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IN THE SUPREME COURT OF IOWA
No. 27 / 05-1400 Filed April 13, 2007 CLIFFORD AYERS, Appellant, vs. D & N FENCE COMPANY, INC. and EMC INSURANCE COMPANIES, Appellees, UNITED FIRE AND CASUALTY COMPANY, Intervenor-Appellee. Appeal from the Iowa District Court for Linn County, Denver D. Dillard, Judge.

Employer and employee appeal the judgment of the district court affirming the decision of the workers' compensation commissioner. AFFIRMED.

David A. O'Brien of Willey, O'Brien, L.C., Cedar Rapids, for appellant.

Michael L. Mock of Bradshaw, Fowler, Proctor & Fairgrave, P.C., Des Moines, for appellee D & N Fence Company.

Anne L. Clark of Hopkins & Huebner, P.C., Des Moines, for appellee EMC Insurance Companies.

2 Chris Scheldrup and Charles A. Blades of Scheldrup Law Firm, P.C., Cedar Rapids, for appellee United Fire & Casualty Company.

3 STREIT, Justice. Be careful what you wish for because it just might come true. Clifford Ayers injured his right knee in 1987 while working for D & N Fence Company. He was paid for an eighteen percent permanent

disability to that lower extremity. In 2002, while still in the employ of D & N, Ayers injured his knee again. He filed a petition for workers'

compensation alleging the 2002 injury caused additional disability to his right leg and resulted in a knee replacement surgery. D & N denied the allegations claiming Ayers's current disability was the result of his 1987 injury and had little or nothing to do with the 2002 injury. The

commissioner agreed with D & N and awarded Ayers medical benefits. D & N cried foul claiming the commissioner should not have imposed liability upon D & N for additional medical expenses based on the 1987 injury when Ayers's petition alleged those expenses were necessitated by the 2002 injury. We conclude the commissioner did not abuse his discretion when he imposed liability for the 1987 injury. D & N was well aware of the earlier injury and even made it the focus of the hearing. Moreover, we find D & N's insurer in 1987 did not have a constitutional right to notice regarding the possible imposition of liability based upon the 1987 injury. Any obligation to notify the insurer was that of D & N. Accordingly, we affirm the district court. I. Facts and Prior Proceedings

Ayers was fifty-six years old at the time of the hearing. He had been working for his brother's company, D & N, for twenty-six years. He began his career as a fence installer and was promoted to foreman, yard

4 foreman, and finally manager of commercial sales, a position he has held since 1989. Ayers's claim in this case involves an injury to his right knee. Ayers first injured his knee in 1987. He was carrying some materials through a doorway at work when he fell. This injury ultimately required arthroscopic surgery resulting in the removal of a significant amount of cartilage. Ayers was found to have sustained an eighteen percent

impairment to his right leg, and accordingly was paid permanent partial disability benefits. In 2002, Ayers injured his right knee at a D & N job site when he stepped in a hole. He twisted his knee and felt significant pain. Ayers immediately left the job site and reported the injury to D & N. A few days later, Ayers saw his family doctor who referred him to Dr. Fabiano, an orthopedic surgeon. Dr. Fabiano concluded Ayers suffered from a medial collateral ligament (MCL) strain. X-rays showed degenerative arthritis. Dr.

Fabiano opined the MCL strain may have "aggravate[d] and startle[d]" Ayers's degenerative arthritis. He performed knee replacement surgery after more conservative treatments did not alleviate Ayers's pain. The

surgery was a success and Ayers returned to work after seven weeks of recovery. In April 2003, Ayers filed a workers' compensation claim for his March 2002 injury. Ayers sought reimbursement for his medical

expenses ($51,174.62), seven weeks of healing period benefits at $599.97 per week, and 110 weeks of permanent partial disability benefits at the same rate. D & N and its insurer, EMC, disputed whether Ayers's 2002 injury caused any new permanent disability and the knee replacement surgery.

