Verizon Business Network Services, Inc. f/k/a MCI Worlcom Network Services, Inc., d/b/a MCI Telecommunications Corporation v. Melinda McKenzie, Iowa Court of Appeals, No. 2-394 / 11-1845


The Claimant was injured on December 26, 1999, when she slipped and fell on a wet floor while working at MCI. She sought medical treatment for low back and left leg pain. Conservative treatment was unsuccessful and surgery was never recommended. The Claimant was given light duty instructions, but never returned to work in any capacity. More than one doctor had told the claimant that losing weight would help her combat persistent pain.


The Claimant filed a workers’ compensation petition in January of 2001. A month prior to the arbitration hearing, the Claimant was seen by a pain management specialist, Dr. Bruce Keppen, who opined that “weight loss is the only thing that is going to give…long term relief.” After the arbitration hearing, the Claimant was awarded a 25% industrial disability. The Claimant continued to suffer from low back and left pain. In 2006, she underwent gastric bypass surgery and eventually lost more than two hundred pounds. MCI refused to authorize or pay for the surgery.


A review-reopening action was begun in 2007. After the review reopening hearing in 2008, the deputy found the Claimant had suffered a substantial change in circumstances or condition that was not anticipated at the time of the original arbitration decision and that she sustained a 100% industrial disability with permanent total benefits beginning on September 11, 2002. MCI was also ordered to pay for the Claimant’s gastric bypass surgery.


On appeal to the commissioner, he found that at the initial hearing, weight loss was anticipated as significantly improving the Claimant’s pain and thus overall disability. Despite the weight loss, the Commissioner stated that the Claimant had only a slight improvement in pain and she did not improve as anticipated thus her disability was shown not to be attributable to her obesity and the previous award was appropriately adjusted. The commissioner refused to address the employer’s complaint regarding the deputy’s use of the stipulated commencement date for permanent partial disability benefits. This decision was appealed to the district court.


The district court found that the Claimant’s current condition did warrant an increase in compensation and affirmed the award to permanent total benefits. The district went on to find the agency erred in finding the employer liable for the Claimant’s gastric bypass surgery. Further, the court stated that the issue of commencement date for benefits should have been addressed by the agency. The case was then remanded to the agency.


The case was appealed to the Court of Appeals and was eventually remanded back down the agency. After being remanded down to the agency, the case again worked its way back up to the district court. On appeal to the district court, the court found that the Commissioner did not conduct a proper analysis to determine the Claimant had experienced an economic change sufficient to warrant a finding of permanent and total disability on review-reopening. The court also found the commissioner erred as to the commencement date for benefits as it was illogical to back date a review reopening commencement date to the date of injury when the initial decision held the Claimant was only entitled to 25% permanent partial disability. The court found the date to commence benefits was when the review reopening petition was filed. The district court then affirmed the decision of the commissioner finding the employer liable for the Claimant’s gastric bypass surgery. The case was then once again appealed to the Iowa Court of Appeals.



Permanent Disability


On cross appeal to the Court of Appeals, the Claimant contended that it was error for the district court to remand the case to the agency again for a determination of whether she is entitled to permanent total disability benefits under prior precedent. In its analysis, the Court first looked the standard for justifying a review-reopening claim which had been clarified by the Supreme Court in a decision calledKolhaas; which identified five ways a review-reopening requirement could be satisfied:(1) a worsening of the claimant’s physical condition; (2) a reduction of the claimant’s earning capacity; (3) a temporary disability developing into a permanent disability; (4) a critical fact existed but was unknown or could not have been discovered by the exercise of reasonable diligence at the time of the prior settlement or award; or (5) a scheduled member injury later causes an industrial disability.


The Claimant on cross appeal contended that her case fell into the fourth way, that a critical fact existed but was unknown. The Claimant asserted that this fact was that her weight loss surgery and years of treatment did not improve her pain. The Court noted that the Claimant’s review-reopening petition was not based on a new fact which not recognized, appreciated or considered. The Court noted she was morbidly obese before her work related injury and this fact was appreciated by the commissioner in regards to the Claimant’s initial award. The Court stated that her claim was one of asserting that the commissioner in its initial decision was incorrect in giving her 25% disability.


