Evidence Regarding Whether a Reasonable Controversy Exists
On February 20, the Nebraska Supreme Court ruled in Armstrong v. State, 290 Neb. 205, that evidence could be presented up until the time of trial to demonstrate a reasonable controversy existed at the time the employer denied workers’ compensation benefits. In other words, the evidence is not just limited to the evidence available to the employer at the time benefits are denied. In Armstrong, the employee injured her left shoulder while working as a staff nurse at the Eastern Nebraska Veterans’ Home.
Under Neb. Rev. Stat. § 48-125(1)(b), an employer is required to pay a 50% waiting-time penalty if they fail to pay compensation within 30 days of an employee’s notice of a disability and there is no reasonable controversy regarding the employee’s claim for benefits. When compensation becomes so delayed and the employee receives compensation as an award from a court, the employee is also entitled to attorney fees and interest. The Nebraska Supreme Court acknowledged “reasonable controversy” has been a part of case law for more than 90 years even though it does not appear in statute.
In the past, the Nebraska Supreme Court declared in Mendoza v. Omaha Meat Processors that a reasonable controversy exists when (1) there is a question of law previously unanswered that must be answered to determine a right or liability for a claim under the Nebraska Workers’ Compensation Act, or (2) when the evidence would support reasonable but opposite conclusions about an aspect of a claim that affects allowance or rejection of a claim, in whole or in part.
The Nebraska Supreme Court has held a reasonable controversy existed even though the evidence showing the controversy was unknown at the time the employer denied benefits. For example, in Dawes v. Wittrock Sandblasting & Painting, the court found a reasonable controversy existed based on testimony unknown at the time the employer denied benefits.
Because the Nebraska Legislature amended Neb. Rev. Stat. § 48-125 since the decision in Dawes, the Nebraska Supreme Court concluded that because the language was not materially changed by amendment, the holding in Dawes—a reasonable controversy can be shown by evidence mentioned at trial but unknown at the time benefits were denied—continues to apply. Further, the court reasoned that the purpose of the waiting-time penalties to require employers and insurers to promptly handle and decide claims is not affected or inconsistent with the decision in Dawes. Specifically, employers and insurers still have an incentive to investigate all claims and pay non-controversial claims promptly in order to avoid penalty.
As a result, the Nebraska Supreme Court in Armstrong found evidence produced at trial demonstrated the existence of a reasonable controversy and therefore, the waiting-time penalty, attorney fees and interest based on the State’s failure to pay benefits within 30 days of notice of Armstrong’s disability was not imposed.