Supreme Court Holds That 85.39 Examination Not Taxable as Costs Under 876 IAC 4.33(6)
The Supreme Court, in DART v. Young, No. 14-0231 (Iowa June 5, 2015) , held that an independent medical evaluation under section 85.39 could not be completely paid under the "costs" section of the commissioner's administrative rules at 876 IAC 4.33(6). The court affirmed the decision of the Court of Appeals, although discussing the issue in more detail. The case was decided on a 4-3 vote, with Justices Hecht, Appel and Zager in dissent.
The facts in DART were relatively straightforward. Defendants accepted claimant's back injury, but did not obtain a rating of impairment under section 85.39. Claimant obtained an evaluation of her own, and sought to tax the expense of this evaluation as costs under 876 IAC 4.33(6). The commissioner and the district court ordered that the evaluation to be paid in full under 4.33(6), and the district court affirmed. The Court of Appeals reversed, finding that ordering payment for the exam as costs would defeat the statutory requirements under 85.39. DART v. Young, No. 14-0231 (Iowa App. Oct. 1, 2014). The Supreme Court accepted the case for further review.
The court acknowledged that it was to give substantial deference to the agency when it interpreted its own regulations, and reversed the agency only when its application of the regulations was "irrational, illogical or wholly unjustifiable." The court noted the statutory process for payment of an IME under section 85.39, and noted that "the statute does not preclude an employee from seeking evaluations outside the statutory process at the employee's own expense." The court also noted that the workers' compensation statute, section 86.40, stated that costs incurred in the hearing were to be "taxed in the discretion of the commissioner" and that the regulations at 4.33(6) included the "reasonable costs of obtaining no more than two doctors' or practitioners' reports."
The court notes that section 86.40 only granted discretion to tax all costs in the hearing (emphasis in original) and did not grant the commissioner the authority to "restructure the statutory process governing evaluations of permanent disabilities and the employer's statutory obligation to reimburse the employee for an independent evaluation." The court, indicating that it needed to harmonize the statutes, noted that if 4.33(6) and 86.40 allowed for the costs of the examination to be paid, there would be a conflict with section 85.39. If, however, 86.40 "is confined to costs attributable to the hearing and excludes expenses incurred for medical treatment and evaluations, the conflict is eliminated." The court also concludes that the costs of a report under 4.33(6) did not include "the expenses of the underlying medical treatment and examination. . . ."
The court ultimately rejects the contention that hearing costs include the expenses of an independent examination because the examination is necessary to obtain a report on the results of the examination for a hearing. The court goes on to state, however, that the examination and report would be a reimbursable expense under 85.39 "just as an unreimbursed written report of an examination and evaluation, like deposition testimony and witness fees, could be taxed as hearing costs by the commissioner." The court concludes that section 85.39 is the sole method for reimbursement of an examination by a physician of the employee's choosing and that the expense of the exam is not included in the report.
Two separate dissents, one by Justice Hecht and the other by Justice Appel, were written. Justice Hecht found that section 85.39 was not the sole basis for the commissioner's authority to shift costs to the employer. Justice Hecht noted that costs were in the discretion of the commissioner, and that 4.33(6), did not require the taxation of costs, only gave the commissioner the discretion to do so. Therefore, the commissioner's interpretation of 4.33(6) was not in conflict with 85.39. Justice Hecht would find that "claimants must not be deterred by economic realities from obtaining and presenting evidence supporting their claims at a hearing." He also notes that if the costs of the examination are not included, and the report is not provided in conjunction with an examination, it will most likely be given less weight at hearing. Ultimately, since the commissioner's interpretation was not irrational, illogical or wholly unjustifiable, the interpretation should have been accorded deference by the court.
Justice Appel noted that section 86.40 provided that all costs incurred in the hearing were potentially compensable. Secondly, only reports presented at the hearing were compensable. Finally, the recovery of costs was a discretionary matter with the commissioner. Justice Appel finds that section 85.39 and 86.40 are not in conflict. Section 85.39 provide that a party is entitled to an early, mandatory payment of certain costs. In contrast, section 86.40 only allows costs, presented as a part of the hearing, in the discretion of the commissioner. All that 86.40 encompasses is the payment of costs at the hearing. The majority, according to Justice Appel, creates a "nonexistent conflict." ("Iowa Code section 85.39 does not cast a grim and menacing policy shadow over Iowa Code section 86.40").
It is important to note that DART v. Young does not hold that no costs of an examination can be paid under 876 IAC 4.33(6). Indeed, all of the justices appear to agree that the commissioner has the discretion to tax costs with the exception of the costs attributable to the examination. In practice, this would seem to allow for claimant's attorneys to ask the examining physician to set forth the amount of time (and the amount of costs) of the report that were attributable to the examination itself and to carve out those costs when asking for payment of the report. Since the time spent in the examination is minimal compared to the time spent preparing the report, the practical effects of the decision may not be as substantial as it appears at first glance.
