Polaris Industries, Inc., petitioner-appellee/cross-appellant v. Douglas Hesby, respondent-appellant/cross-appellee.

IN THE COURT OF APPEALS OF IOWA

No. 15-0629
Filed February 10, 2016

POLARIS INDUSTRIES, INC.,
Petitioner-Appellee/Cross-Appellant,

vs.

DOUGLAS HESBY,
Respondent-Appellant/Cross-Appellee.
________________________________________________________________

Appeal from the Iowa District Court for Polk County, Robert B. Hanson,

Judge.

A worker appeals a judicial review order on the issue of credit owed the

employer for previous payments; the employer cross-appeals the determination

of industrial disability. AFFIRMED ON BOTH APPEALS.

Harry W. Dahl of Harry W. Dahl, P.C, Des Moines, for appellant/cross-

appellee.

D. Brian Scieszinski of Bradshaw, Fowler, Proctor & Fairgrave, P.C., Des

Moines, for appellee/cross-appellant.

Considered by Potterfield, P.J., and Doyle and Tabor, JJ.
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TABOR, Judge.

Claimant Douglas Hesby appeals from a judicial review order that

remanded his case to the workers’ compensation commissioner to decide if his

employer, Polaris Industries, Inc., was entitled to credit for its payments for

previous existing disabilities under Iowa Code section 85.34(7) (2013). Polaris

cross-appeals the finding that Hesby sustained a thirty-percent loss in earning

capacity following a July 2012 workplace fall injuring his left shoulder and hip.

We affirm the district court on both challenges.

I. Background Facts and Proceedings

Now in his late fifties, Hesby has worked in assembly and maintenance at

Polaris in Spirit Lake since 1994 and plans to stay until he retires. He received

one year of vocational training as a welder after high school but has no other

degrees. His maintenance duties include climbing on tanks, changing oil and

filters, and climbing onto the roof.

During his two decades at Polaris, Hesby has suffered a series of injuries.

In 1999, Hesby injured his right shoulder at work, underwent surgery, received a

six-percent impairment rating, and settled his workers’ compensation claim. He

returned to full-duty work. In 2007, he again injured his right shoulder when he

fell on a patch of ice. After a time of light-duty work, he returned to his job

without restrictions.

Hesby injured his right hip at work in 2009 and eventually underwent hip

replacement surgery in 2010. Hesby filed a workers’ compensation claim.

Following a hearing in December 2011, the commissioner assigned Hesby a
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twenty-percent impairment rating. The district court affirmed the commissioner’s

industrial disability award on October 15, 2013.

On July 28, 2012, Hesby slipped on a coffee-soaked rug at work and

landed on his left shoulder and hip. He reported the injury and was treated by

Polaris’s in-house therapist. But he continued to work until October 28, 2012.

After his injury failed to improve, Hesby went to see Dr. Keith Baumgarten on

November 20, 2012. His examination revealed a torn rotator cuff and muscle

atrophy in the left shoulder. Instead of surgery, Dr. Baumgarten recommended

physical therapy and a subacromial-space injection; he placed Hesby on work

restrictions. Polaris was unable to accommodate the restrictions, and Hesby

received workers’ compensation benefits for eight months.

Dr. Baumgarten’s recommendations were not approved by Polaris’s

workers’ compensation carrier,1 and as a result, Hesby did not receive treatment

for four months. In July 2013, Hesby saw Dr. Marc Hines, who found Hesby had

a ten-percent whole-person impairment. Hesby had returned to work the

previous month without restriction, but Dr. Hines assigned him a shoulder-lifting

restriction of twenty pounds in September 2013. Hesby continues in the same

maintenance job he had before the injury.

