BEFORE THE IOWA INDUSTRIAL COMMISSIONER
_________________________________________________________________
JANINA SKELLEY,
Claimant,
vs.
File No. 941825
BRAMMER MANUFACTURING,
A P P E A L
Employer,
D E C I S I O N
and
WAUSAU INSURANCE,
Insurance Carrier,
Defendants.
_________________________________________________________________
The record, including the transcript of the hearing before the
deputy and all exhibits admitted into the record, has been
reviewed de novo on appeal. The decision of the deputy filed
April 30, 1993 is affirmed and is adopted as the final agency
action in this case.
Defendants shall pay the costs of the appeal, including the
preparation of the hearing transcript.
Signed and filed this ____ day of November, 1993.
________________________________
BYRON K. ORTON
INDUSTRIAL COMMISSIONER
Copies To:
Mr. William B. Bribriesco
Attorney at Law
2407 18th St., Ste 202
Bettendorf, Iowa 52722
Mr. Craig Levien
Attorney at Law
600 Union Arcade Bldg.
111 E. Third
Davenport, Iowa 52801
1402.3 1806 1803
2206 1403.30 1806
Filed November 17, 1993
Byron K. Orton
BEFORE THE IOWA INDUSTRIAL COMMISSIONER
____________________________________________________________
JANINA SKELLEY,
Claimant,
vs.
File No. 941825
BRAMMER MANUFACTURING,
A P P E A L
Employer,
D E C I S I O N
and
WAUSAU INSURANCE,
Insurance Carrier,
Defendants.
____________________________________________________________
1402.30; 1806; 1803; 2206
Claimant with preexisting degenerative disc disease which
had not had an impact on her employment awarded 75 percent
permanent partial disability where her only return to work
had been through the employer creating a modified job for
her. She was only able to work four hours per day.
Claimant was 53 years of age and did not have a high school
education. Other than for the employer, she likely would
have had no bona fide aspects of gainful employment. She
was laid off at the time of hearing despite the fact that a
number of employees with less seniority had been retained in
a work status by the employer. Medically speaking, she was
limited to sedentary employment which avoided bending,
stooping and lifting more than ten pounds occasionally. She
needed to be able to change positions frequently as she
needed for her comfort.
1403.30; 1806
Employer failed to carry burden of establishing basis for
apportionment, i.e., (1) preexisting disability (2) that was
not caused by the employment with the employer.
Page 1
BEFORE THE IOWA INDUSTRIAL COMMISSIONER
____________________________________________________________
:
JANINA SKELLEY, :
:
Claimant, :
:
vs. :
: File No. 941825
BRAMMER MANUFACTURING, :
: A R B I T R A T I O N
Employer, :
: D E C I S I O N
and :
:
WAUSAU INSURANCE, :
:
Insurance Carrier, :
Defendants. :
___________________________________________________________
STATEMENT OF THE CASE
This is a proceeding in arbitration brought by Janina
Skelley against Brammer Manufacturing Company and Wausau
Insurance Company as a result of an injury that occurred on
February 20, 1990. It was stipulated that the claimant's
period for healing or recuperation ended on September 14,
1990. The rate of compensation was stipulated to be $214.91
per week. The only issue for determination is the extent of
permanent partial disability affecting Janina Skelley that
was proximately caused by the February 20, 1990 injury.
Apportionment of disability is an issue as is aggravation of
a preexisting condition. Defendants have paid 89.4 weeks at
the stipulated rate.
The record in this case consists of testimony from
Janina Skelley, James Skelley and Carla Lott. The record
also contains jointly offered exhibits 1 through 12.
FINDINGS OF FACT
The evidentiary facts in this case are subject to
little dispute. Janina Skelley is a 53-year-old married
woman who dropped out of high school during the twelfth
grade. She has not completed high school or obtained a GED.
She has no specialized formal vocational training or other
formal education.
Janina has been employed by Brammer for 18 years. Her
prior work experience consists of being a nurse's aide,
department store clerk, waitress, cook, and housekeeper.
Janina worked as a stacker at Brammer Manufacturing Company
prior to the injury. The work required a considerable
amount of lifting, bending and stooping. At the time of
injury she was earning $9.40 per hour. In 1989 she earned
$18,500. This computes to an average of $355.77 per week.
When divided by $9.40 per hour, the 1989 earnings show that
Page 2
she worked an average of 37.85 hours weekly. If she had
worked during 1989 with a rate of pay of less than $9.40 per
hour, the number of hours worked per week would be greater
than the figure previously noted.
On February 20, 1990, Janina was injured when she fell
backwards off a ladder landing on her back on a cement
floor. Initially the x-rays showed no fractures but a
subsequent closer examination by Dr. Dennis Miller disclosed
a compression fracture of her L2 vertebra (ex. 12, p. 9).
Janina experienced a very extended period of recuperation.
Janina is afflicted by severe degenerative disc
disease, particularly at the lower levels of her lumbar
spine (exhibit 4, pages 58, 60 & 61; ex. 5; ex. 7, p. 2; ex.
12, pp 9 & 17 lines 22-24). The degenerative condition is
probably the cause of Janina's back pain and other symptoms
as indicated by her primary treating orthopedic surgeon,
Dennis L. Miller, M.D. (ex. 7, pp. 5-6).
With regard to Janina returning to work, Dr. Miller
stated:
...I think it's very difficult for men or women
with her skills but particularly women and her age
group with her back condition to return to gainful
employment. People with this situation tend to do
better if they can change positions at their need
so if they can have the opportunity to switch from
sitting to standing as they need to, they can do
fairly well but that's not -- it's hard to find
those jobs in competitive gainful employment and I
think her chances of -- in the routine job market
are dismal.
(exhibit 12, page 20).
Janina has undergone extensive physical therapy, work
hardening and functional capacity evaluations. The result
has been that she is limited to lifting ten pounds on an
occasional basis and is to avoid bending and stooping (ex.
1, pp. 1-3, 10-17; ex. 10, p. 1). Those test results have
not been considered to be highly accurate and there is some
possibility of a functional overlay, depression or some
other psychological component to Janina's symptoms (exs. 5 &
7, p. 6).
Janina has been evaluated as having a significant
degree of permanent impairment. Dr. Dennis Miller assigned
a 17 percent impairment rating of which 7 percent was due to
degeneration, 5 percent to a compression fracture of her L2
vertebra and 5 percent due to loss of range of motion (ex.
12, pp. 17-19). John S. Koch, M.D., has evaluated Janina as
having a 5 percent permanent impairment due to the fracture
and 7 percent due to degeneration but did not give any
additional rating for loss of range of motion (ex. 3). Dr.
Koch stated that the 5 percent due to the fracture has
resulted from her work place accident. He declined to
express an opinion on causation with regard to the balance
of her impairment. Except for the 5 percent rating for loss
Page 3
of range of motion, the impairment ratings from Drs. Miller
and Koch are identical. Their opinions regarding causation
likewise appear to be identical.
Based upon the record in this case there is no showing
that Janina had ever been disabled from performing her work
due to her degenerative disc disease prior to February 20,
1990. Dr. Dennis Miller agreed that the injury aggravated
her preexisting degenerative disc disease condition (ex. 12,
p. 16).
Even though her healing was stipulated to have ended
earlier, she did not return to work until May 23, 1991.
That return to work was accomplished only through the
employer creating a job for her out of parts of several
other jobs and through the cooperation of representatives of
the insurance carrier and an extensive work hardening
program. She initially returned to work at three hours per
day, increased to four hours per day, increased to six, and
then on to eight hours per day but was unable to endure
working eight hours per day. She eventually developed a
more or less permanent pattern of working four hours per day
(ex. 10, pp. 10-11). Janina has made a very good faith
effort in her physical therapy and work hardening
activities. Working four hours per day causes her
considerable distress but she prefers to be working (ex. 10,
pp. 6 & 11).
Janina worked from May 1991 through October 1992 when
she experienced a flare-up of her symptoms from no
particular identifiable cause. As she was preparing to
return to work she was placed into a lay off status. Janina
was laid off even though other employees with less seniority
were still retained. The lay off was part of a two-phase
lay off in which approximately 30 percent of the plant work
force had been laid off. At the time of hearing, Janina had
not been recalled to work. She will retain recall rights
until May 1994. There was no assurance or prediction that
she would in fact be recalled. Since returning to work in
May 1991, she has received routine pay increases to the
point that she was earning $10.74 per hour when she last
worked on October 22, 1992.
Janina has made some unsuccessful applications for
employment. She stated that she would be unable to perform
the work if hired but has applied in any event. She has
received some unemployment compensation and it is likely
that the job applications were made in order to qualify for
those unemployment benefits. Janina's recreational
activities have been curtailed and her housekeeping
activities have likewise been curtailed as a result of her
back problems. Those activities were not curtailed prior to
the fall that occurred on February 20, 1990.
Since Janina is only capable of working four hours per
day, she experiences approximately a 50 percent reduction in
actual earnings when the employer makes work available for
her. In a lay off status, she, of course, receives no
income. Were it not for the employer accommodating Janina
Page 4
and making work available to her, it is unlikely that she
would be able to obtain any employment anywhere other than
perhaps some intermittent, unreliable, part-time employment.
In view of her reduced capacity for work hours and her loss
of access to jobs, it is found that Janina has experienced a
75 percent reduction in earning capacity as a result of the
February 20, 1990 injury. While it is true that she had
preexisting degenerative changes in her back those
degenerative changes had not had any actual impact on her
ability to work and earn a living in a job which required a
substantial amount of lifting, bending and stooping until
this injury occurred.
CONCLUSIONS OF LAW
The claimant has the burden of proving by a
preponderance of the evidence that the injury is a proximate
cause of the disability on which the claim is based. A
cause is proximate if it is a substantial factor in bringing
about the result; it need not be the only cause. A
preponderance of the evidence exists when the causal
connection is probable rather than merely possible.
Blacksmith v. All-American, Inc., 290 N.W.2d 348 (Iowa
1980); Holmes v. Bruce Motor Freight, Inc., 215 N.W.2d 296
(Iowa 1974).
The question of causal connection is essentially within
the domain of expert testimony. The expert medical evidence
must be considered with all other evidence introduced
bearing on the causal connection between the injury and the
disability. The weight to be given to any expert opinion is
determined by the finder of fact and may be affected by the
accuracy of the facts relied upon by the expert as well as
other surrounding circumstances. The expert opinion may be
accepted or rejected, in whole or in part. Sondag v. Ferris
Hardware, 220 N.W.2d 903 (Iowa 1974); Anderson v. Oscar
Mayer & Co., 217 N.W.2d 531 (Iowa 1974); Bodish v. Fischer,
Inc., 257 Iowa 516, 133 N.W.2d 867 (1965).
