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Sumner v. Eagle Nest Hotel (5/5/95), 894 P 2d 628
NOTICE: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, (907) 264-0607.
THE SUPREME COURT OF THE STATE OF ALASKA
DEL SUMNER, )
) Supreme Court No. S-6342
) Superior Court No.
v. ) 3AN-92-6115 CI
EAGLE NEST HOTEL, ) O P I N I O N
ALASKA NATIONAL INSURANCE, )
COMPANY, and THE ALASKA )
WORKERS' COMPENSATION BOARD, )
Appellees. ) [No. 4194 - May 5, 1995]
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Glen C. Anderson,
Appearances: William J. Soule,
Anchorage, for Appellant. Shelby L. Nuenke-
Davison, Davison & Davison, Anchorage, for
Before: Moore, Chief Justice,
Rabinowitz, Matthews, Compton and Eastaugh,
Del M. Sumner was injured while working at the Eagle
Nest Hotel (Eagle Nest). He received a permanent partial
impairment (PPI) rating which he communicated in full to Eagle
Nest's workers' compensation insurance carrier1 on July 31, 1991.
Lump-sum PPI benefits were fully paid by August 21, 1991, despite
a temporary controversion of Sumner's claim. Sumner appealed to
the Alaska Workers' Compensation Board (Board) asking for a
penalty for late payment of PPI benefits. The Board ultimately
denied relief. On appeal to the superior court pursuant to
Appellate Rule 601, the denial was affirmed. Sumner appeals. We
I. FACTS AND PROCEEDINGS
Sumner was hired by Eagle Nest as a part-time
maintenance worker in mid-April 1991. Sumner claimed that he
injured his back a few days later. He called Eagle Nest the next
day and reported the injury. A notice of injury was filed May 6.
The first temporary total disability (TTD) payment was made on
May 10. Other TTD payments were made on May 23, June 6, June 20,
July 1, and July 19.
Sumner was referred to Dr. Michael James, who saw him
on May 13. Dr. James placed him in a physical therapy program.
After completion of this program, Dr. James examined Sumner and
approved his return to certain work. Dr. James also gave Sumner
a PPI rating of fourteen percent. This examination took place on
July 25. The insurer received Dr. James' report by fax on July
ANIC began tallying PPI benefits biweekly from July 26
onward. PPI payments were made on July 31 and August 14. The
July 31 payment included TTD benefits through July 25 and PPI
benefits from July 26 forward. On August 9, ANIC filed a
controversion notice, contesting the lump-sum PPI payment. ANIC
noted that PPI benefits were being paid biweekly pending
clarification of the PPI rating from the examining doctor. The
reason for the controversion was that Dr. James' report indicated
some improvement in the affected area; continued improvement
might lead to a lower PPI rating in the future, which would
result in a lower lump-sum payment. Clarification was received
on August 19 and the lump-sum PPI payment was made on August 21.
Sumner then filed an Application for Adjustment of
Claim, claiming he was entitled to a twenty-five percent penalty
on the PPI sum as well as fees and costs. Through its
interpretation of AS 23.30.155(b)2 and (e),3 the Board held that
payment was late if not paid within twenty-one days of the date
the employer learned of the PPI rating.4 The Board, by counting
the day the employer became aware of the rating, found that
payment occurred on the twenty-second day, and awarded a twenty-
five percent penalty. Under AS 23.30.155(d), the Board found
that the adjuster had not reasonably controverted the claim. A
penalty of $4500 was ordered. The Board suspended its
decision one week later, noting that it might have been mistaken
in counting the day that notice was received. It reconsidered
and decided that the notice day did not count, and thus payment
was timely. Sumner argued that the next scheduled TTD payment
date should have been the PPI payment date; the Board noted that
applying section 155 to PPI payments would result in a "more
consistent and equitable structure" for payments than would
requiring the PPI payment on the next TTD payment date.
Sumner appealed to the superior court, which affirmed.
The court concluded that the statute was ambiguous as to when a
lump-sum PPI payment would be due. It agreed with the Board,
both in its application of section 155 to PPI payments and its
decision not to count the day notice was received. The court
agreed with the Board that this date was July 31. Sumner
A. Standard of Review
The parties dispute the appropriate standard of review.
