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					CHAPTER 4 EMPLOYMENT COVERED AND DEFENSES NOVEMBER 2002-SEPTEMBER 2003 Annemarie Pantazis Thompson & Pantazis, PLLC Charlotte, North Carolina TABLE OF CONTENTS

I. II.

EMPLOYEE (G.S. 97-2(2))........................................................................... IV-1 Huntley v. Howard Lisk Co., Inc. ................................................................. IV-1 Disability (G.S. 97-2(9)) .................................................................................. IV-2 Knight v. Wal-Mart Stores, Inc ...................................................................... IV-2 Walker v. Lake Rim Lawn and Garden ........................................................ IV-3 Trivette v. Mid-South Management, Inc. ...................................................... IV-4 Parker v. Wal-Mart Stores, Inc. ..................................................................... IV-5 Drakeford v. Charlotte Express Nat. Union Fire .......................................... IV-5 Standard for Medical Causation .................................................................... IV-5 Holley v. ACTS, Inc. ..................................................................................... IV-5 Martin v. Martin Bros. Grading ..................................................................... IV-6 Hodgin v. Hodgin........................................................................................... IV-7 Exclusivity & Woodson Claims (G.S. 97-10.1) ............................................. IV-7 Whitaker v. Town of Scotland Neck ............................................................. IV-7 Alford v. Catalytica Pharmaceuticals, Inc. ..................................................... IV-8 Rights and Remedies Against Third Parties (G.S. 97-10.2(j)) ....................... IV-9 Austin v. Midgett ............................................................................................ IV-9 Pre-Judgment Interest ........................................................................ IV-10 Credit for Workers’ Compensation Payment .................................. IV-10 Intoxication (G.S. 97-12) ............................................................................. IV-11 Willey v. Williamson Produce..................................................................... IV-11

III.

IV.

V.

VI.

VII. Compromise Settlement Agreements (Clinchers) (G.S. 97-17) .................. IV-11 Carroll v. Living Centers Southeast, Inc. ..................................................... IV-11 Atkins v. Kelly Springfield Tire Co.............................................................. IV-12 Lemly v. Colvard Oil Co. ............................................................................. IV-12 VIII. IX. X. XI. Defendants’ Acceptance of Liability (G.S. 97-18) ................................... IV-13 Harrison v. Lucent Technologies ................................................................ IV-13 Liability of Principal Contractors & Subcontractors (G.S. 97-19) ............... IV-14 Robertson v. Hagwood Homes, Inc. ........................................................... IV-14 Notice of Accident to Employer (97-22) ..................................................... IV-14 Lakey v. U.S. Airways, Inc. .......................................................................... IV-14 Credits (G.S. 97-42) ...................................................................................... IV-15 Smith v. First Choice Services ...................................................................... IV-15 Cox v. City Of Winston-Salem .................................................................... IV-17

BIBLIOGRAPHY.................................................................................................. IV-18

CHAPTER 4 EMPLOYMENT COVERED AND DEFENSES NOVEMBER 2002-SEPTEMBER 2003 Annemarie Pantazis Thompson & Pantazis, PLLC Charlotte, North Carolina I. EMPLOYEE (G.S. 97-2(2)) Huntley v. Howard Lisk Co., Inc., 154 N.C.App. 698, 573 S.E.2d 233 (Dec. 17, 2002) Plaintiff applied for a truck driving position with Defendant. As a part of the job application process, Defendant required Plaintiff to take a road test. Before the test, Defendant’s safety director requested that Plaintiff make a pre-trip inspection of the eighteen-wheel tractor-trailer that she was to drive. Plaintiff requested a pair of gloves to use during the inspection. The safety director told Plaintiff that the gloves were in the cab of the truck. Plaintiff retrieved the gloves. As she was exiting the cab of the truck, she reached for an outside handhold. There was no outside handhold attached to the truck and Plaintiff fell five feet to the ground, breaking her leg in three places. Plaintiff sued the Defendant in Superior Court alleging that Defendant was negligent in failing to inform her that the tractor-trailer did not have outside handholds. Defendant answered and alleged that Plaintiff was contributorily negligent. The court granted Defendant’s motion for summary judgment. Plaintiff appealed stating that the Superior Court lacked subject matter jurisdiction to hear her case. Plaintiff argued that the injury she sustained in the preliminary employment inspection is compensable under the Workers’ Compensation Act such that the Superior Court lacked jurisdiction. The issue was whether an interviewee performing a pre-employment test is deemed an employee, such that she is subject to the Workers’ Compensation Act. The Court held that people who are injured in the course of a job interview are not entitled to receive workers’ compensation benefits. In a decision of first impression, the Court of Appeals held that there was no employer/employee relationship at the time of Plaintiff’s injury. The Court found that IV-1

