Cesare Bosco v. Labor & Industry Review Commission
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2004 WI 77 SUPREME COURT CASE NO.: COMPLETE TITLE: OF WISCONSIN 03-0662 Cesare Bosco, Plaintiff-Respondent, v. Labor & Industry Review Commission, Defendant, A.T. Polishing Company and Shelby Insurance Company, d/b/a Insura Property & Casualty Insurance Company, Defendants-AppellantsPetitioners. REVIEW OF A DECISION OF THE COURT OF APPEALS 2003 WI App 219 Reported at: 267 Wis. 2d 293, 671 N.W.2d 331 (Ct. App. 2003-Published) OPINION FILED: SUBMITTED ON BRIEFS: ORAL ARGUMENT: March 9, 2004 SOURCE OF APPEAL: COURT: COUNTY: JUDGE: Circuit Kenosha Bruce E. Schroeder JUSTICES: CONCURRED: DISSENTED: NOT PARTICIPATING: SYKES, J., did not participate. June 15, 2004 ATTORNEYS: For the defendants-appellants-petitioners there were briefs by Michael C. Frohman and Kasdorf, Lewis & Swietlik, S.C., Milwaukee, and oral argument by Michael C. Frohman. For the plaintiff-respondent there was a brief by Gregory A. Pitts and Schoone, Leuck, Kelley, Pitts & Knurr, S.C., Racine, and oral argument by Gregory A. Pitts. 2004 WI 77 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 03-0662 (L.C. No. 02 CV 923) STATE OF WISCONSIN : IN SUPREME COURT Cesare Bosco, Plaintiff-Respondent, v. FILED Labor & Industry Review Commission, JUN 15, 2004 Defendant, Cornelia G. Clark Clerk of Supreme Court A.T. Polishing Company and Shelby Insurance Company, d/b/a Insura Property & Casualty Insurance Company, Defendants-AppellantsPetitioners. REVIEW of a decision of the Court of Appeals. ¶1 faith JON P. WILCOX, J. penalties under This case is an action for bad Wisconsin's Worker's See Wis. Stat. § 102.18(1)(bp)(2001-02).1 Polishing 1 Company and its Affirmed. insurer, Compensation Act. The defendants, A.T. Shelby Insurance Company All references to the Wisconsin Statutes are to the 200102 edition unless otherwise noted. No. 03-0662 (Shelby),2 appeal from a published court of appeals decision, Bosco v. LIRC, 2003 WI App 219, 267 Wis. 2d 293, 671 N.W.2d 331. The court of appeals affirmed a Kenosha County Circuit Court order, Bruce E. Schroeder, Judge, which reversed the conclusion of the Labor and Industry Review Commission (LIRC) that it was fairly debatable whether Wis. Stat. § 102.23(5) required Shelby and A.T. Polishing to make payments to A.T. Polishing's employee, Cesare Bosco, during the appeal on the merits of his worker's compensation claim, even though Shelby conceded that Bosco suffered permanent total disability caused by occupational exposure while he was employed at A.T. Polishing. For the reasons discussed below, we affirm the decision of the court of appeals. I. ¶2 FACTUAL BACKGROUND AND PROCEDURAL POSTURE This case has an extremely lengthy and complex procedural history, which is set forth in full below in order to appreciate the issues involved in this appeal. Bosco employed by A.T. Polishing from 1987 until November 5, 1996. 1993 Bosco however, saw Bosco a doctor continued regarding working at breathing A.T. was In difficulties; Polishing until November 1996 when his doctor took him off work due to asthma. On April 4, 1997, Bosco filed an Application for Hearing with the Worker's Compensation Division 2 of the Department of A.T. Polishing has been continuously represented throughout this litigation by its insurance carrier, Shelby. Therefore, except where it is necessary to refer to each party individually, this opinion refers to both entities collectively as Shelby. 2 No. 03-0662 Industry, Labor and Human Relations (DILHR) regarding his lung disease. ¶3 In his application, Bosco identified the date of injury as "occupational; 7/22/96" and listed his last day of work before disability as "11/96." Bosco alleged that he developed pulmonary problems due to exposure to irritants while employed at A.T. Polishing. Further, Bosco claimed possible total of disability as a result this injury. Shelby, A.T. Polishing's insurer in 1996, filed an answer on June 5, 1997, wherein it admitted exposure alleged in that the "[t]he accident application actually or occupational occurred on or about the time claimed[,]" but denied that "[t]he accident or disease causing injury arose out of the alleged employment." Shelby also denied that Bosco was temporarily or permanently disabled. stated: Shelby left blank the section of the answer that "State exactly what matters are in dispute and your reason for denying liability." ¶4 On February 4, 1998, a hearing was held in front of Administrative Law Judge (ALJ) Thomas R. Jones. At the hearing, the ALJ noted that Shelby admitted it was on the risk from 1994 until Bosco's last day of work and stated: "The defense . . . is the insurance carrier which has been variously known as Shelby Mutual and other names, and it now is willing to concede that an occupational illness exists, though it's not entirely sure that it's the right insurance company." the ALJ noted: 3 Further, No. 03-0662 Before we went on the record Mr. Frohman [counsel for Shelby] asked if he could delay things so he could think about bringing in another insurance carrier to help carry the load. I denied that request as the present medical filings don't seem to indicate that any earlier period of breathing problem was anything but a temporary and separate problem. When the ALJ asked counsel for Shelby if he had any further comments on the issues, counsel for Shelby stated: "No, Your Honor, I think you had it right." ¶5 that The ALJ's August 21, 1998, decision and order noted Shelby conceded Bosco suffered the alleged injury disputed that Bosco was 100 percent totally disabled. but The ALJ found that Bosco was permanently totally disabled due to his work exposure since November 5, 1996. The ALJ ordered that A.T. Polishing and Shelby pay total disability benefits from November 5, 1996, for the rest of Bosco's life. The ALJ further ordered that such payments were to commence in 21 days from the date of the order. ¶6 Shelby appealed to LIRC, arguing that the ALJ's finding of the date of disability November 1996 was incorrect as a matter of law and that the correct date of injury was 1993. Shelby argued that, as a matter of law, the date of injury for occupational disease is the time when the occurs and that liability is set at that time. disability first Shelby asserted that the medical evidence established that Bosco's disability first occurred in 1993. In a decision dated April 27, 1999, LIRC rejected Shelby's claim: In addition, applicant's application alleged an occupational disease in July of 1996, and respondent, 4 No. 03-0662 in its answer, admitted that the accident or occupational exposure occurred on or about the time claimed. The respondent never amended its answer. Apart from the medical evidence recited above, the commission could not now find an earlier date of injury, when a different carrier was on the risk; that carrier was never given any opportunity to present evidence on its behalf because the employer had originally conceded to a July of 1996 date of injury. ¶7 Thereafter, Bosco's attorney sent repeated requests that Shelby pay the permanent total disability benefits pursuant to § 102.23(5).3 apply unless Shelby, contending that the statute did not there were two or more insurers joined in the action, did not pay and commenced an action for review with the circuit court of Kenosha County. circuit court affirmed LIRC's On December 15, 1999, the decision, noting that "[t]he answer which was filed raised no issue respecting the liability of the plaintiff insurer; the plaintiff employer's liability is not questioned." The circuit court remarked that the first time Shelby challenged the date of injury was when it requested a continuance at the administrative hearing, nearly eight months after filing its answer. The court emphasized that no amendment was and made to the answer no effort was made another insurer until that point in the proceeding. court held that because a request for to bring in The circuit continuance must be brought within a reasonable time before the date of the hearing 3 Wisconsin Stat. § 102.23(5) provides: "The commencement of action for review shall not relieve the employer from paying compensation as directed, when such action involves only the question of liability as between the employer and one or more insurance companies or as between several insurance companies." 