JAMES E. FOSTER,		)
				)
Employee,			)	DECISION AND ORDER
 Respondent,			)
				)	AWCB Case No. 8101937
v.				)
				)	AWCB Decision No. 90-0050
ASPOETIS CONSTRUCTION, INC.,	)
				)	Filed with AWCB Anchorage
Employer,			)	March 21 1990
				)
and				)
				)
EMPLOYERS' FIRE INSURANCE,	)
				)
Insurer,			)
 Defendants.			)
				)

On January 26, 1990, we heard the employer's petition to set aside or modify a compromise and release agreement entered into by the parties and approved by us on August 9, 1989. The employee was present and represented by attorney Chancy Croft. The employer and insurer (employer) were represented attorney Meredith A. Ahearn. The record closed on February 7, 1990, the first day we met after an outstanding deposition was received.

It is undisputed that Foster was injured while working for the employer on June 26, 1969. While he attempted to join two pieces of pipe in a ditch, a side of the ditch caved in and buried him up to the chest. The employee suffered a comminuted fracture of his left proximal tibia and was treated by Edward E. Voke, M.D., an orthopedic surgeon.

Foster received weekly temporary total disability (TTD) benefits for a total of 40 weeks beginning July 16, 1969 and ending March 20, 1970.

In his report of January 20, 1971, Dr. Voke stated that the employee's condition was as follows:

Based on these facts, Dr. Voke gave Foster a 20% impairment rating to the left leg, and he was paid appropriate permanent partial disability (PPD) benefits.

Foster was next seen by Dr. Voke for a follow up examination on July 28, 1976. In his report dated August 10, 1976, the doctor remarked:

Dr. Voke also noted in this report that the employee was released for work at that time.

In a report dated September 28, 1977, Dr. Voke stated:

The doctor once again noted that the employee was released for work, and it could not be determined whether any permanent impairment would result from the initial injury.

On April 20, 1982, Foster saw J. Paul Dittrich, M.D., an orthopedic surgeon, complaining of low back pain, aching stiffness and pain in his left leg at the site of the previous fracture. Upon examination Dr. Dittrich found that the spine was straight and not tender, the left iliac crest was definitely lower than the right, increased varus curvature of the left upper tibia and no neurologic deficit. In reviewing x-rays of the lumbar spine, the doctor found no significant abnormalities. Based on these findings, Dr. Dittrich diagnosed that the employee's left leg was one-half inch shorter than the right leg. With regard to Foster's back problem, the doctor stated; "I think his back pain may well he related to shortening of the left leg." Dr. Dittrich prescribed a lift in the left shoe. Finally, the doctor noted that not only was the employee released for regular work, but he had been working before seeing him.

Foster saw Dr. Voke again on December 17, 1986. report, the doctor stated:

Upon examination and review of the x-rays, Dr. Voke diagnosed "[d]egenerative disc disease L5 spine" and "[s]hortening left leg" and remarked: "This gentleman wants to retire because of the above. He does not need a CAT scan. He should then be retired from heavy construction work, but he is able, of course, to be involved in sedentary activities."

In a Physician's Report on Disability Applicant for the Alaska Carpenters Retirement Plan dated January 15, 1987, Dr. Voke stated that Foster suffered a permanent partial disability and the establishment or onset of the disability was December 17, 1986.

After a follow up examination in August 24, 1987, Dr. Voke stated in a report. "He should retrain, as he is a candidate for such, as he should not return to heavy construction."

On February 25, 1988, the employee was examined by Edward L. Barber, D.C., and it was his opinion that Foster was not able to return to heavy labor work and should have been retrained.

The employee filed his Application for Adjustment of Claim on March 19, 1988, requesting TTD benefits, temporary partial disability (TPD) benefits, permanent partial disability (PPD) benefits, permanent total disability (PTD) benefits, medical expenses and vocational rehabilitation services.

On April 11, 1988, Poster was examined by George B. vWichman, M.D. Subsequent to that examination, the doctor stated: "As a result of the examination and review of the x-rays, it is my belief that his condition has become worse since 1985. I do not think that he should try to continue working as a pile driver."

At the employer's request the employee was examined and evaluated by Michael H. Newman, M.D., on June 14, 1988. In addition to finding that Foster suffered from a "fracture left tibia with various shortening deformity" and "lumbar disc degeneration with a history of injury," Dr. Newman stated in his report of June 14, 1988:

In the physical capacities evaluation mentioned above, the doctor stated that the employee could 1) sit, stand and walk for four consecutive hours; 2) sit, stand and walk eight hours during a normal workday; 3) lift 10 to 20 pounds frequently and 35 to 50 pounds occasionally; 4) bend, squat, climb, twist, crawl occasionally and reach above shoulder level continuously during an average workday; 5) with his hands do simple grasping, pushing and pulling and fine manipulation; 6) work at unprotected heights, be around moving machinery and drive automotive equipment with mild restriction; and 7) be exposed to marked changes in temperature, humidity, dust, fumes and gases.