there was no employment contract between Plaintiff and Defendant. Plaintiff was not paid for her time during the preemployment inspection. There was no agreement, written or oral, between the parties, nor was there a promise of employment conditioned upon the preemployment inspection. The Court held that allowing Plaintiff to seek benefits under the Act would be akin to allowing every person who is injured in the course of a job interview to seek benefits, which “is clearly not the purpose of the Act.” II. Disability (G.S. 97-2(9)) Knight v. Wal-Mart Stores, Inc., 149 N.C.App. 1, 562 S.E.2d 434 aff’d per curiam 357 N.C. 44, 577 S.E.2d 620 (2003) On March 15, 1998, Plaintiff injured his back when he fell from a ladder while stacking freight. Plaintiff reported the incident and went to the hospital, where he was diagnosed with a disc protrusion. Plaintiff unsuccessfully attempted to return to work on May 21, 1998. On July 22, 1998, Plaintiff underwent a laminectomy, but did not receive any relief from the surgery. Plaintiff tried unsuccessfully on at least three occasions after the surgery to return to work. On January 4, 1999, Plaintiff’s treating physician said he was at maximum medical improvement and issued a 15% rating to the back. Plaintiff also received permanent light duty lifting restrictions. After he was released at MMI, Plaintiff tried to return to WalMart as a sweeper/greeter. Plaintiff testified that his pain was so severe that he was unable to work in any capacity. The Court found that Plaintiff had produced medical evidence that he was physically incapable of work in any employment as a consequence of the work-related injury. The Commission awarded Plaintiff ongoing temporary total disability benefits after the point he reached MMI. The Court of Appeals and Supreme Court affirmed the award. The main issue is whether a claimant may receive TTD after reaching MMI. The Court reasoned that compensation for a general disability under 97-29 or 97-30 is different than compensation for a scheduled injury under 97-31. Once a claimant establishes a loss of wage earning capacity, he is entitled to continuing compensation under either 97-29 or 97-30. A finding of MMI is the first point in time where a claimant can elect compensation for scheduled benefits under 97-31. MMI does not preclude a claimant from continuing to receive benefits under 97-29 or 97-30. The Court said that Plaintiff’s healing period did not end once he was released at MMI; rather, that was simply the point in time where the Plaintiff could elect, if he so chose, to receive compensation under 97-31. MMI does not represent a point in time where Plaintiff’s claim automatically converts from temporary to permanent. Since Plaintiff established that he could not, because of his injury, return to work in any capacity, he IV-2

was entitled to ongoing benefits under 97-29 despite having reached MMI. The Knight decision is arguably the most important workers’ compensation decision of the past year. By affirming the lower court’s decision, the Supreme Court effectively overruled Franklin v. Broyhill Furniture Industries, 123 N.C. App. 200, 472 S.E.2d 382 (1996) and its progeny of cases which held that an employee may not receive temporary total disability benefits after the employee reaches MMI. The Knight case implies that an employee is entitled to ongoing compensation until the employee reaches “maximum vocational improvement,” that is, when the employee returns to his preinjury wages. See Walker v. Lake Rim Lawn & Garden below. The Knight case does not resolve whether a carrier is entitled to a credit for total disability compensation paid between the time claimant reaches MMI and the time the claimant elects to take his rating under 97-31. Two cases have held, however, that an employer is not entitled to a credit for benefits paid after MMI if the claimant continues to elect benefits under 97-29. Brown v. S&N Comm., Inc., 124. N.C. App. 320, 477 S.E.2d 197 (1996); Kisiah v. WR Kisiah Plumbing, Inc., 124 N.C.App. 72, 476 S.E.2d 434 (1996). Walker v. Lake Rim Lawn and Garden, 155 N.C.App. 709, 575 S.E.2d 764 (Jan 21, 2003) This case is important because it states that an employee is entitled to TTD until he reaches “maximum vocational improvement.” Mr. Walker sustained a knee injury which was accepted on a Form 60. Plaintiff underwent surgery and was found to be at MMI on December 12, 1998. The treating physician issued permanent light duty restrictions and a 10% PPD rating to the knee. Plaintiff was also referred to pain management and was assigned a rehabilitation professional. Several attempts to place Plaintiff in a suitable position were unsuccessful.