5 No. under Wis. Admin. Code § DWD 2002)4 80.09(2)(Nov., 03-0662 and the decision to grant a continuance is committed to the discretion of LIRC,5 it was required to uphold the decision of the commission. ¶8 Shelby again appealed, and the court of appeals affirmed the circuit court, noting that Shelby had essentially waived any date of injury defense by making a pleading error. A T Polishing Co. v. LIRC, No. 00-0343, unpublished slip op., ¶1 (Wis. Ct. App. Oct. 18, 2000). The court of appeals reasoned: By not making a timely amendment to the answer, Bosco was not apprised of the fact that Shelby wanted to contest the date of injury and Sentry Insurance, the worker's compensation carrier for A T Polishing in 1993, was not made a party to the lawsuit. Therefore, Shelby failed to join the issue and was not free to belatedly claim, prior to the start of the hearing before the ALJ, that July 22, 1996, was not the date of injury. Id., ¶6. Therefore, the court of appeals concluded that "LIRC's refusal to allow argument on the issue of date of injury was not only reasonable, it was compelled." ¶9 January This 16, court 2001. denied The Id., ¶5. Shelby's merits of petition the for underlying review on worker's compensation claim have therefore been finally adjudicated and are no longer at issue. Shelby did not make any payments to Bosco until this court denied its petition for review. 4 All subsequent references to the Wisconsin Administrative Code are to the November 2002 version unless otherwise noted. 5 See Wis. Stat. § 102.17. 6 No. ¶10 03-0662 Meanwhile, on January 14, 2000, Bosco filed an amended Application for Hearing, seeking bad faith penalties under § 102.18(1)(bp)6 and Wis. Admin. Code § DWD 80.70(2)7 for failure to pay the permanent total disability award ordered by the ALJ pending appeal, as required by § 102.23(5). On February 18, 2002, the ALJ entered an order rejecting Bosco's claim for bad faith penalties under § 102.18(1)(bp). The ALJ specifically found that Shelby and A.T. Polishing were not required to make payments pending appeal under § 102.23(5). Finally, the ALJ's order denied jurisdiction for Bosco to litigate a claim under 6 Wisconsin Stat. § 102.18(1)(bp) provides: The department may include a penalty in an award to an employee if it determines that the employer's or insurance carrier's suspension of, termination of or failure to make payments or failure to report injury resulted from malice or bad faith. This penalty is the exclusive remedy against an employer or insurance carrier for malice or bad faith. The department may award an amount which it considers just, not to exceed the lesser of 200% of total compensation due or $15,000. The department may assess the penalty against the employer, the insurance carrier or both. Neither the employer nor the insurance carrier is liable to reimburse the other for the penalty amount. The department may, by rule, define actions which demonstrate malice or bad faith. 7 Wisconsin Admin. Code § DWD 80.70(2) states: An insurance company or self-insured employer who, without credible evidence which demonstrates that the claim for the payments is fairly debatable, unreasonably fails to make payment of compensation or reasonable and necessary medical expenses, or after having commenced those payments, unreasonably suspends or terminates them, shall be deemed to have acted with malice or in bad faith. 7 No. 03-0662 Wis. Stat. § 102.22(1) for inexcusable delay, as this claim was not pled in the hearing application. ¶11 Bosco appealed to LIRC, which, by order dated June 28, 2002, affirmed the order of the ALJ. Unlike the ALJ, LIRC did not provide a definitive interpretation of § 102.23(5). Rather, LIRC determined that the statute was susceptible to more than one reasonable meaning such that it was fairly debatable whether Shelby was required to make payments under § 102.23(5). LIRC ruled: Mutual's 'lacked "The commission cannot conclude reading of Wis. Stat. § 102.23(5) a reasonable basis.'" Thereafter, is that Thus, Shelby unreasonable on July 3, or 2002, Bosco filed a complaint in Kenosha County Circuit Court seeking review of LIRC's decision. ¶12 On December 30, 2002, the circuit court, Judge Schroeder presiding, reversed the decision of LIRC and remanded for further proceedings on Bosco's bad faith claim. court ruled § 102.23(5). that LIRC erred in its The circuit interpretation The court reasoned: The decision of this court in the prior action between the parties contained, on its third page, the explicit finding: "the . . . employer's liability is not questioned." In the subsequent appeal, in which this court's decision was affirmed by the court of appeals and a petition for review denied by the supreme court, no issue was taken with that finding. It was therefore clear that the plaintiff was entitled to the payment of benefits from A.T. Polishing. The appeal concerned the date of the injury, and was an effort by Shelby to force another insurer to bear the cost. The plaintiff's substantial rights, and those of A.T. Polishing, were fixed, regardless of the outcome of the appeal, with only the final sum and obligated insurer potentially subject to adjustment after the 8 of No. 03-0662 appeal, a situation identical to that contemplated by the statute. In reversing LIRC's decision, the circuit court noted that the entire appeal on the merits was "a tardily-conceived effort by Shelby to escape liability on the claim[.]" Because the original appeal was merely a coverage dispute, the circuit court ruled that "[n]either Shelby, nor A.T. Polishing, was relieved of the obligation to make the required payments." ¶13 Shelby then appealed to the court of appeals. The court of appeals affirmed the circuit court and remanded to LIRC to consider whether A.T. Polishing, Shelby, or both were liable for bad faith § 102.23(5). concluded penalties under the proper Bosco, 267 Wis. 2d 293, ¶36. that § 102.23(5) is plain and interpretation of The court of appeals unambiguous: intent of [the statutory] language is unequivocal: "The an employer must make payment of benefits during judicial review when the only question is who will pay the benefits." in original). Id., ¶32 (emphasis The court reasoned that "[a]n interpretation of Wis. Stat. § 102.23(5) that would permit an employer or insurer to impugn liability on a phantom insurance company would be tantamount to permitting employers and insurers to engage in mischief and to avoid paying benefits that they concede are due to the injured employee." Id., ¶33. II. ISSUES 9 No. ¶14 03-0662 The present appeal involves two related issues: 1) whether § 102.23(5) unambiguously requires an employer8 to pay benefits to an employee upon commencement of an action for judicial review of LIRC's award when only the date of injury is challenged suffered on appeal, permanent but total it is conceded disability that that was the caused employee by his employment with the employer, such that failure to make payment pending appeal could not be based on a reasonable interpretation of § 102.23(5); and 2) whether an insured employer is subject to bad faith penalties under § 102.18(1)(bp), separate insurer, for failure to comply with § 102.23(5). from its We answer both questions in the affirmative. 