After a review of prior precedent, the Court articulated that the standard in a review reopening decision was if there had been a change in the claimant’s work related condition or a reduction in her earning capacity – which as applied to the Claimant meant has the Claimant’s back injury worsened or has her earning capacity been reduced since the original arbitration decision? The Court then went on to find that the Commissioner had improperly reevaluated the first arbitration decision due to his identifying the difficulty in assigning the claimant her true loss of earning capacity at the first arbitration decision due to her obesity and psychological make up. On remand the commissioner stated that the Claimant’s obesity and psychological make up were no longer barriers to determination of the extent of Claimant’s disability. However, the Court found this was exactly what the previous decision inKolhass had warned against.


The Court stated the commissioner is not supposed to re-determine the condition of the employee which was adjudicated by the former award. The loss of earning capacity is to be determined as of the time of the hearing based on factors then prevailing, not based on what the claimant’s physical condition and economic realities might be at some future time. Therefore, the Court found thatthe commissioner in this review-reopening must accept the former award as an assessment of the Claimant’s physical condition and economic reality at the time it was issued and not attempt to reevaluate now the conditions that existed back then. The commissioner must determine whether there was in fact a change that “warrants an end to, diminishment of, or increase of compensation” previously awarded.


The Court then looked at the facts of the case and determined that the only possible way to justify a review reopening in this case was under the fourth standard, that a fact was unknown and undiscoverable but based upon the current record it was unable to be determined if such existed. Thus the case needed to be remanded.


Commencement Date for Benefits


The Court next turned its attention to the proper date for the commencement of permanency benefits should they be awarded. The Court found that the district court was correct in using the date that the review reopening petition was filed to commence permanency benefits. In so finding, the Court looked to prior precedent inDickensonv.John Deere Products Engineering, 395 N.W.2d 644, 649 (Iowa Ct. App. 1986), which held that interest begins to accrue as of the date of the review-reopening petition, and determined that weekly benefits awarded as a result of a review-reopening decision should also commence as of the filing of the petition for review-reopening. The Court found it was implicit in the holding inDickensenthat weekly benefits for review-reopening proceedings are not due to be paid until a review-reopening petition has been filed.


Unauthorized Medical Expenses


The Court then turned its attention to the issue of the compensability of claimant’s gastric bypass surgery. The Court identified the issue as being whether the unauthorized gastric bypass surgery was beneficial to the treatment of the Claimant’s work related injury. Or in other words, whether the gastric bypass surgery “provided a more favorable medical outcome than would likely have been achieved by the care authorized by the employer.”


In reviewing the evidence submitted, the Court found that the gastric bypass surgery corrected her non-work related morbid obesity, but did not provide a more favorable medical outcome for her work related injury that would have been achieved by the care offered by the employer. The Court stated the only evidence in the record that the surgery was beneficial was the testimony of the claimant herself. The Court then cited to medical testimony which was skeptical that the weight loss surgery had indeed benefited the claimant’s work related injury. Ultimately the Court found that there was no substantial evidence in the record to support the finding that the weight loss surgery was beneficial. Thus, the Court overturned this issue in favor of the employer.


Thomas Dunlap v. Action Warehouse and Commerce & Industry Insurance Company, Iowa Court of Appeals, No. 2-568 / 11-1451

On July 18, 2007, the Claimant sustained a work injury while pulling a fifty pound box off a shelf. The pallet he was standing on broke, which caused him to fall backward into the raised forklift he was using and causing the box to smash into him. He was seen by Dr. Boyett a few hours after the incident. Dr. Boyett noted the chief complaint was of pain in his left back and left lower portion of the neck. He ultimately opined the Claimant had a back contusion/strain and that it was work related. The Claimant was returned to work with restrictions.


The Claimant was seen by Dr. Boyett on seven more occasions and was enrolled in physical therapy. At his last appointment with Dr. Boyett in September, the Claimant reported only mild discomfort though he had some generalized soreness all the time. The Claimant’s MRI at the time was completely normal and he was assessed as having chronic back pain with apparent symptom magnification. He was then discharged and encouraged to return to full duty.