IV-3

The Court explained the significance of MMI as follows: [M]aximum improvement as a purely medical determination occurs when the employee’s physical recovery has reached its peak. However, maximum medical improvement is not the point at which temporary total disability must end, if the employee has not regained his or her ability to earn pre-injury wages. Thus, whether the employee has reached the point of maximum medical improvement is not necessarily a crucial fact upon which the question of plaintiff’s right to compensation depends....Both pain treatment and vocational services are considered medical compensation as defined in 97-2(19) and are designed to give relief and ...to lessen the period of disability....Therefore, until he has reached maximum vocational recovery, this plaintiff’s healing period is not yet at an end. The Court upheld the award of Plaintiff ongoing temporary total disability benefits because he had not yet reached maximum vocational improvement. Trivette v. Mid-South Management, Inc., 154 N.C.App. 140, 571 S.E.2d 692 (Nov. 19, 2002) Plaintiff suffered a back injury at work. Defendants admitted liability for Plaintiff’s medical expenses, but disputed that Plaintiff was disabled as a result of her injury. Plaintiff suffered from multiple sclerosis at the time of her injury. The Commission awarded a couple of weeks of temporary total disability. On the first appeal, the Court affirmed the Commission’s finding that Plaintiff was not entitled to total disability for her back injury due to her pre-existing condition. The Court remanded to the Commission for a finding as to whether Plaintiff was entitled to compensation for permanent partial disability. On remand, the Commission awarded Plaintiff 30 months of TTD and 15 weeks of PPD for a 15% rating to the back. The Commission reasoned that Plaintiff’s disability was the result of a combination of her compensable low back injury and her non-compensable multiple sclerosis. Defendants appealed the Commission’s award TTD arguing that the Commission could not award disability compensation at the remand hearing after it had not done so during the first hearing. The Court of Appeals affirmed the Commission’s award stating that the Commission had the inherent power to set aside its own decision regarding the extent of disability. Parker v. Wal-Mart Stores, Inc., __ N.C. App. __, 576 S.E.2d 112 (Feb 18, 2003) This case states that the Full Commission must make specific findings as to the IV-4

extent of disability. Plaintiff had a back injury. Plaintiff had not been released to return to work by her treating physician and continued to have work restrictions. The Full Commission found that Plaintiff had been disabled since she last worked for the employer and that Plaintiff had not yet reached maximum medical improvement. Based on these findings, the Commission ordered payment of temporary total disability benefits. The Court of Appeals remanded for more specific findings regarding Plaintiff’s ability to earn her pre-injury wages. The Court held “an employee’s release to return to work is not the equivalent of a finding that the employee is able to earn the same wage prior to the injury.” Drakeford v. Charlotte Express Nat. Union Fire, __ N.C. App. __, 581 S.E.2d 97 (Jun 17, 2003) Plaintiff slipped and fell at work injuring his neck and lower back. Defendants accepted Plaintiff’s claim without filing a Form 21 or Form 60. Plaintiff’s pain symptoms did not improve despite a lack of objective findings. He was eventually diagnosed with Chronic Inflammatory Demyelinating Polyneuropathy (CIDP), which is a rare neurologic disorder. The medical evidence tended to show that the CIDP was a preexisting condition which cannot be caused or aggravated by trauma. The Court held that Plaintiff did not meet his burden of proving that his disability was related to his work-related injury. The Court held that “when a pre-existing, non job-related disease or infirmity eventually causes an incapacity to work without any aggravation or acceleration of it by a compensable accident or by an occupational disease, the resulting incapacity so caused is not compensable.” III. Standard for Medical Causation Holley v. ACTS, Inc., __ N.C.__, 581 S.E.2d 750 (2003) This case states that in order to prove medical causation, the Plaintiff must show to a reasonable degree of medical certainty that the event caused the injury. Plaintiff twisted her left leg while at work and felt a sudden pain in her left calf. She was subsequently diagnosed with deep vein thrombosis (DVT), a condition caused by blood clots. Although two physicians testified that it was possible that the DVT was caused by her accident, both doctors were unable to state with any degree of medical certainty that the accident caused the DVT. The Supreme Court stated that “mere possibility is insufficient to establish causation.” Testimony that an “event could or might be the cause of any injury is insufficient to support a causal connection where there is further evidence tending to show that the expert’s opinion is mere guess or speculation.” IV-5