8 We recognize that because the Worker's Compensation Act requires almost all employers to carry insurance to cover all & liabilities under the Act, see Wis. Stat. §§ 102.28(2) 102.31(1)(b), it is most likely that an insurer would pay benefits under § 102.23(5) when its insured becomes obligated to do so, either by indemnifying the employer or paying benefits directly on its behalf. The terms of the insurance policy will govern whether the employer will make payments directly or through its insurer. Wis. Stat. § 102.30(5). Also, we note: In a typical tripartite insurance relationship involving an insurer, the insured, and the insurance defense attorney, the insurer has a duty to retain and pay for an attorney to represent the policyholder/insured when the insured is sued by a third party. As such, the insurer maintains the right to control the defense, the settlement of a claim, and the payment of a claim within policy limits. Marten Transp., Ltd. v. Hartford Specialty Co., 194 Wis. 2d 1, 18, 533 N.W.2d 452 (1995)(internal citation omitted). 10 No. ¶15 03-0662 We conclude that § 102.23(5) unambiguously requires an employer to make payment to a disabled employee pending appeal of a date of injury defense in an occupational disease case when the employer's liability is not disputed on appeal and the only question is who will pay benefits. Shelby's interpretation of Therefore, we hold that § 102.23(5) is not reasonable or fairly debatable as a matter of law because Shelby's original appeal did not contest A.T. Polishing's liability and involved only the question of whether Shelby was liable to pay benefits. Further, because § 102.18(1)(bp) specifically allows for the imposition of bad faith penalties on an employer for failure to pay benefits and because § 102.23(5) specifically directs the employer to pay benefits pending an appeal when the only issue is who will subject pay to benefits, bad faith we hold that penalties an employer under may be § 102.18(1)(bp), independent from its insurer, when it fails to pay benefits in accordance with § 102.23(5). III. STANDARDS OF REVIEW ¶16 When reviewing an appeal from a circuit court in an administrative review proceeding, this court reviews the decision of the agency, not that of the circuit court or ALJ. See Motola v. LIRC, 219 Wis. 2d 588, 597, 580 N.W.2d 297 (1998); Lopez v. LIRC, 2002 WI App 63, ¶9, 252 Wis. 2d 476, 642 N.W.2d 561. ¶17 the Section 102.18(1)(bp) provides, in relevant part, that Department of Workforce Development (DWD) may include a penalty in an award to an employee if the department determines 11 No. that "the make employer's or insurance payments . . . resulted Wis. Stat. § 102.18(1)(bp). penalties for bad faith carrier's . . . failure from A 03-0662 malice claimant failure to or bad seeking make § 102.18(1)(bp) must prove two elements: to faith." to impose payments under 1) the employer or insurer did not have a reasonable basis for denying benefits; and 2) the employer or insurer knew it lacked a reasonable basis for denying benefits or recklessly disregarded reasonable basis for denying payment. a lack of a See Brown v. LIRC, 2003 WI 142, ¶¶24-26, 267 Wis. 2d 31, 671 N.W.2d 279. ¶18 A determination of bad faith under presents a mixed question of fact and law. § 102.18(1)(bp) Id., ¶10. The historical conduct of a party constitutes an issue of fact, and we will sustain LIRC's factual determinations supported by credible and substantial evidence. facts are undisputed: award of the ALJ, § 102.23(5). if Id. they are Here, the Following LIRC's decision affirming the Bosco Shelby, demanded based on payment its of benefits under interpretation of § 102.23(5), refused and did not begin to make payments until this court denied its petition for review. ¶19 Whether a party's conduct rises to the level of bad faith under § 102.18(1)(bp) is a question of law. Wis. 2d 31, ¶11. Brown, 267 LIRC concluded that Shelby did not engage in bad faith because Shelby's interpretation of § 102.23(5) was not unreasonable and therefore it was fairly debatable whether § 102.23(5) required Shelby to make disability payments to Bosco during the original appeal. In Brown, we determined that LIRC's 12 No. 03-0662 conclusion concerning whether a party's conduct constitutes bad faith is However, entitled even under to great the weight great deference. weight standard, Id., we ¶17. will not uphold an agency's interpretation of a statute if it is contrary to the clear meaning of a statute. Beverly Enters., Inc. v. LIRC, 2002 WI App 23, ¶18, 250 Wis. 2d 246, 640 N.W.2d 518. ¶20 In addition, unlike Brown, LIRC's bad faith determination in the present case did not involve any value or policy choices based on the party's conduct; rather, LIRC based its conclusion regarding bad faith solely on its interpretation of § 102.23(5), a statute which it admitted it had no previous experience interpreting. In fact, there is no reported case interpreting § 102.23(5). Further, LIRC did not actually render a definitive interpretation of § 102.23(5); it merely determined that § 102.23(5) was susceptible to more than one reasonable interpretation and that Shelby's interpretation of § 102.23(5) that payment is not required pending appeal of the date of injury unless two or more insurers are part of the proceeding was not unreasonable. Generally, "[n]o deference is due an agency's conclusion of law when an issue before the agency is one of first impression or when an agency's position on an issue provides no real guidance." ¶21 Brown, 267 Wis. 2d 31, ¶14. We determine that LIRC's conclusion that Shelby did not engage in bad faith for failing to make payments pending appeal under § 102.23(5) is entitled to no deference because LIRC based its bad faith conclusion solely on an interpretation of a statute with which it has no prior experience interpreting, 13 No. its interpretation in this case will provide no 03-0662 guidance to future litigants, and because we ultimately conclude that LIRC's interpretation of § 102.23(5) is contrary to the plain meaning of the statute. ¶22 Therefore, we examine de novo whether § 102.23(5) unambiguously required A.T. Polishing to make payments to Bosco pending the appeal on the merits of this case such that Shelby or A.T. Polishing did not have a reasonable basis for denying benefits. In addition, the second issue whether an insured employer is subject § 102.18(1)(bp), to separate bad from faith its penalties insurer, for under failure comply with § 102.23(5) was not addressed by LIRC. to Rather, the second issue was first raised by the parties at the court of appeals in "[n]either response Shelby, to nor the A.T. circuit court's Polishing, obligation to make the required payment." was statement relieved of that the Thus, we review de novo whether § 102.18(1)(bp) permits the imposition of bad faith penalties upon an insured employer, separate from its insurer, for failure to comply with § 102.23(5). ¶23 Both statutory issues language to before a us set require of facts. the application When of interpreting statutes, our goal is to give effect to the language in the statute. State ex rel. Kalal v. Circuit Court for Dane County, 2004 WI 58, ¶43, ___Wis. 2d ___, ___N.W.2d ___. We begin by looking to the language of the statute because we "assume that the legislature's language." intent Id., ¶44. is expressed in the statutory Technical terms or legal terms of art 14 No. 03-0662 appearing in the statute are given their accepted technical or legal definitions while nontechnical words and phrases are given their common, everyday meaning. that are specifically definition Concerned the for defined ___Wis. 2d ___, in legislature Cranes 677 and Wis. Stat. § 990.01(1). a has statute are provided. Doves DNR, In N.W.2d 612. accorded the Wis. v. 2004 addition, Terms Citizens WI ¶6, read we 40, the language of a specific statutory section in the context of the entire statute. its textually Thus, we interpret a statute in light of Id. manifest scope, context, and purpose. Kalal, ___Wis. 2d ___, ¶48 & n.8. ¶24 "'If this process of analysis yields a plain, clear statutory meaning, then there is no ambiguity and the statute is applied according to this ascertainment of its meaning.'" Citizens Concerned