After his injury, the Claimant continued to work with the employer. The Claimant apparently regularly complained to his manager and asked his manager what he should do since he was still in a great amount of pain. The Claimant was referred to human resources and was told he could see a different doctor at his own expense.


On September 17 and 18 the Claimant called in to work with stomach flu and back pain. The only time prior to September 17 that he had missed work was for doctor’s appointments. Management at the employer felt that they were getting along good without the Claimant and when he returned on September 19, his employment was terminated for excessive absenteeism and tardiness though he had not been written up for tardiness since April 2007.


The Claimant did not seek any medical treatment at the time because he had no insurance. Eventually the Claimant learned of a free medical clinic and was seen by Dr. Palmer. Dr. Palmer felt the claimant needed further follow up in relation to his back and leg issues and referred the Claimant to Dr. Neff. After being informed again that the employer would not provide any additional care for this injury, the claimant obtained an attorney and filed a petition for alternate medical care on April 16, 2008.


The deputy’s decision found that the employer had admitted liability for the injury and granted the Claimant’s request for alternate medical care and ordered the employer to provide care with Dr. Neff and any recommendations Dr. Neff may make. In May of 2008, the Claimant was seen by Dr. Neff. In his report to the employer, Dr. Neff stated that it was impossible to make a specific diagnosis at this point and that this far from injury it was hard to know what was related to what. Dr. Neff also stated the Claimant needed further work up for his symptoms but there was no way to associate current symptoms with an injury this far out.


The Claimant underwent an EMG recommend by Dr. Neff in June of 2008 for his left arm symptoms which showed cubital tunnel syndrome. Surgery was recommended. Dr. Neff then recommended the Claimant be seen by a spine specialist concerning his continued back pain. These recommendations were not authorized by the employer. The employer wrote to Dr. Neff stating that the employer assumed the current treatment recommendations were not causally related to the Claimant’s work injury. Dr. Neff agreed with the statement based upon the information he had but later clarified his opinion that it was difficult to look at an MRI and point to a date of injury, but based upon the Claimant’s history, his complaints were more likely than not causally related to his work injury but could state within a reasonable degree of medical certainty that they were related.


An IME was conducted by Dr. Kunlein in October of 2008. He found that several of the Claimant’s previous injuries had been reported as resolved; notably his chest and shoulder contusions as well as cervical and thoracic strains. Ultimately, Dr. Kuhnlein diagnosed the Claimant with low back pain with radicular symptoms and cubital tunnel syndrome left elbow. He went on to state that it was probable the Claimant’s work injury was a substantial factor in causing the diagnoses. Dr. Kuhnlein recommended that the Claimant see a pain specialist and a second orthopedic opinion. He assigned the Claimant 11% whole person impairment.


In 2009, the Claimant began treating with Dr. Thompson. He prescribed extensive physical therapy and found the Claimant’s low back and cubital tunnel conditions to be work related. In March of 2009, the employer designated Dr. John Prevo as their expert and scheduled an appointment for the Claimant. 3 weeks prior to this designation the Iowa Board of Medicine brought charges against Dr. Prevo for “substance abuse which impairs his ability to practice medicine with reasonable skill and safety.” While initially objecting to seeing Dr. Prevo, the Claimant ultimately attended his appointment with him.


The Claimant stated that this appointment lasted 15 minutes. Following the exam, Dr. Prevo opined that he could not state with any degree of medical certainty that Claimant’s complaints were related to his 2007 work injury. Dr. Prevo believe the Claimant to be at MMI and found his left elbow complaints to be related to a contusion sustained in 1994 though no complaint of elbow problems had arisen again until 2007.


Dr. Prevo was subpoenaed by the Claimant’s attorney and no objections to this subpoena were raised. When he appeared to be deposed, Dr. Prevo refused to provide certain documents which were subpoenaed concerning the current state of his medical license. During the deposition, Dr. Prevo also refused to answer any questions regarding his disciplinary charges and the state of his license.


At hearing of the matter, the Claimant initially objected to the use of Dr. Prevo’s deposition in evidence but later withdrew the objection and sought sanctions against the employer for Dr. Prevo’s refusal to answer questions and provide requested documents. The deputy’s decision ordered the employer to pay for the costs of Dr. Prevo’s deposition but refused to level any further sanctions. The deputy did however note that the refusal by Dr. Prevo to answer questions concerning his charges called into question his credibility and gave greater weight should be given to the opinions of Dr. Thompson and Dr. Kuhnlein.