Hesby filed this workers’ compensation claim, and a deputy commissioner

held an arbitration hearing on October 31, 2013. In post hearing briefs, Polaris

asked for credit for thirty weeks of permanent partial disability (PPD) benefits

paid Hesby for his right shoulder claim and “any industrial disability benefits paid”

1
During these proceedings, Polaris was self-insured, but the record indicates Sedgwick
CMS was previously its insurance carrier.
4

for his prior hip claim. Hesby responded that Polaris was “not entitled to credit

for the benefits paid, because both injuries are industrial.” On January 28, 2014,

the deputy issued an arbitration decision finding Hesby suffered a thirty-percent

loss of earning capacity due to multiple tears in his left shoulder. The deputy

also decided Polaris was not legally entitled to credit for prior payment of benefits

under section 84.34(7)(b) and awarded Hesby one-hundred and fifty weeks of

PPD benefits. Polaris filed an intra-agency appeal.

On August 12, 2014, the commissioner affirmed the deputy’s ruling, but

offered the following explanation for denying Polaris credit:

While defendant asserts a prior payment to claimant for a 20
percent whole body impairment rating, review of the record of the
case on appeal fails to establish any documentary evidence of the
prior payment of 100 weeks of disability benefits as asserted. There
is no letter establishing payment commencement or completion, a
payment history log, or an agreement for settlement. The mere
assertion of a prior payment cannot be found to be sufficient to
grant a credit for prior payments. The credit, if one is to be
awarded, need be proven by defendant by some documentation or
other stipulation. Without proof of such prior payment, the credit
cannot be awarded.

Polaris filed an application for rehearing on August 13, 2014. The

employer contended the commissioner “incorrectly concluded that there was no

evidence presented at the hearing as to any permanency benefits paid to Hesby

on account of his previously alleged work injuries at Polaris.” Polaris recounted

that before Hesby’s 2012 injury, he sustained a 1999 shoulder injury and a 2009

hip injury. The employer asserted that at the time of the October 31, 2013

arbitration hearing, 1) Hesby had been paid thirty weeks of PPD benefits for the
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1999 shoulder injury, and 2) Hesby had not yet been paid PPD benefits for the

2009 hip injury because “this claim was still on appeal.”2

Polaris noted that during the October 2013 arbitration hearing, it submitted

into evidence the hearing transcript from Hesby's prior arbitration hearing

concerning his 2009 work injury, during which Hesby stipulated on the record he

had been previously paid thirty weeks of PPD benefits for a prior shoulder claim.

Further, Polaris asserted that while testifying at the October 2013 arbitration

hearing, Hesby acknowledged he had been paid thirty weeks of PPD benefits as

a result of his prior shoulder claim.

Hesby filed a resistance to the rehearing application. Hesby did not deny

receiving thirty weeks of benefit payments for the 1999 shoulder injury, but

argued Polaris received credit for those payments when it paid the award for the

2009 hip injury. Hesby argued Polaris would not be entitled to take the thirty-

week credit a second time because that “would constitute a double reduction.”

When the commissioner took no action on the rehearing application,

Polaris sought judicial review. On October 20, 2014, Polaris filed an application

in the district court for leave to present additional evidence of “the seventy weeks

of PPD benefits paid to Hesby after the arbitration hearing in this matter.” The

district court issued an order denying the application on October 30, 2014.

2
Polaris cited Hesby v. Polaris Ind., Inc., File No. 5035340, Arb. Dec’n (March 26, 2012);
aff’m on appeal (April 17, 2013); aff’m on judicial review (October 15, 2013). Polaris
asserted that it elected not to appeal the judicial review order in the hip-injury case and
“paid out the award (100 weeks PPD less the 30 weeks credit for PPD previously paid)”
after the October 31, 2013 arbitration hearing in the present case.
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Polaris filed an offer of proof and renewed its request to present additional

evidence on January 8, 2015.

In ruling on the petition for judicial review, the district court affirmed the

commissioner’s determination of thirty-percent industrial disability but reversed

the commissioner’s denial of Polaris’s request for credit for past payments. The

court explained:

On judicial review, Polaris points out that Hesby admitted to
receiving past payments for thirty weeks during arbitration hearings,
the transcripts of which were part of the record in this case. . . .
Based on this evidence in the record, the court concludes that
substantial evidence does not support the Commissioner's finding
that there was no evidence in the record to support the claimed
credit by Polaris. The evidence cited by Polaris provides an
admission, under oath, of the receipt of thirty weeks of credit from a
prior work injury. No neutral, detached, or reasonable person
would find that no evidence existed in the record when faced with
the evidence cited above by Polaris.
See Iowa Code § 17A.19(10)(f)(1).