for (quoting Bruno Milwaukee v. Cranes and Doves, County, Wis. ___Wis. 2d ___, 2003 WI 28, ¶20, ¶6 260 Wis. 2d 633, 660 N.W.2d 656). If the statute is unambiguous, there to is no legislative need to history; resort we simply extrinsic apply the unambiguous statute to the facts before us. not ambiguous merely meaning or because conclusions. because different Id., ¶7. the parties courts have sources such language Id. as of an A statute is disagree reached as to its different A statute is ambiguous if it is "readily susceptible to two or more meanings by reasonably well-informed individuals." Id. (citing Lincoln Sav. Wis. 2d 430, 441-42, 573 N.W.2d 522 (1998)). IV. ANALYSIS 15 Bank v. DOR, 215 No. A. 03-0662 Wisconsin Stat. § 102.23(5) ¶25 Wisconsin Stat. § 102.23(5) provides: "The commencement of action for review shall not relieve the employer from paying compensation as directed, when such action involves only the question of liability as between the employer and one or more insurance companies." companies or as between several insurance The heart of this dispute is whether by contesting Bosco's date of injury on the appeal on the merits, Shelby was appealing employer "only and one the or question more of liability insurance as companies between or as the between several insurance companies," Wis. Stat. § 102.23(5), or whether Shelby was contesting the ultimate liability of A.T. Polishing. ¶26 Shelby argues that § 102.23(5) applies only to cases where liability for a specific date of injury is undisputed and the only issue on appeal is whether the employer had insurance coverage for that date or which insurance company was on the risk for that particular date. According to Shelby, the statute does not apply where the issue on appeal is when the employee became disabled. liability in Shelby asserts that under Wis. Stat. § 102.03, worker's compensation specific date of injury. cases attaches only to a Therefore, Shelby contends that by challenging the 1996 date of injury on its original appeal, it was challenging the ultimate liability of A.T. Polishing and was not simply contesting coverage. As Shelby explains, the issue on the original appeal was whether A.T. Polishing was liable for a 1996 date of injury. Shelby argues that had it been successful in arguing that the date of injury was 1993, A.T. 16 No. 03-0662 Polishing would not have automatically been liable for a 1993 date of injury; rather, according to Shelby, Bosco would have to file another Application for Hearing asserting a 1993 date of injury, join the appropriate insurer, and prove A.T. Polishing was liable for a 1993 date of injury. ¶27 At oral argument, Shelby clarified that while it conceded Bosco suffered a permanent total disability and while it conceded the permanent total disability was caused by occupational exposure at A.T. Polishing, it never conceded that A.T. Polishing was liable for a 1996 date of injury. Shelby asserts that A.T. Polishing's liability was not fixed simply because it conceded a permanent total disability that was caused by occupational exposure as liability must be linked to a specific date of injury in order for an employer to be held liable for that injury. ¶28 Finally, Shelby asserts that a challenge to the date of injury is only a challenge to coverage if there are several insurers joined in the action who were on the risk at different dates. However, where there is only one insurer joined in the action, a challenge to the date of injury contests the ultimate liability of both the employer and insurer. Shelby notes that while it attempted to implead another insurer who was on the risk in 1993, the ALJ prevented it from doing so. ¶29 Bosco, on the other hand, asserts that Shelby's entire appeal was a last minute attempt to avoid its responsibility and force coverage on another insurer who was on the risk in 1993. Bosco notes that in its answer, 17 Shelby conceded Bosco's No. occupational exposure occurred contested only causation. time of the around the time 03-0662 alleged and In addition, Bosco states that by the administrative hearing, Shelby conceded Bosco's injuries were caused by occupational exposure at A.T. Polishing. Bosco notes that the ALJ stated that Shelby was merely trying to bring in another insurer to "help carry the load." that because conceded Shelby that Bosco contested was only the permanently date totally Bosco argues of injury disabled due and to occupational exposure at A.T. Polishing, the only question on appeal was whether Shelby was liable for paying benefits or whether the insurer on the risk in 1993 would pay benefits. According to Bosco, A.T. Polishing's liability became fixed once Shelby conceded that Bosco was permanently totally disabled due to occupational exposure at A.T. Polishing. ¶30 Bosco contends that A.T. Polishing would still be liable if Shelby had been successful in arguing that the date of injury was 1993. Bosco notes that the only practical difference had Shelby been successful would have been that the rate of disability payments would have been different and the checks would have according to been coming Bosco, the from a date of different injury insurer. bears only Thus, on the question of which insurer is liable for disability payments. ¶31 Finally, Bosco argues that Shelby's interpretation of § 102.23(5) runs contrary to the purpose of the Worker's Compensation Act, which is to provide prompt payment to injured employees. According to Bosco, Shelby's interpretation would force injured employees entitled to benefits to wait until all 18 No. 03-0662 issues between insurers are resolved when it is undisputed that the employer is liable for the payments. ¶32 In the original appeal, Shelby contended that November 1996 was not the correct date of injury and, as a matter of law, the proper date of injury was sometime in 1993. It is undisputed that Bosco was employed by A.T. Polishing from 1987 until 1996. At oral argument, Shelby clarified that it has never claimed that Bosco's work-related injury was caused by exposure at another employer. Therefore, we need not address whether a challenge to the date of injury in an occupational disease case is always a challenge to the employer's liability. Rather, the narrow question we address is whether a date of injury defense liability where constitutes it is a challenge conceded that to the the employer's employee suffered permanent total disability that was caused by his occupational exposure with the employer and where the employee was continuously employed with the defendant employer at the time of the alleged alternative date of injury. ¶33 date of liability dependent Shelby's primary argument is that by contesting the injury it because upon the was contesting liability date of for injury A.T. Polishing's worker's under ultimate compensation Wis. Stat. § 102.03. Section 102.03 provides, in pertinent part: (1) Liability under this chapter shall exist against an employer only where the following conditions concur: (a) Where the employee sustains an injury. 19 is No. 03-0662 (b) Where, at the time of the injury, both the employer and employee are subject to the provisions of this chapter. (c)1. Where, at the time of the injury, the employee is performing service growing out of an incidental to his or her employment. . . . . (d) Where the injury is not intentionally selfinflicted. (e) Where the accident or disease causing injury arises out of the employee's employment. . . . . (4) The right to compensation and the amount of the compensation shall in all cases be determined in accordance with the provisions of law in effect as of the date of the injury except as to employees whose rate of compensation is changed . . . . ¶34 We agree with Bosco that Shelby's initial appeal concerned only the issue of who would pay benefits and A.T. Polishing's liability was not in dispute. First, even if Shelby had been successful in arguing that the correct date of injury was 1993, A.T. Polishing would still have met all of the statutory prerequisites to liability under § 102.03 so that a finding of a 1993 date of injury would have had no practical effect in commentator regard has to A.T. noted, Polishing's "[t]he liability. date of As disability one [for occupational disease] is important because it determines which provisions of law (including the maximum limitations on wages and benefits) govern the claim, and which employer or insurer is liable." John D. Neal & Joseph Danas, Compensation Handbook § 3.4 (5th ed. 2003). 