5 A deputy workers' compensation commissioner conducted a hearing concerning Ayers's claim. recovery. Ayers pursued two theories of

First, he argued the March 2002 injury aggravated or

accelerated a preexisting condition (degenerative arthritis) and caused both the knee replacement surgery and additional disability to his right leg. Alternatively, Ayers argued the knee replacement surgery and the additional disability were proximately caused by the cumulative effect of the 1988 surgery and fifteen years of walking over uneven terrain while working for D & N. At the beginning of the hearing, the attorney for D & N and EMC stated: I believe there will be testimony . . . in this case that Mr. Ayers' problems with his right knee were ongoing from 1987 to 1988, and that essentially what we're looking at here is not a new injury, but it's simply a continuation of the '87, '88 injury. And it's our position, Your Honor, that all of this is really an ongoing part of the '87, '88 injury. And if you look at--It's really more analogous to Smithart [654 N.W.2d 891 (Iowa 2002)], where everything should be looked at as part of the first injury as opposed to any ongoing injury that we have. The deputy commissioner ruled in favor of D & N finding Ayers "clearly had serious degenerative joint disease prior to March 25, 2002" and that he "failed to prove that the proximate cause of his need for the knee arthroplasty surgery was the work injury." Ayers appealed the deputy's decision to the commissioner arguing inter alia: Even if the court concludes that Ayers' knee replacement surgery was not caused by trauma or cumulative trauma, the medical expenses related to the knee replacement surgery should still be paid . . . [because] the 1987 work related injury was a cause of Ayers' degenerative arthritis condition.

6 In his appeal decision, the commissioner succinctly ruled: Claimant alleged and the parties stipulated that the claimant sustained a traumatic injury on March 25, 2002, when he stepped in a hole. In 1988 claimant had surgery and cartilage was removed from his right knee as a result of a 1987 work-related injury with this same employer for which weekly compensation was paid. All the physicians in this case attribute the knee replacement surgery to the 1988 surgery for the 1987 injury. None clearly attribute the surgery to the 2002 injury. Claimant proved convincingly that the surgery was causally related to the 1987 injury but failed to carry the burden of proving that the 2002 injury was a substantial factor in the need for the surgery. Accordingly, claimant is entitled to recover the requested [medical] benefits under section 85.26(2) for the 1987 injury . . . but he is not entitled to recover weekly compensation for the 2002 injury. The motion to reconsider filed by D & N and EMC alerted the commissioner to the fact United Fire & Casualty Company insured D & N at the time of the 1987 injury. D & N and EMC noted Ayers's petition did not allege entitlement to medical benefits arising from the 1987 injury, and urged any liability for such medical benefits should be relitigated by the proper parties. Ayers also requested a rehearing arguing the

commissioner failed to address the issue of cumulative trauma. In his decision on rehearing, the commissioner modified the decision by relieving EMC from liability and affirmed the remainder of his decision. Ayers filed a petition for judicial review in Linn County. D & N filed a cross-petition for judicial review and United Fire filed a petition to intervene. After United Fire was allowed to intervene, it filed a motion to present additional evidence concerning insurance coverage and

causation of Ayers's current disability and knee replacement surgery. The district court denied United Fire's motion and dismissed all issues pertaining to insurance coverage without prejudice.

7 Thereafter, the district court upheld the commissioner's ruling. It found the commissioner's findings of facts were supported by substantial evidence. The court rejected D & N's argument that the commissioner erred in ordering payment of medical benefits resulting from the 1987 injury when Ayers's petition alleged a 2002 injury date. The court also rejected United Fire's claim it had a right to notice and an opportunity to defend against the imposition of liability based upon the 1987 injury. The court agreed with the commissioner that any obligation to notify United Fire was D & N's obligation pursuant to Iowa Code section 87.10 (2001). The court stated Ayers is entitled to compensation and any dispute between his employer and the employer's insurance companies should not be a basis for delaying his rights. There was no "surprise development" which prejudiced D & N Fence . . . . Ayers filed a notice of appeal. D & N and United Fire filed a notice of cross appeal. Ayers contends the commissioner erred in finding the 2002 injury did not cause permanent disability and the knee

replacement surgery. He argues the commissioner erred by applying the wrong standards to determine whether the 2002 injury aggravated a preexisting condition or was a cumulative injury. He also claims the

commissioner erred by admitting into evidence a second report by D & N's expert because it was created and produced after the case preparation completion date established in the agency's hearing assignment order. D & N and United Fire both argue the commissioner erred by awarding Ayers medical benefits for the 1987 injury because the issue was not properly presented to the commissioner for consideration.

8 II. Scope of Review

" `We review the district court decision by applying the standards of the [Iowa] Administrative Procedure Act to the agency action to determine if our conclusions are the same reached by the district court.' " Univ. of Iowa Hosp. & Clinics v. Waters, 674 N.W.2d 92, 95 (Iowa 2004) (quoting Locate.Plus.Com, Inc. v. Iowa Dep't of Transp., 650 N.W.2d 609, 612 (Iowa 2002)). The Iowa Administrative Procedure Act provides fourteen

grounds upon which a reviewing court may reverse the decision of the workers' compensation commissioner. relevant grounds for this appeal Iowa Code

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