Maglothin v. TRYCO STEEL CORP.

137 Mich. App. 640 (1984) 357 N.W.2d 914 MAGLOTHIN v. TRYCO STEEL CORPORATION Docket Nos. 72599, 72682. Michigan Court of Appeals. Decided September 18, 1984. Charles G. Gale, for plaintiff. Thaddeus A. Gorny, and Conklin, Benham, McLeod, Ducey & Ottaway, P.C. (by Martin L. Critchell), of counsel, for Tryco Steel Corporation and Great American Insurance Company. Frank J. Kelley, Attorney General, Louis J. *643 Caruso, Solicitor General, and Joseph M. Binno, Assistant Attorney General, for Second Injury Fund, and Ray W. Cardew, Jr., Assistant Attorney General, for Compensation Supplement Fund. Before: HOOD, P.J., and V.J. BRENNAN and P.E. DEEGAN,[*] JJ. PER CURIAM. Plaintiff was injured at work on September 28, 1976, when the deck of a parking garage on which he was working collapsed, causing plaintiff to fall onto a steel rod. Tryco Steel and Great American Insurance Company (defendants), paid general disability weekly compensation benefits pursuant to the Worker's Disability Compensation Act. On May 4, 1979, plaintiff filed a petition for hearing with the Bureau of Workers' Disability Compensation (bureau) claiming that he had suffered total and permanent industrial loss of use of both legs and seeking differential benefits from the Second Injury Fund pursuant to MCL 418.521(2); MSA 17.237(521)(2). The hearing referee denied the claim for differential benefits. Plaintiff appealed from the decision to the Workers' Compensation Appeal Board (WCAB). While the appeal was pending, the Legislature created within the bureau a Compensation Supplement Fund (CSF), from which employers of insurers are reimbursed for compensation supplement benefits paid pursuant to MCL 418.352; MSA 17.237(352).[1] Plaintiff's request of defendants to *644 pay the compensation supplement during pendency of the WCAB appeal was denied upon advice from the bureau that no compensation supplement is due while a case is pending before the WCAB. Plaintiff petitioned for a Rule V hearing contesting defendants' refusal to pay the compensation supplement pending the WCAB appeal. The referee held that, since there was no ongoing dispute as to plaintiff's entitlement to general disability weekly compensation benefits, defendants were required to pay the supplement pending the WCAB appeal.[2] However, the referee found that there was an ongoing dispute within the meaning of MCL 418.801(2); MSA 17.237(801)(2) and therefore declined to impose any penalty payment for defendants' earlier refusal to pay the compensation supplement. Plaintiff appealed from the referee's denial of the late payment penalty to the WCAB. That appeal and plaintiff's earlier appeal from the denial of differential benefits were consolidated. On June 15, 1983, the WCAB issued a decision holding that plaintiff had sustained the loss of industrial use of both legs and was therefore entitled to differential benefits and, further, imposed a penalty on defendants for failure to timely pay the compensation supplement pending the first WCAB appeal. Both defendants and the Second Injury Fund appeal. Defendants challenge the WCAB's finding that a late payment penalty was due for defendants' failure to timely pay the supplement benefits pending the appeal. The Second Injury Fund does not contest the WCAB's finding as to plaintiff's eligibility for differential benefits, but contends (1) that such differential benefits are *645 limited by the two-year-back rule of MCL 418.381(2); MSA 17.237(381)(2) and (2) that the WCAB erred in applying the 12% interest rate established in MCL 418.801(5); MSA 17.237(801)(5) to payments which became due prior to the effective date of the statute. I We first consider whether the WCAB erred in imposing a penalty under § 801(2) for defendants' failure to pay the compensation supplement benefits while plaintiff's appeal from the denial of differential benefits was pending. MCL 418.801(2); MSA 17.237(801)(2) provides: "If weekly compensation benefits, accrued weekly benefits, medical bills, or travel allowance are not paid within 30 days after becoming due and payable in cases where there is not an ongoing dispute, $50.00 per day shall be added and paid to the worker for each day over 30 days in which the benefits, medical bills, or travel allowance are not paid. Not more than $1,500.00 in total may be added pursuant to this subsection." The WCAB held: "There was no dispute regarding plaintiff's entitlement to weekly benefits, including the supplement. Defendant's failure to pay same in a timely manner, even though based on a good faith belief the supplement was not due, is sufficient to warrant application of the penalty. The ongoing dispute regarding total and permanent disability has no bearing on the undisputed weekly benefit and supplement entitlement to preclude the penalty application. Perry v Sturdevant Mfg Co [124 Mich App 11; 333 NW2d 366 (1983)]." Defendants and the CSF contend that the supplement is not a "weekly compensation benefit" *646 within § 801(2) and that the penalty provision therefore does not apply. While this Court finds merit to the arguments advanced by defendants and the CSF in support of that position, we need not presently decide the question. We find that even if § 801(2) applies to late payment of the supplement benefits, the penalty was improperly imposed in this case because there was an "ongoing dispute" as to plaintiff's right to receive the supplement benefits. Section 352 provides that employees receiving maximum benefits under § 351 are entitled to a supplement based on the recipient's weekly compensation rate. Section 352(5) states: "An employee who is eligible to receive differential benefits from the second injury fund shall be paid the supplement pursuant to this section as reduced by the amount of the differential payments being made to the employee by the second injury fund at the time of the payment of the supplement pursuant to this section." (Emphasis supplied.) It is true that an ongoing dispute as to one aspect of an employee's claim for benefits will not bar imposition of a penalty for late payment of other unrelated categories of benefits. See Perry v Sturdevant Mfg Co, 124 Mich App 11; 333 NW2d 366 (1983). Relying on Perry, supra, the WCAB found that there was no ongoing dispute as to weekly benefits, including the compensation supplement, since the pending appeal involved only differential benefits. However, the above quoted statute makes clear that an employee's right to the compensation supplement is directly affected by the amount of differential benefits he or she receives. This is precisely why the CSF advised defendants that payment of the supplement was *647 not due until the issue of differential benefits had been resolved by the WCAB.