Aggravation of a preexisting condition is one manner of
sustaining a compensable injury. While a claimant is not
entitled to compensation for the results of a preexisting
injury or disease, its mere existence at the time of a
subsequent injury is not a defense. Rose v. John Deere
Ottumwa Works, 247 Iowa 900, 76 N.W.2d 756 (1956). If the
claimant had a preexisting condition or disability that is
materially aggravated, accelerated, worsened or lighted up
so that it results in disability, claimant is entitled to
recover. Nicks v. Davenport Produce Co., 254 Iowa 130, 115
N.W.2d 812 (1962); Yeager v. Firestone Tire & Rubber Co.,
253 Iowa 369, 112 N.W.2d 299 (1961).
Apportionment of disability between a preexisting
condition and an injury is proper only when some
ascertainable portion of the ultimate industrial disability
existed independently before an employment-related
aggravation of disability occurred. Bearce v. FMC Corp.,
465 N.W.2d 531 (Iowa 1991); Varied Enterprises, Inc. v.
Sumner, 353 N.W.2d 407 (Iowa 1984). Hence, where employment
Page 5
is maintained and earnings are not reduced on account of a
preexisting condition, that condition may not have produced
any apportionable loss of earning capacity. Bearce, 465
N.W.2d at 531. Likewise, to be apportionable, the
preexisting disability must not be the result of another
injury with the same employer for which compensation was not
paid. Tussing v. George A. Hormel & Co., 461 N.W.2d 450
(Iowa 1990).
The burden of showing that disability is attributable
to a preexisting condition is placed upon the defendant who
seeks to benefit from the asserted apportionment. Where
evidence to establish a proper apportionment is absent, the
defendant is responsible for the entire disability that
exists. Bearce, 465 N.W.2d at 536-37; Sumner, 353 N.W.2d at
410-11.
For the disability which results from the preexisting
degenerative disc disease to be apportionable to the extent
that it would relieve the employer from paying for the
results of it, it would be necessary for the employer to
prove two things. First, the employer would need to prove
that actual disability in the nature of reduced earnings or
earning capacity had preexisted the February 20, 1990
injury. There is no such evidence in this case to support
such a finding. Second, to be apportionable, the employer
would have the burden of proving that the degeneration was
not a result of other injuries with the same employer. The
role that claimant's work played in developing the
degenerative disc disease is not inquired about by counsel
in this case, however, it is noted that at page nine of
exhibit 12, Dr. Miller referred to her condition as
"degenerative disc disease and wear and tear changes
throughout the lumbar spine." In view of this, it is not
possible to make a finding that the employment was not a
factor in producing those degenerative changes as would be
necessary in order to meet the second prong of the
apportionment test. Since neither prong has been met, it
clearly is not appropriate to apportion the disability in
this case based upon the degenerative changes which existed
before February 20, 1990.
Industrial disability or loss of earning capacity is a
concept that is quite similar to impairment of earning
capacity, an element of damage in a tort case. Impairment
of physical capacity creates an inference of lessened
earning capacity. The basic element to be determined,
however, is the reduction in value of the general earning
capacity of the person, rather than the loss of wages or
earnings in a specific occupation. Post-injury earnings
create a presumption of earning capacity. The earnings are
not synonymous with earning capacity and the presumption may
be rebutted by evidence showing the earnings to be an
unreliable indicator. Bearce v. FMC Corp., 465 N.W.2d 531
Page 6
(Iowa 1991); DeWall v. Prentice, 224 N.W.2d 428, 435 (Iowa 1974);
Carradus v. Lange, 203 N.W.2d 565 (Iowa 1973); Holmquist v.
Volkswagon of America, Inc., 261 N.W.2d 516 (Iowa App. 1977)
A.L.R.3d 143; Michael v. Harrison County, Thirty-fourth Biennial
Report of the Industrial Commissioner 218 (1979); 2 Larson
Workmen's Compensation Law, sections 57.21 and 57.31.
It has been found that Janina has experienced a 75 percent
reduction in her earning capacity based upon her loss of ability
to work a full work day and her loss of access to jobs and the
job market. Were it not for a beneficent employer she would
likely be without any real prospect for employment. It is
determined that Janina has a 75 percent permanent partial
disability under the provisions of Code section 85.34(2)(u).
This entitles her to receive 375 weeks of compensation for
permanent partial disability.
ORDER
IT IS THEREFORE ORDERED that defendants pay Janina Skelley
three hundred seventy-five (375) weeks of compensation for
permanent partial disability at the stipulated rate of two
hundred fourteen and 91/100 dollars ($214.91) per week payable
commencing September 14, 1990. All accrued amounts shall be paid
to claimant in a lump sum together with interest pursuant to
section 85.30 after allowing credit for the eighty-nine point
four (89.4) weeks of benefits which were voluntarily paid prior
to hearing.
It is further ordered that the costs of this proceeding are
assessed against defendants pursuant to rule 343 IAC 4.33.
It is further ordered that defendants file claim activity
reports as requested by this agency pursuant to rule 343 IAC 3.1
Signed and filed this ____ day of April, 1993.
______________________________
MICHAEL G. TRIER
DEPUTY INDUSTRIAL COMMISSIONER
Copies to:
Mr. William B. Bribriesco
Attorney at Law
2407 18th St. STE 202
Bettendorf, Iowa 52722
Mr. Craig A. Levien
Attorney at Law
600 Union Arcade Bldg
111 E 3rd
Davenport, Iowa 52801
Page 1
1402.3 1806 1803 2206 1403.30 1806
Filed April 30, 1993
Michael G. Trier
BEFORE THE IOWA INDUSTRIAL COMMISSIONER
____________________________________________________________
JANINA SKELLEY,
Claimant,
vs.
File No. 941825
BRAMMER MANUFACTURING,
A R B I T R A T I O N
Employer,
D E C I S I O N
and
WAUSAU INSURANCE,
Insurance Carrier,
Defendants.
___________________________________________________________
1402.30 1806 1803 2206
Claimant with preexisting degenerative disc disease which
had not had an impact on her employment awarded 75 percent
permanent partial disability where her only return to work
had been through the employer creating a modified job for
her. She was only able to work four hours per day.
Claimant was 53 years of age and did not have a high school
education. Other than for the employer, she likely would
have had no bona fide aspects of gainful employment. She
was laid off at the time of hearing despite the fact that a
number of employees with less seniority had been retained in
a work status by the employer. Medically speaking, she was
limited to sedentary employment which avoided bending,
stooping and lifting more than ten pounds occasionally. She
needed to be able to change positions frequently as she
needed for her comfort.
1403.30 1806
Employer failed to carry burden of establishing basis for
apportionment, i.e., (1) preexisting disability (2) that was
not caused by the employment with the employer.
BEFORE THE IOWA INDUSTRIAL COMMISSIONER
____________________________________________________________
THOMAS F. ALLEN, Deceased, :
SANDRA KAY ALLEN, Surviving :
Spouse and Executor, :
: File No. 941868
Claimant, :
: A P P E A L
vs. :
: D E C I S I O N
ALLEN WATER AND WASTEWATER :
ENGINEERING, INC., :
:
Employer, :
:
and :
:
KEMPER INSURANCE COMPANY, :
:
Insurance Carrier, :
Defendants. :
____________________________________________________________
The record, including the transcript of the hearing
before the deputy and all exhibits admitted into the record,
has been reviewed de novo on appeal.
ISSUES
Defendants state the following issues on appeal:
I. Did the deputy err in awarding penalty
benefits to the claimant pursuant to Iowa Code
section 86.13?
II. Did the deputy err in failing to award a
credit to employer and insurance carrier as a
result of the third party settlement?
FINDINGS OF FACT
The findings of fact contained in the proposed agency
decision filed March 5, 1993 are adopted as set forth below.
Segments designated by asterisks (*****) indicate portions
of the language from the proposed agency decision that have
been intentionally deleted and do not form a part of this
final agency decision.
Thomas F. Allen was the spouse of Sandra Kay Allen.
Thomas was a professional engineer whose practice seems to
have specialized in water and waste water treatment. Thomas
had been a part of the French Reneker Engineering firm in
Fairfield, Iowa, and then subsequently started his own firm,
Allen Water and Wastewater in the mid-1980's (Claimant's
Exhibit 71, page 4). Thomas operated the business as a
corporation by the name of Allen Water and Wastewater
Engineering, Inc. He was the president of the corporation
Page 2
and its principal employee. The business operated in much
the same manner as if Thomas had functioned as a sole
proprietor. The only other employee of the corporation at
the time of his death was Ethel Marie Barry. The
corporation was the alter ego of Thomas F. Allen. The
business ended with his death. Ethel performed bookkeeping
for the company and assisted Sandra in compiling records and
otherwise closing out the business.
Thomas apparently had a practice of paying himself a
salary of $2,000 every two weeks (Cl. Ex. 34). It is noted
that he paid himself a bonus in the amount of $8,900 in
early 1989. When revenues were insufficient during late
1989, Thomas did not take a salary from the company. He did
continue to take a reimbursement for expenses and paid Ethel
Marie Barry's salary (Cl. Ex. 49, pp. 23-25 and 39; Cl. Ex.
34; Cl. Ex. 35). In short, the salary which Thomas actually
received from his corporation was dependent upon the
profitability of that corporation. The profitability varied
from time to time and the amount which he withdrew from the
company in the form of salary and bonus likewise varied from
time to time (Cl. Ex. 31-33). The record in this case does
not contain the actual records of Allen Water and Wastewater
Engineering, Inc., which deal with its income tax status,
corporate organizational documents or the like. Since the
income tax returns filed by Thomas do not show any profit or
loss or distribution of dividends from the corporation, it
appears as though the profits from the corporation were paid
to Thomas in the form of salary. When profits and revenues
were low, he received no salary. When they were high, he
paid himself a bonus.
The salary payment practice used by Thomas is common
for small corporations, proprietorships and partnerships.
