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SUPREME COURT OF LOUISIANA No. 97-C-0684 LARRY D. WISE versus J. E. MERIT CONSTRUCTORS, INC.

ON WRIT OF CERTIORARI TO THE COURT OF APPEAL, FIRST CIRCUIT, OFFICE OF WORKERS' COMPENSATION ADMINISTRATION, DISTRICT EIGHT

Knoll, J.* This application concerns whether the hearing officer erred in ordering the claimant's worker's compensation benefits forfeited because he had failed to answer truthfully the employer's second injury fund questionnaire concerning a prior injury. We granted writs to consider that issue and to resolve a conflict among the circuits regarding the statutory interpretation of what constitutes a direct relationship between claimant's answer and the subsequent injury that is the subject of the claim. After carefully reviewing the record and the applicable law, we conclude that under the circumstances of this case, the lower courts' forfeiture of claimant's worker's compensation benefits was in error. FACTS AND PROCEDURAL HISTORY In 1991, claimant, Larry D. Wise, worked for Encoat, Inc. as a laborer. Claimant explained his duties there as follows: "Well, my job, Mr. Cobb, was to `G'

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Victory, J., not on panel. Rule IV, Part 2, Sec. 3. 1

pipes. I had an electronic wand, and it contained see like 2,500 volts. I have to walk down eighty feet of pipe every day for every eight to twelve hours a day." While at Encoat, claimant developed fluid on his right knee, for which he was treated at Lane Memorial Hospital on August 31, 1991. At that time, claimant was diagnosed with traumatic arthritis and contusion and given prescription medication. The employer placed claimant on light duty for one week. Thereafter, the condition cleared and claimant resumed his regular duties. The hearing officer found that single incident to be quite minor. Claimant had missed no work and was given light duty for only one week. Claimant thereafter resumed his normal duties as a full-time laborer with Encoat until the plant closed in 1993. There is no evidence of any other problems with claimant's right knee during those years. Following the plant closing, claimant sought employment with defendant, J. E. Merit Constructors. As part of the hiring process, claimant was required to take a physical examination and to fill out Merit Constructors' form entitled "Louisiana Second Injury Fund Questionnaire." Claimant passed the physical examination which included bending, stretching, and squatting. On January 27, 1994, claimant completed Merit Constructors' questionnaire. A copy of claimant's completed questionnaire is appended to this opinion. Near the top of the first page, the form asked: "ARE YOU BOTHERED WITH OR HAVE YOU EVER HAD THE FOLLOWING:" Following that statement was a listing, single-spaced, of seventy-five medical conditions or situations to which the responder was to mark "yes" or "no." Following those were eight additional medical inquiries. At the bottom of the second page was a notice cautioning responders to answer truthfully. Claimant testified that a Merit Constructors representative cautioned

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claimant that he would not get the job if he had a problem or injury. Against the backdrop of those conflicting messages, claimant proceeded to complete the questionnaire. Claimant marked "yes" on only two questions: "Has your weight changed more than 15 pounds in the last 2 years?" and beside a question regarding amputations.1 Claimant made no response to "Arthritis." Beside the remaining conditions, claimant drew a continuous line indicating a "No" response. The questionnaire shows that claimant then amended his response to "Knee Problems" by scratching out his original "No" answer, but did not mark "Yes." Merit Constructors never questioned claimant regarding his responses to the questionnaire. Merit Constructors never asked claimant why he left "Arthritis" blank or why he scratched out his "No" answer to "Knee Problems." Merit Constructors never sought to clarify the ambiguity and thereby edify itself regarding the existence of a permanent partial disability. Claimant began working for Merit Constructors as a laborer on February 2, 1994. The multiproducts division, where claimant worked, produced raw materials that were transported on conveyor belts. Some of the powder and pellet-like granules fell from the belts to the floor. It was claimant's duty to clean up the spills with a shovel, push broom, and wheelbarrow. Claimant worked at defendant's factory without incident until May 15, 1994. Claimant testified that on that date he was cleaning in a tight space between two reactors. There, he slipped on some materials on the floor, twisted, and fell. He hit his right knee hard against one of the reactor tubes. Claimant reported the injury to his labor foreman. Although limping and in pain, he completed his duties for the day.
A portion of Wise's left little finger had been amputated on the job in 1981 for which he had received worker's compensation benefits for five weeks. 3
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Claimant reported his continued pain over the next three months, but did not seek medical care. Claimant testified that he iced his knee at night, took aspirin, and went to work each day because he needed the job. On August 18, 1994, claimant was asked to clean up a large spill on the second floor. Claimant testified that as he was wheeling some of the swept up products to the reject bin, his right knee slipped. As claimant fell, his right knee buckled under him. Claimant reported this injury to the supervisor and asked to go home to nurse his painful knee. Claimant testified that his supervisor told him that he needed a doctor's excuse before returning to work. The next day, claimant sought medical attention at the Veteran's Hospital in Baton Rouge. Medical evidence reveals that claimant suffered a torn meniscus to his right knee, for which he underwent two arthroscopic surgeries. The first surgery occurred on September 21, 1994, less than a month after claimant sought medical care. Claimant never returned to work and has received no worker's compensation benefits from Merit Constructors. Claimant filed a worker's compensation claim against J. E. Merit Constructors on August 14, 1995. As an affirmative defense, Merit Constructors argued that claimant's failure to divulge his 1991 knee problem on the company's "Second Injury Fund" questionnaire required forfeiture of claimant's claim under La.R.S. 23:1208.1. Merit Constructors contends that claimant's response to the question regarding knee problems amounted to an untruthful statement. Merit Constructors further asserts that claimant's failure to divulge the 1991 traumatic arthritis as a knee problem directly relates to the 1994 torn meniscus, which is the subject of the current claim. After the presentation of claimant's case, the hearing officer granted Merit Constructors' motion for involuntary dismissal on the basis of forfeiture under