[3] Inasmuch as plaintiff's right to receive the supplement could not be determined until his eligibility for differential benefits was resolved, we find that the pending WCAB appeal of the denial of differential benefits was an ongoing dispute as to the supplement. The WCAB erred in imposing a penalty under § 801(2). II The Second Injury Fund also appeals from the WCAB's decision. The Second Injury Fund does not contest the award of differential benefits, but asserts that the WCAB erred in failing to apply the two-year-back rule of MCL 418.381(2); MSA 17.237(381)(2).[4] Plaintiff concedes that the two-year-back limitation is applicable to the instant case, and we so hold. The case is therefore remanded to the WCAB for calculation of differential benefits applying § 381(2). The Second Injury Fund finally contends that the WCAB erred in applying the 12% interest rate established in MCL 418.801(5); MSA 17.237(801)(5) to payments which became due prior to the effective date of the statute, January 1, 1982. The Second Injury Fund's argument was rejected by the Michigan Supreme Court in Selk v Detroit *648 Plastic Products, 419 Mich 1; 345 NW2d 184 (1984), clarified on resubmission 419 Mich 32; 348 NW2d 652 (1984).[5] The WCAB's imposition of a penalty under MCL 418.801(2); MSA 17.237(801)(2) for late payment of the compensation supplement benefits is reversed. The case is remanded for recalculation of differential benefits limited by the two-year-back provision of MCL 418.381(2); MSA 17.237(381)(2). Affirmed in part, reversed in part and remanded. HOOD, P.J. (dissenting in part and concurring in part). I must respectfully dissent from that part of the majority opinion that finds the plaintiff was not entitled to a § 352 supplement because there was an "ongoing dispute" as to plaintiff's right to receive the supplement. At no time did plaintiff's employer contest plaintiff's right to receive general benefits. Section 352(1), MCL 418.352(1); MSA 17.237(352)(1), mandates the payment of a supplement to plaintiff, "Beginning January 1, 1982, an employee receiving or entitled to receive benefits * * * shall be entitled to a supplement to weekly compensation". (Emphasis added.) Defendants do not argue that plaintiff is not entitled to supplements under this provision. Rather, defendants argue that because there remained an ongoing dispute as to plaintiff's entitlement to differential benefits, the employer need not have paid the supplement. In Perry v Sturdevant Mfg Co, 124 Mich App 11, 17; 333 NW2d 366 (1983), this Court said that the penalty provision applies where the *649 "ongoing dispute", MCL 418.801(2); MSA 17.237(801)(2), involves benefits in a "different category". Therefore, because plaintiff's entitlement to general benefits and the supplement to those benefits was not disputed, he should have received them. Section 352(5), upon which defendants rely, does not change this result. That section merely alters the calculation of the supplemental benefit by subtracting the differential benefit amount from total benefits before calculating the supplement. Subsection (5) does not alter the fact that subsection (1) mandates the payment of a supplement in addition to plaintiff's general benefits. Because I find that plaintiff was entitled to the § 352(1) supplement, I address the issue of whether the § 801 penalty provision applies, MCL 418.801(2); MSA 17.237(801)(2). Defendant Tryco argues that it withheld paying plaintiff the supplement benefits in good faith reliance upon a CSF directive. I would follow Perry, supra, p 19, "No good faith defense is provided; deliberate nonpayment is not required for the imposition of a penalty". I would affirm the WCAB's assessment of a § 801(2) penalty. In all other respects I concur with the majority opinion. NOTES [*] Circuit judge, sitting on the Court of Appeals by assignment. [1] MCL 418.352; MSA 17.237(352) established the right of employees receiving compensation benefits under MCL 418.351; MSA 17.237(351) to be paid a supplement based on the employee's weekly compensation rate. The insurer or self-insurer is responsible to pay the supplement and is entitled to reimbursement for the payments from the CSF. The CSF, established in MCL 418.391; MSA 17.237(391), is financed by legislative appropriation from general tax revenues of the state. [2] The WCAB appeal involved only plaintiff's claim for differential benefits. Defendants have not contested plaintiff's right to general weekly disability compensation benefits. [3] According to the CSF's appellate brief, the CSF has adopted a new policy providing for payment of the compensation supplement pending a determination for the employee's entitlement to differential benefits. The CSF reimburses the employer or insurer pursuant to § 391 prior to a final determination of the employee's right to differential benefits. If the employee qualifies for differential benefits, the Second Injury Fund reimburses the CSF for any overpayment of the supplement pursuant to § 352(5). [4] MCL 418.381(2); MSA 17.237(381)(2) provides: "If any compensation is sought under this act, payment shall not be made for any period of time earlier than 2 years immediately preceding the date on which the employee filed an application for a hearing with the bureau." [5] The Court in Selk v Detroit Plastic Products, 419 Mich 1; 345 NW2d 184 (1984), clarified on resubmission 419 Mich 32; 348 NW2d 652 (1984), held that where an employer pays compensation on or after January 1, 1982, interest on the award shall be paid at 12% from the date each payment is due. 419 Mich 35.