Widely fluctuating earnings are quite typical for sole
proprietors. Individuals like Thomas are, from a practical
standpoint, self-employed sole proprietors even though they
have adopted the corporate form of business. Persons such
as Thomas are technically classified as employees of the
corporation under which they do business but they are not
normal employees, despite the fact that all or part of what
is paid to them is termed a salary or wages. They continue
to work even when no money is available to actually pay
their salary or wages. They are not placed into a layoff
status. They have the ability, if they choose to use it, to
borrow and pay a salary or wages to themselves. They have
the ability to cause the corporation to appear profitable or
unprofitable based upon matters such as rent which they pay
to themselves for the business premises. It is noted that
Thomas paid himself rent for the offices used by the
employer corporation. Items such as depreciation, interest
expense and many other variables are subject to the control
of a person such as Thomas. Corporate meetings can set a
salary or salary level which may or may not actually be
paid. If funds are not available to pay the established
salary to the owner at the time when it is due, it may be
Page 3
paid at a later time when and if funds become available. In
short, the owner of a business is not a normal employee from
the standpoint of wages or salary. Thomas had full ability
to perform many functions which easily could overstate or
understate the profitability of the business and the owner's
salary. The facts in evidence in this case clearly show
that the practices followed by Thomas F. Allen in operating
the business of Allen Water and Wastewater Engineering,
Inc., were within the range of practices commonly and
customarily used by individuals who function as a
self-employed proprietor yet have chosen the corporate form
for conducting the business. It would be extremely
speculative to venture to guess at what amount of actual
salary Thomas Allen would have paid to himself during
calendar year 1990 or during the period running from May 1,
1989 through May 1, 1990, if he had not died on January 13,
1990.
Allen Water and Wastewater Engineering was charged a
premium for covering Thomas F. Allen with workers'
compensation insurance. The premium was based upon Thomas
having yearly earnings of $57,200. The period during which
earnings were considered for determining the premium was
from May 1 of one year until May 1, of the following year, a
date different than the calendar year period used for
determining income taxes. The 1988-1989 premium year
provided a final premium based upon Thomas having a yearly
salary of $57,200. The 1989-1989 premium audit charged a
premium based upon Thomas having a yearly salary of $57,200.
The sum of $57,200 was used by the insurance carrier when
computing the premium to be charged for workers'
compensation coverage for Thomas F. Allen. When premium
audits were conducted, the insurance carrier continued to
charge a premium based upon Thomas F. Allen having a yearly
salary of $57,200 (Cl. Ex. 21, 22 and 23; Cl. Ex. 71, pp. 9-
15). The premiums for insurance year 1989-1990 have been
fully paid (Cl. Exs. 24 and 26). It is clear that the
premium charged to Allen Water and Wastewater, Inc. was
based upon Thomas F. Allen having wages or earnings in the
amount of $57,200.
Claimant's exhibit 6 is a weekly planner-type of book.
It is the book used by Thomas F. Allen for planning his
daily activities and appointments. Ethel Marie Barry also
confirmed that claimant's exhibits 5 through 15 were all
made in the handwriting of Thomas F. Allen and that exhibit
7 is the file used by Thomas F. Allen for keeping those
exhibits in his office records. Ethel Marie Barry is fully
familiar with the handwriting of Thomas F. Allen. No
contrary evidence is in the record of this case (Cl. Ex. 49,
pp. 8-20). It is found that all the writing on exhibits 5
through 15 was performed by Thomas F. Allen.
It is readily apparent from reviewing exhibits 5
through 15 that Thomas F. Allen, doing business as Allen
Water and Wastewater Engineering, Inc., was engaged in
performing some type of a project for a business known as
Page 4
Iowa Bottlers. At this point it should be noted that Iowa
Beverage Manufacturers, Inc., is sometimes referred to as
Iowa Beverage or Iowa Bottlers (Cl. Ex. 52, pp. 5 and 6).
Throughout the record of this case those different names are
used interchangeably.
The records maintained by Thomas F. Allen clearly show
that he had dealings with Iowa Beverage Manufacturers, Inc.,
on January 2, 1990, January 4, 1990, January 5, 1990,
January 9, 1990, and possibly at other times as well. The
first page of exhibit 15 shows that Tom had a plan to stop
at Ottumwa at Iowa Bottlers for something to do with tests.
On the third page of claimant's 10 appears what is
apparently a list of things which Tom wished to accomplish.
Number 2 appears to indicate that he intended to check the
depth of flow at a manhole at 6:00 a.m. Number 13 indicates
that no flow periods are from 4:00 to 5:00 a.m. or on
Saturday or Sunday. It is noted that from 7:00 a.m. to 3:00
p.m., the first shift is operating and that from 3:00 p.m.
to 11:00 p.m., the second shift is operating, and that from
8:30 p.m. to 5:00 p.m., cleaning is ongoing. Most of the
entries on the page are in pencil, however, there is an
entry in blue ink which appears to say Saturday or Sunday in
parentheses. That entry was apparently entered at some
point after the original writing was made since a different
writing instrument was used. When taken as a whole, the
sheet appears to indicate that 6:00 a.m. or anytime on a
Saturday or Sunday would be a reasonable time for performing
the check of flow at the manhole. The entries in exhibit 6
for Saturday, January 13, by what apparently is the 5:00
p.m. line, indicates that Tom planned to be at the Iowa
Bottlers plant in Ottumwa on that Saturday.
Standing alone, claimant's exhibits 6 through 15
readily establish that Thomas Allen was performing services
for Iowa Bottlers and intended to perform some of those
services on Saturday, January 13, 1990.
*****Further evidence that Thomas F. Allen was
performing services for Iowa Beverage Manufacturers, Inc.,
is provided by claimant's exhibit 16 and the testimony from
Charles E. Sizemore, personnel manager of Iowa Beverage (Cl.
Ex. 50), Keith Kropf, superintendent of the City of Ottumwa
Water Pollution Control Facility (Cl. Ex. 51), Stephen Allen
Cullinan, industrial pre-treatment coordinator for the City
of Ottumwa (Cl. Ex. 52), Theodore J. McNulty, executive vice
president of Iowa Beverage Manufacturing, Inc., in Ottumwa
(Cl. Ex. 53), and, Manish Kohli, chemist analyst for Iowa
Beverage in January 1990 (Cl. Ex. 70).
Charles E. Sizemore, at page 19 of his deposition,
testified that he knew that Tom was coming over to the plant
on the weekend of his death in order to check the flow in a
manhole and that Saturday, January 13, would have been a
suitable time for him to do so (Cl. Ex. 50, pp. 13-19).
Additionally, according to Sizemore, the company had a
special tool made for removing the manhole in question
because it was quite heavy. The tool was available at its
Page 5
plant for whoever would have needed to use it (Cl. Ex. 50,
pp. 12 and 13). The fact that Tom did not have such a tool
in his car at the time of the fatal accident has no bearing
whatsoever upon whether or not a business purpose existed
for Tom's travel to Ottumwa on January 13, 1990.
Stephen Cullinan confirmed that it would be appropriate
for Tom to check the flow at the manhole on a Saturday or
Sunday, a time which he felt would be a low flow period (Cl.
Ex. 52, pp. 21 and 22). Other corroboration of the business
purpose comes from Theodore J. McNulty (Cl. Ex. 53, pp. 5-
7), Elvin Frank Beach (Cl. Ex. 54, pp. 15 and 16), Thomas L.
Dugan (Cl. Ex. 55, pp. 7-9), and Manish Kohli (Cl. Ex. 70,
pp. 9 and 10). There is absolutely no evidence in existence
which refutes the fact that Thomas F. Allen had a distinct
business purpose when traveling to Ottumwa, Iowa on January
13, 1990.
It is well documented in the record of this case that
Thomas Allen would commonly work on weekends, particularly
on Saturdays. It was not uncommon for him to simply appear,
unannounced at places where he had business to perform (Cl.
Ex. 54, pp. 25 and 26; Cl. Ex. 51, pp. 16 and 17). The fact
that he did not have an appointment to meet with anyone at
the Iowa Beverage Manufacturers plant is of no significance.
There is no evidence in the record to indicate that he would
have needed an appointment in order to gain access or to
know where to go at the plant. He had been there
previously. It was not uncommon for him to merely show up,
unannounced, at places where he had business interests.
It is well documented by the evidence in this case that
Thomas F. Allen had a business need for checking the flow in
manholes at the Iowa Beverage Manufacturers plant in
Ottumwa, Iowa, at a time when flow in the manhole would be
low. The record indicates that Saturday or Sunday was an
appropriate time to conduct that testing. From the record,
it is possible that approximately 6:00 a.m. on a weekday
might have been an equally appropriate time to conduct the
testing. From the record, it cannot be determined if any
one time would have been preferable to another though it
appears that any of the options would have been adequate and
appropriate. If Thomas Allen had not chosen to go to
Ottumwa on Saturday, January 13, 1990, it would have been
necessary for him to go there at some other time when the
flow was at a low level.
From the third page of claimant's exhibit 10, it is
apparent that on January 5, 1990, Thomas Allen knew that it
would be necessary for him to check the flow in the manholes
at the Iowa Bottlers plant on a Saturday, Sunday or,
possibly, at 6:00 a.m. on a weekday. There is nothing in
the record to indicate that the tests which Thomas needed to
perform could not have been done on Sunday the 14th,
Saturday the 6th, Sunday the 7th, or at some other time on
Saturday the 13th.
The record shows that Thomas F. Allen needed to make a
trip to Ottumwa to the Iowa Bottlers plant at some point in
Page 6
order to check the flow during the low flow periods of time.
If he had not gone on Saturday, January 13, when he did, it
would have been necessary for him to go at some other time.
It can be reasonably argued that the possibility or
opportunity to meet with Tom and Peg Lazio on the evening of
January 13, 1990, might have played some part in his
decision to go to Ottumwa and check the manhole during the
afternoon of January 13 rather than at some other
appropriate time. Thomas Allen had worked the morning of
Saturday, January 13. According to Sandra, he stopped at
home shortly before lunch and informed her that he needed to
check the flow in some manholes at Iowa Bottlers in Ottumwa.
He asked her to go along with him so they could go dancing
and also to see if their friends, Tom and Peg Lazio, would
be able to meet with them. Tom then had lunch with Tom
Dugan. Dugan was informed that the Allens intended to
engage in some type of social activity that evening. It was
a reason given by Tom Allen for finishing the lunch meeting
when he did. Tom then apparently stopped at the business
place of Elvin Beach and informed Beach that he was going to
Ottumwa to look at manholes. Apparently, nothing about
social activities was mentioned (Cl. Ex. 54, pp. 15 and 15).
Dugan was under the impression that the Allens were staying
overnight wherever it was they were going but he could not
identify why he had that impression (Cl. Ex. 55, pp. 9-11
and 14). He knew no particulars about the plans the Allens
had made. It is apparent that Dugan's impression about
staying overnight was incorrect since no overnight clothes
or personnel hygiene items were in the car at the time the
fatal accident occurred.