This case is critical because it states that without any other supporting evidence, medical testimony that says the accident “could” or “might” have caused the injury is no longer sufficient to establish causation. Martin v. Martin Bros. Grading, __ N.C. App. __, 581 S.E.2d 85 (Jun 17, 2003) Plaintiff suffered a closed head injury when a falling tree limb struck him on the head while he was clearing property for his employer. Plaintiff was diagnosed with a subdural hematoma and small vessel disease. Plaintiff started having problems with memory loss and was irritable and anxious. He had not exhibited any of these symptoms prior to his injury. After undergoing physical and neurological treatment, Plaintiff was released to return to work. Plaintiff did return to work, but he had another head injury when a small earth compactor overturned. Plaintiff did not work again after that incident. Plaintiff’s medical experts testified that “the most likely diagnosis” for Plaintiff’s post-concussive syndrome was related to the accidents at work. Defendants’ expert stated that Plaintiff’s accidents “likely” aggravated the progress of Plaintiff’s small vessel disease. None of the doctors stated to a “reasonable degree of medical certainty” that Plaintiff’s accidents caused his neurological problems. The Commission found Plaintiff’s injuries to be compensable. Defendants argued that the medical testimony did not support a finding of causation. The Court held that whether the doctors in this case testified that is was “possible,” “probable,” or “likely” that Plaintiff’s accidents caused his disability goes to the weight to the evidence, and not to its competence. Since the task of assigning weight of the medical evidence is for the Commission, the Court did not disturb the Commission’s award.

(Note that this case was decided four days after the Supreme Court’s decision in Holley v. ACTS, Inc, which stated that a “could” or “might have” standard was not enough to show medical causation. Holley required a showing of a reasonable degree of medical certainty on the issue of causation.) Hodgin v. Hodgin, __ N.C. App. __, 583 S.E.2d 362 (Aug 05, 2003) This case is an application of Holley. Plaintiff contended that he suffered a hernia when he was lifting a heavy chest of drawers. His treating physician diagnosed a IV-6

large para-esophageal hernia. The treating physician stated that “I don’t think anybody knows for sure what causes these hernias.” Another physician stated that Plaintiff’s pain could have been related to his hernia. The Commission awarded benefits, which the Court of Appeals overturned. The Court stated that “mere possibility has never been legally competent to prove causation.” Since the doctor could not give a causation opinion to a reasonable degree of certainty or at least to “any discernible likelihood or probability,” Plaintiff’s claim was not compensable. IV. Exclusivity & Woodson Claims (G.S. 97-10.1) Whitaker v. Town of Scotland Neck, 154 N.C.App. 660, 572 S.E.2d 812 (Dec 17, 2002) Employee worked for the Town of Scotland Neck operating a garbage truck. Employee was crushed to death when the mechanical arm of the garbage truck malfunctioned and pinned a dumpster against Employee’s chest. The town’s investigation into the incident revealed a defective latch on the truck. Several employees stated that this particular dumpster had fallen to the side of the same garbage truck three weeks earlier. The earlier accident had been reported to the town’s safety director, but no action was taken to fix either the truck or the dumpster. One employee estimated that the latch had been broken for two to three months. Other evidence indicated that the latch had been broken for as long as six months prior to Employee’s death. OSHA found five safety violations in connection with the accident. These citations including failure to properly train and supervise employees, failure to properly inspect equipment, operating unsafe equipment, and operating equipment in an unsafe manner. The OSHA report found that “with reasonable diligence and routine inspection employer could and should have known of the broken latch.” Based on the investigative findings, Plaintiff brought a Woodson claim against the town. (A Woodson claim is an exception to the exclusivity provision of 97-10.1 that allows an employee to sue its employer in civil court if the employer engages in intentional or wilful misconduct knowing it is substantially certain to cause serious injury or death, and in fact, does cause serious injury or death. Woodson v. Rowland, 329 NC 330 (1991).) The trial court granted summary judgment for the Defendants stating that the town’s conduct did not rise to the level of misconduct needed to sustain a Woodson claim. The Court of Appeals outlined six factors to consider when determining whether “substantial certainty” existed at the time of the event such that the employer would be IV-7