The deputy’s decision went on to find that the greater weight of the evidence showed the Claimant’s low back, left leg and left arm symptoms to be caused by his work injury in July of 2007. The deputy further found the Claimant had not reached MMI and was in a healing period. The decision also stated the Claimant had been terminated due to his inability to work due to his back condition and was therefore entitled to temporary partial disability and healing period benefits. The deputy did however deny the request for penalty benefits finding Dr. Boyett and Neff’s opinions made liability fairly debatable.


The decision was appealed to the Commissioner who affirmed the deputy in all respects. The decision was then appealed to the district court, which affirmed the commissioner in all respects as well, save for finding the Claimant was entitled to penalty benefits from the date of his injury until the date Dr. Neff responded that his treatment recommendations were not causally related. The decision was then appealed to the Court of Appeals




The employer contended that substantial evidence did not support the finding that the Claimant’s complaints were related to his work injury. The Court found that the central theme presented by the employer was the Claimant’s lack of credibility. The Court stated that it is for the commissioner as the finder of fact to determine the credibility of the witness and weigh the evidence. The court’s review of the record found that they found no error in the finding that the Claimant was credible


The court then turned its attention to the issue of medical causation and once again noted that this was an issue of substantial evidence. The Court stated that the agency is the one who is to determine the weight to assign an expert opinion and the Court was not at liberty to accept contradictory opinions of other experts to reject the finding of the commissioner. The Court then went on to find that the deputy detailed his findings in regards to the weight to give the medical opinion, which was adopted by the commissioner. Based upon this and its review of the record as a whole, the Court found that substantial evidence supported the finding that the Claimant’s condition was related to his work injury.


Award of Temporary Disability and Healing Period Benefits


The court reviewed the record and found that substantial evidence supported the agency’s determination that the Claimant was not truly returned to work by Dr. Boyett and that he had no achieved MMI by the time of the hearing. The Court found that the Claimant “attempted to work while injured, complaining to everyone around him about his pain and Dr. Boyett’s treatment and release. He was told he would be responsible for the expenses if he saw someone other than Dr. Boyett, so saw no one. When he missed work because of the injury, he was fired… Drs. Thompson and Kuhnlein opined the claimant needed further medical care for his injuries from the 2007 work incident…” Based upon the foregoing, the Court no error in the district court’s affirmation of the agency’s award of temporary disability/healing period benefits.


Award of Penalty Benefits


The Court first noted that a challenge to the awarding of penalty benefits was a challenge to the Commissioner’s application of law to the facts and as such, would not be reversed unless it is irrational, illogical or wholly unjustifiable.


The Court stated that penalty benefits are permitted “if a delay in commencement or termination of benefits occurs without reasonable or probable cause or excuse…” Reasonable cause or excuse exists if the delay was necessary for the insurer to investigate the claim or the employer had a reasonable basis to contest the employee’s entitlement to benefits.


The employer contended that Dr. Boyett has given the Claimant a full duty release and this provided a reasonable basis for the position that no benefits were owed. The Court ultimately agreed that no penalty benefits were owed due to “what was arguably a full duty release from Dr. Boyett” as well as the opinion of Dr. Neff that the back pain was not related to his work injury. The Court found these provided a reasonable basis for the position that no benefits were owing and overturned the finding of the district court.


Cross Appeal of Claimant


Having found the Claimant was not entitled to penalty benefits, the Court did not address that portion of the Claimant’s cross appeal. The Court did however take up the issue of the agency’s refusal to hold Dr. Prevo in contempt for non compliance with a subpoena.


The Court found that the agency did not have the power to impose civil punishment for contempt in this case. The Court stated that the Iowa Code provides when an act constitutes contempt and that the Code specifically refers to disobedience of a subpoena issued by a court of the state or any judicial officer, including judicial magistrates. The Court stated that the subpoenas in this case were not issued by any court of the state, judicial officer or judicial magistrate and as such disobedience could not constitute an act of contempt. The Court also enumerated that nothing in the Workers’ Compensation Code gave the Commissioner the power of contempt and that the Commissioner does not possess common law powers – all power is derived specifically by statute. Therefore, as it the power was not provided by statute, a partysubject to the workers’ compensation statutes cannot be found in contempt of the Industrial Commissioner.