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La.R.S. 23:1208.1.2 The hearing officer factually found the 1991 injury to be "a relatively minor incident, based upon what I've read in the Lane Memorial Records." The hearing officer also made a credibility determination: "I do believe you....I think you thought about it and then canceled out your feelings with regard to telling them about the knee because it didn't require a great deal of treatment and because you hadn't had any problems with it." And later: "I believe you're telling the truth when you say that the reason you decided not to say that you had a knee problem is because you didn't have one at the time that you filled this out." The hearing officer then concluded that claimant had answered "No" concerning knee problems because claimant had not answered what the question was asking on its face. The hearing officer also concluded that because both injuries were to the same part of the body, the compensation claim was defeated under the "hard line" interpretation of La.R.S. 23:1208.1 found in Resweber v. Haroil, 94-2708, 94-3138 (La. 9/5/95), 660 So.2d 7. The court of appeal, in an unpublished opinion, affirmed, finding that the hearing officer had not manifestly erred. LAW AND DISCUSSION A work injury subsequent to a known permanent partial disability qualifies an employer to seek reimbursement for worker's compensation benefits from a statutorily designated "Second Injury Fund" under certain circumstances. A claimant's

untruthful statement regarding his permanent partial disability which prejudices his employer's ability to seek reimbursement from the fund gives rise to an affirmative defense under La.R.S. 23:1208.1, whereby the injured employee forfeits all

Defense counsel actually moved for a directed verdict. However, since this was a non-jury trial, it is clear that counsel's procedural intent was to move for an involuntary dismissal under La.Code Civ.P. art. 1672B. 5

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compensation benefits. The worker's compensation statutes actually provide two separate anti-fraud forfeiture provisions by which employers may affirmatively defend against paying a claim. La.R.S. 23:1208 applies to situations where, during a pending claim, a claimant has made a false statement or misrepresentation for the specific purpose of obtaining worker's compensation benefits. The claimant, by making the false statement, seeks to defraud the system. The defense under La.R.S. 23:1208.1, the issue at hand, is entirely separate. La.R.S. 23:1208.1 is applied when a falsity was made on an employer's medical questionnaire, before the accident or injury. The significance of the falsity is that an untruthful statement on the questionnaire regarding a preexisting condition is prejudicial to the employer's ability to recover from a second injury fund. Resweber v. Haroil, 94-2708, 94-3138 (La. 9/5/95), 660 So.2d 7. Therefore, this court, in Resweber, has concluded that the legislature imposes the penalty of forfeiture only when the employer is prejudiced. An employer is prejudiced only when the false statement "directly relates to the medical condition for which a claim is made or affects the employer's ability to receive reimbursement from the second injury fund." La.R.S. 23:1208.1 (emphasis added); Resweber. Reimbursement from the fund executes the legislative policy expressed in La.R.S. 23:1371(A): "to encourage the employment of physically handicapped employees who have a permanent, partial disability." If not for the fund, many employers would be reluctant to hire employees with disabilities because of the increased worker's compensation exposure. Denis P. Juge, Louisiana Workers' Compensation,

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