate's address. Terrence did not respond to Auto-Owners' emails.

         On November 3, 2016, Oseland's heirs filed a claim petition seeking underpaid benefits and interest. Auto-Owners filed an answer, acknowledging that it owed underpaid benefits to the heirs and stating that it "was ready to issue payment on proper submission of the decedent claimant's estate tax ID number, address, and the personal representative of said estate." Auto-Owners denied that it was liable for any interest on the underpaid benefits.

         Because Oseland died without a will, the heirs obtained a decree of descent to establish that they were Oseland's legal heirs.[3] The decree of descent was issued on January 31, 2017, and sent to Auto-Owners on February 13, 2017.

          On May 25, 2017, the parties executed a stipulation for settlement. In it, the parties agreed that Auto-Owners would pay the heirs the amount of underpaid benefits its forensic accountant had calculated were due and that the heirs' claims for approximately $10, 000 in additional underpaid benefits, interest, penalties, and expenses would remain open. Auto-Owners paid the heirs $159, 001.29 in underpaid benefits on June 5, 2017.

         The heirs' outstanding claims proceeded to a hearing before a compensation judge. The compensation judge determined that the heirs were not entitled to additional underpaid benefits, penalties, or expenses but held that the heirs were entitled to interest on the underpaid benefits. In addition, the compensation judge determined that the applicable rate of interest on the underpayments was based on the date of each underpayment. In other words, the applicable interest rate was "the rate set by statute at the time the benefits became due and owing."

         The parties cross-appealed the compensation judge's order. The heirs appealed the compensation judge's decision on the applicable interest rate, the denial of their claim for penalties, and the determination that the decree of descent was not a taxable expense. Auto-Owners, on the other hand, appealed the compensation judge's determination that interest began accruing prior to the date that our decisions in Ekdahl and Hartwig were issued.

         The WCCA unanimously affirmed the compensation judge's denial of the heirs' claim for penalties and expenses.[4] On the issues related to interest, the court's decision was divided. A three-judge majority determined that the due date for Oseland's underpaid benefits was the statutory deadline set out in Minn. Stat. § 176.1292, subd. 2(d)(3) (2018), and that no interest was owed because Auto-Owners paid the heirs before that statutory deadline had passed. Oseland v. Crow Wing County, No. WC17-6120, 2018 WL 4377144, at *4-7 (Minn. WCCA Aug. 30, 2018).

         Two WCCA judges dissented from this part of the court's opinion. Chief Judge Milun dissented from the majority's interest determination, concluding that the compensation judge should be affirmed as to both the date interest accrued and the applicable rate. Judge Quinn also dissented in part, concluding ...


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