Sumner contends that the main issues in this case are legal and
thus this court should review it under the substitution of
judgment standard. ANIC argues that review of the time-period
issue is a matter of fundamental policy and should be reviewed
under the "reasonable basis"standard.
We have articulated two standards under which agency
interpretations of statutory terms (questions of law) will be
reviewed. In general, the rational basis standard defers to the
agency's interpretation of the statute, if reasonable. The
substitution of judgment standard substitutes the court's
interpretation of the statute. See Tesoro Alaska Petroleum Co.
v. Kenai Pipe Line Co., 746 P.2d 896, 903 (Alaska 1987).5
Under either standard, no deference is given to the
decision of the superior court. "[W]hen the superior court acts
as an intermediate court of appeal, no deference is given to the
lower court's decision." Tesoro, 746 P.2d at 903.
The issue of the appropriate standard of review need
not be addressed, as the agency's action satisfies either.
B. Issues Relevant to the Case
This case turns on two questions: (1) was the PPI
payment timely made, and (2) if so, can a request for
clarification or controversion that did not delay payment still
result in the assessment of a penalty?6
We conclude that the PPI payment was timely made, and
that a controversion that does not delay payment, even if made in
bad faith, does not provide the basis for a penalty.
C. The Lump-sum PPI Benefits Were Paid on Time
This issue involves two questions: the method of
measuring the time for payment, and the date the time period
1. The Board Properly Defined the Time
Limit for Payment of PPI Benefits
The parties dispute whether the lump-sum payment was
due on the next scheduled TTD payment date (August 14, Sumner's
position), or due within twenty-one days of notice of the PPI
rating under AS 23.30.155 (August 21, ANIC's position).
Alaska statutes and cases do not provide a due date for
PPI lump-sum payments. PPI payment rules are delineated in AS
23.30.190, and no statutory time frame is clearly specified.7
Alaska Statute 23.30.155(b) and (e), providing for installment
payments within fourteen days and penalties if the payment is
over seven days late, have not been applied by this court to a
case involving PPI payments. Under 8 AAC 45.063(a), time periods
under the Alaska Workers' Compensation Act do not include the day
of the event.
An examination of workers' compensation law prior to
the 1988 amendments provides one perspective on this issue.
Section 190, providing for permanent partial disability payments,
was markedly different than the present version. Depending on
the injury, compensation was provided for a certain number of
weeks at eighty percent of wages. Former AS 23.30.190(a)(1)
(amended 1988). The relevant provisions of section 155,
providing for "payment of compensation,"were largely the same.
Section 155(a) stated, "Compensation under this chapter shall be
paid periodically." Section 155(b) provided for payment of the
first installment by the fourteenth day after knowledge "of the
injury or death." Later compensation installments were due every
fourteenth day. Therefore, PPD payments were made in
installments, and the fourteen day period with the seven day
penalty period applied. See Fairbanks N. Star Borough Sch. Dist.
v. Crider, 736 P.2d 770, 772, 774-75 (Alaska 1987) (case under
former statutory scheme noting that PPD payments in biweekly
installments are the norm). Therefore, there is a historical
basis for applying the section 155 time periods to the current
act. Quite possibly the legislature simplified section 190
without considering the payment ramifications, or whether section
155 still applies to PPI payments.
Applying the next TTD payment date as the PPI due date
is undesireable from policy standpoint as it would result in a
variable time period of eight to twenty-one days for PPI payment
(the one to fourteen days until the next TTD payment plus the
seven day penalty period). The Board noted this uncertainty in
its June 8, 1992 decision, analogizing the resulting variable
period to a "game of craps."
The Board's interpretation gives the employer adequate
time to analyze a PPI rating, and establishes a consistent twenty-
one day period for payment. There is a rational basis for the
Board's decision. The decision comports with the historic
workers' compensation framework and does not contradict any case
or statute. Were we to apply our independent judgment, we would
arrive at the same conclusion. Therefore, we affirm that
2. The Issue of the Notice Date Has Been Waived
Sumner also disputes the date of notice of the PPI
rating, arguing that notice was given to ANIC on July 29, rather
than July 31 as determined by the Board.