Annett Holdings v. Lacy Allen, Court of Appeals of Iowa, No. 2-691/12-0388


The Claimant was a resident of Crystal Springs, Mississippi. He had his GED and while having a welding certificate, never worked as a welder. In 1996 he began driving trucks for a living. In 2005 or 2006, he began his employment as an over the road trucker with TMC Transportation, a subsidiary of Annett Holdings, hereinafter referred to as employer. As part of his employment, the Claimant had to secure loads to the back of flat bed trucks with chains. On March 31, 2006 while securing the cargo with a chain, the Claimant felt a burning sensation in his neck and pain radiation down his arm.


The Claimant was seen by Dr. Harrigan who gave the Claimant restrictions on April 5, 2006. On April 5 and April 10, the employer offered the Claimant work was consistent with these restrictions, though the work was in Des Moines – 850 miles from the Claimant’s home in Mississippi. The employer offered to pay for the Claimant’s transportation to and from Des Moines for home visits and doctor’s appointments as well as hotel accommodations near the work site. Both of these offers were refused by the Claimant.


On May 26, 2006, the employer suspended the Claimant’s healing period benefits due to refusal of the light duty work. This lasted until July 26, 2006.


On July 27, 2006, the Claimant underwent a discectomy and cervical fusion with Dr. Cullon. He was released to light duty work on October 3, 2006. On October 5, 11 and 13 the employer again offered the Claimant light duty work in Des Moines consistent with his restrictions. The Claimant again refused and benefits were suspended. On October 31, 2006, the Claimant’s status was upgraded to medium work. On November 1, 2006, light duty work was again offered the Claimant in Des Moines and he again refused.


On September 3, 2009, the Claimant was seen by Dr. Jackson who rated the Claimant at 16% impairment and placed him in the light duty category. An FCE also placed Claimant in the light duty category. The following day, Dr. Kuhnlein rated the claimant at 25% impairment, and stated that he could not say the Claimant’s current complaints are related to the March 31, 2006 injury within a reasonable degree of medical certainty.


A vocational assessment performed on January 1, 2010 found that the Claimant would not be competitively employable at the present time in the labor market due to his work history, training, education and restrictions. Dr. Cullom affirmed his conclusion that the claimant was capable of medium level employment on March 11, 2010. Additionally, on March 12, 2010, Dr. Jackson reviewed the FCE report and report of Dr. Kuhnlein and amended his opinion that Claimant was in the medium level of employment.


At hearing, the deputy found the Claimant’s testimony was evasive and offered shifting explanations and excuses for his action or was flatly unbelievable. The deputy did not find the Claimant a credible witness on his own behalf. In the order, the deputy found the employer’s offer of light duty work was not suitable. He further found the Claimant suffered a loss of earning capacity of fifty percent of the body as a whole. This decision was affirmed by the Commissioner. On appeal to the district court, the court reversed on the issue of suitable work but affirmed the finding of fifty percent disability. The decision was then appealed to the Court of Appeals.


On appeal, the Court first noted that whether suitable employment was offered is a mixed question of law and fact. The same is true for the finding of fifty percent industrial disability.


Suitable Work


The court stated that Iowa law provides “if an employer offers “suitable work” to an injured employee, the employee must accept the work or waive the right to partial, temporary total, and healing period benefits.” The Court did note that in determining whether suitable work was offered, the Commissioner may consider the distance of available work from the Claimant’s home.


The Court reviewed recent precedent involving a case much along these same facts in which it was determined that suitable work was not offered when it was 387 miles from the Claimant’s home. The Court then held that in this case the work offered was not suitable as the distance between the available work and the Claimant’s home was not reasonable. The Court then overturned the decision of the district court.


Permanent Partial Disability Benefits


In determining the issue of entitled to permanent partial disability benefits, the Court first stated that the fifty percent industrial disability determination based on the application of law to the facts of this case will be upheld on review unless it is “irrational, illogical, or wholly unjustifiable.”