The district court also considered Polaris’s renewed request to present additional

evidence. The court concluded:

[T]he additional evidence of payments made to Hesby by Polaris is
material, and that good reasons exist for Polaris's failure to present
that evidence at the contested case hearing before the Deputy.
This evidence is material due to the possibility of either a double
recovery or a double credit under Iowa Code section 85.34(7)
relating to the award in the present case and the recent award in
the hip-injury case. Good reason for the failure to enter this
evidence also exists as the final judicial review ruling had not yet
been filed at the time of the present case’s arbitration hearing. The
court also notes that Hesby is unlikely to be prejudiced by the entry
of this evidence as Hesby was aware of the previous award and of
possible credits, given the fact that credits under section 85.34(7)
were also at issue in his previous workers’ compensation case.

The district court remanded for an agency hearing where both sides could

present further evidence on the credit issue. Hesby appeals the resolution of the
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credit issue. Polaris cross-appeals the court’s affirmation of the impairment

award.

II. Scope and Standards of Review

Our review of workers’ compensation cases is governed by Iowa Code

chapter 17A. Warren Props. v. Stewart, 864 N.W.2d 307, 311 (Iowa 2015).

When deciding a judicial review petition, the district court acts in an appellate

capacity. Mike Brooks, Inc. v. House, 843 N.W.2d 885, 888 (Iowa 2014). On

appeal we apply chapter 17A standards to decide if we reach the same

conclusions as the district court. Id. “If we reach the same conclusions, we

affirm; otherwise we may reverse.” Id.

One of the questions before us is the commissioner’s evaluation of

Hesby’s industrial disability, which is “determined by an evaluation of the

employee’s earning capacity.” Cedar Rapids Cmty. Sch. Dist. v. Pease, 807

N.W.2d 839, 852 (Iowa 2011). That issue raises a mixed question of law and

fact. Neal v. Annett Holdings, Inc., 814 N.W.2d 512, 525 (Iowa 2012). The

commissioner's industrial-disability determination involves the application of law

to fact, which we will not overturn unless it is “irrational, illogical, or wholly

unjustifiable.” Id. at 526; accord Larson Mfg. Co., Inc. v. Thorson, 763 N.W.2d

842, 856–57 (Iowa 2009).

The other question before us is the commissioner’s rejection of the

employer’s request for credit under Iowa Code section 85.34(7). Our supreme

court has determined the legislature has not vested the commissioner with the

authority to interpret section 85.34(7). See Roberts Dairy v. Billick, 861 N.W.2d
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814, 817 (Iowa 2015). Therefore, we review the commissioner’s statutory

interpretation “to correct errors of law on the part of the agency.” Teleconnect

Co. v. Iowa State Commerce Comm’n, 404 N.W.2d 158, 161 (Iowa 1987).

We are bound by the commissioner’s findings of fact unless they are not

supported by substantial evidence. Warren Props., 864 N.W.2d at 311. The

legislature defined substantial evidence as “the quantity and quality of evidence

that would be deemed sufficient by a neutral, detached, and reasonable person,

to establish the fact at issue when the consequences resulting from the

establishment of that fact are understood to be serious and of great importance.”

Iowa Code § 17A.19(10)(f)(1). Our role is not to decide if the evidence before the

commission supports a different finding; rather, our role is to decide if substantial

evidence supports the commissioner’s actual findings. Mike Brooks, Inc., 843

N.W.2d at 889 (quoting Pease, 807 N.W.2d at 845).

