Sanchez v. Wohl Shoe Co.

771 P.2d 984, 108 N.M. 276
CourtNew Mexico Court of Appeals
DecidedMarch 14, 1989
Docket10604
StatusPublished
Cited by13 cases

This text of 771 P.2d 984 (Sanchez v. Wohl Shoe Co.) is published on Counsel Stack Legal Research, covering New Mexico Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sanchez v. Wohl Shoe Co., 771 P.2d 984, 108 N.M. 276 (N.M. Ct. App. 1989).

Opinion

OPINION

DONNELLY, Judge.

The previous opinion is- withdrawn and the following is substituted.

Claimant appeals from a decision of the Workers’ Compensation Division denying her request for attorney fees. The single issue presented on appeal is whether claimant was entitled to an award of attorney fees . payable by respondents based on claimant’s contention that respondents, without reasonable basis, denied that she sustained an injury and that respondents acted in bad faith in delaying and processing her claim. We affirm the judgment of the hearing officer.

Claimant suffered an accidental injury on February 5, 1987, in the course and scope of her employment. A few weeks later respondents voluntarily began to pay total disability compensation because of claimant’s inability to work. Respondents continued to pay total compensation until June 28, 1987, after which claimant filed her claim for continued benefits with the Division. Pending a final decision by the Division, respondents paid some interim compensation.

After formal hearing before the Division claimant was awarded compensation for temporary total disability under the Workmen’s Compensation Act, NMSA 1978, Sections 52-1-1 to -70 (Cum.Supp.1986) (Interim Act). She then sought payment of her attorney fees under the Interim Act, alleging respondents had acted in bad faith in handling her claim, Section 52-l-54(C)(2), and in unreasonably denying that an injury occurred, Section 52-l-54(C)(3).

Prior to the Interim Act of 1986 a successful worker’s compensation claimant could collect attorney fees from the employer as part of the costs of the proceedings. Woodson v. Phillips Petroleum Co., 102 N.M. 333, 695 P.2d 483 (1985). In 1986 the legislature amended Section 52-l-54(C) to provide that “[a] workman shall be responsible for payment of his own attorneys’ fees” except in circumstances specifically described in the statute. See 1986 N.M.Laws, ch. 22, §§ 18 & 105. In 1987 the legislature again revised the attorney fee provision. § 52-1-54 (Repl.Pamp. 1987). The claim in the instant case, however, arose during the period when the 1986 Interim Act was applicable.

After an evidentiary hearing on claimant’s request for an award of attorney fees, the hearing officer ruled that claimant should pay her own attorney fees, based on the following findings:

1. Respondents acted in good faith in their handling of this claim. Respondents did not engage in bad faith as defined in Section 52-1-54 N.M.S.A. (1986 Supp.).
2. Respondents’ Counsel acted in good faith,at all times material hereto in her handling of this cause. Respondents’ Counsel did not engage in bad faith as defined in Section 52-1-54.
3. Claimant failed to establish any economic loss from any alleged bad faith on the part of Respondents or their Counsel.
4. Respondents did not specifically deny that an injury had occurred.

Claimant challenges these findings and asserts error in the rejection of her requested findings.

CLAIMANT’S ALLEGATIONS OF BAD FAITH

Claimant’s request for an award of attorney fees based on allegations of bad faith by respondents falls into three categories: (1) failure of the respondents to pay total disability benefits; (2) contacts made by respondents’ adjuster and attorney with her treating physician; and (3) failure of respondents to pay certain medical costs. In reviewing claimant’s contentions we have considered the whole record, see Tallman v. ABF, 108 N.M. 124, 767 P.2d 363 (Ct.App.1988), and have determined that there is substantial evidence to support the findings of the hearing officer.

Section 52-l-54(C)(2) of the Interim Act defines conduct on the part of respondents which will entitle an injured worker to the payment of the worker’s attorney fees. It provides that a worker shall be responsible for payment of his own attorney fees except that he shall be entitled to recover a reasonable attorney fee from an employer where the hearing officer finds that the employer “acted in bad faith with regard to handling the injured workman’s claim and the injured workman has suffered economic loss as a result thereof * * Bad faith means “conduct * * * in the handling of a claim which amounts to fraud, malice, oppression or willful, wanton or reckless disregard of the rights of the workman.” § 52 — 1—54(C)(2). Thus, an award of attorney fees under Section 52-l-54(C)(2) requires a specific finding by the hearing officer of bad faith on the part of the employer in handling the worker’s claim and a showing that the worker has suffered economic loss as a result thereof.

Claimant suggests that this court apply not only the statutory definition of bad faith but also the supplemental definition, “frivolous or unfounded refusal to pay,” which was developed in New Mexico’s law of bad faith in the context of general insurance. E.g., State Farm Gen. Ins. Co. v. Clifton, 86 N.M. 757, 527 P.2d 798 (1974) (delay in paying proceeds of residential damage insurance); Chavez v. Chenoweth, 89 N.M. 423, 553 P.2d 703 (Ct.App.1976) (delay in paying medical expenses under automobile insurance policy). Given the specific definition provided by the legislature in Section 52 — 1—54(0(2), we need not look beyond the boundaries of the statute. The language defining “bad faith” in Section 52-l-54(C)(2) closely parallels the conduct required in order to award punitive damages. See SCRA 1986, 13-1827. Punitive damages are imposed “for the limited purposes of punishment and to deter others from the commission of like offenses.” Marler v. Allen, 93 N.M. 452, 601 P.2d 85 (Ct.App.1979). Similarly, attorney fees under Section 52-l-54(C)(2) may be viewed as punishment.

Claimant argues that respondents’ failure to pay total disability benefits after June 28, 1987, was evidence of bad faith. Failure or refusal to pay compensation triggers the right to file a claim for worker’s compensation. § 52-l-31(A). However, a failure or refusal to pay compensation benefits does not constitute bad faith in itself. Thus, where cessation of benefits forms the basis of a claim of bad faith, claimant must show that the employer’s failure to pay compensation was fraudulent, malicious, oppressive, or that the conduct was in willful, wanton, or reckless disregard of the rights of the worker. § 52-l-54(C)(2).

As shown by the record, while respondents were paying total compensation, they received regular assurances from claimant’s treating physician, Dr. Charles Hounshell, that claimant was benefitting from treatment and would soon be returning to work. The record also indicates that respondents paid total disability benefits well beyond Dr. Hounshell’s projected date for claimant’s return to work.

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Bluebook (online)
771 P.2d 984, 108 N.M. 276, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sanchez-v-wohl-shoe-co-nmctapp-1989.