The Court reviewed the record in its entirety and stated that substantial evidence supported the finding of partial industrial disability and that the finding of fifty percent disability was not irrational, illogical or wholly unjustifiable. The Court then turned to the issue of whether the Claimant had met his burden that he was an odd lot employee and therefore should be deemed permanently and totally disabled. The Court found that while the vocational expert had found the Claimant unable to find employment in the job market, there were no medical opinions which substantiated this. Furthermore, the Court stated it was the purview of the commissioner to determine the weight to be given the evidence and the determinations of credibility. In this case, the deputy found the Claimant to be not credible, and as he was the primary source of establishing the level of disability in this case, the burden of proof was not met to establish Claimant as an odd lot employee.


The finding of 50% disability was therefore affirmed.


Jeff Carter, Conservator for Sandra Paniagua v. Alter Trading Corporation, a/k/a Alter Trading Co., Sentinel Insurance Company, LTD. and Carmen Yolanda Guzman and Angel Y. Sabillon, Lidia G. Sabillon Moreno a/k/a Jose Rodriguez Jr. and Aida Guzman, Iowa Court of Appeals; No. 2-740 / 11-1697


The deceased employee, Yobany Sabaillon Moreno, was born in Honduras in 1968. His son, Angel, was born in 1990. In 1994, Moreno married Carmen Yolanda Guzman and in 1997, a daughter, Lidia was born to the two. In 1999, the deceased moved to the United States to find employment. He regularly sent money back to Guzman in Honduras who needed the money to support the family and survive.


When he arrived in the U.S., Moreno began to use the alias Jose Rodriguez Jr. after assuming a Wisconsin ID and social security number. At some point prior to 2006, the deceased began living and working in Iowa. In January 2006, Moreno had a child with Ruth Paniagua Salas (an American citizen) by the name of Sandra Paniagua. While Moreno did not live with the two, he did provide them with financial support.


In September of 2006, Moreno was hired by Alter Trading Corporation under his alias. His SSN was used to verify he was legally able to work in the United States. The name of Rodriguez and SSN were listed on the paperwork for life insurance. He signed all paperwork in the name of Rodriquez verifying the information was true and correct.


In October of 2007, Moreno was killed in a work related accident. After this, two sets of claimants came forth: Moren’s minor child Sandra who lives in Iowa and Moreno’s wife and minor children who live in Honduras. Petitions were filed separately seeking apportionment of the deceased’s survivor’s benefits.


After an arbitration hearing, the deputy allocated 45% of the deceased’s death benefits to Guzman as a surviving spouse and 22% to Angel during the period of his dependency. The remaining 33% was assigned to Paniagua during the period of her dependency. The deputy also ordered that one half of the benefits apportioned to Guzman and her children should be paid to the 2nd Injury fund. The deputy stated in the decision that the benefits awarded to Paniagua were decreased somewhat to provide an equitable apportionment to the family in Honduras. The deputy also assessed a penalty against the employer as they never commenced benefits herein although they knew or should have known on the date of claimant’s death that he had a dependent or dependents.


On appeal, the commissioner modified the deputy’s decision in part reapportioning Moreno’s death benefits to allocate forty percent to Guzman, thirty percent to Angel, and the remaining thirty percent to Paniagua. The commissioner further ordered that when Angel was no longer a dependent, the benefits shall then be apportioned sixty-five percent to Guzman, and thirty-five percent to Paniagua. The commissioner noted that he did not consider the amount of benefits payable to the Second Injury Fund when apportioning the compensation to the non-resident aliens. The commissioner also affirmed the award of penalty benefits. The District Court affirmed this decision on judicial review. The case was then appealed to the Court of Appeals.




The conservator for Paniagua contended that the commissioner’s apportionment of benefits between Moreno’s dependents was not supported by substantial evidence. The Court first turned its attention to the statute which provides for the payment of compensation to the surviving spouse unless the commissioner makes an order for equitable apportionment between the surviving spouse and any dependent children. The Court when on to analyze what was meant by the term equitable.