20 Jr., Worker's Under § 102.03, the No. 03-0662 date of injury is relevant to liability in three circumstances: 1) at the time of the injury both the employee and employer must be subject to Wisconsin's Worker's Compensation Act, § 102.03(1)(b); 2) at the time of the injury, the employee must be performing services growing out of or incidental to his employment, § 102.03(1)(c)1.; and 3) the right to compensation and the amount is determined by the law in effect at the time of injury except for changes in the rate of compensation. Wis. Stat. § 102.03(4). ¶35 There is no dispute that in 1993 both Bosco and A.T. Polishing were subject to the Worker's Compensation Act. Likewise, because it is undisputed that Bosco was employed at A.T. Polishing in 1993, there can be no dispute that in 1993 Bosco was performing services related to his employment when his injury allegedly occurred. Also, there has been no allegation that the substantive law governing A.T. Polishing's liability was different in 1993 than it was in 1996. not allege conceded that that Bosco's Bosco's injury condition exposure at A.T. Polishing. Bosco's disease arose "out Wis. Stat. § 102.03(1)(e). was was Moreover, Shelby did self-inflicted caused by and it occupational In other words, it conceded that of Shelby the employee's challenged employment." only the legal conclusion that the date of disability was Bosco's last day of work. that Therefore, even if Shelby had been successful in arguing the correct date of injury was 1993, all of the prerequisites for liability contained in § 102.03(1) would have been met. Had Bosco been employed with a different employer in 21 No. 1993, a date of injury defense would have 03-0662 implicated A.T. Polishing's liability; however, it is undisputed that Bosco was continuously employed with A.T. Polishing from 1993 until 1996. ¶36 Second, while Shelby asserts a new hearing would have been required to hold the 1993 insurer liable had Shelby been successful in its date of injury defense, this argument misses the point. Regardless of whether a new hearing would have been required in order to hold the 1993 insurer liable, a new hearing would not have affected the liability of A.T. Polishing. court has twice recognized that a challenge to the This date of injury when the employee has been continuously employed with the same employer does not affect that employer's liability, but is relevant only to the issue of which insurance carrier is responsible for making payments. ¶37 In Maryland Casualty Co. v. Industrial Commission, 230 Wis. 363, 284 N.W. 36 (1939), an employee filed for worker's compensation benefits alleging a date of injury in 1933; the insurance carrier as of the alleged date of injury, Employers Mutual, was made a party to the proceeding. Id. at 364. At the hearing, it was determined that the correct date of injury was in 1932. Mutual The Commission initially paid. awarded Id. at benefits, 364-65. which Employers However, Employers Mutual later discovered that it was not on the risk in 1932 and petitioned for a new hearing. At the hearing, Maryland Casualty, the insurer on the risk in 1932, contended that the Commission was without jurisdiction because it was not properly made a party. Id. at 366-67. 22 While additional evidence was No. taken at the second hearing, Maryland Casualty 03-0662 declined to request a de novo hearing on all the issues, instead claiming it could not be made a party to the proceeding. Id. at 367. After the hearing was concluded, the Commission again awarded benefits and ordered that Maryland Casualty was liable for payments from the time Employers Mutual stopped paying. ¶38 Casualty On appeal argued, to inter the Wisconsin alia, that Id. at 368. Supreme it was Court, not liable Maryland to pay benefits because it did not have timely notice of the claim. Id. at 371. The court, in ruling that the relevant statute required notice only to the employer, stated: being bound, its insurer was bound with it. was bound was determined in the former "the employer That the employer proceeding. . . . The liability of the employer, Douglass county, was fixed by the first proceeding." ¶39 Id. at 371-72 (emphasis added). In Miller Brewing Co. v. LIRC, 173 Wis. 2d 700, 495 N.W.2d 660 (1993), we again recognized that where an employee is continuously employed with the same employer, a date of injury defense affects only the liability of the various insurers and does not affect the employee's rights vis-à -vis its employer. In Miller Brewing, compensation, aggravated the alleging his employee that the post-traumatic filed a harassment stress claim of disorder. for his worker's co-workers Id. at 708. DIHLR awarded benefits, concluding that the employee's date of injury was the last day the employee worked for Miller Brewing, rather than the date when his first harassment-related absence occurred. Id. at 709. During the relevant time period, Miller 23 No. Brewing had two insurers: Union) was on the risk 03-0662 National Union Insurance (National when the employee's absences first occurred, and Twin City Insurance (Twin City) was the insurer during the period when Miller Brewing. Id. the employee ended his employment at After determining the date of injury, DIHLR dismissed National Union. Id. LIRC subsequently affirmed DIHLR's conclusion that the employee had suffered a compensable occupational disease as a result of his employment, but determined that the correct date of injury was the first date of the employee's National City. wage Union was loss; liable therefore, for LIRC payment and determined that dismissed Twin it Id. ¶40 Miller Brewing and National Union filed an action for judicial review, defendants. Id. naming only LIRC and the employee as On appeal before this court, the sole issue was whether, under Wis. Stat. § 102.23(1)(a)(1989-90), Twin City was an "adverse party" such that it was required to be made a party to the appeal. Union's argument was Id. at 711. that it and The linchpin of National Twin City were united in interest because neither had asserted a date of injury defense; rather, both had asserted that the employee's injury was not caused by his employment. Id. at 718. This court, in concluding that the action was properly dismissed for failure to join an adverse party stated: "We conclude that in this case the respective liability of the two insurance companies depends upon the determination of the date of injury." Id. at 722. In addition, we noted that the question of which insurance company 24 No. 03-0662 was liable did not affect the employee's right to recover from the employer. Id. at 721. Thus, our case law establishes that a challenge to the date of injury when the employee has been continuously employed with the same employer does not affect the employer's liability, but is relevant only to the issue of which insurance carrier is responsible for making payments because the employer's liability was established at the first hearing. ¶41 Finally, the position Shelby took during the original appeal completely belies its current position that the appeal was not merely an attempt to shift liability to another insurer. In his Application for Hearing, Bosco listed the date of injury as July 22, 1996. accident or In its answer, Shelby admitted that "[t]he occupational exposure alleged in actually occurred on or about the time claimed."9 the application The first time Shelby asserted its date of injury defense was the day of the original administrative hearing. At the hearing, the ALJ noted that Shelby was "willing to concede that an occupational illness exists, though it's insurance company." not entirely sure that it's the right The ALJ stated that the sole issue was whether A.T. Polishing and Shelby would "have to pay on a 1996 total perm claim, whether it's total or some other lesser amount 9 Shelby claims that simply admitting that the exposure occurred during the time alleged does not mean that it conceded Bosco's injury occurred during this time. However, Shelby eventually conceded that Bosco's permanent total disability was caused by the occupational exposure at A.T. Polishing. It seems perplexing to argue that the exposure causing Bosco's injury occurred sometime in 1996 but his injury occurred earlier in 1993. 