This issue has been waived because it was raised first
in the reply brief. Alaska R. App. P. 212(c)(3) (The reply brief
"may raise no contentions not previously raised in either the
appellant's or appellee's briefs."); Conam Alaska v. Bell
Lavalin, Inc., 842 P.2d 148, 158 (Alaska 1992). If Sumner
intended to argue that the Board's finding was clearly erroneous,
or not supported by substantial evidence, he should have done so
in his points on appeal, or at least in his opening brief.
D. There Is No Basis for Awarding a Penalty
Sumner observes that the Board did not determine
whether the controversion was made in bad faith. He contends
that this determination should have been made because he believes
that bad faith warrants the imposition of a penalty regardless of
the promptness of payment.
Sumner cites Harp v. ARCO Alaska, Inc., 831 P.2d 352,
358 (Alaska 1992), for support. Harp is inapposite. Harp dealt
with an allegedly good faith controversion as a means of avoiding
a penalty for a delayed payment. The instant case involves no
delay; rather, Sumner alleges bad faith as a means of imposing a
penalty. The controversion was timely. It was a simple letter
to the examining doctor requesting clarification. It did not
delay Sumner's receipt of PPI beyond the allotted time.
Sumner provides no other legal basis for imposition of
a penalty. Thus, his claim fails.
The Board reasonably, and in our view correctly,
interpreted and applied AS 23.30.155(b) and (e) to the timeliness
of PPI payments under section 190. The issue regarding the
Board's decision that notice was given to ANIC on July 31 has
been waived. All other grounds for reversal argued by Sumner are
unpersuasive. Thus, the judgment of the superior court is
1 Eagle Nest's workers' compensation insurance carrier
was Alaska National Insurance Company (ANIC).
2 The first installment of compensation becomes
due on the 14th day after the employer has
knowledge of the injury or death. On this
date all compensation then due shall be paid.
Subsequent compensation shall be paid in
installments, every 14 days, except where the
board determines that payment in installments
should be made monthly or at some other
3 If any installment of compensation payable
without an award is not paid within seven
days after it becomes due, as provided in (b)
of this section, there shall be added to the
unpaid installment an amount equal to 25
percent of it. This additional amount shall
be paid at the same time as, and in addition
to, the installment, unless notice is filed
under (d) of this section or unless the
nonpayment is excused by the board after a
showing by the employer that owing to
conditions over which the employer had no
control the installment could not be paid
within the period prescribed for the payment.
4 The Board has applied AS 23.30.155 to PPI payments in
other rulings. See Fahlsing v. Arctic N. Servs. Co., AWCB No.
9029940 (Mar. 29, 1994); Chenery v. Gensco of Alaska, AWCB No.
9120852 (Sept. 25, 1992); Binder v. Fairbanks Historical,
Preservation Found., AWCB No. 8816700 (Dec. 11, 1991).
5 "The rational basis test is used where the questions at
issue implicate special agency expertise or the determination of
fundamental policies within the scope of the agency's statutory
function." Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co.,
746 P.2d 896, 903 (Alaska 1987). The rational basis approach
merely determines whether the agency's determination is supported
by the facts and is reasonably based in law. Id.
The substitution of judgment standard is applied when
the question of law does not involve agency expertise or where
the expertise is not particularly probative. Id. "Application
of this standard permits a reviewing court to substitute its own
judgment for that of the agency even if the agency's decision had
a reasonable basis in law." Id.
6 Sumner devotes portions of his briefs urging
application of the presumption of compensability to penalties and
rebutting an allegedly improper argument by ANIC about the
inapplicability of section 155(e) to PPI payments. These issues
are irrelevant. The presumption of compensability deals with an
employer's liability for workers' compensation payments. C.f.
Sokolowski v. Best Western Golden Lion Hotel, 813 P.2d 286, 292
(Alaska 1991). As Sumner admits, "Liability for the P.P.I.
benefits was never controverted in this case."
Sumner also argues that the Board should have awarded
interest on the lump-sum payment, noting Land & Marine Rental Co.
v. Rawls, 686 P.2d 1187, 1192 (Alaska 1987) ("[A] workers'
compensation award . . . shall accrue lawful interest . . . from
the date it should have been paid."). As the PPI payment was
timely made, no interest award is due.
7 The only mention of payment time or method in 190 is
as follows: "The compensation is payable as a single lump sum,
except as otherwise provided in AS 23.30.041 [rehabilitation],
but the compensation may not be discounted for any present value
considerations." AS 23.30.190(a).