subject to a Woodson claim. These factors are: 1)Whether the risk that caused the harm existed for a long period of time without causing injury; 2) whether the risk was created by a defective instrumentality with a high probability of causing the harm at issue; 3) whether there was evidence the employer, prior to the accident, attempted to remedy the risk that caused the harm; 4) whether the employer’s conduct which created the risk violated state or federal work safety regulations; 5) whether the employer created the risk by failing to adhere to an industry practice, even though there was no federal or state work safety violation and 6) whether the employer offered training in the safe behavior appropriate in the context of the risk causing the harm. Wiggins v. Pelikan, Inc., 132 NC App. 752, 513 S.E.2d 829 (1999). The Court found that five of the six factors were present in this case. The Court held that summary judgment was improper since the Plaintiff put forth some evidence that the defendant-employer acted with “substantial certainty.” Alford v. Catalytica Pharmaceuticals, Inc., 150 N.C.App. 489, 564 S.E.2d 267 (2002) rev’d per curiam 356 N.C. 654, 577 S.E.2d 293 (2003) Several employees of a chemical company brought a Woodson claim against their employer for injuries sustained during a chemical leak. The employees alleged that they were injured by the release of bromine and bromine gas. The Superior Court judge dismissed the employees’ Woodson claim on the grounds that the one-year statute of limitations for intentional torts had expired. The Court of Appeals affirmed stating that NCGS 1-54(3), which generally applies to intentional torts, also applies to Woodson claims because Woodson claims are grounded in conduct that is substantially certain to cause serious injury or death. Judge Thomas dissented on the basis that Woodson claims are not necessarily intentional torts and should instead be subject to the catch-all three year statute of limitations. The Supreme Court, in a per curiam decision, reversed the Court of Appeals and adopted Judge Thomas’ dissent. The holding of the case is that Woodson claims are subject to a three year statute of limitations. V. Rights and Remedies Against Third Parties (G.S. 97-10.2(j)) Austin v. Midgett, __ N.C. App. __, 583 S.E.2d 405 (Aug 05, 2003) This case demonstrates the interplay between liability coverage, UIM coverage, and a workers’ compensation lien. The end result is to prevent a double penalty against the employee who receives both workers’ compensation benefits and UIM payments. IV-8

Employee, Austin, died as a result of a car accident with Midgett. At the time of the accident, Austin was acting in the course and scope of his employment with the N.C. Department of Transportation. Midgett had $50,000 in liability coverage with Farm Bureau. Austin had $100,000 in UIM insurance with Integon. Austin also had $100,000 in UIM coverage with State Farm through his father’s policy. Plaintiff filed a wrongful death action against Midgett. The parties stipulated to negligence and also stipulated that the damages to Austin exceeded $200,000. The parties asked the trial court to determine the amount of UIM coverage available in the case. NC DOT paid Plaintiff workers’ compensation benefits in the amount of $100,278.98. DOT asserted a workers’ compensation lien in this amount against any third party recovery, including any proceeds plaintiff received from the UIM policies. Plaintiff filed a motion with the superior court judge to extinguish this lien pursuant to 97-10.2(j). Plaintiff and DOT subsequently entered into a compromise agreement whereby DOT would accept $33,426.00 in satisfaction of the workers’ compensation lien. The trial court entered an order reducing the lien to $33,426.00, but the order was to be considered null and void if the plaintiff, for any reason, did not receive a total recovery of $200,000 from a combination of the liability and UIM carriers. Farm Bureau tendered its $50,000 limits. The UIM carriers each received a $25,000 credit due to this payment. The trial court ordered each UIM carrier to pay $75,000 (which represented each carrier’s policy limit minus the $25,000 credit for the payment from the liability carrier). State Farm paid $75,000 to Plaintiff. Plaintiff requested pre-judgment interest. The judge awarded post-judgment interest, but not prejudgment interest. Plaintiff appealed the portion of the order denying pre-judgment interest. Integon appealed the court’s order refusing to grant it a credit for workers’ compensation payments received by Plaintiff.

Pre-Judgment Interest
The Court of Appeals held that Integon was responsible for paying pre-judgment interest to Plaintiff because pre-judgment interest is considered a part of compensatory damage up to the liability limit. The Court held that Integon’s liability limit was $75,000, not $100,000 as Plaintiff contended.

