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Searle Petroleum, Inc. v. Milady

Court of Appeals of Iowa

December 5, 2013

GAIL MLADY, Respondent-Appellee

Appeal from the Iowa District Court for Pottawattamie County, James S. Heckerman, Judge.

An employer and insurance carrier appeal the district court's denial of their petition for judicial review.

Sara A. Lamme and Tiernan T. Siems of Erickson & Sederstrom, P.C., Omaha, Nebraska, for appellants.

Richard B. Maher, Omaha, for appellee.

Heard by Potterfield, P.J., and Mullins and Bower, JJ.


Searle Petroleum, Inc. and XL Environmental Insurance Co. (the employer) appeal the district court's ruling denying its petition for judicial review filed after the workers' compensation commissioner awarded Gail Mlady permanent total disability benefits based on Mlady's review-reopening petition. The employer asserts on appeal the district court erred in (1) making its own findings of fact, (2) finding substantial evidence supports the agency's findings of fact, (3) affirming the agency's conclusion Mlady demonstrated an economic change in condition since the initial hearing, (4) affirming the agency's conclusion Mlady sustained a physical change in condition, (5) confirming the agency's determination that the change in physical and economic condition was caused by the work injury, (6) finding the agency was correct in concluding Mlady was not barred by the doctrine of res judicata, (7) approving of the agency's decision on the commencement date of permanent total disability benefits, (8) affirming the agency's failure to conclude Mlady's condition actually improved since the initial hearing, and (9) accepting the agency's assessment of costs to Searle in an order nunc pro tunc.

Because we find substantial evidence supports the agency's findings, we affirm the award of permanent total disability benefits, but we reverse the agency's determination as to the commencement date of the benefits and its award of costs.


Mlady suffered a low back injury at work in August 2003. He underwent three back surgeries and was released at maximum medical improvement in July 2006. He was given permanent restrictions and placed in the light or sedentary category of labor. He filed a workers' compensation claim, and his case proceeded to hearing on only one issue—the extent of permanent partial disability benefits to which Mlady was entitled. In a decision issued May 15, 2009, the deputy workers' compensation commissioner determined Mlady had a permanent partial disability in the amount of eighty percent. With respect to employment, the deputy found:

Since the date of his work injury, claimant has not sought employment of any type. The employer has not offered light duty work, meaningful vocational rehabilitation or counseling, whether career counseling or otherwise. Without retraining, rehabilitation or counseling, it is extremely doubtful, claimant will return to gainful employment. He believes he is totally disabled and incapable of functioning in the workplace. Claimant is pessimistic about his ability to rehabilitate himself even though several physicians have advised claimant to find employment in the sedentary to light categories of labor. No physician has precluded claimant from working. Claimant appears to be standing in the way of rehabilitation.

The deputy also acknowledged Mlady was receiving social security disability benefits and was not motivated to find gainful employment because he did not want to lose the benefits he currently received. No one appealed the deputy's decision.

Mlady filed a review-reopening petition in the spring of 2010. The case proceeded to a hearing in front of a different deputy workers' compensation commissioner in December 2010. The deputy issued his decision February 3, 2011, in which he found Mlady demonstrated an economic change in condition since the original decision which resulted in permanent and total disability. The deputy noted,

It was assumed that the claimant would work if only he demonstrated motivation. This record shows that given the claimant's physical condition caused by the work injury he is unable to secure gainful employment. It has been over seven years since the injury and over a year since the arbitration hearing and there has been no improvement in the claimant's employability.

The deputy ordered the payment of permanent total disability benefits to commence as of the date of the injury with credit for benefits paid under the prior order. After the decision, which taxed costs of the action to the employer, the deputy filed a nunc pro tunc order specifically providing the employer had to pay the cost of an independent medical examination (IME) in the amount of $600, pursuant to Iowa Code section 85.39 (2011); the filing fee and service of process fee totaling $111.08; and a vocational rehabilitation evaluation in the amount of $1410, pursuant to Iowa Administrative Code rule 876–4.33. The deputy denied the application of costs for a functional capacity evaluation as it did not appear to be required as a part of the IME.

The employer filed an intra-agency appeal to the commissioner who, after a de novo review of the record, on December 15, 2011, affirmed the deputy's finding of permanent total disability based on a change in economic condition and also concluded Mlady proved a change in physical condition, which also warranted an award of permanent total disability benefits. The commissioner noted,

[C]laimant has provided convincing evidence that his physical condition has also deteriorated since the arbitration hearing. Claimant has provided examples of activities of daily living which are impacted by his pain and he has also developed debilitating headaches and increasing back pain with radiculopathy. As noted in Kohlhaas[ v. Hog Slat. Inc., 777 N.W.2d 387 (Iowa 2009)] while issues of res judicata still apply in a claim for review-reopening, the agency is charged with determining if the facts and circumstances of claimant's disability have changed since the time of the arbitration hearing. Herein they have clearly substantially changed. The presiding deputy commissioner properly found that claimant cannot obtain employment in the competitive labor market and has sustained a 100 percent loss of earning capacity. Defendants' assertion that claimant's condition has improved since the arbitration hearing is completely without merit on the present record.

The commissioner affirmed the commencement date of the permanent total disability benefits and the assessment of costs from the deputy's nunc pro tunc order.

The employer filed a petition for judicial review of the commissioner's decision with the district court. In October 2012, the district court entered its ruling denying the employer's petition. The district court found substantial evidence to support the commissioner's factual findings that Mlady sought employment after the arbitration hearing and that work outside Mlady's immediate vicinity in Nebraska was not possible as lengthy travel causes his back pain to worsen. The court concluded the agency did not commit error in finding a change in economic and physical conditions. It also found the commissioner's decision on causation of the change in conditions was not erroneous, was not wholly irrational, and did not ignore important and relevant evidence. The court found there was new evidence considered in the review-reopening action, and thus, the action did not violate the principles of res judicata. The court found substantial evidence supported the agency's ...

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