Sandra Allen talked with Peg Lazio in the early
afternoon of January 13. At that point in time, both Sandra
and Peg have testified that the time at which they would
meet was uncertain. The Lazios testified that they had
planned a family dinner prior to the time that they were
contacted by Sandra. ***** Sandra, Peg and Tom Lazio all
agree that the first time any mention had been made of the
Lazios and Allens getting together on Saturday, January 13,
was in the early afternoon of that day. They all agree that
the plans for getting together were not finalized until
Allens phoned from the car telephone after they were already
en route traveling from Mount Pleasant to Ottumwa. The
Lazios had previously made other plans for that evening in
the nature of a family gathering and they did not cancel
those plans in order to meet with the Allens. As it turned
out, the work which Tom had to do was expected to occupy his
time until approximately 8:00 p.m. This would have amounted
to approximately three hours of work.
It is found that Thomas Allen planned to go to Ottumwa
on the afternoon of Saturday, January 13, 1990, prior to the
time that he knew whether or not the Lazios would be able to
meet with him and Sandra. One can speculate about what
might have happened if the Lazios had been unavailable.
Perhaps, Tom and Sandra would have eaten dinner at a
Page 7
restaurant in Ottumwa or someplace en route to or from
Ottumwa. Perhaps, they would have gone dancing in Ottumwa.
Perhaps, Sandra would not have gone along for the ride.
Perhaps, Tom would have rescheduled the trip for some other
time or date. It is, however, unlikely that the trip would
have been rescheduled because Tom had appointments to meet
at Iowa Bottlers on the following Monday and Tuesday.
Sandra did not like for him to work on Sundays and he
usually avoided work on Sundays. It is possible that the
Monday or Tuesday meetings at Iowa Bottlers would have
required input which would result from his testing at the
manhole cover and that it would be necessary to complete
that testing prior to the meetings. Tom Allen was
performing a project which was time sensitive. It was
necessary that the steps needed to move the project to a
prompt completion, be taken in a prompt manner. It cannot
be determined whether or not Tom would have actually needed
the test results for the Monday or Tuesday meetings but it
is apparent that they were needed for the project to keep
progressing toward completion.
It is found that Tom Allen would have gone to Ottumwa
to test at the manhole at Iowa Bottlers on the afternoon of
January 13, 1990, even if the Lazios had not been available
to meet with him and Sandra. The evidence showing that the
principal purpose of the travel was to conduct the testing
is clear and convincing. There is no reliable evidence to
the contrary, only surmise and conjecture. The importance
of moving promptly with the project in which Tom Allen was
engaged is well corroborated by the testimony of Charles
Sizemore (Cl. Ex. 50, p. 7; Cl. Ex. 16), Keith Kropf (Cl.
Ex. 51, p. 15), Stephen Cullinan (Ex. 52, pp. 25 and 26),
Theodore J. McNulty (Cl. Ex. 53, p. 8), and Manish Kohli
(Cl. Ex. 70, p. 7). When Thomas Allen made his plan of
things to do on January 5, 1990, checking flow in manholes
were the first two activities on the list (Cl. Ex. 10, p.
3). There is every reason to believe that the activities
that Tom planned to perform at the manhole on January 13,
1990, were an integral part of keeping the project going in
order to achieve a timely completion. It is very unlikely
that his plan to do so would have changed regardless of the
availability of the Lazios. Tom Allen needed to perform the
testing. His plan to perform the testing on that Saturday
was made several days prior to the time that he knew whether
or not the Lazios would be available to meet with him and
Sandra. That fact, when coupled with the time sensitive
nature of the project makes it extremely unlikely that his
plans would have been altered if the Lazios had been
unavailable. There is no credible evidence in the record of
this case to support the contention that meeting with the
Lazios was a principal, primary or even significant
consideration in selecting the time at which Tom Allen went
to Ottumwa in order to perform testing at the Iowa Beverage
Manufacturers plant on January 13, 1990.
In short, the evidence in this case overwhelmingly and
Page 8
without any substantial evidence to the contrary proves
beyond all doubt whatsoever that Thomas Allen was performing
engineering services for Iowa Beverage Manufacturers, Inc.,
at its Ottumwa, Iowa plant, that on January 13, 1990, he was
traveling to that plant in order to perform testing at a
manhole cover as part of those services and that he was
fatally injured in a motor vehicle accident while he was
traveling on a customarily used direct route for travel
between Mount Pleasant and Ottumwa, Iowa. That same
evidence overwhelmingly shows that the business function
which was planned would have needed to be performed at some
other time if it were not to be performed on January 13 and,
accordingly, the related travel from Mount Pleasant to
Ottumwa and back would have been necessary at some other
time if it were not performed on January 13. One can engage
in surmise and conjecture in order to allege that if the
Lazios had not been available on January 13 that the travel
and business function might not have been performed on that
date. The evidence in the record is, however, to the
contrary. It is found that Thomas Allen would have gone to
the Iowa Beverage Manufacturers plant on January 13, 1990,
and would have performed the travel that he was engaged in
at the time of his death even if the Lazios had been
unavailable to meet with him and Sandy on that evening. The
record of this case contains no substantial evidence to the
contrary.
There are other pertinent facts which should be
considered. The car in which Thomas was traveling was owned
and provided by the corporate employer (Cl. Exs. 19, 20).
Decedent was customarily compensated for his travel expenses
(Cl. Ex. 49, pp. 24, 25, 30).
No written contract was found between Allen Water and
Wastewater Engineering, Inc., and Iowa Beverage
Manufacturers, Inc., because none had been entered into.
CONCLUSIONS OF LAW
The conclusions of law contained in the proposed agency
decision filed March 5, 1993 are adopted as set forth below.
Segments designated by asterisks (*****) indicate portions
of the language from the proposed agency decision that have
been intentionally deleted and do not form a part of this
final agency decision. Segments designated by brackets ([
]) indicate language that is in addition to the language of
the proposed agency decision.
[It is noted that the conclusion of law that the
decedent was in the course of his employment at the time of
his death has not been raised as an issue on appeal.
However, the findings of fact and the conclusions of law on
that issue and the issue of decedent's rate are incorporated
herein.]
The claimant has the burden of proving by a
preponderance of the evidence that the alleged injury
actually occurred and that it arose out of and in the course
of employment. McDowell v. Town of Clarksville, 241 N.W.2d
904 (Iowa 1976); Musselman v. Cent. Tel. Co., 261 f there
was evidence which showed that the trip would have been
rescheduled if the Lazios had been unavailable, it would
still have been necessary for the trip and work which was
planned to be performed at some other time if it had not
been performed on January 13, 1990. The death of Thomas F.
Allen is clearly compensable and his surviving spouse,
Sandra K. Allen, is entitled to receive benefits under the
provisions of section 85.31.
***** Claimant asserts that the rate of compensation
should be based upon section 85.36(11) with the wage being
based upon a salary of $57,200, the salary level for which a
premium was charged.
The premium charged by Kemper Insurance Company to
Allen Water and Wastewater Engineering, Inc., was based upon
Thomas Allen having a yearly salary of $57,200 per year. In
fact, Kemper had exercised its prerogative to limit the
maximum salary for which they would issue workers'
compensation coverage for a corporate executive and $57,200
was that maximum amount for which they would issue coverage.
Kemper would not cover a larger salary even if actual
earnings were more than $57,200. Kemper collected a premium
during policy year 1988-1989 based upon Thomas F. Allen
having earnings of $57,200. They collected a premium for
policy year 1989-1990 based upon Thomas F. Allen having a
yearly salary of $57,200 per year.
*****
It is therefore concluded that subsection 11 of section
Page 10
85.36 of the Code controls in this case. It is a specific
express exception to the normal practice of basing the rate
of compensation upon actual earnings. The actual earnings
are immaterial. In this case, the level of coverage which
was purchased and the premium paid was based upon Thomas F.
Allen having a yearly wage of $57,200. The weekly rate of
compensation should therefore be computed under section
85.36(5) with the yearly earnings being determined under
section 85.36(11) as $57,200 per year. The gross weekly
earnings of Thomas F. Allen for purposes of computing the
rate of workers' compensation weekly benefits is therefore
$1,100. Since Thomas was married and entitled to himself
and his spouse as an exemption, the rate of compensation is
$609.60 per week.
An issue exists with regard to a claimed credit under
section 85.22. The case Fisher v. Keller Industries, 485
N.W.2d 626 (Iowa 1992) controls the claimed credit in this
case. Since Kemper Insurance Company denied liability for
the claim and made no payment of weekly compensation
benefits, they have no basis for indemnification. They had
no right to object to the third party settlement. The
statute provides no provisions for future credit for amounts
which have not been paid. The supreme court case was
decided prior to the date of hearing in this case. It is
therefore controlling. Defendants are not entitled to any
credit whatsoever based upon the third party recovery.
Since they paid nothing, they have no right to be
indemnified and no basis for indemnification which, by its
very definition, requires that something has been paid in
order for there to be a reimbursement.
The final issue in this case is the claimant's claim
for a penalty under the provisions of the fourth unnumbered
paragraph of Iowa Code section 86.13. It is recognized that
since Sandra Allen was not a participant in her husband's
business that it was difficult for her to provide the
adjusters of the insurance carrier with information which
they could use to corroborate or deny her claim. That fact
would be apparent to a reasonable adjuster. It could
initially cause some suspicion about the validity of the
claim.
[The standard is whether defendants' claim is fairly
debatable. Where defendants assert a claim that is fairly
debatable, they do not act unreasonably in the denial of
payment. Seydel v. U of I Physical Plant, Appeal Decision,
November 1, 1989.
In this case, the circumstances of claimant's death
raised significant questions of application of the dual
purpose doctrine and other aspects of the issue of whether
claimant's death was in the course of his employment.
Claimant's spouse was in the vehicle with claimant, and the
record shows clearly that part of the trip was for a
personal, rather than a business purpose. Although the
evidence as it developed through the course of the case
ultimately established that the death of claimant was in the
Page 11
course of his employment, it cannot be said that the
question of compensability was not fairly debatable.
Although the evidence of compensability ultimately proved to
be compelling, defendants' argument that the death was not
in the course of employment was not unreasonable. A party
is entitled to raise a viable argument in its favor without
suffering a penalty under Iowa Code section 86.13. Covia v.
Robinson, 507 N.W.2d 411 (Iowa 1993). The question of
whether claimant's death was in the course of his employment
was fairly debatable and penalty benefits are not
appropriate.]