The facts in DART were relatively straightforward. Defendants accepted claimant's back injury, but did not obtain a rating of impairment under section 85.39. Claimant obtained an evaluation of her own, and sought to tax the expense of this evaluation as costs under 876 IAC 4.33(6). The commissioner and the district court ordered that the evaluation to be paid in full under 4.33(6), and the district court affirmed. The Court of Appeals reversed, finding that ordering payment for the exam as costs would defeat the statutory requirements under 85.39. DART v. Young, No. 14-0231 (Iowa App. Oct. 1, 2014). The Supreme Court accepted the case for further review.
The court acknowledged that it was to give substantial deference to the agency when it interpreted its own regulations, and reversed the agency only when its application of the regulations was "irrational, illogical or wholly unjustifiable." The court noted the statutory process for payment of an IME under section 85.39, and noted that "the statute does not preclude an employee from seeking evaluations outside the statutory process at the employee's own expense." The court also noted that the workers' compensation statute, section 86.40, stated that costs incurred in the hearing were to be "taxed in the discretion of the commissioner" and that the regulations at 4.33(6) included the "reasonable costs of obtaining no more than two doctors' or practitioners' reports."
The court notes that section 86.40 only granted discretion to tax all costs in the hearing (emphasis in original) and did not grant the commissioner the authority to "restructure the statutory process governing evaluations of permanent disabilities and the employer's statutory obligation to reimburse the employee for an independent evaluation." The court, indicating that it needed to harmonize the statutes, noted that if 4.33(6) and 86.40 allowed for the costs of the examination to be paid, there would be a conflict with section 85.39. If, however, 86.40 "is confined to costs attributable to the hearing and excludes expenses incurred for medical treatment and evaluations, the conflict is eliminated." The court also concludes that the costs of a report under 4.33(6) did not include "the expenses of the underlying medical treatment and examination. . . ."
The court ultimately rejects the contention that hearing costs include the expenses of an independent examination because the examination is necessary to obtain a report on the results of the examination for a hearing. The court goes on to state, however, that the examination and report would be a reimbursable expense under 85.39 "just as an unreimbursed written report of an examination and evaluation, like deposition testimony and witness fees, could be taxed as hearing costs by the commissioner." The court concludes that section 85.39 is the sole method for reimbursement of an examination by a physician of the employee's choosing and that the expense of the exam is not included in the report.
Two separate dissents, one by Justice Hecht and the other by Justice Appel, were written. Justice Hecht found that section 85.39 was not the sole basis for the commissioner's authority to shift costs to the employer. Justice Hecht noted that costs were in the discretion of the commissioner, and that 4.33(6), did not require the taxation of costs, only gave the commissioner the discretion to do so. Therefore, the commissioner's interpretation of 4.33(6) was not in conflict with 85.39. Justice Hecht would find that "claimants must not be deterred by economic realities from obtaining and presenting evidence supporting their claims at a hearing." He also notes that if the costs of the examination are not included, and the report is not provided in conjunction with an examination, it will most likely be given less weight at hearing. Ultimately, since the commissioner's interpretation was not irrational, illogical or wholly unjustifiable, the interpretation should have been accorded deference by the court.
Justice Appel noted that section 86.40 provided that all costs incurred in the hearing were potentially compensable. Secondly, only reports presented at the hearing were compensable. Finally, the recovery of costs was a discretionary matter with the commissioner. Justice Appel finds that section 85.39 and 86.40 are not in conflict. Section 85.39 provide that a party is entitled to an early, mandatory payment of certain costs. In contrast, section 86.40 only allows costs, presented as a part of the hearing, in the discretion of the commissioner. All that 86.40 encompasses is the payment of costs at the hearing. The majority, according to Justice Appel, creates a "nonexistent conflict." ("Iowa Code section 85.39 does not cast a grim and menacing policy shadow over Iowa Code section 86.40").
It is important to note that DART v. Young does not hold that no costs of an examination can be paid under 876 IAC 4.33(6). Indeed, all of the justices appear to agree that the commissioner has the discretion to tax costs with the exception of the costs attributable to the examination. In practice, this would seem to allow for claimant's attorneys to ask the examining physician to set forth the amount of time (and the amount of costs) of the report that were attributable to the examination itself and to carve out those costs when asking for payment of the report. Since the time spent in the examination is minimal compared to the time spent preparing the report, the practical effects of the decision may not be as substantial as it appears at first glance.
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