After having heard Foster's claim on July 21, 1988, we issued a decision and order (D&O) on August 16, 1988, in which we held, among other things, that the employee was: 1) not entitled to TTD, PTD or TPD benefits because Dr. Voke had determined on December 17, 1986 that he was permanently and partially disabled; 2) not entitled to PPD benefits because he never suffered a decrease in earning capacity due to his work-related injury; 3) entitled to a vocational rehabilitation evaluation since he suffered a permanent disability and expressed a sincere interest in undergoing a vocational rehabilitation program; and 4) entitled to receive TTD benefits while undertaking the approved evaluation.

On October 25, 1988, Foster was seen by Paul L. Craig, Ph.D., and clinical neuropsychologist for a neuropsychological evaluation. In a subsequent report, Dr. Craig concluded, in part:

At the request of the employee's rehabilitation counselor, his back problem was evaluated by Robert Fu, M.D., on November 15, 1988. In his report, the doctor noted:

On November 22, 1988, Dr. Fu gave Foster the B-200 test. In his chart notes, the doctor stated:

In a clinical note dated February 20, 1989, Dr. Fu stated in part "with regard to work, Mr. Foster has apparently volunteered at the Pioneer Home doing mail delivery. He state it keeps him active and he can take his time. It probably would not lead to a paying job but he is quite content in being able to do something."

In a letter to Foster's attorney dated April 7, 1989, Dr, Voke stated:

On April 25, 1989, Elizabeth Dowler, Executive Director of Work Therapy Enterprises, Inc., filed a report with the employer summarizing the findings and conclusion of a work tolerance screening program that Poster underwent between March 13 and 31, 1989. In the "Summary And Recommendations" portion of this report, Dowler stated, in part:

As noted previously, the parties entered into a C&R and we approved it on August 9, 1989. This C&R provided in pertinent part:

On September 27, 1989, the employer filed a petition to modify or set aside the C&R for fraud and a petition for a stay. On October 6, 1989, we issued a stay order which: 1) stayed the commencement of the annuity contract until a hearing was held and we had ruled on the employer's petition; and 2) ordered the employer to continue paying the monthly benefits at the regular rate until a hearing was held and we had ruled on its petitions.

At the hearing, Lyle Davis testified that he is a private investigator retained by the employer to investigate the work history of Foster and to identify his daily activities. Davis stated that he had the employee under surveillance and took video tapes of him between August 11 and August 25, 1989, and observed him doing the following activities: walking, riding his Harley Davidson motorcycle, driving his Datsun car, driving a Ford flatbed truck, bending, twisting at the waist, carrying light and heavy items, picking up and setting down his granddaughter, carrying his granddaughter in his arms head on his shoulders, holding his granddaughter above his head, and walking with and without a cane.

The employer also introduced evidence at the hearing that showed Foster had a business license in 1987 and 1988, had adds for his welding business in the Yellow Pages of the telephone book for those years and made approximately $4,000 in those two years as an independent contractor.

At the hearing, the employer also introduced the deposition of Dr. Fu which had been taken on January 22, 1990. On direct examination by the employer's attorney, Dr. FU said that he had reviewed the surveillance video tapes taken by Davis and it was his medical opinion that Foster was not permanently and totally disabled. On cross examination by the employee's attorney, Dr. Fu testified that after seeing Foster on two occasions in November 1988 he did not express an opinion in his reports that the employee was permanently and totally disabled, that he has not expressed to anyone an opinion that Foster was permanently and totally disabled, based on the B-200 test results there was no physiological basis for the employee's back complaints, and that nothing has changed since 1988 to change his opinion.

Dowler, the owner of Work Therapy Enterprises, stated at the hearing that after reviewing the surveillance video tapes taken by Davis, that the employee demonstrated the ability to move normally and showed no evidence of pain or disability. On cross examination by the employee's attorney, Dowler acknowledged that her April 24, 1989 report did not say anything about Foster being permanently and totally disabled.

Joseph West, Todd Henry and James Foster, Jr., were witnesses at the hearing and testified at they had worked with the employee on various occasions in the past couple of years and while the employee applied his trade as a welder or supervised work, they supplied the heavy labor.

Finally, Foster testified. With regard to the surveillance video tapes, he stated that they did not reveal the whole story. For example, he had to crawl in the back of a car to remove his clothes because he was ordered to by a police officer because his estranged wife was taking the car back; the television he was shown caring and the cabinet he was shown dragging, weighed 30 and 40 pounds respectively; and his granddaughter he was shown doing various things with, only weighed approximately 18 to 20 pounds. The employee acknowledged doing various welding jobs in 1987 and 1988 but explained that because of financial difficulties, including personal bankruptcy, divorce proceedings, and the fact that his workers' compensation benefits had been terminated, he had no choice but to work. In addition, he stated that since he worked for himself and had to purchase his own welding supplies, he actually lost money.

The employer takes the position that we should either set aside the C&R because it was obtained by fraud committed by the employee, or, in the alternative, modify the C&R in such a manner that consideration is given to the fact that the employee worked for a certain period in 1987 and 1988. The employee, on the other hand, argues that no new evidence has been introduced showing that he committed any type of fraud on the employer before the C&R was signed and approved.