Defendants shall also pay the sum of $4000 to the
Second Injury Fund of Iowa pursuant to section 85.65. The
burial expense provided by section 85.28 at the time of
decedent's death was an amount up to $1000. In this case it
is found that the actual burial expenses exceed $1000 (pl.
ex. 42). Defendants shall also pay Sandra K. Allen the sum
of $1000 pursuant to section 85.28.
Since claimant has prevailed in this proceeding she is
entitled to recover the costs of this action. The affidavit
of costs together with the attachments, has been reviewed
(cl. ex. 72). All items requested are properly assessed
under the provisions of rule 343 IAC 4.33. The deposition
transcripts were all received into evidence at the hearing.
Woody v Machin, 380 N.W.2d 727 (Iowa 1986). Claimant is
therefore entitled to recover the entire amount claimed,
namely $1,087.11.
WHEREFORE, the decision of the deputy is affirmed and
modified.
ORDER
THEREFORE, it is ordered:
That it is ordered that defendants pay Sandra K. Allen
the sum of six hundred nine and 60/100 dollars ($609.60) per
week for the period of time running from January 13, 1990.
That it is further ordered that defendants pay the
Second Injury Fund of Iowa the sum of four thousand dollars
($4000).
That defendants shall pay the costs of this matter
including transcription of the hearing and shall reimburse
claimant for the filing fee if previously paid by claimant.
That it is further ordered that defendants pay to
Sandra K. Allen one thousand dollars ($1,000) in burial
expenses.
That it is further ordered that defendants shall pay
interest pursuant to Iowa Code section 85.30.
Signed and filed this ____ day of January, 1994.
Page 12
________________________________
BYRON K. ORTON
INDUSTRIAL COMMISSIONER
Copies To:
Mr. Roger Stone
Attorney at Law
1200 MNB Building
Cedar Rapids, Iowa 52401
Mr. Craig Levien
Attorney at Law
600 Union Arcade Building
111 East Third
Davenport, Iowa 52801
1102; 1104; 1110; 1402.30
1506; 2003; 3001; 3002;
3400; 1704; 4000.2
Filed January 31, 1994
BYRON K. ORTON
BEFORE THE IOWA INDUSTRIAL COMMISSIONER
____________________________________________________________
THOMAS F. ALLEN, Deceased, :
SANDRA KAY ALLEN, Surviving :
Spouse and Executor, :
: File No. 941868
Claimant, :
: A P P E A L
vs. :
: D E C I S I O N
ALLEN WATER AND WASTEWATER :
ENGINEERING, INC., :
:
Employer, :
:
and :
:
KEMPER INSURANCE COMPANY, :
:
Insurance Carrier, :
Defendants. :
____________________________________________________________
1102; 1104; 1110; 1402.30
Decedent was an engineer. He lived and had his office at
Mt. Pleasant, Iowa, but was involved in a project at
Ottumwa, Iowa, (as well as other projects throughout SE
Iowa). He commonly worked on Saturdays. He was killed in
an automobile accident while traveling from Mt. Pleasant to
Ottumwa in order to perform approximately three hours of
work associated with a project. Decedent and his spouse had
planned to meet with friends after the work was completed.
The plan to meet with friends was made on the day of death
but the plan to travel to Ottumwa to perform the work which
was intended had been performed several days earlier. If
decedent had not gone to Ottumwa on the date of death, he
would have needed to make the trip at some other time in
order to perform the intended work. The fact of the
employment, the plan to travel and the subsequently formed
plan to meet with friends was shown conclusively by the
evidence in the case and without any evidence or reasonably
conjecture to the contrary. The death was held compensable.
1506; 2003; 3001; 3002
The defendant employer in this case was a corporation which
consisted principally of the decedent. He functioned as a
sole proprietor but had elected to do business as a
corporation. The insurance had charged a premium based upon
an earning level of $57,200 per year. It would not make
coverage available at a higher level of earnings. It used
that same level for the policy year in which the death
occurred and had used it for the preceding policy year. The
policy year which the insurance carrier used for determining
wages upon which to base their premium was not the same as
the calendar year used by the decedent for his individual
income taxes. The rate of compensation was held to be
controlled by section 85.36(11) and that the actual earnings
of the decedent were immaterial. The deputy hearing this
case was one of the drafters of the legislation which became
section 85.36(11). The intent was to make the weekly
benefit to be determined precisely by the wage level which
was represented when the policy was issued and the premiums
for the policy were determined. It was intended to be an
exception to the normal rule of basing the rate on actual
earnings. It was intended to avoid the often cumbersome
litigation that frequently occurs, such as that in this
case, when people who for all practical purposes are
self-employed, are technically treated as an employee under
the workers' compensation laws. It was intended to provide
that the benefit paid would be commensurate with the premium
actually charged.
3400; 1704
Defendants had consistently denied liability and continued
to do so at the time of hearing. They paid nothing in the
way of weekly benefits to the surviving spouse. The Keller
case was decided prior to the date of hearing of this case.
Any alleged agreement by claimant to grant a credit was void
as lacking consideration and mutuality. No credit was
allowed for the third party recovery.
4000.2
The evidence establishing liability in this case was strong.
The defense in this case denied undisputable facts which
were requested to be admitted in request for admissions,
even things as basic as the ownership of the automobile, a
matter of public record and which was shown on the DOT
accident report of which defendants had possession.
However, it was held that the presence of decedent's spouse
in the automobile and the evidence in the record that at
least part of the purpose of the trip was personal (to go
for dinner and dancing with friends) made the case fairly
debatable. No penalty was imposed.
Page 1
BEFORE THE IOWA INDUSTRIAL COMMISSIONER
____________________________________________________________
:
THOMAS F. ALLEN, Deceased, :
SANDRA KAY ALLEN, Surviving :
Spouse and Executor, :
:
Claimant, :
:
vs. :
: File No. 941868
ALLEN WATER AND WASTEWATER :
ENGINEERING, INC., :
: A R B I T R A T I O N
Employer, :
: D E C I S I O N
and :
:
KEMPER INSURANCE COMPANY, :
:
Insurance Carrier, :
Defendants. :
___________________________________________________________
STATEMENT OF THE CASE
This is a proceeding in arbitration brought by Sandra
K. Allen, in her capacity as surviving spouse and also as
executor of the estate of Thomas F. Allen, based upon the
death of Thomas F. Allen which occurred on January 13, 1990.
Sandra seeks death benefits pursuant to section 85.31. The
principal issue in the case is whether the death arose out
of and in the course of employment. It involves application
for the dual purpose doctrine. Sandra also seeks a penalty
under the fourth unnumbered paragraph of section 86.13.
There is an issue regarding the rate at which weekly
benefits are payable and an issue with regard to the amount
of credit defendants are entitled to receive as a result of
the recovery obtained in a wrongful death action against
third parties.
The case was heard and fully submitted at Ottumwa,
Iowa, on July 14, 1992. The evidence in the case consists
of testimony from Sandra Kay Allen, Mary Margaret (Peg)
Lazio, Robert Flagherty, and Randy Hilbrant. The record
also contains claimant's exhibits 1 through 72 and
defendants' exhibits 1 through 5.
FINDINGS OF FACT
The appearance and demeanor of those who testified at
hearing was observed by the undersigned. Their testimony
has been considered in light of the other evidence in the
record. They are found to be credible witnesses to the
extent that their testimony is based upon their personal
knowledge and observations. The finding of credibility does
not extend to the accuracy of their opinions or conclusions.
Page 2
Thomas F. Allen was the spouse of Sandra Kay Allen.
Thomas was a professional engineer whose practice seems to
have specialized in water and waste water treatment. Thomas
had been a part of the French Reneker Engineering firm in
Fairfield, Iowa, and then subsequently started his own firm,
Allen Water and Wastewater in the mid-1980's (Claimant's
Exhibit 71, page 4). Thomas operated the business as a
corporation by the name of Allen Water and Wastewater
Engineering, Inc. He was the president of the corporation
and its principal employee. The business operated in much
the same manner as if Thomas had functioned as a sole
proprietor. The only other employee of the corporation at
the time of his death was Ethel Marie Barry. The
corporation was the alter ego of Thomas F. Allen. The
business ended with his death. Ethel performed bookkeeping
for the company and assisted Sandra in compiling records and
otherwise closing out the business.
Thomas apparently had a practice of paying himself a
salary of $2,000 every two weeks (Cl. Ex. 34). It is noted
that he paid himself a bonus in the amount of $8,900 in
early 1989. When revenues were insufficient during late
1989, Thomas did not take a salary from the company. He did
continue to take a reimbursement for expenses and paid Ethel
Marie Barry's salary (Cl. Ex. 49, pp. 23-25 and 39; Cl. Ex.
34; Cl. Ex. 35). In short, the salary which Thomas actually
received from his corporation was dependent upon the
profitability of that corporation. The profitability varied
from time to time and the amount which he withdrew from the
company in the form of salary and bonus likewise varied from
time to time (Cl. Ex. 31-33). The record in this case does
not contain the actual records of Allen Water and Wastewater
Engineering, Inc., which deal with its income tax status,
corporate organizational documents or the like. Since the
income tax returns filed by Thomas do not show any profit or
loss or distribution of dividends from the corporation, it
appears as though the profits from the corporation were paid
to Thomas in the form of salary. When profits and revenues
were low, he received no salary. When they were high, he
paid himself a bonus.
The salary payment practice used by Thomas is common
for small corporations, proprietorships and partnerships.
Widely fluctuating earnings are quite typical for sole
proprietors. Individuals like Thomas are, from a practical
standpoint, self-employed sole proprietors even though they
have adopted the corporate form of business. Persons such
as Thomas are technically classified as employees of the
corporation under which they do business but they are not
normal employees, despite the fact that all or part of what
is paid to them is termed a salary or wages. They continue
to work even when no money is available to actually pay
their salary or wages. They are not placed into a layoff
status. They have the ability, if they choose to use it, to
borrow and pay a salary or wages to themselves. They have
the ability to cause the corporation to appear profitable or
Page 3
unprofitable based upon matters such as rent which they pay
to themselves for the business premises. It is noted that
Thomas paid himself rent for the offices used by the
employer corporation. Items such as depreciation, interest
expense and many other variables are subject to the control
of a person such as Thomas. Corporate meetings can set a
salary or salary level which may or may not actually be
paid. If funds are not available to pay the established
salary to the owner at the time when it is due, it may be
paid at a later time when and if funds become available. In
short, the owner of a business is not a normal employee from
the standpoint of wages or salary. Thomas had full ability
to perform many functions which easily could overstate or
understate the profitability of the business and the owner's
salary. The facts in evidence in this case clearly show
that the practices followed by Thomas F. Allen in operating
the business of Allen Water and Wastewater Engineering,
Inc., were within the range of practices commonly and
customarily used by individuals who function as a
self-employed proprietor yet have chosen the corporate form
for conducting the business. It would be extremely
speculative to venture to guess at what amount of actual
salary Thomas Allen would have paid to himself during
calendar year 1990 or during the period running from May 1,
1989 through May 1, 1990, if he had not died on January 13,
1990.