25 No. as far as the extent of disability." 03-0662 When asked if he wanted to comment further on the issues, Shelby's counsel stated: Your Honor, I think you had it right." "No, The ALJ's decision stated: [The claim] alleges an occupational asthma work injury with a last day of work of November 5, 1996. The claim is for total disability and past and future treatment expenses. The carrier now accepts that the applicant did sustain this work injury, but has not paid benefits to date. It contends that permanent injury should be 15 percent, rather than 100 percent. (Emphasis added.) ¶42 Perhaps most damaging for Shelby are the statements contained in its brief initial decision of LIRC. to the circuit court, appealing the Shelby argued: If a single employer has had successive insurers, liability is imposed upon the insurer whose policy was in force at the time the disability occurred. The factual record establishes without doubt that the applicant's lung disability began in 1993, before Shelby Insurance Company came on the risk for A T Polishing Company. Resp't Br. at 107 (citations omitted). Further, Shelby asserted: The statute provides for recovery of occupational disease benefits against the carrier on the risk as of the date of injury. If the correct date of injury is shown to be in 1993 and not in 1996, the applicant must proceed against the carrier on the risk in 1993. The commission lacks statutory authority to order recovery of benefits against an insurance carrier whose policy was not in effect as of the date of injury. . . . 26 No. 03-0662 The commission has erred in its conclusion of law that Shelby Insurance Company is responsible for occupational disease benefits based on a date of injury of November 5, 1996. Id. at 110-11 (emphasis added).10 ¶43 Indeed, in the circuit court's original decision, it specifically stated, "the plaintiff employer's liability is not questioned." The circuit court, when considering the present bad faith appeal, emphasized that no issue was taken with this factual finding during the original appeal, noting that the original appeal was "a coverage issue, and camouflaging it as a dispute over the date of the loss does not alter that fact." ¶44 We conclude, based on § 102.03, Maryland Casualty, Miller Brewing, and the record before us that A.T. Polishing's liability was fixed at the first proceeding and the initial appeal concerned only the question of whether Shelby was liable to pay benefits. Because Shelby conceded that Bosco's permanent total disability was caused by occupational exposure during his employment at A.T. Polishing and Bosco was continuously employed at A.T. Polishing from 1993 until 1996, Shelby's initial challenge to the date of Bosco's injury was not a challenge to the liability of A.T. Polishing. Rather, by alleging that the correct date of injury was 1993, Shelby was challenging only its 10 In addition, the record contains an activity log report from Shelby concerning A.T. Polishing. An entry dated February 4, 1998, signed by one Ronald Aldridge, discussing Bosco's claim against A.T. Polishing, evidences that Shelby's entire strategy all along was to absolve itself from liability. The entry states: "If Dr. Levy gives us a favorable opinion on this case stating no change since '93 or early '94 prior to Shelby Ins. involvement, we will not pay a dime on it." 27 No. liability and attempting to place liability on 03-0662 the 1993 insurance carrier. ¶45 payment The to unambiguous the decision "when liability as companies injured such as employee action between or language the Wis. Stat. § 102.23(5). § 102.23(5) pending involves employer between in appeal only and one several the or requires of LIRC's question more insurance of insurance companies." We agree with the court of appeals that this language is unequivocal: "an employer must make payment of benefits during judicial review when the only question is who will pay the benefits." in original). Bosco, 267 Wis. 2d 293, ¶32 (emphasis The facts of this case fall squarely within the statutory language. ¶46 As demonstrated above, A.T. Polishing's liability was fixed at the first proceeding. Bosco was permanently Because Shelby had conceded that totally disabled due to occupational exposure at A.T. Polishing, the employer's liability was not in question; indeed, under this set of facts employer that could have been liable. it was the only A successful challenge would not have affected Bosco's rights vis-à -vis A.T. Polishing, except perhaps by changing the rate of disability. The record is clear that the original appeal in this case involved only the question Under of these Shelby's facts, liability, the date of not that injury of was A.T. Polishing. relevant only to whether Shelby was liable or whether A.T. Polishing would be required to seek payment from its 1993 insurer. Because the original appeal involved only the issue of who was liable for 28 No. 03-0662 benefits, the issue concerned only "liability as between the employer several and one insurance or more insurance as between Wis. Stat. § 102.23(5). companies." companies or Thus, the plain language of § 102.23(5) required A.T. Polishing to make payments to Bosco during appeal, either directly or through its insurer. ¶47 We find no support for Shelby's position that § 102.23(5) applies only where two or more insurers are parties to the original hearing. First, the text of the statute does not require that two insurance companies must be joined in the action in order for its provisions to apply. To permit an insurer make to shirk its statutory obligations to payment pending appeal when it contends that another carrier is liable simply because the other insurer is not a party to the action would contravene the statutory language. ¶48 Moreover, Shelby's position defeats the manifest purpose of the Worker's Compensation Act. textually As has long been recognized by courts in this state, the purpose of the Worker's Compensation Act "is to give prompt relief to injured employees who are entitled to compensation." Schneider Fuel & Supply Co. v. Indus. Comm'n, 224 Wis. 298, 301, 272 N.W. 25 (1937).11 Because the purpose of the Act is to "provide prompt justice for injured workers and to prevent, as far as possible, the delays that might arise from protracted litigation[,] [t]he 11 See also McDonough v. DWD, 227 Wis. 2d 271, 280, 595 N.W.2d 686 (1999); Chappy v. LIRC, 128 Wis. 2d 318, 329-30, 381 N.W.2d 552 (Ct. App. 1985). 