Credit for Workers’ Compensation Payment
Integon argued that NCGS 20-279.21(e) allowed the UIM carrier to reduce its liability by the amount of workers’ compensation payments made to the Plaintiff. The IV-9

Court explained that the statute requires “UIM carriers to insure the amount of the employer’s workers’ compensation lien on UIM proceeds received by the employee in addition to the damages uncompensated by workers’ compensation benefits.” The Court held that the statute preserves a credit to the UIM carrier for workers’ compensation benefits which are not subject to an employer’s lien. The UIM carrier is required to pay both the amount of the workers’ compensation lien and all amounts not compensated by workers’ compensation payments. Applying the law to these facts, the Court came up with the following figures: Total UIM liability: WC benefits received: Uncompensated loss: WC lien: 200,000.00 100,278.98 (credit to UIM carriers) 99,721.02 33,426.00

Total owed by UIM carriers 133,147.02 (which is prorated between the carriers) Amount each UIM carrier owes 66,573.51 Total UIM liability for each carrier: 75,000 (100,000-25,000 liability credit) Each carrier is responsible for $66,573 plus any pre-judgment interest up to $75,000 VI. Intoxication (G.S. 97-12) Willey v. Williamson Produce, 149 N.C. App. 74, 562 S.E.2d 1 (2002) rev’d 357 N.C. 41, 577 S.E.2d 622 (Mar 28, 2003) Employee was a truck driver who died in a traffic accident. He tested positive for cocaine, but there was conflicting expert testimony on whether the metabolic levels caused a pharmacological effect on the truck driver. The Commission found in favor of the truck driver and stated that the employer had not met its burden of proving impairment under 97-12. The Court of Appeals reversed the Commission and stated that the defendants had a “presumption of impairment” due to the presence of cocaine in plaintiff’s system. The Court of Appeals relieved the employer of proving that the intoxication caused the injury. Instead, the Court placed the burden on the plaintiff to prove that the employee’s intoxication did not cause the accident. Judge Greene dissented on the basis that the plain language of 97-12 fails to mention a “presumption of impairment.” Judge Greene stated that the presumption of impairment endorsed by the majority opinion improperly shifts the burden of proof from defendants to plaintiffs on the issue of impairment. IV-10

The Supreme Court reversed and reinstated the Commission’s findings based on Judge Greene’s dissent. There is no presumption of impairment even if there is evidence that Plaintiff was intoxicated at the time of the accident. The burden of proving that the intoxication caused the accident remains with the Defendant. VII. Compromise Settlement Agreements (Clinchers) (G.S. 97-17) Carroll v. Living Centers Southeast, Inc., __ N.C. App. __, 577 S.E.2d 925 (Apr 01, 2003) This case states that defendants have 24 days from the time the clincher order is rendered to pay plaintiff’s benefits. The parties settled the case by a clincher agreement. Plaintiff did not receive payment until 36 days after the approval order. Plaintiff moved for a 10% penalty. The Court held that the amendment to 97-17 provided that there would be no review of Commission decisions to approve settlement agreements. Therefore, the benefits are due 10 days after the date of order, and are considered late 14 days later. Therefore, the carrier has 24 days to pay Plaintiff pursuant to a clincher before the late penalty will apply. This rule does not apply to form agreements. Atkins v. Kelly Springfield Tire Co., 154 N.C.App. 512, 571 S.E.2d 865 (Dec 03, 2002) Clincher agreements can be set aside if they are not accompanied by a full and complete medical report. The only medical record submitted with the clincher in this case was a Form 25R indicating plaintiff’s impairment rating. The plaintiff sought to set aside the clincher on the basis that the Commission did not examine the “full medical report” prior to approving the clincher as required by 97-82(a). The Court defined “full medical report” as the complete medical records related to the work-related injury. The Court rejected the substitution of a Form 25R for a full and complete medical report. The Court remanded the case to the Full Commission for a determination as to whether the clincher was fair and just based on the full and complete medical report. Lemly v. Colvard Oil Co., __ N.C. App. __, 577 S.E.2d 712 (Apr 01, 2003) The parties mediated Plaintiff’s claim. At the conclusion of mediation, the parties signed a “memorandum of settlement.” The mediation agreement stated that Defendants would pay Plaintiff a lump sum of $40,000 and all unpaid medical bills. The agreement also stated that Plaintiff would execute a clincher agreement. After the IV-11

mediation, Defendants sent Plaintiff a clincher agreement. Plaintiff refused to sign the clincher. The Court of Appeals stated that “compromise settlement agreements, including mediated settlement agreements, are governed by the principles of contract law.” The language of the mediation agreement indicated that the parties reached a meeting of the minds with respect to the settlement of the workers’ compensation claim. The Court held that a “memorandum of settlement is a valid compromise settlement agreement subject to approval by the Industrial Commission pursuant to Rule 502(1).” A memorandum of settlement can be sent to the Commission for approval as long as it contains the necessary terms of settlement.

IV-12

VIII.