Allen Water and Wastewater Engineering was charged a
premium for covering Thomas F. Allen with workers'
compensation insurance. The premium was based upon Thomas
having yearly earnings of $57,200. The period during which
earnings were considered for determining the premium was
from May 1 of one year until May 1, of the following year, a
date different than the calendar year period used for
determining income taxes. The 1988-1989 premium year
provided a final premium based upon Thomas having a yearly
salary of $57,200. The 1989-1989 premium audit charged a
premium based upon Thomas having a yearly salary of $57,200.
The sum of $57,200 was used by the insurance carrier when
computing the premium to be charged for workers'
compensation coverage for Thomas F. Allen. When premium
audits were conducted, the insurance carrier continued to
charge a premium based upon Thomas F. Allen having a yearly
salary of $57,200 (Cl. Ex. 21, 22 and 23; Cl. Ex. 71, pp. 9-
15). The premiums for insurance year 1989-1990 have been
fully paid (Cl. Exs. 24 and 26). It is clear that the
premium charged to Allen Water and Wastewater, Inc. was
based upon Thomas F. Allen having wages or earnings in the
amount of $57,200.
Claimant's exhibit 6 is a weekly planner-type of book.
It is the book used by Thomas F. Allen for planning his
daily activities and appointments. Ethel Marie Barry also
confirmed that claimant's exhibits 5 through 15 were all
made in the handwriting of Thomas F. Allen and that exhibit
7 is the file used by Thomas F. Allen for keeping those
Page 4
exhibits in his office records. Ethel Marie Barry is fully
familiar with the handwriting of Thomas F. Allen. No
contrary evidence is in the record of this case (Cl. Ex. 49,
pp. 8-20). It is found that all the writing on exhibits 5
through 15 was performed by Thomas F. Allen.
It is readily apparent from reviewing exhibits 5
through 15 that Thomas F. Allen, doing business as Allen
Water and Wastewater Engineering, Inc., was engaged in
performing some type of a project for a business known as
Iowa Bottlers. At this point it should be noted that Iowa
Beverage Manufacturers, Inc., is sometimes referred to as
Iowa Beverage or Iowa Bottlers (Cl. Ex. 52, pp. 5 and 6).
Throughout the record of this case those different names are
used interchangeably.
The records maintained by Thomas F. Allen clearly show
that he had dealings with Iowa Beverage Manufacturers, Inc.,
on January 2, 1990, January 4, 1990, January 5, 1990,
January 9, 1990, and possibly at other times as well. The
first page of exhibit 15 shows that Tom had a plan to stop
at Ottumwa at Iowa Bottlers for something to do with tests.
On the third page of claimant's 10 appears what is
apparently a list of things which Tom wished to accomplish.
Number 2 appears to indicate that he intended to check the
depth of flow at a manhole at 6:00 a.m. Number 13 indicates
that no flow periods are from 4:00 to 5:00 a.m. or on
Saturday or Sunday. It is noted that from 7:00 a.m. to 3:00
p.m., the first shift is operating and that from 3:00 p.m.
to 11:00 p.m., the second shift is operating, and that from
8:30 p.m. to 5:00 p.m., cleaning is ongoing. Most of the
entries on the page are in pencil, however, there is an
entry in blue ink which appears to say Saturday or Sunday in
parentheses. That entry was apparently entered at some
point after the original writing was made since a different
writing instrument was used. When taken as a whole, the
sheet appears to indicate that 6:00 a.m. or anytime on a
Saturday or Sunday would be a reasonable time for performing
the check of flow at the manhole. The entries in exhibit 6
for Saturday, January 13, by what apparently is the 5:00
p.m. line, indicates that Tom planned to be at the Iowa
Bottlers plant in Ottumwa on that Saturday.
Standing alone, claimant's exhibits 6 through 15
readily establish that Thomas Allen was performing services
for Iowa Bottlers and intended to perform some of those
services on Saturday, January 13, 1990.
Any scintilla of a doubt which might have existed as to
whether or not Thomas F. Allen was performing services for
Iowa Beverage Manufacturers, Inc., is overwhelmingly
extinguished by claimant's exhibit 16 and the testimony from
Charles E. Sizemore, personnel manager of Iowa Beverage (Cl.
Ex. 50), Keith Kropf, superintendent of the City of Ottumwa
Water Pollution Control Facility (Cl. Ex. 51), Stephen Allen
Cullinan, industrial pre-treatment coordinator for the City
of Ottumwa (Cl. Ex. 52), Theodore J. McNulty, executive vice
president of Iowa Beverage Manufacturing, Inc., in Ottumwa
Page 5
(Cl. Ex. 53), and, Manish Kohli, chemist analyst for Iowa
Beverage in January 1990 (Cl. Ex. 70).
If exhibits 6 through 15 were not sufficient to
convince a person that Thomas F. Allen had a business
purpose for going to Ottumwa, Iowa, on January 13, 1990, any
such doubt is overwhelming erased by the testimony of
Charles E. Sizemore, who, at page 19 of his deposition,
testified that he knew that Tom was coming over to the plant
on the weekend of his death in order to check the flow in a
manhole and that Saturday, January 13, would have been a
suitable time for him to do so (Cl. Ex. 50, pp. 13-19).
Additionally, according to Sizemore, the company had a
special tool made for removing the manhole in question
because it was quite heavy. The tool was available at its
plant for whoever would have needed to use it (Cl. Ex. 50,
pp. 12 and 13). The fact that Tom did not have such a tool
in his car at the time of the fatal accident has no bearing
whatsoever upon whether or not a business purpose existed
for Tom's travel to Ottumwa on January 13, 1990.
Stephen Cullinan confirmed that it would be appropriate
for Tom to check the flow at the manhole on a Saturday or
Sunday, a time which he felt would be a low flow period (Cl.
Ex. 52, pp. 21 and 22). Other corroboration of the business
purpose comes from Theodore J. McNulty (Cl. Ex. 53, pp. 5-
7), Elvin Frank Beach (Cl. Ex. 54, pp. 15 and 16), Thomas L.
Dugan (Cl. Ex. 55, pp. 7-9), and Manish Kohli (Cl. Ex. 70,
pp. 9 and 10). There is absolutely no evidence in existence
which refutes the fact that Thomas F. Allen had a distinct
business purpose when traveling to Ottumwa, Iowa on January
13, 1990.
It is well documented in the record of this case that
Thomas Allen would commonly work on weekends, particularly
on Saturdays. It was not uncommon for him to simply appear,
unannounced at places where he had business to perform (Cl.
Ex. 54, pp. 25 and 26; Cl. Ex. 51, pp. 16 and 17). The fact
that he did not have an appointment to meet with anyone at
the Iowa Beverage Manufacturers plant is of no significance.
There is no evidence in the record to indicate that he would
have needed an appointment in order to gain access or to
know where to go at the plant. He had been there
previously. It was not uncommon for him to merely show up,
unannounced, at places where he had business interests.
It is well documented by the evidence in this case that
Thomas F. Allen had a business need for checking the flow in
manholes at the Iowa Beverage Manufacturers plant in
Ottumwa, Iowa, at a time when flow in the manhole would be
low. The record indicates that Saturday or Sunday was an
appropriate time to conduct that testing. From the record,
it is possible that approximately 6:00 a.m. on a weekday
might have been an equally appropriate time to conduct the
testing. From the record, it cannot be determined if any
one time would have been preferable to another though it
appears that any of the options would have been adequate and
appropriate. If Thomas Allen had not chosen to go to
Page 6
Ottumwa on Saturday, January 13, 1990, it would have been
necessary for him to go there at some other time when the
flow was at a low level.
From the third page of claimant's exhibit 10, it is
apparent that on January 5, 1990, Thomas Allen knew that it
would be necessary for him to check the flow in the manholes
at the Iowa Bottlers plant on a Saturday, Sunday or,
possibly, at 6:00 a.m. on a weekday. There is nothing in
the record to indicate that the tests which Thomas needed to
perform could not have been done on Sunday the 14th,
Saturday the 6th, Sunday the 7th, or at some other time on
Saturday the 13th.
It is overwhelming, abundantly clear that Thomas F.
Allen needed to make a trip to Ottumwa to the Iowa Bottlers
plant at some point in order to check the flow during the
low flow periods of time. If he had not gone on Saturday,
January 13, when he did, it would have been necessary for
him to go at some other time. It can be reasonably argued
that the possibility or opportunity to meet with Tom and Peg
Lazio on the evening of January 13, 1990, might have played
some part in his decision to go to Ottumwa and check the
manhole during the afternoon of January 13 rather than at
some other appropriate time. Thomas Allen had worked the
morning of Saturday, January 13. According to Sandra, he
stopped at home shortly before lunch and informed her that
he needed to check the flow in some manholes at Iowa
Bottlers in Ottumwa. He asked her to go along with him so
they could go dancing and also to see if their friends, Tom
and Peg Lazio, would be able to meet with them. Tom then
had lunch with Tom Dugan. Dugan was informed that the
Allens intended to engage in some type of social activity
that evening. It was a reason given by Tom Allen for
finishing the lunch meeting when he did. Tom then
apparently stopped at the business place of Elvin Beach and
informed Beach that he was going to Ottumwa to look at
manholes. Apparently, nothing about social activities was
mentioned (Cl. Ex. 54, pp. 15 and 15). Dugan was under the
impression that the Allens were staying overnight wherever
it was they were going but he could not identify why he had
that impression (Cl. Ex. 55, pp. 9-11 and 14). He knew no
particulars about the plans the Allens had made. It is
apparent that Dugan's impression about staying overnight was
incorrect since no overnight clothes or personnel hygiene
items were in the car at the time the fatal accident
occurred.
Sandra Allen talked with Peg Lazio in the early
afternoon of January 13. At that point in time, both Sandra
and Peg have testified that the time at which they would
meet was uncertain. The Lazios testified that they had
planned a family dinner prior to the time that they were
contacted by Sandra. Tom and Peg Lazio have been shown by
the evidence of this case to be responsible members of their
community. Tom is president of the school board. Tom and
Sandra Allen, likewise, appear as solid, reputable citizens.