29 No. proceedings should be as simple and as speedy as 03-0662 possible." Employers Health Ins. Co. v. Tesmer, 161 Wis. 2d 733, 738, 469 N.W.2d 203 (Ct. App. 1991)(citations omitted). This purpose is reflected in the express language of § 102.23(5), which requires payment liability to the employee for such payments challenged on appeal. the arrangements during appeal has been payments. that between Thus, the the employer's established and is not The statutory language demonstrates that the employer irrelevant from the perspective of established if employer § 102.23(5) is the and insurer employee, liable requires its to prompt once make payment are it is benefit to the insured when the only issues on appeal are collateral issues regarding the indemnification of the employer. Had Shelby been successful on appeal and another hearing been required to hold the 1993 insurer responsible, this run-of-the-mill case would have been saddled with another entire layer of litigation and would have delayed payment to Bosco even longer, even though the liability of A.T. Polishing for those payments was fixed at the first proceeding. ¶49 In addition, we note the original appeal in this case resulted from Shelby's failure to amend its pleading or timely request a continuance in order to bring in the 1993 insurer. oral argument, Shelby conceded that payment would have At been required under § 102.23(5) had it been successful in bringing another insurer into the action. Were we to hold that payment pending appeal is not required under § 102.23(5) when the only question on appeal is which insurer will have to pay, simply 30 No. 03-0662 because one insurer failed to successfully bring the other into the proceeding, § 102.23(5) we would dependent upon be rendering parties' the pleading operation choices. of The language of § 102.23(5) does not provide that its requirements are contingent upon there being another insurer joined in the action. We decline to accept Shelby's invitation to read limiting language into § 102.23(5). ¶50 requires Therefore, we conclude that § 102.23(5) unambiguously an employer to make payment to a disabled employee pending appeal of a date of injury defense in an occupational disease case when the employer's liability is not disputed on appeal and the only question is who will pay benefits. Because A.T. Polishing's liability was not contested on appeal, and the only issue on appeal was who would pay benefits, under the plain language of § 102.23(5), A.T. Polishing should have paid compensation to Bosco.12 12 Because § 102.23(5) unambiguously required A.T. Polishing to make payments to Bosco on appeal and Shelby was in control of A.T. Polishing's defense, it had a duty to either make payment on A.T. Polishing's behalf, if its policy so provided, or, if not, to instruct A.T. Polishing that it (A.T. Polishing) was required to make payments less it be subject to bad faith penalties. "When, as here, the insurer undertakes and controls the defense of a claim against its insured, it has a duty not only to protect itself to the extent of its liability but it must act in good faith to protect the interest of its insured. If it fails to do so it is liable to its insured for the amount the insured required over and above the policy limits." 31 No. ¶51 03-0662 The statutory scheme is clear that when there is only a dispute concerning who pays benefits on appeal, the employer, directly or through its insurer, is required to promptly pay the compensation award to the employee and any issues concerning reimbursement can be litigated Wis. Stat. § 102.18(1)(bw).13 after the appeal. See If it was ultimately determined that the correct date of injury was in fact 1993, Shelby could have petitioned for reimbursement under § 102.18(1)(bw). The circuit court noted that such adjustments are an everyday part of worker's compensation practice. In fact, this is precisely what occurred in Maryland Casualty, 230 Wis. at 364-68: insurer that was originally found to be liable the paid compensation, later determined that it was not the insurer on the risk at the date of injury, and filed a new Application for Hearing, seeking reimbursement from the insurer who was on the risk at the date of injury. Mowry v. Badger State Mut. Cas. Co., 129 Wis. 2d 496, 534, 385 N.W.2d 171 (1986)(quoting Howard v. State Farm Mut. Auto. Ins. Co., 60 Wis. 2d 224, 227, 208 N.W.2d 442 (1973)(emphasis in original)). 13 Wisconsin Stat. § 102.18(1)(bw) provides: If an insurer, a self-insured employer or, if applicable, the uninsured employers fund pays compensation to an employee in excess of its liability and another insurer is liable for all or part of the excess payment, the department may order the insurer or self-insured employer that is liable to reimburse the insurer or self-insured employer that made the excess payment or, if applicable, the uninsured employers fund. 32 No. ¶52 comply 03-0662 We emphasize that we do not hold that the failure to with the dictates constitutes bad faith. of § 102.23(5) in this instance Rather, like the court of appeals, we merely hold that Shelby's interpretation of § 102.23(5) is not reasonable Shelby's or fairly original debatable appeal as did not a matter contest of law A.T. because Polishing's liability and involved only the question of whether Shelby was liable to pay benefits. debatable that A.T. In other words, it was not fairly Polishing, either directly or through Shelby, was required to make payments under § 102.23(5). remand, LIRC will be able to consider all of factors that go into a bad faith determination. the On relevant However, LIRC cannot use Shelby's interpretation of § 102.23(5) to conclude that there was a reasonable basis for denying benefits. B. Wisconsin Stat. § 102.18(1)(bp) ¶53 The employer next is § 102.18(1)(bp), comply issue subject separate with § 102.23(5). we address to bad from In its other is whether insurer, words, insured penalties faith an under for failure we must to determine whether A.T. Polishing may be separately subject to bad faith penalties under § 102.18(1)(bp) for failing to make payments during the original appeal. ¶54 Shelby argues that an insured employer cannot be held separately liable for failure to make benefit payments because an insured employer is under no independent obligation to make benefit payments. According to Shelby, only self-insured employers are required to make benefit payments and therefore, 33 No. 03-0662 only self-insured employers may be held liable for bad faith failure to employee Shelby make may not asserts because its benefit demand that only payments. payment Shelby directly argues from Wis. Stat. § 102.30(4) purpose is to make an that an employer. is inapplicable worker's compensation benefits primary regardless of other insurance. ¶55 that In the contrast, employer Bosco pay notes that benefits § 102.23(5) pending judicial mandates appeal. Further, according to Bosco, § 102.30(4) explicitly permits an employee Moreover, to recover Bosco compensation asserts that directly from an § 102.18(1)(bp) employer. specifically authorizes LIRC to assess penalties against either the insurer or employer, or both. ¶56 Section 102.18(1)(bp), the provision governing the imposition of bad faith penalties, provides, in pertinent part: The department may include a penalty in an award to an employee if it determines that the employer's or insurance carrier's . . . failure to make payments . . . resulted from malice or bad faith. . . . The department may assess the penalty against the employer, the insurance carrier or both. Wis. Stat. § 102.18(1)(bp)(emphasis added). The language of this statute supports Bosco's position because it specifically permits the department to assess penalties against either the insurer or employer. § 102.18(1)(bp) states However, that "[t]he the last department sentence may, define actions which demonstrate malice or bad faith." by 34 rule, In fact, the department has done so in Wis. Admin Code § DWD 80.70. section provides: of This No. 03-0662 (1) An employer who unreasonably refuses or unreasonably fails to report an alleged injury to its insurance company providing worker's compensation coverage, shall be deemed to have acted with malice or bad faith. (2) An insurance company or self-insured employer who, without credible evidence which demonstrates that the claim for the payments is fairly debatable, unreasonably fails to make payment of compensation or reasonable and necessary medical expenses, or after having commenced those payments, unreasonably suspends or terminates them, shall be deemed to have acted with malice or in bad faith. Wis. Admin Code § DWD 80.70. This administrative code provision supports Shelby's position because it deems employers to have acted in bad faith only when they fail to report an injury or claim to their insurer and deems only insurers and self-insured employers to have acted in bad faith for failure to make benefit payments. ¶57 position. Indeed, the secondary authorities also support this In discussing the imposition of bad faith penalties, one authority notes: The test to determine if an employer's failure or refusal to report an injury is malicious or in bad faith is whether the failure or refusal is "unreasonable." As to failure to pay indemnity or medical expenses, the test is whether the insurer or self-insured employer has "credible evidence" that demonstrates that the claim is "fairly debatable." 