We granted plaintiff's writ to consider the proper standard to be applied in determining whether a workers' compensation claimant is entitled to penalties and attorney fees pursuant to La. R.S. 23:1201. After examining the unambiguous language of the statute, we note the arbitrary and capricious standard no longer applies to actions brought under this statute and hold that statutory penalties and attorney fees shall be awarded if the employer or insurer fails to timely pay benefits due claimant pursuant to La. R.S. 23:1201 unless: (1) the claim is reasonably controverted or (2) such nonpayment results from conditions over which the employer or insurer had no control. Furthermore, we hold plaintiff is entitled to an award of penalties and attorney fees for defendants' failure to timely and adequately compensate him since his claim was not reasonably controverted and the nonpayment did not result from conditions over which the employer or insurer had no control.
Facts and Procedural History
Plaintiff, Richard Brown, was injured in the course and scope of his employment for the defendant, Texas-LA Cartage, Inc., on May 21, 1996. Brown, however, continued to work until his physician found him temporarily unable to work on July 9, 1996. Following this restriction from work, defendant began paying workers' compensation benefits.
Compensation for Brown's first week of injury was suspended pursuant to La. R.S. 23:1224.
After receiving benefits for several weeks, Brown contacted an attorney who then advised the claims adjuster by letter dated August 30, 1996, that Brown was a full-time employee and therefore entitled to increased benefits. The claims adjuster contacted Texas-LA Cartage and was told that although Brown worked less than forty hours a week in the four weeks preceding his injury due to a business slow down, he was hired as a full-time employee. The claims adjuster then recalculated the rate and increased Brown's benefits to $322.68 per week. On September 10, 1996, Brown was issued a check for the difference in the pay rate for the weeks previously paid. On that same date, Brown was also issued a check for the first week following injury which had been withheld pursuant to La. R.S. 23:1224.
On September 12, 1996, Brown filed a Disputed Claim for Compensation, Form LDOL-WC-1008, with the Office of Workers' Compensation, alleging that he was injured during the course and scope of his employment and seeking, inter alia, penalties and attorney fees for the allegedly late and inadequate benefits.
Subsequent to a hearing on the merits, the hearing officer dismissed Brown's claims, reasoning that there was no negligence present in the handling of Brown's claim and that the matter was reasonably controverted. Specifically, the court stated:
The court of appeal, with one judge dissenting, affirmed the decision of the Office of Workers' Compensation, reasoning that the hearing officer was not clearly wrong in denying penalties and attorney fees in this case as defendant acted responsibly in administering Brown's claim and was willing to appropriately compensate him. The court reviewed the testimony of the claims adjuster and noted that she had no indication of Brown's status as a full-time employee who might, or might not, work forty hours a week. Furthermore, her testimony confirmed that although Brown's status was unclear, a check was issued for the increased amount when the discrepancy was discovered. The third circuit declined to penalize defendant since it had paid the increased benefits despite the alleged "gray area" surrounding Brown's work status.
Regarding Brown's contention that the first check issued compensated him for less than a full week's benefits, the appellate court found the insurer was acting pursuant to its established policy of issuing checks only on Wednesday for the prior week ending on Saturday. The court held the claimant was adequately paid and defendant sought to systematically meet the compensation requirements; therefore, the hearing officer was not clearly wrong in denying penalties in this respect.
Turning to the payment of benefits for Brown's first week following disability, the third circuit found the hearing officer was not clearly wrong in denying penalties and attorney fees given the wording of La. R.S. 23:1224. The claims adjuster testified that the benefits for the first week were due on August 20 and the company then had a fourteen-day period in which to pay them. The benefits were paid on September 10 because, according to the adjuster, checks were issued only on Wednesdays and she was out of the office on the Wednesday prior to September 10. After considering this testimony, the appellate court concluded defendant acted responsibly in administering Brown's claims.
Brown asked this court to review the case, arguing the lower courts erred in not awarding penalties and attorney fees because: (1) the first installment of compensation due on the fourteenth day after notice of disability was paid late, was a partial payment, and was paid at an improper weekly rate; and (2) the withheld first week of disability payments due after six weeks of continued disability was not paid until 21 days after the expiration of six weeks of continuous disability. We granted Brown's writ to determine whether the lower courts applied the correct standard in denying penalties and attorney fees and to consider the correctness of that decision. Brown v. Texas-La Cartage, Inc., 98-1063 (La.6/19/98), 720 So.2d 1207.
