Opinion
BOARD No. 03283895
Filed: March 31, 1998
REVIEWING BOARD DECISION
(Judges Maze-Rothstein, Smith and McCarthy).
APPEARANCES
John J. King, Esq., for the employee at hearing.
John Williams, pro se, on appeal.
Mary Ann Calnan, Esq., for the insurer.
The insurer appeals from a decision that denied the employee's claim for benefits but also found that he had made several false statements while under oath in the course of the hearing proceeding and had also concealed or knowingly failed to disclose that which is required by law to be revealed, but nevertheless dismissed the insurer's request to assess costs, attorney's fees and a penalty pursuant to § 14(2). The insurer contends that the decision is contrary to law. We agree and so reverse the § 14(2) findings.
General Laws c. 152, § 14(2) states in pertinent part:
If it is determined in any proceeding within the division of dispute resolution, a party, . . ., concealed or knowingly failed to disclose that which is required by law to be revealed, knowingly used perjured testimony or false evidence, knowingly made false statement of fact or law, participated in the creation or presentation of evidence which he knows to be false, or otherwise engaged in conduct that such party knew to be illegal or fraudulent, the party's conduct shall be reported to the general counsel of the insurance fraud bureau. Notwithstanding any action the insurance fraud bureau may take, the party shall be assessed, in addition to the whole costs of such proceedings and attorneys' fees, a penalty payable to the aggrieved insurer . . ., in an amount not less than the average weekly wage in the Commonwealth multiplied by six.
G.L.c. 152, § 14(2), as amended by St. 1991, c. 398, § 37.
The employee filed a claim for an industrial accident that ostensibly occurred on August 24, 1995 while he worked as a truck driver. (Dec. 4.) He claimed that he sustained battery acid burns on his groin and thighs when he fastened his seat belt. He also alleged that his right wrist and mouth were injured while being transferred from the truck to the ambulance. (Dec. 5-6.) After a § 10A conference, an order of § 34 temporary total incapacity weekly benefits issued from August 24, 1995 onward. (Dec. 1.) The insurer appealed to a hearing de novo.
The parties opted out of § 11A requirements with the judge's approval, and were allowed to submit their own medical evidence.Id.; see 452 Code. Mass. Regs. 1.10(7). The employee submitted no medical evidence. At the hearing on August 6, 1996, his testimony was squarely impeached. (Dec. 8.) He repeatedly denied that he had suffered any burns or rashes on the lower part of his body prior to August 24, 1995, and he denied or downplayed the number and extent of prior injuries he had suffered. (Dec. 6-7.) Hospital records documenting numerous prior injuries — many to the same body parts — directly contradicted these statements. Id.
452 Code. Mass. Regs. 1.10(7) states in pertinent part "[i]n claims where initial liability has not been established, subject to the provisions of M.G.L.c. 152, § 11A(2) and 452 CMR 1.02, the parties may agree in writing at the time of conference that an impartial is not required."
In the decision, the judge found that "based on the testimony and demeanor of the employee at hearing [testimony which was internally inconsistent and in which the employee denied and minimized the number and extent of prior injuries to the same body parts], in light of all the evidence in the case, . . . the employee was not burned by battery acid nor any other substance while in the course of his employment with the employer on August 24, 1995. He did not injure his right arm or face on that date. He suffered no work injury on August 24, 1995." (Dec. 8.) (Parenthetical added). The judge concluded that:
Although I find that the employee knowingly made several false statements while under oath in the course of this proceeding, I conclude that under the interpretation of Section 14 pronounced by the Reviewing Board in Charles Murphy vs. Trans World Airlines, Board Number 53044-90 (January 31, 1997), Section 14 penalties are not properly awarded in this proceeding. . . . . . .
The Murphy case appears to prevent a finding of fraud under Section 14(2) in this proceeding for two reasons. First, the Reviewing Board states that "because fraud is not a creation of this statute but is drawn into the statute from existing law, for it to be actionable it also must influence the outcome of a proceeding." Murphy at page 9. I have declined to credit the fraudulent testimony of the employee in this proceeding. Therefore, the fraud did not influence the outcome of the proceeding, at least not to the detriment of the insurer.
Second, the Reviewing Board seems to be saying that a claim for fraud committed at a hearing cannot be raised during the pendancy of the hearing. According to the Reviewing Board, a separate claim and proceeding would be required after the hearing decision is issued.
Id. at 9.
The insurer contends that this conclusion misreads Murphy. It argues that the employee's fraud is actionable because the outcome of the proceeding was detrimentally influenced at its expense and to its prejudice. It asserts that § 14 penalties can be assessed in the same proceeding without the necessity of bringing a separate claim. We agree.