35 No. 03-0662 John D. Neal & Joseph Danas, Jr., Worker's Compensation Handbook § 7.22 (5th ed. 2003)(emphasis added)(internal citations omitted).14 ¶58 However, we do not believe that Wis. Admin. Code § DWD 80.70 is dispositive of the question before us. Admin. Code constitute exclusive certain § DWD bad list 80.70 faith of merely or circumstances. deems that certain It does not malice. what actions First, Wis. may Because the constitute present actions provide bad issue faith is one an in of first impression, it is not surprising that the department's rules do not cover this specific situation. Also, as noted supra, § 102.18(1)(bp) specifically allows for the imposition of bad faith penalties on an employer or insurer for failure to pay benefits. In addition, chapter 102 repeatedly utilizes the phrase "self-insured employer" when it intends to refer to these entities, but § 102.18(1)(bp) does not refer to insurers and self-insured employers, it refers to insurers and employers. Moreover, the court of appeals has previously recognized that bad faith penalties could be imposed directly on an employer for delay in making payments. See North Am. Mech., Inc. v. LIRC, 157 Wis. 2d 801, 810, 460 N.W.2d 835 (Ct. App. 1990). ¶59 recover Moreover, § 102.30 specifically permits an employee to benefits directly from 14 an employer or insurer and See also Charles B. Palmer, Wisconsin Worker's Compensation Law: A Handbook for Employers § 8.8 (1999)(noting the same distinction between bad faith penalties for employers and self-insured employers). 36 No. 03-0662 provides that recovery against one shall bar recovery against the other: (4) Regardless of any insurance or other contract, an employee or dependent entitled to compensation under this chapter may recover compensation directly from the employer and may enforce in the person's own name, in the manner provided in this chapter, the liability of any insurance company which insured the liability for that compensation. . . . (5) Payment of compensation under this chapter by either the employer or the insurance company shall, to the extent thereof, bar recovery against the other of the amount so paid. As between the employer and the insurance company, payment by either the employer or the insurance company directly to the employee or the person entitled to compensation is subject to the conditions of the policy. Wis. Stat. § 102.30(4)&(5)(emphasis added). when read together, recognize that an These two sections, employee may recover directly from the employer, but whether the employer actually pays the money directly out of pocket, subject to indemnification by the insurer, or whether the insurer pays the money on behalf of the employer is dependent upon the specific insurance policy. Thus, in Miller Brewing, this court recognized that whether an employer is insured has no bearing on the ability of an injured employee's compensation from the employer: right to demand "In any event, the financial arrangements between Miller Brewing and the insurance companies do not appear to affect [the employee]. [The employee] may seek payment from either the employer or the insurance company which is determined to have insured the liability." 37 Miller Brewing, No. 173 Wis. 2d at 721 (citing 03-0662 Wis. Stat. §§ 102.28(2) and 102.30(4)&(5) (1989-90)). ¶60 Most importantly, the specific statute at issue in this case, § 102.23(5), explicitly directs the employer to make payments to the employee pending appeal when the only issue on appeal is who is to pay benefits: for review shall compensation not as "The commencement of action relieve the employer from directed . . . ." § 102.23(5)(emphasis added). paying Wis. Stat. Therefore, because § 102.18(1)(bp) specifically allows for the imposition of bad faith penalties on an employer for failure to pay benefits and because § 102.23(5) specifically directs the employer to pay benefits pending an appeal when the only issue is who will pay benefits, we hold that an employer may be subject to bad faith penalties under § 102.18(1)(bp), independent from its insurer, when it fails to pay benefits in accordance with § 102.23(5). Again, we emphasize that we do not hold that A.T. Polishing is liable for bad faith penalties for failing to comply with § 102.23(5); rather, we merely hold that it may be liable for bad faith penalties under § 102.23(5) if § 102.18(1)(bp) LIRC for determines that failing the to comply prerequisites with for a finding of bad faith are satisfied. ¶61 carry and note worker's that under We that almost compensation insurance must Wisconsin's Wis. Stat. § 102.31(1)(b). all employers insurance, cover all See 38 also required to Wis. Stat. § 102.28(2), liability Worker's are of the employer Compensation State v. Koch, Act. 195 No. Wis. 2d 801, 808, 537 N.W.2d 39 (Ct. App. 03-0662 1995)(worker's compensation insurance must provide coverage for all workers and for all work-related maintains the right activities). to control the Generally, defense of an insurer the insured, settle a claim on its behalf, and pay a claim within the policy limits. Marten Transp. Ltd. v. Hartford Specialty Wis. 2d 1, 18, 533 N.W.2d 452 (1995). Co., 194 Thus, during the defense of a claim, the insured usually acts at the direction of its insurer. If an employee seeks compensation directly from an employer, the employer's insurance policy will govern whether the insurer indemnifies the employer or pays the sum on its behalf. Wis. Stat. § 102.30(5). When bad faith penalties are sought directly against an insured employer for acts occurring after its insurer began handling the defense of the claim, these facts should be taken into consideration in determining whether the employer had a reasonable basis for denying benefits and whether denying the employer benefits knew or it lacked recklessly a reasonable disregarded a basis lack of for a reasonable basis for denying payment. V. ¶62 CONCLUSION We conclude that § 102.23(5) unambiguously requires an employer to make payment to a disabled employee pending appeal of a date of injury defense in an occupational disease case when the employer's liability is not disputed on appeal and the only question is who will pay benefits. Shelby's interpretation of Therefore, we hold that § 102.23(5) is not reasonable or fairly debatable as a matter of law because Shelby's original 39 No. 03-0662 appeal did not contest A.T. Polishing's liability and involved only the question of whether Shelby was liable to pay benefits. Further, because § 102.18(1)(bp) specifically allows for the imposition of bad faith penalties on an employer for failure to pay benefits and because § 102.23(5) specifically directs the employer to pay benefits pending an appeal when the only issue is who will subject to pay bad benefits, faith we hold penalties that an employer under may be § 102.18(1)(bp), independent from its insurer, when it fails to pay benefits in accordance with § 102.23(5). By the Court. The decision of the court affirmed. ¶63 DIANE S. SYKES, J., did not participate. 40 of appeals is No. 1 03-0662
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