We apply a different level of review where the commissioner fails to

consider all of the evidence. See JBS Swift & Co. v. Hedberg, No. 14-0565,

2015 WL 162098, *5 (Iowa Ct. App. Jan. 14, 2015) (“The deference afforded the

agency on substantial evidence review is predicated on the assumption the

agency reviewed and considered the evidence in reaching its decision.”). When

the commissioner fails to consider all the evidence, the appropriate remedy is to

remand for the commissioner to re-evaluate the evidence unless the facts are

established as a matter of law. Id.
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III. Analysis

We are asked to decide two issues. First, Hesby claims the district court

wrongly reversed the commissioner’s determination that Polaris was not entitled

to a credit for prior PPD payments. Second, Polaris claims the district court erred

in affirming the commissioner’s determination that Hesby sustained a thirty-

percent industrial disability. We will address the issues in reverse order.

A. Industrial Disability

Polaris argues Hesby did not suffer any industrial disability because he

returned to his pre-injury job without restriction and his current earnings have not

been affected. Hesby defends the commissioner’s finding of thirty-percent

impairment. He asserts he is unable to perform his duties without occasional

assistance and is no longer able to perform full-time welding. Hesby points to his

loss of strength and range of motion in his left shoulder. He also relies on the

employability assessment performed by vocational consultant Barbara Laughlin.

She concluded, as an “older worker” Hesby faced a difficulty if he had to compete

in the job market and, due to his injuries and reduction in abilities, Hesby faced a

“significant loss of directly transferable occupations.”

The percentage of industrial disability measures the extent to which a

work-related injury has impaired the employee’s ability to earn wages. Bearce v.

FMC Corp., 465 N.W.2d 531, 535 (Iowa 1991). The focus of industrial disability

is on the worker’s ability to be employed, not on what the worker can or cannot

do. Second Injury Fund v. Nelson, 544 N.W.2d 258, 266 (Iowa 1995). In our
10

case, the commissioner found Hesby suffered a thirty-percent loss of earning

capacity due to the injury he suffered on July 28, 2012.

The commissioner considers multiple factors in determining industrial

disability, including “the employee’s functional impairment, age, education,

intelligence, work experience, qualifications, ability to engage in similar

employment, and adaptability to retraining.” Keystone Nursing Care Ctr. v.

Craddock, 705 N.W.2d 299, 306 (Iowa 2005) (citing Myers v. F.C.A. Servs., Inc.,

592 N.W.2d 354, 356 (Iowa 1999)). The agency weighed the pertinent factors:

Douglas has a high school education. He received one year of
vocational training as a welder. He previously worked for about a
year as a full-time welder. Other past work involves building
maintenance, industrial cleaning, warehouse work and his
maintenance work at Polaris. Restrictions on his ability to use his
shoulder for heavy, sustained work would greatly impact the type of
jobs he has held in the past.
On the other hand, he has returned to his job without loss of
pay. However, the impact of Dr. Hines’ restrictions are not fully
known at this time. The loss of his job at Polaris would be
financially devastating to Douglas.

The agency also relied on Laughlin’s assessment that Hesby had limited

transferable occupations available to him.

Hesby was not required to prove an actual reduction in his earnings to

establish a loss of earning capacity. See Larson Mfg. Co., 763 N.W.2d at 856.

The fact he was able to continue at his current maintenance job does not prove

he suffered no industrial disability. See id. at 857. The agency properly

considered the factors that bear on Hesby’s employability and reached the

conclusion Hesby lost thirty percent of his earning capacity as a result of his work
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injury. We do not find the commissioner’s ultimate resolution to be irrational,

illogical, or wholly unjustifiable. Accordingly, we affirm on this issue.

B. Credit

Hesby challenges the district court’s reversal of the commissioner’s

decision that Polaris was not entitled to a credit under Iowa Code section

85.34(7)(b)(1); stating:

If an injured employee has a preexisting disability that was caused
by a prior injury arising out of and in the course of employment with
the same employer, and the preexisting disability was compensable
under the same paragraph of subsection 2 as the employee’s
present injury, the employer is liable for the combined disability that
is caused by the injuries, measured in relation to the employee’s
condition immediately prior to the first injury. In this instance, the
employer’s liability for the combined disability shall be considered to
be already partially satisfied to the extent of the percentage of
disability for which the employee was previously compensated by
the employer.