Defendants’ Acceptance of Liability (G.S. 97-18) Harrison v. Lucent Technologies, __ N.C. App. __, 575 S.E.2d 825 (Feb 18, 2003)

Employee worked as a secretary for the employer. She injured her shoulder and neck when she attempted to carry a heavy box of manila folders. An MRI of the neck showed degenerative changes, but no evidence of a disc herniation. Plaintiff’s left shoulder continued to bother her, but she returned to work on light duty restrictions. Although the employer initially provided medical treatment for plaintiff, liability was ultimately denied. The Full Commission found plaintiff’s neck claim to be compensable, but not her shoulder claim. The Commission ordered the employer to pay for treatment related to plaintiff’s neck and for treatment initially authorized by the employer. The employer was excused from paying for plaintiff’s shoulder treatment. Plaintiff argued that since defendants initially directed medical treatment for her shoulder injury, the defendants were estopped from denying liability for the shoulder claim. Plaintiff relied on Kanipe v. Lane Upholstery, 141 N.C. App. 620, 540 S.E.2d 785 (2000) in making this argument. The Court of Appeals rejected Plaintiff’s argument and noted that the Kanipe case stood for the proposition that defendants are not entitled to direct medical treatment until they accept the claim. Plaintiff tried to invert the holding in Kanipe to conclude that the employer accepts liability once it directs medical treatment. The Court refused to adopt Plaintiff’s argument. Even though an employer directs medical treatment, it does not have an obligation to accept the claim. Conversely, plaintiff is under no duty to treat with defendants’ doctors until the employer accepts the claim (with the exception of making herself available for a one time examination for purposes of determining compensability).

IV-13

IX.

Liability of Principal Contractors & Subcontractors (G.S. 97-19) Robertson v. Hagwood Homes, Inc., 584 S.E.2d 871, 2003 WL 22037841 (N.C. App. Sept. 2003)

General contractor (Hagwood) contracted with sub-contractor (Schuette) to provide framing work for Lot 15 in the Magnolia Green Subdivision. Schuette provided a certificate of insurance to Hagwood showing that Schuette had coverage from March 16, 1999 to March 16, 2000. After completion of Lot 15, Hagwood continued to subcontract framing work to Schuette. Schuette did not send another certificate of insurance for the subsequent framing work. Schuette subcontracted part of the framing work to another subcontractor, McGuirt. McGuirt did not provide either Schuette or Hagwood with a certificate of insurance. Plaintiff, Robertson, was injured while working for McGuirt. At the time of the injury, neither McGuirt nor Schuette had current workers’ compensation insurance. Plaintiff contended that Hagwood was his statutory employer under 97-19, which provides that general contractors are liable for injuries sustained by employees of subcontractors if the subcontractor does not provide a certificate of insurance. The Court held that the statute also applied to sub-subcontractors. “The chain of liability extends from the immediate employer of the injured employee up the chain to the first responsible contractor who has the ability to pay.” The Court also found that if there are separate and distinct contracts with the general and the subcontractor, a new certificate of insurance must be issued at the time of each contract. On the other hand, if there is one contract with multiple houses, only one certificate covering the period of work need be obtained. X. Notice of Accident to Employer (97-22) Lakey v. U.S. Airways, Inc., 155 N.C.App. 169, 573 S.E.2d 703 (Dec 31, 2002) Plaintiff, a flight attendant, sustained a back injury when she was hit by a beverage cart during in-flight turbulence. The parties entered into a Form 21 agreement, which was approved by the Commission. The Form 21 listed plaintiff’s injury as a low back sprain. She treated with doctors chosen by the defendants. She was eventually written into light duty work with a gradual increase to full-duty work. During her return to work, plaintiff suffered another back injury when she was thrown around the gallery during turbulence. At the time of the second injury, plaintiff had a greater average weekly wage. Defendant filed a Form 18 for the second injury approximately six months after the IV-14

injury. She alleged a new injury, or in the alternative, a change in condition. Plaintiff reinstated compensation at plaintiff’s original average weekly wage. Plaintiff also began to treat with her own physician. Plaintiff filed a Form 33 for additional medical treatment and indemnity benefits. Defendants argued that Plaintiff did not provide notice of the second injurty within the 30-day statutory period of 97-22. Defendants also argued that Plaintiff did not seek approval to treat with her own physicians during a reasonable period of time. The Court held that Plaintiff’s failure “to provide written notice of her injury will not bar her claim where the employer has actual knowledge of her injury.” The burden is on the employer to show that it was prejudiced by the lack of notice. The Commission found that the defendants could not show that they were prejudiced by any delay in notification. The Commission also found that the defendants had actual knowledge of the second accident. Finally, the Court held that the Commission has discretion to approve an injured employee’s request for approval of a physician, which the Commission did during the hearing of this claim. XI. Credits (G.S. 97-42) Smith v. First Choice Services, N.C.App. __, 580 S.E.2d 743, (June 3, 2003)