Page 7
They are not the type of people who would normally be
expected to fabricate stories or give perjured testimony.
Sandra, Peg and Tom Lazio all agree that the first time any
mention had been made of the Lazios and Allens getting
together on Saturday, January 13, was in the early afternoon
of that day. They all agree that the plans for getting
together were not finalized until Allens phoned from the car
telephone after they were already en route traveling from
Mount Pleasant to Ottumwa. The Lazios had previously made
other plans for that evening in the nature of a family
gathering and they did not cancel those plans in order to
meet with the Allens. As it turned out, the work which Tom
had to do was expected to occupy his time until
approximately 8:00 p.m. This would have amounted to
approximately three hours of work.
It is found that Thomas Allen planned to go to Ottumwa
on the afternoon of Saturday, January 13, 1990, prior to the
time that he knew whether or not the Lazios would be able to
meet with him and Sandra. One can speculate about what
might have happened if the Lazios had been unavailable.
Perhaps, Tom and Sandra would have eaten dinner at a
restaurant in Ottumwa or someplace en route to or from
Ottumwa. Perhaps, they would have gone dancing in Ottumwa.
Perhaps, Sandra would not have gone along for the ride.
Perhaps, Tom would have rescheduled the trip for some other
time or date. It is, however, unlikely that the trip would
have been rescheduled because Tom had appointments to meet
at Iowa Bottlers on the following Monday and Tuesday.
Sandra did not like for him to work on Sundays and he
usually avoided work on Sundays. It is possible that the
Monday or Tuesday meetings at Iowa Bottlers would have
required input which would result from his testing at the
manhole cover and that it would be necessary to complete
that testing prior to the meetings. Tom Allen was
performing a project which was time sensitive. It was
necessary that the steps needed to move the project to a
prompt completion, be taken in a prompt manner. It cannot
be determined whether or not Tom would have actually needed
the test results for the Monday or Tuesday meetings but it
is apparent that they were needed for the project to keep
progressing toward completion.
It is found that Tom Allen would have gone to Ottumwa
to test at the manhole at Iowa Bottlers on the afternoon of
January 13, 1990, even if the Lazios had not been available
to meet with him and Sandra. The evidence showing that the
principal purpose of the travel was to conduct the testing
is clear and convincing. There is no reliable evidence to
the contrary, only surmise and conjecture. The importance
of moving promptly with the project in which Tom Allen was
engaged is well corroborated by the testimony of Charles
Sizemore (Cl. Ex. 50, p. 7; Cl. Ex. 16), Keith Kropf (Cl.
Ex. 51, p. 15), Stephen Cullinan (Ex. 52, pp. 25 and 26),
Theodore J. McNulty (Cl. Ex. 53, p. 8), and Manish Kohli
(Cl. Ex. 70, p. 7). When Thomas Allen made his plan of
Page 8
things to do on January 5, 1990, checking flow in manholes
were the first two activities on the list (Cl. Ex. 10, p.
3). There is every reason to believe that the activities
that Tom planned to perform at the manhole on January 13,
1990, were an integral part of keeping the project going in
order to achieve a timely completion. It is very unlikely
that his plan to do so would have changed regardless of the
availability of the Lazios. Tom Allen needed to perform the
testing. His plan to perform the testing on that Saturday
was made several days prior to the time that he knew whether
or not the Lazios would be available to meet with him and
Sandra. That fact, when coupled with the time sensitive
nature of the project makes it extremely unlikely that his
plans would have been altered if the Lazios had been
unavailable. There is no credible evidence in the record of
this case to support the contention that meeting with the
Lazios was a principal, primary or even significant
consideration in selecting the time at which Tom Allen went
to Ottumwa in order to perform testing at the Iowa Beverage
Manufacturers plant on January 13, 1990.
In short, the evidence in this case overwhelmingly and
without any substantial evidence to the contrary proves
beyond all doubt whatsoever that Thomas Allen was performing
engineering services for Iowa Beverage Manufacturers, Inc.,
at its Ottumwa, Iowa plant, that on January 13, 1990, he was
traveling to that plant in order to perform testing at a
manhole cover as part of those services and that he was
fatally injured in a motor vehicle accident while he was
traveling on a customarily used direct route for travel
between Mount Pleasant and Ottumwa, Iowa. That same
evidence overwhelmingly shows that the business function
which was planned would have needed to be performed at some
other time if it were not to be performed on January 13 and,
accordingly, the related travel from Mount Pleasant to
Ottumwa and back would have been necessary at some other
time if it were not performed on January 13. One can engage
in surmise and conjecture in order to allege that if the
Lazios had not been available on January 13 that the travel
and business function might not have been performed on that
date. The evidence in the record is, however,
overwhelmingly to the contrary. It is found that Thomas
Allen would have gone to the Iowa Beverage Manufacturers
plant on January 13, 1990, and would have performed the
travel that he was engaged in at the time of his death even
if the Lazios had been unavailable to meet with him and
Sandy on that evening. The record of this case contains no
substantial evidence to the contrary.
There are other pertinent facts which should be
considered. The car in which Thomas was traveling was owned
and provided by the corporate employer (Cl. Exs. 19, 20).
Decedent was customarily compensated for his travel expenses
(Cl. Ex. 49, pp. 24, 25, 30).
No written contract was found between Allen Water and
Wastewater Engineering, Inc., and Iowa Beverage
Page 9
Manufacturers, Inc., because none had been entered into.
Page 10
CONCLUSIONS OF LAW
The claimant has the burden of proving by a
preponderance of the evidence that the alleged injury
actually occurred and that it arose out of and in the course
of employment. McDowell v. Town of Clarksville, 241 N.W.2d
904 (Iowa 1976); Musselman v. Cent. Tel. Co., 261 Iowa 352,
154 N.W.2d 128 (1967). The words "arising out of" refer to
the cause or source of the injury. The words "in the course
of" refer to the time, place and circumstances of the
injury. Sheerin v. Holin Co., 380 N.W.2d 415 (Iowa 1986);
McClure v. Union County, 188 N.W.2d 283 (Iowa 1971).
An injury occurs in the course of employment when it is
within the period of employment at a place where the
employee reasonably may be performing his duties and while
he is fulfilling those duties or engaged in doing something
incidental thereto. McMullin v. Department of Revenue, 437
N.W.2d 596 (Appellate 1989).
Thomas Allen had no fixed place of work. He had no
fixed hours of work. He was traveling in an employer-owned
and provided conveyance at the time of his death en route to
perform functions which were part of the duties ot the
maximum salary for which they would issue workers'
compensation coverage for a corporate executive and $57,200
was that maximum amount for which they would issue coverage.
Kemper would not cover a larger salary even if actual
Page 11
earnings were more than $57,200. Kemper collected a premium
during policy year 1988-1989 based upon Thomas F. Allen
having earnings of $57,200. They collected a premium for
policy year 1989-1990 based upon Thomas F. Allen having a
yearly salary of $57,200 per year.
Subsection 11 of section 85.36 of the Code was added in
1986. There was a corresponding amendment to section 85.1A.
The undersigned was involved in drafting and preparing that
legislation. The purpose intended by the drafters was to
resolve problems and reduce litigation regarding the rate of
compensation in those cases such as this where the person
had an option regarding whether to be covered and the
business was, for all practical purposes, a sole
proprietorship but was doing business in the corporate form.
Much litigation had been ongoing regarding the rate of
compensation. Salaries were being stated for purposes of
paying a premium yet when an injury occurred the actual
earnings were often much in excess of the salary which had
been reported for purposes of paying workers' compensation
insurance premiums. In other cases, there was litigation
over the rate where a premium had been collected based upon
a record of earnings from a prior year which turned out to
be much greater than the actual earnings during the period
of time prior to the injury. The very nature of these
businesses, as noted in the findings of fact in this case,
is that the earnings of the owner fluctuate wildly from time
to time. The owners are not typical employees with a stable
level of income. The normal rules which base the rate of
compensation upon actual earnings simply do not work well
with sole proprietors regardless of whether or not they have
chosen to do business as a corporation. It was intended by
the drafters that these individuals, whose earnings often
fluctuate widely and who have the ability to make business
records overstate or understate their actual earnings should
simply be allowed to purchase a fixed amount of workers'
compensation insurance coverage, pay a premium for the
coverage which they select and that, if injured, they will
draw benefits based upon the amount of coverage which they
have purchased and for which they have paid the appropriate
premium. Simply stated, it was intended that corporate
officers, proprietors and partners simply be allowed to
purchase a given level of coverage and that whatever level
of coverage they purchase is determinative of the rate of
compensation that will be paid if an injury or death occurs.
It was felt by the drafters that such a system would reduce
litigation and would be inherently fair. Insurance
companies were free to limit the amount of coverage which
they would sell to any particular individual, a prerogative
which Kemper has exercised as shown by the evidence in this
case. It was intended that the risk assumed by the
insurance carrier would be exactly commensurate with the
premium which it collected. That is precisely what has
happened in this case.
It is therefore concluded that subsection 11 of section
Page 12
85.36 of the Code controls in this case. It is a specific
express exception to the normal practice of basing the rate
of compensation upon actual earnings. The actual earnings
are immaterial. In this case, the level of coverage which
was purchased and the premium paid was based upon Thomas F.
Allen having a yearly wage of $57,200. The weekly rate of
compensation should therefore be computed under section
85.36(5) with the yearly earnings being determined under
section 85.36(11) as $57,200 per year. The gross weekly
earnings of Thomas F. Allen for purposes of computing the
rate of workers' compensation weekly benefits is therefore
$1,100. Since Thomas was married and entitled to himself
and his spouse as an exemption, the rate of compensation is
$609.60 per week.
An issue exists with regard to a claimed credit under
section 85.22. The case Fisher v. Keller Industries, 485
N.W.2d 626 (Iowa 1992) controls the claimed credit in this
case. Since Kemper Insurance Company denied liability for
the claim and made no payment of weekly compensation
benefits, they have no basis for indemnification. They had
no right to object to the third party settlement. The
statute provides no provisions for future credit for amounts
which have not been paid. The supreme court case was
decided prior to the date of hearing in this case. It is
therefore controlling. Defendants are not entitled to any
credit whatsoever based upon the third party recovery.
Since they paid nothing, they have no right to be
indemnified and no basis for indemnification which, by its
very definition, requires that something has been paid in
order for there to be a reimbursement.