The Court first noted that equitable did not mean and equal distribution of benefits. The Court went on to state that in equitably apportioning death benefits between entitled dependents, the commissioner must consider the facts and circumstances of the dependents. This includes consideration of the needs of the dependents.


The Conservator for Paniagua argued that the apportionment which was done by the commissioner was done without a detailed or factual explanation as to why or how the apportionment was equitable. The Court noted that the conservator provided a wealth of financial information and evidence including expert testimony highlighting cost of living differences between the United States and Honduras. The Court found however that the commissioner did not summarily disregard or ignore the evidence submitted by the conservator. Rather, the deputy did consider the differences in the economies but also considered other relevant factors including the relative support that Moreno provided his dependents, Paniagua’s receipt of life insurance proceeds, Paniagua’s mother’s ability to be employed and the fact that Moreno’s Honduras family’s major source of income was the money received from Moreno. Ultimately the Court found that the decision of the agency considered the facts, circumstances and needs of the dependents and affirmed as to the commissioner’s finding.


Reduction in Benefits


The court next turned its attention to the issue of reduced benefits for Moreno’s dependents in Honduras. The court noted that the legislature made a conscious choice that certain nonresident aliens should receive reduced benefits. The Court stated that a recent decision of the Iowa Supreme Court directed the commissioner not consider “the amount of the benefits payable to the Second Injury Fund when it apportion[s] the compensation to the nonresident aliens.”


The Court went on to reiterate that it found the commissioner’s apportionment of benefits was equitable in this case. The Court further stated that the commissioner was correct in not considering the reduction required under Iowa law for non resident aliens when apportioning benefits. Thus the finding was affirmed.


Penalty Benefits


The Court then finally turned its attention to the issue of penalty benefits. The court first determined that substantial evidence supported the finding that there was a delay in the payment of benefits as the employer did not pay benefits to anyone until after they were apportioned by the Commissioner. The employer’s defense that there was no delay in payment of benefits to Paniagua due to the commissioner not having determined how to apportion benefits was not accepted by the Court.


Next the Court examined whether a reasonable cause or excuse existed for the delay in payment of benefits. The court stated a reasonable cause or excuse for delay exists if 1) the delay was necessary for the insurer to investigate the claim or (2) the employer had a reasonable basis to contest the employee’s entitlement to benefits.

Upon its review of the record, the Court held that the denial of benefits on the basis that the employer was waiting until the outcome of the apportionment was not objectively reasonable. The fact that Moreno had a dependent or dependents was not open to dispute on any logical basis. All of the employment paperwork indicated that the deceased had a dependant, Paniagua. The Court noted that even if the identity of the deceased was fairly debateable, the employer knew the deceased had at least one dependent. Ultimately the Court found substantial evidence supported the awarding of a penalty.


Finally the Court addressed the issue of the amount of the penalty. The conservator for Paniagua wished the penalty to be assessed against an amount which took into account the deceased was married with 5 exemptions as opposed to single with 2. However the Court found that the deputy correctly used the single with 2 rate for purposes of penalty due to the information available to the employer at the time period of the delay in payment of benefits for consideration of penalty.


Next the conservator argued that the entirety of the penalty should be paid to Paniagua as she was the only dependent known to the employer at the period of the delay. The Court disagreed with this however noting that had benefits properly been paid, those in Honduras would have later been compensated for the benefits they should have received during that time. The Court went on to affirm the commissioner’s reasoning that all parties received fewer benefits because of the employer’s actions. All parties therefore should properly share in the penalty, as they do all other benefits.



The final issue the Court confronted was the conservatory’s request for sanctions against the employer for failure to admit the facts of identity of the Decedent and the Dependency of Sandra Paniagua. The conservator raised the issue of discovery sanctions in its application for rehearing following the deputy commissioner’s ruling. The conservator again raised the issue in its application for rehearing following the commissioner’s ruling. Both applications were denied. On judicial review, the district court determined the issue of sanctions was raised by the Conservator and “the presiding authority has failed to rule on the issue.” The court therefore remanded the case to the agency on the issue of sanctions.


On appeal, the employer contended “the commissioner had the legal authority to deny the application for rehearing raising the issue of discovery sanctions without issuing any written ruling.” The Court agreed and stated that the remand from the District Court should not have happened.

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