Thursday, February 9, 2017

Workers' Compensation Misrepresentation Defense

A recent decision from the Florida First District Court of Appeal reminds us yet again that there is no "fraud" defense in Florida workers' compensation. The word is bantered about in discussions at meetings and seminars by a variety of system constituents. What Florida has is not a "fraud defense" but a "misrepresentation defense." Certainly, a "misrepresentation" may also be a "fraud," but "misrepresentation" may occur even in the absence of "fraud." Whether it is effective or not is a statutory interpretation for the Judge. 

In City of Hialeah v. Bono (1D16-957), the court recently explained the "misrepresentation defense" again. There, the Judge of Compensation Claims rejected the "affirmative defense of misrepresentation under sections 440.09(4) and 440.105(4), Florida Statutes." Because the judge concluded that this defense failed, benefits were awarded to the injured worker and the employer appealed. 

The court reversed the Judge, concluding that "the wrong legal analysis" was applied. The Judge ignored the analysis of misrepresentation and instead "applied civil case law on fraud." As mentioned above, it is not a "fraud" defense, but a "misrepresentation" defense. As importantly, it is contained in Chapter 440, Fla. Stat., and there is ample appellate case law to assist with its interpretation. 

The court noted that Chapter 440 makes it "illegal for any person to 'knowingly make, or cause to be made, any false, fraudulent, or misleading oral or written statement for the purpose of obtaining or denying any benefit or payment' under the Workers’ Compensation Law."  The effect of such a misrepresentation is to bar payment of benefits "for an employee found to have 'knowingly or intentionally engaged in' such acts 'for the purpose of securing workers’ compensation benefits.'” 

So, the appropriate analysis is a "two-part inquiry," according to the court. Step one, the Judge must decide "whether a false (or fraudulent or misleading) statement was made by the claimant." In the second step, the Judge must then decide "whether, at the time the statement was made, it was made with the intent to obtain benefits." The court noted that this is not a novel question. It set forth this same two part test in  Arreola v. Admin. Concepts, 17 So. 3d 792, 794 (Fla. 1st DCA 2009). The defense was also explained by the court in Village Apartments v. Hernandez, 856 So. 2d 1140, 1142 (Fla. 1st DCA 2003).

The court conlcuded that the trial judge in Bono did not employ this two-part test. Therefore the court reversed the trial judge's decision and instructed that the Arreola analysis, the "two part inquiry" be applied to the case. 

The decision reminds again that "fraud" is not the issue or the point. The issue in workers' compensation law is set forth in the workers' compensation statute, and it is an issue of "misrepresentation." This has been described as the “misrepresentation defense” in multiple cases. Logan v. Poe's Hardware & Rentals, 381 So.2d 1170 (Fla. 1st DCA 1980); Cycenas v. Sarasota Coca Cola Bottling Co., 440 So.2d 39 (Fla. 1st DCA 1983); U.S. Home Corp. v. MacDonald, 445 So.2d 636 (Fla. 1st DCA 1984); Kalbes v. Armour Indus. Sec., 483 So.2d 124 (Fla. 1st DCA 1986); Collier v. Donzi Marine, 596 So.2d 1175 (Fla. 1st DCA 1992); Moore v. Williams Co., 622 So.2d 120 (Fla. 1st DCA 1993); Fawaz v. Florida Polymers, 622 So.2d 492 Fla. 1st DCA 1993); Winn Dixie v. Teneyck, 656 So.2d 1348 (Fla. 1st DCA1995); Walters v. Keebler Co., 652 So.2d 976 (Fla 1st DCA 1995); Simpson v. American Custom Interiors, 911 So.2d 794 (Fla. 1st DCA 2004); Polston v. Hurricane Island Outward Bound, 920 So.2d 766 (Fla. 1st DCA 2006); UNC Aviation Services v. Horne, 957 So.2d 698 (Fla. 1st DCA 2007); Matrix Employee Leasing v. Hernandez, 975 So.2d 1217 (Fla. 1st DCA 2008); Chandler v. Centex Rooney Const. Co., 15 So.3d 837 (Fla. 1st DCA 2009); Rene Stone Work v. Gonzalez, 25 So.3d 1272 (Fla. 1st DCA 2010); Charlotte County Public Schools v. Gary, 41 So.3d 395 (Fla. 1st DCA 2010); Clark v. R & L Carriers, 151 So.3d 129 (Fla. 1st DCA 2014); THG Rentals & Sales of Clearwater, Inc. v. Arnold, 196 So.3d 485 (Fla. 1st DCA 2016).

Seemingly, both the statute and the court have been clear on this "fraud" versus "misrepresentation" distinction. However, it is also possible that the confusion, and tendency of some to shorthand "misrepresentation" as "fraud" can nonetheless be traced to the court. In 2005 the court shorthanded a reference to "misrepresentation" with "the so-called fraud defense." Pinnacle Benefits, Inc. v. Alby, 913 So.2d 756 (Fla. 1st DCA 2005). Again in 2010, the court noted “Claimant seeks review of a final order denying all of her claims for benefits pursuant to the so-called 'fraud defense' in section 440.09(4), Florida Statutes (2007).” McArthur v. Mental Health Care, Inc., 35 So.3d 105 (Fla. 1st DCA 2010).  

Does the shorthanding come from the marketplace, and the court just made these unfortunate reinforcing mentions? Or, does the court making such shorthand references create the mislabelling in the marketplace? In either case, the use of "fraud" is misapplied. Whether the court started it or just acquiesced in it in these two cases, the use of "fraud" or "so called fraud" causes or reinforces misunderstanding, and does not serve the marketplace. 

A final thought is warranted on the misrepresentation statute, section 440.105(4)(b), Fla. Stat. That section creates criminal liability for presenting false information. This may be true even if no workers' compensation accident ever occurs, and if no workers' compensation benefits are ever paid or claimed. See, State v. Brock, 138 So.3d 1060 (Fla. 4th DCA 2014). While this decision is not controlling in every Florida court, it is a decision of which workers and employers should be aware. This court interpreted the misrepresentation statute as imposing broad liability for false or misleading representations. 

The misrepresentation defense is an intriguing element of Florida's workers' compensation law. Understanding it may require study and patience. However, everyone would benefit by cessation of the reference to "fraud," and use of the more accurate "misrepresentation."

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