In Murphy v. Trans World Airlines, 11 Mass. Workers' Comp. Rep. 94, 99 (1997) the reviewing board stated that "because fraud is not a creation of this statute but is drawn into the statute from existing law, for it to be actionable it also must influence the outcome of a proceeding." In Zimmerman v. Kent, 31 Mass. App. Ct. 72, 77 (1991) the court stated that "[t]o show deceit or misrepresentation, there must be 'a false statement of a material fact made to induce [another] to act, together with reliance on the false statement to . . . [another's] detriment." See Murphy,supra, at 101. The reviewing board has held that, "[d]efense of the false claim certainly amounts to an obvious detriment. . . . "Pittsley v. Brake and Truck Supply, 10 Mass. Worker's Comp. Rep. 444, 446-48 (1996).
Proper application of § 14(2) under Murphy, supra has two components: 1) a § 14(2) act or omission during the course of a proceeding in the division of dispute resolution; and 2) influence of a proceeding to the detriment of a party.
In Murphy, supra the first element was absent. Murphy made full disclosure of his out of state work while receiving § 34 benefits at all times, first at the conference proceeding and later at the hearing proceeding. Id at 100-102. Compare Pirelli v. Caldor, Inc., 11 Mass. Workers' Comp. Rep. 380, 382(1997) (retraction there insufficient to avoid § 14(2) penalties). Since Murphy was forthright during the dispute resolution proceedings there was no § 14(2) act or omission during the course of a proceeding in the division of dispute resolution, so the second element in the analysis was not necessary.
In stark contrast, here the judge explicitly found the employee "knowingly made several false statements[,]" (Dec. 9), which he never retracted during the hearing proceeding. The findings of a knowing false statement of fact triggers the second prong of theMurphy test — a detrimental influence of proceeding.
In the case at bar, the detriment to the insurer was twofold. It was ordered at conference to pay ongoing benefits under § 34 on a fraudulently based claim. Furthermore, the employee's conduct forced the insurer to defend against a fraudulent claim at hearing with a consequent expenditure of costs and fees to its detriment. The fact that the employee's statements were discredited and the insurer won the case does not extinguish this harm. The finding of no detriment is error.
While under § 14(2) fraud is confined to "any proceeding within the division of dispute resolution," the common law concept of detriment is not.
As to when a § 14 fraud claim may be raised, the judge's interpretation of Murphy as requiring a § 14(2) action to be brought under a separate claim in a new proceeding is also errant. The reviewing board in Murphy stated that:
[w]hile the influence on outcomes of pre-hearing proceedings could be determined at hearing, it follows that any fraud that influenced the outcome at hearing itself would not be discernible until the outcome (i.e. the decision) indicating that influence. Therefore, a separate claim and proceeding would be required.
Murphy, supra at 99. This means only that more often than not, fraud perpetrated in a hearing remains undiscovered until the decision has issued. However, this reality does not in any way prohibit a finding of fraud if discovered during the proceeding. The aforementioned passage from Murphy addresses a particular situation, and does not extend to all instances of fraud whenever discovered.
In Pirelli v. Caldor, Inc., 11 Mass. Workers' Comp. Rep. 380 (1997), the reviewing board made this point clear:
[o]nce a judge determines that, a party has 'participated in the creation . . . of evidence which [s]he knows to be false . . .' and that evidence is introduced 'in any proceeding within the division of dispute resolution,' then the judge is required by G.L.c. 152, § 14(2) to impose costs and penalties.
Id. at 381-382. In Pirelli, a judge found that an employee had made false statements of fact, provided no corroborative medical evidence, and did not retract her false statements until cross-examination when it was obvious that the unrevealed work activity had been discovered. Perilli, supra at 382. On the basis of that finding, the assessment of costs and penalties was mandated under § 14(2).
Pirelli states that in appropriate circumstances, a timely retraction could mitigate against the imposition of penalties. Id. at 382. Such was true in Murphy, supra. That is not what happened in Pirelli, supra, nor is it what happened here.
We reverse the finding that despite the identification of fraud during the hearing proceeding there was no detriment to the insurer and, thus, no influence on the hearing proceeding. We assess a penalty equal to six times the average weekly wage in the Commonwealth together with costs to be paid by the employee to the insurer. See supra note 1. We affirm the recoupment order for benefits paid prior to the hearing. By a copy of this decision directed to the general counsel of the Insurance Fraud Bureau, we make the report called for by § 14(2).
So ordered.
_____________________ Susan Maze-Rothstein Administrative Law Judge
_____________________ William A. McCarthy Administrative Law Judge
_____________________ Suzanne E.K. Smith Administrative Law Judge
FILED: March 31, 1998