Hesby contends substantial evidence supported the commissioner’s conclusion

Polaris “did not meet its burden of establishing entitlement to a credit.”

Polaris defends the district court’s grant of its petition to review the

commissioner’s refusal to calculate a credit for prior PPD benefits Polaris paid to

Hesby for previous injuries under section 85.34(2)(u). Like the district court,

Polaris faults the commissioner for finding “no evidence” of prior payments in the

agency record. Polaris contends it is entitled to credit for thirty weeks of PPD

payments paid to Hesby for his 1999 shoulder injury and seventy weeks of PPD

benefits for his 2009 hip injury.

The successive disability statute was recently discussed by the Iowa

Supreme Court but only in the context of different employers. See Warren
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Props., 864 N.W.2d at 321 (analyzing method of apportionment under section

85.34(7)(a) for concurrent employers); Roberts Dairy, 861 N.W.2d at 822

(analyzing method of apportionment under section 85.34(7)(a) for successive

employers). As Hesby notes in his brief, section 85.34(7)(b)(1) governs the

availability of credit for disability benefits paid for a previous injury occurring with

the same employer. In contrast to section 85.34(7)(a) dealing with different

employers, the supreme court observed that section 85.34(7)(b)(1) “explains

exactly how the offset is to be calculated when an employee suffers successive

injuries while working for the same employer.” Roberts Dairy, 861 N.W.2d at

822.

But the question in this appeal is not how to calculate an offset for Polaris;

rather the question is whether Polaris presented sufficient evidence of its

entitlement to an offset to justify a calculation. Hesby argues the district court

erred in granting a remand on the credit issue because Polaris failed to provide

documentation of its payments for the 1999 injury. Hesby also claims any

payments for the 2009 hip injury should not be offset because they were made

after the commissioner’s decision in this case.

At the October 2013 arbitration hearing, counsel for Polaris asked Hesby if

he was paid thirty weeks of benefits for his 1999 shoulder injury; Hesby

responded: “[I]f that’s what the record shows, yes.” Polaris also offered as an

exhibit a copy of a transcript from a December 2011 arbitration hearing where

Hesby’s attorney stipulated Polaris was “entitled to credit for thirty weeks of PPD

paid for prior shoulder injury.” The deputy commissioner acknowledged in the
13

arbitration decision that Hesby received thirty weeks of PPD payments. But in

the agency appeal decision, the commissioner does not consider Hesby’s

testimony acknowledging receipt of thirty weeks of PPD payments for his 1999

shoulder injury or the exhibit from the prior arbitration hearing showing Hesby’s

stipulation to receiving those payments. The commissioner is not entitled to

ignore record evidence. See JBS Swift & Co., 2015 WL 991438, at * 5.

Given Hesby’s admission during his testimony and the exhibit showing his

prior stipulation, we agree with the district court that the commissioner’s denial of

any offset to Polaris based on a lack of documentation in the record was not

supported by substantial evidence as required by section 17A.19(10)(f)(1).

Further, we find a remand is necessary because the commissioner failed to

consider relevant evidence concerning PPD payments for the 1999 shoulder

injury. See id.

We also agree with the district court’s decision to remand for a hearing to

allow the presentation of additional evidence concerning Polaris’s PPD payments

for Hesby’s 2009 hip injury.3 Because of ongoing litigation, Polaris had not yet

paid seventy weeks of PPD benefits for the hip injury at the time of arbitration

hearing. The district court properly determined under Iowa Code section

17A.19(7) that Polaris had good cause for not presenting evidence of its

payments at the arbitration hearing and evidence of the payments is material to

3
Hesby argues for the first time on appeal that Polaris was required to present this
additional evidence within twenty days of filing its notice of appeal to the commissioner.
We do not find that this issue was preserved for our review.
14

determining the “extent of the percentage of disability for which the employee

was previously compensated by the employer” under section 85.34(7)(b)(1).

Accordingly, we affirm the decision of the district court and remand to the

commissioner for further proceedings.

AFFIRMED ON BOTH APPEALS.