The final issue in this case is the claimant's claim
for a penalty under the provisions of the fourth unnumbered
paragraph of Iowa Code section 86.13. It is recognized that
since Sandra Allen was not a participant in her husband's
business that it was difficult for her to provide the
adjusters of the insurance carrier with information which
they could use to corroborate or deny her claim. That fact
would be apparent to a reasonable adjuster. It could
initially cause some suspicion about the validity of the
claim.
As time passed, however, the validity of the claim
became increasingly clear. Nevertheless, defendants would
not budge from their position of denial. They refused to
commence weekly payments. By the time all depositions had
been taken and the case proceeded to hearing it should have
been abundantly clear to any reasonable person that the
claim was compensable. Nevertheless, defendants have
continued to deny the claim despite the absence of even a
scintilla of evidence which provides any rational basis for
denying the claim. This is a case in which the maximum
penalty allowed by law is appropriate. Even as recently as
March 1992 defendants denied requests for admissions of
facts which were easily verifiable and absolutely,
indisputably true. Examples are request number 71 wherein
Page 13
they denied that the car in which the decedent was traveling
at the time of his death was owned by and registered to
Allen Water and Wastewater Engineering, Inc. Defendants
denied request number 67 which asserted that the letter
which is in evidence in this case as claimant's exhibit 16
was a true and correct copy of the original. They denied
request number 68 which asserted that Thomas F. Allen was a
consulting engineer for Iowa Beverage Manufacturers, Inc.
They denied request numbers 69 and 70, all of which were
facts which clearly and indisputably existed. The response
to request number 25 denied that Thomas F. Allen was
president of the employer corporation. The authenticity of
his appointment calendar, that records were made in
decedent's handwriting, that decedent had lunch with Tom
Dugan on January 13, 1990, and dozens of other clearly true
indisputable facts were all denied. The unwarranted denial
of facts in the request for admissions, plaintiff's exhibits
45-48, are merely illustrative of the manner in which the
true facts of this case were absolutely ignored by the
defendant insurance carrier and its adjusters. They decided
to deny the claim and then refused to reconsider their
decision regardless of the evidence and information that was
presented to them. The evidentiary facts relied upon by
Flagherty when denying the claim were either immaterial to
the ultimate issues in the case or were incorrect. The
investigation which was conducted in this case was lacking.
It is recognized that the trail initially was difficult in
view of Sandra's lack of knowledge of all the facts but
certainly by the time the case had arrived at hearing it was
abundantly clear that the claim was compensable. A full 50
percent penalty is therefore warranted.
Defendants have an arguable defense to the amount of
the weekly benefit upon which the penalty claim should be
computed. It is recognized that section 85.36(11) has
little in the way of precedent. There is some precedent at
the agency level but none at the level of the Iowa Supreme
Court. Nevertheless, the language is clear and
understandable. More importantly, Kemper charged, collected
and retained a premium based upon Thomas F. Allen having
annual earnings of $57,200. It is not reasonable for them
to assert their obligation should somehow be reduced to a
level which is not commensurate with the premium which they
charged and collected. It is therefore determined that the
penalty should be based upon the full amount of the weekly
benefits, namely $609.60 per week. The standard set by the
Iowa Supreme Court in the case of Boylan v. American
Motorists Ins. Co., 489 N.W.2d 742 (Iowa 1992) has clearly
been met in this case. It is not within the role of this
agency to decide whether or not outrageous conduct, bad
faith or similar conditions existed in the denial of this
claim. The standard which falls within the jurisdiction of
this agency has clearly been met. The delay in commencement
of benefits was without reasonable cause or excuse. Any
argument that it was reasonable to not pay based upon the
Page 14
dispute regarding the rate of compensation is rejected, in
large part because Kemper did not even pay at the rate which
it asserted to be the correct rate. Even if Kemper's
position on the credit for the third party recovery were to
be accepted, they would still have owed additional amounts.
Kemper has not paid in accordance with what it contends the
correct payments should be in this case. Failure to pay in
accordance with their own position in the case, as far as
the issues of rate and credit are concerned, is strong proof
that the failure to pay was unreasonable.
Upon performing all the computations, with all amounts
being computed as of March 5, 1993, the date of this
decision, defendants owe Sandra 164 weeks of benefits
payable at the rate of $609.60 per week for a total of
$99,974.40. Those weekly benefits were not paid when due
and under the provisions of section 85.30, Sandra is also
entitled to recover interest in the amount of $15,669.04.
As a result of the unreasonable denial of this claim, the 50
percent penalty is based only upon the weekly benefits,
without interest. The amount of the penalty assessed
pursuant to the fourth unnumbered paragraph of section 86.13
is $49,987.20. Defendants shall also pay the sum of $4000
to the Second Injury Fund of Iowa pursuant to section 85.65.
The burial expense provided by section 85.28 is an amount up
to $1000. In this case it is found that the actual burial
expenses exceed $1000 (pl.ex. 42). Defendants shall also
pay Sandra K. Allen the sum of $1000 pursuant to section
85.28.
Since claimant has prevailed in this proceeding she is
entitled to recover the costs of this action. The affidavit
of costs together with the attachments, has been reviewed
(cl.ex. 72). All items requested are properly assessed
under the provisions of rule 343 IAC 4.33. The deposition
transcripts were all received into evidence at the hearing.
Woody v Machin, 380 N.W.2d 727 (Iowa 1986). Claimant is
therefore entitled to recover the entire amount claimed,
namely $1,087.11.
ORDER
IT IS THEREFORE ORDERED that defendants Allen Water and
Wastewater Engineering, Inc. and Kemper Insurance Company
pay Sandra K. Allen the sum of one hundred sixty-six
thousand six hundred thirty and 64/100 dollars ($166,630.64)
for accrued weekly benefits, interest, penalty, and burial
expense.
It is further ordered that defendants pay Sandra K.
Allen the sum of six hundred nine and 60/100 dollars
($609.60) per week for the period of time running from
March 6, 1993.
It is further ordered that defendants pay the Second
Injury Fund of Iowa the sum of four thousand dollars
($4000).
It is further ordered that the costs of this action are
assessed against defendants pursuant to rule 343 IAC 4.33 in
Page 15
the sum of one thousand eighty-seven and 11/100 dollars
($1,087.11) and shall pay that amount to claimant.
Page 16
Signed and filed this ____ day of March, 1993.
______________________________
MICHAEL G. TRIER
DEPUTY INDUSTRIAL COMMISSIONER
Copies to:
Mr. Roger Stone
Attorney at Law
1200 MNB Bldg
Cedar Rapids, Iowa 52401
Mr. Craig Levien
Attorney at Law
600 Union Arcade Bldg
111 E 3rd
Davenport, Iowa 52801
1102; 1104; 1110; 1402.30
1506; 2003; 3001; 3002;
3400; 1704; 4000.2
Filed March 5, 1993
Michael G. Trier
BEFORE THE IOWA INDUSTRIAL COMMISSIONER
____________________________________________________________
:
THOMAS F. ALLEN, Deceased, :
SANDRA KAY ALLEN, Surviving :
Spouse and Executor, :
:
Claimant, :
:
vs. :
: File No. 941868
ALLEN WATER AND WASTEWATER :
ENGINEERING, INC., :
: A R B I T R A T I O N
Employer, :
: D E C I S I O N
and :
:
KEMPER INSURANCE COMPANY, :
:
Insurance Carrier, :
Defendants. :
___________________________________________________________
1102 1104 1110 1402.30
Decedent was an engineer. He lived and had his office at
Mt. Pleasant, Iowa, but was involved in a project at
Ottumwa, Iowa, (as well as other projects throughout SE
Iowa). He commonly worked on Saturdays. He was killed in
an automobile accident while traveling from Mt. Pleasant to
Ottumwa in order to perform approximately three hours of
work associated with a project. Decedent and his spouse had
planned to meet with friends after the work was completed.
The plan to meet with friends was made on the day of death
but the plan to travel to Ottumwa to perform the work which
was intended had been performed several days earlier. If
decedent had not gone to Ottumwa on the date of death, he
would have needed to make the trip at some other time in
order to perform the intended work. The fact of the
employment, the plan to travel and the subsequently formed
plan to meet with friends was shown conclusively by the
evidence in the case and without any evidence or reasonably
conjecture to the contrary. The death was held compensable.
1506 2003 3001 3002
The defendant employer in this case was a corporation which
consisted principally of the decedent. He functioned as a
sole proprietor but had elected to do business as a
corporation. The insurance had charged a premium based upon
an earning level of $57,200 per year. It would not make
coverage available at a higher level of earnings. It used
that same level for the policy year in which the death
occurred and had used it for the preceding policy year. The
policy year which the insurance carrier used for determining
wages upon which to base their premium was not the same as
the calendar year used by the decedent for his individual
income taxes. The rate of compensation was held to be
controlled by section 85.36(11) and that the actual earnings
of the decedent were immaterial. The deputy hearing this
case was one of the drafters of the legislation which became
section 85.36(11). The intent was to make the weekly
benefit to be determined precisely by the wage level which
was represented when the policy was issued and the premiums
for the policy were determined. It was intended to be an
exception to the normal rule of basing the rate on actual
earnings. It was intended to avoid the often cumbersome
litigation that frequently occurs, such as that in this
case, when people who for all practical purposes are
self-employed, are technically treated as an employee under
the workers' compensation laws. It was intended to provide
that the benefit paid would be commensurate with the premium
actually charged.
3400 1704
Defendants had consistently denied liability and continued
to do so at the time of hearing. They paid nothing in the
way of weekly benefits to the surviving spouse. The Keller
case was decided prior to the date of hearing of this case.
Any alleged agreement by claimant to grant a credit was void
as lacking consideration and mutuality. No credit was
allowed for the third party recovery.
4000.2
The evidence establishing liability in this case was
overwhelming and uncontroverted. The adjusters and
investigators for the defendants relied entirely upon
suspicion and ignored all the other evidence which included
the decedent's business records made in his own handwriting
and the testimony of community leaders in the city of
Ottumwa, Iowa. The unreasonable position of the defense in
this case is illustrated by their action in denying
undisputable facts which were requested to be admitted in
request for admissions, even things as basic as the
ownership of the automobile, a matter of public record and
which was shown on the DOT accident report of which
defendants had possession. Simply stated, they decided to
deny the claim and continued to deny the claim without
regard to what the investigation showed. They referred to
evidentiary facts which were immaterial to the ultimate
issue as reasons for denying the claim. A full 50 percent
penalty was awarded.