Plaintiff was vice president and secretary of a small family run business. Plaintiff broke his leg when he fell off of a ladder onto a concrete warehouse floor. State Farm began providing the family business with workers’ compensation insurance in 1991. At first, the company elected to exclude officers from coverage. After procuring workers’ compensation insurance, but before Plaintiff’s injury, the employer approached its insurance agent about adding officers to the workers’ compensation policy. The employer was under the impression that officers were included in the policy and instructed Plaintiff to file a claim. State Farm denied the claim on the basis of mutual mistake. Although the computer system showed that officers were covered, State Farm alleged that a computer error accounted for the officer’s inclusion on the policy. State Farm sought to reform the insurance contract arguing that the officer’s inclusion was the result of a mutual mistake. The employer was under the impression that the carrier would be paying Plaintiff two-thirds of his salary while he recovered from his injury. For a short while during the recovery period, the employer paid Plaintiff one-third his salary. State Farm sought a credit for the money paid by the employer to the Plaintiff during his recovery period. IV-15

The issues are 1) can the carrier reform an insurance policy to exclude coverage for officers under the theory of mutual mistake; and 2) can the carrier get a credit under 97-42 for benefits paid by the employer to the employee? The Court held that the inclusion of the officers in the workers’ compensation policy was a unilateral mistake, not a mutual mistake, since the employer had requested that the policy be changed to include officers. “A party seeking reformation must prove the existence of mutual mistake. However, a unilateral mistake by a party to a contract, unaccompanied by fraud, imposition, undue influence, or like circumstances of oppression is insufficient to avoid a contract.” Since there was no mutual mistake, State Farm could not reform the policy to exclude the officers. The Court also held that an insurance carrier is not entitled to a credit under G.S. 97-42 for benefits paid directly by the employer to the employee. 97-47 states “payments made by the employer to the injured employee during a period of disability, ?, which by the terms of this Article were not due and payable when made, may, subject to the approval of the Commission, be deducted from the amount paid as compensation. The Court held that payments are due and payable under 97-42 when the employer has accepted Plaintiff’s injury as compensable and initiated payment of benefits. “When the payments made by an employer are due and payable, the employer is not entitled to a credit for payments under the statute.” The evidence in this case showed that the employer considered Plaintiff’s claim to be compensable and paid onethird of his salary. Since the employer considered the claim to be compensable, the payments were considered due and payable under the statute; therefore, State Farm was not entitled to a credit.

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Cox v. City Of Winston-Salem, __ N.C. App. __, 578 S.E.2d 669 (Apr 15, 2003) Plaintiff fell into a manhole while working. The day after the fall, he was diagnosed with multiple contusions and was placed on light duty restrictions. Plaintiff initially did not miss any time from work, but he eventually required surgery on his shoulder. During surgery, the doctor found a cancerous tumor in plaintiff’s clavicle. After surgery, the treating physician increased plaintiff’s restrictions due in part to the removal of the tumor. The city could not accommodate the restrictions, and Plaintiff remained indefinitely out of work. While he was out of work, plaintiff received disability retirement benefits from the State Local Government Employees Retirement System. Defendants accepted the compensability of the claim, but denied that plaintiff was disabled as a result of the accident. The Commission awarded compensation stating that the medical evidence showed that the tumor was accelerated or aggravated by the fall at work. The Court did not issue the defendants a credit for the amount of money plaintiff received for the disability retirement benefits. There was conflicting testimony as to whether plaintiff contributed to the long term disability plan from which he received benefits. The Court remanded to the Full Commission for findings as to whether the defendant fully funded the retirement plan. In considering whether to issue a credit under 97-42, the Court focused on whether or not plaintiff contributed to the plan, but did not address whether the payments made to plaintiff pursuant to the plan were “due and payable.”

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BIBLIOGRAPHY
Fuleihan, Neill S., “Significant Workers’ Compensation Appellate Court Decisions Since November 2001.” Gervasi, Jay A., Jr. “Workers’ Compensation Case Law Update: June 2003” Sumwalt, Vernon “Knight, Willey, Arp & More: How Should be Change our Practice”

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