In considering whether Brown is entitled to penalties and attorney fees, it is initially helpful to consider the statutory progression of such awards. Prior to the insertion of provisions for penalties and attorney fees into La. R.S. 23:1201, penalties and attorney fees were awarded to injured
In 1983, Act No. 1 of the 1st Ex.Sess. placed provisions for penalties and attorney fees entirely within the Workers' Compensation Act and applied those provisions to both insurers and employers. Specifically, the Act reenacted La. R.S. 23:1201 to provide, inter alia, that the first installment of compensation payable for temporary total disability shall become due on the fourteenth day after the employer has knowledge of the injury on which date all such compensation then due shall be paid. If any installment of such compensation was not paid within the specified time period, a penalty, equal to twelve percent of the unpaid installment, was imposed, "unless such nonpayment results from conditions over which the employer or insurer had no control. Whenever the employee's right to such benefits has been reasonably controverted by the employer or his insurer, the penalties set forth in this Subsection shall not apply." Regarding attorney fees, Acts 1983, 1st Ex.Sess., No. 1, La. R.S. 23:1201.2, which had previously provided for penalties and attorney fees when a non-insured employer failed to timely pay any claim due or discontinued payments when the failure or discontinuance was found to be arbitrary, capricious or without probable cause, was amended to, inter alia, delete all references to penalties, but still provide for attorney fees, and to apply to insurers and non-insured employers alike.
Subsequent to the sweeping changes made in 1983, few changes have been made to those portions of La. R.S. 23:1201 at issue in the instant case. Most significantly, Act No. 926 of 1985 included the insurer's knowledge of the injury or death in the requirement that the first installment of compensation payable for temporary total disability shall become due on the fourteenth day after the employer or insurer has knowledge of the injury or death, and Act No. 1137 of 1995 included a provision for reasonable attorney fees as well as penalties in La. R.S. 23:1201(E). Act No. 1137 of 1995 changed § 1201 into its present form which reads in pertinent part:
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Concomitantly, Act No. 1137 of 1995 amended La. R.S. 23:1201.2, which had mandated an award of attorney fees against insurers and non-insured employers who failed to pay claims within sixty days after receipt of written notice when such failure was found to be arbitrary, capricious or without probable cause, to apply only when an employer or insurer discontinues payment of claims and such discontinuance is found to be arbitrary, capricious or without probable cause. As such, La. R.S. 23:1201.2 now reads:
Where a new statute is worded differently from the preceding statute, the legislature is presumed to have intended to change the law. New Orleans Rosenbush Claims Service, Inc. v. City of New Orleans, 94-2223, p. 12 (La.4/10/95), 653 So.2d 538, 544. Thus, as can be seen from the foregoing discussion and the unambiguous language of La. R.S. 23:1201, the question of whether defendant's actions were arbitrary and capricious is no longer applicable when considering penalties and attorney fees for a defendant's failure to pay benefits timely. The legislature made this clear as to penalties in 1983 when it placed the penalty provision within the Workers' Compensation Act and, instead of using the previous phrase "arbitrary, capricious or without probable cause," set forth the current standard of assessing penalties for untimely payment unless the employee's rights to benefits were reasonably controverted by the employer or his insurer or the nonpayment resulted from conditions over which the employer or insurer had no control. Similarly, this change in standards was effected with respect to attorney fees awardable for untimely payment of benefits in 1995 when the legislature added a provision for such fees to La. R.S. 23:1201, which had previously dealt only with penalties, and made La. R.S. 23:1201.2, which retains the arbitrary and capricious standard,
The unambiguous language of La. R.S. 23:1201 clearly establishes that penalties and attorney fees for failure to timely pay benefits shall be assessed unless the claim is reasonably controverted or such nonpayment results from conditions over which the employer or insurer had no control.
The phrase "reasonably controverted," on the other hand, mandates a different standard. In general, one can surmise from the plain meaning of the words making up the phrase "reasonably controvert" that in order to reasonably controvert a claim, the defendant must have some valid reason or evidence upon which to base his denial of benefits. Thus, to determine whether the claimant's right has been reasonably controverted, thereby precluding the imposition of penalties and attorney fees under La. R.S. 23:1201, a court must ascertain whether the employer or his insurer engaged in a nonfrivolous legal dispute or possessed factual and/or medical information to reasonably counter the factual and medical information presented by the claimant throughout the time he refused to pay all or part of the benefits allegedly owed. This definition is in accord with that presently used by the lower courts to determine whether penalties and attorney fees are owed. See Antrainer v. Great Atlantic & Pacific Tea Co., 97-1554, p. 6 (La.App. 1 Cir. 4/8/98), 712 So.2d 590, 594 ("Given the facts, medical and otherwise, known to the employer or his insurer, did the employer or insurer have a reasonable basis to believe that medical expenses and compensation benefits were not due the employee."); Woods v. Ryan Chevrolet, Inc., 30,206, p. 9 (La.App. 2 Cir. 2/25/98), 709 So.2d 251, 257 ("The employee's right to such benefits will be deemed `reasonably controverted' if the employer or insurer had a reasonable basis for believing that medical expenses and indemnity benefits were not due the employee.... Reasonably controverting a claim means that the payor has factual or medical information of such a nature that it reasonably counters that provided by the claimant."); Cook v. Kaldi's Coffee House, 97-0979, p. 10 (La.App. 4 Cir. 1/28/98), 706 So.2d 1052, 1058 ("The test to determine whether the claimant's right has been reasonably controverted turns on whether the employer or his insurer had sufficient factual and medical information to reasonably counter the factual and medical information presented by the claimant."); Lemoine v. Hessmer Nursing Home, 94-836, p. 20 (La.App. 3 Cir. 3/1/95), 651 So.2d 444, 456 ("A workers' compensation claim is `reasonably controverted,' precluding imposition of penalties and attorney fees, if the employer had sufficient factual and medical information upon which to base a decision to reduce or terminate benefits."). If an employer or insurer reasonably controverts
Given the correct interpretation of that portion of La. R.S. 23:1201 at issue in this case, we now turn to the application of this statute to the facts at hand. Claimant alleges he is owed penalties and attorney fees under La. R.S. 23:1201(F) because the first installment of his benefits was late, partial in that it was not a remittance of "all such compensation then due" and in the incorrect amount and because the first week of benefits, withheld pursuant to La. R.S. 23:1224, was not timely paid.
The record is unclear as to when Brown's employer received notice of his temporary total disability. Brown received an off-work slip from his doctor on July 9 and his employer faxed the slip to the insurer on July 10. There is no evidence, however, to show whether his employer received the slip on the ninth or the tenth.
As discussed above, penalties should be assessed against defendants unless the employer or insurer reasonably controverted Brown's right to the benefits or the violations resulted from conditions over which the employer or insurer had no control. Defendants do not claim, nor do the facts support the argument that the benefits were not timely paid for reasons beyond the employer's or insurer's control. Therefore, we must determine whether the employee's right to the timely and accurate payment of benefits was reasonably controverted by the employer or the insurer. We find that it was not.
Brown was not paid all that he was due on July 24 because of the insurer's internal policy of only issuing checks on Wednesday.
We are cognizant of the fact that defendants did not act in an egregious manner in this case. However, the purpose of an imposition of penalties is to "nudge the employer into making timely payments when there is no reasonable basis for refusing or delaying its obligation." Weber v. State, 93-0062, p. 8 (La.4/11/94), 635 So.2d 188, 193. An imposition of penalties in this case furthers such a policy by ensuring that employers and insurers are in compliance with the statutory scheme that requires timely payments unless the employer or insurer has a valid reason or evidence upon which to base a denial of benefits.
We find the hearing officer's failure to award penalties and attorney fees for defendants' failure to timely and adequately compensate plaintiff was manifestly erroneous. We therefore reverse the hearing officer and court of appeal as to these issues and remand the matter to the hearing officer for computation of penalties to be awarded and an assessment of attorney fees consistent with this opinion.
REVERSED AND REMANDED FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION.
Id. at p. 6, 651 So.2d at 403 (citations omitted).
Those other portions of La. R.S. 22:658, discussed supra, which impose penalties and attorney fees when certain insurers fail, arbitrarily, capriciously or without probable cause, to timely pay the amount of any claim due, now specifically except from their coverage workers' compensation insurers.
This testimony is ambiguous as it could be read to mean either that Brown got the off-work slip on the 9th and gave it to his employer that same day or that Brown got the off-work slip on the 9 th and gave it to his employer some time later.