The first question is we have the authority to set aside the C&R. We can set aside an agreed settlement or a compromise and release on general principles of law and equity concerning the recession of contracts. Doughty v. Icicle Seafoods, Inc., AWCB No. 860146 (June 16, 1986) ; Anderson v. Sutton, AWCB No. 100729 (March 23, 1984), Freitag v. City Electric, 3 AN-79-8860 Civil (Alaska Sup. Ct. August 19, 1981). The grounds on which the agreed settlement might be voided are fraud, mistake, or duress. Also, as noted by Professor Larson, "[s]ettlments cannot be disturbed except upon a showing that they were procured by fraud." 3 A. Larson, The Law of Workmen's Compensation 581.51(a) at 15-1120-1123 (1989); Southwest Nurseries v. Industrial Comm'n, 650 P.2d 473 (Ariz. App.). To reopen a case on this basis, the fraud may be by the employee, as alleged in this case, as well as by the employer or insurer. See Hopper v. Industrial Comm’n, 27 Ariz. App. 732, 558 P.2d 927 (1976); Morgan Yacht Corp./Beatrice Foods v. Edwards, 386 So.2d 883 (Fla. App. 1980); Ford v. Barcus, 155 N.W. 2d 507 (Iowa 1968).

Having decided that we have authority to set aside a settlement agreement if procured by fraud, we next must determine if the employer was induced into entering into the C&R in question because of the employee's fraudulent actions.

Fraud has been defined as:

Black's Law Dictionary 788 (4th ed. 1968).

The employer contends in the first instance that it entered into the C&R on August 9, 1989 in the belief that Poster was permanently and totally disabled, and the video tapes taken after the C&R was signed and approved clearly show that Foster is not permanently and totally disabled. The employee, on the other hand, asserts that he did not claim to be permanently and totally disabled when the C&R was entered into, and there was virtually no evidence to indicate that he was permanently and totally disabled at that time. We agree with the employee for the following reasons.

First, the numerous medical records, with one exception, clearly show that Foster has suffered from a permanent and partial, as opposed to a permanent and total, disability since December 1986. At that time Dr. Voke noted "He should then be retired from heavy construction work, but he is able, of course, to be involved in sedentary activities." Dr. Voke reaffirmed this opinion when he examined him in August 1987. Dr. Barbar examined Foster in February 1988 and, instead of finding him permanently and totally disabled, stated that Foster was not able to return to heavy labor work. Accordingly, Dr. Barber suggested he should be retrained. Dr. vWichman examined the employee in April 1988. He noticed that employee's condition had become worse, and that he should not try to continue working as a pile driver. After examining Foster in June 1988 and completing a physical capacities evaluation, which will be discussed at some length further on in this discussion, Dr. Newman did not find him permanently and totally disabled. Dr. Fu, at the employer's request, evaluated Foster in November 1988 and found that he was "interested in getting back into some type of productive activity" and that he "desires pursuing an active, ongoing program with the intention of returning to a labor market." After a B-200 test was given to the employee in November 1988, all Dr. Fu could determine was "inconsistencies in all perimeters suggestive of symptom magnification syndrome." The only exception to these assessments that Foster is permanently and partially disabled, is found in a letter by Dr. Voke to Foster's attorney in April 1989. While the doctor stated that the employee was "totally incapacitated and permanently disabled from all types of gainful employment," he also noted That "He is quite depressed, which I feel is almost the main factor in this man's inability to forge ahead." As the employee testified, this depression was brought about primarily by marital and financial difficulties and not by physical problems relating to his leg.

Next, nearly a year before the signing of the C&R, we held a hearing on the employee's claim and one of the issues raised was whether he was permanently and totally disabled. In our subsequent D&O we stated:

Based primarily on this evidence, we denied, among other things, the employee's claim for PTD benefits and ordered a vocational rehabilitation evaluation.

As noted in the above quoted part of the C&R, after our D&O the employer sent the employee to Dr. Fu for a further evaluation, to Dr. Craig for an evaluation, to Work Therapy Enterprises, Inc., for a work tolerance screening program and deposed Drs. Fu, Craig and Voke. Except for the letter by Dr. Voke, referred to above, there is no evidence in the record that Foster was ever found to be permanently and totally disabled after our D&O. At his deposition, Dr. Fu, the employer's selected doctor, specifically stated that he was never of the opinion that the employee was permanently and totally disabled and never told anyone that he was permanently and totally disabled. Dowler, of Work Therapy Enterprised, Inc., reported, in essence, that Poster became agitated very quickly, needed to take many breaks and had definite limitation's with regard to sitting and standing. There is nothing in these observations that would indicate to the employer that Foster's disability had gone from permanent partial to permanent total. She even felt that the employee's physical capacities could be improved with a strengthening and endurance program. At the hearing she testified that she never considered Foster permanently and totally disabled and has never told anyone that he was permanently and totally disabled.

Third, after reviewing the surveillance video tapes, we have even more difficulty understanding the employer's claim that Foster in some fashion perpetrated a fraud. The tapes show the employee walking, standing, bending and twisting at the waist, Carrying a television a short distance, dragging a cabinet a short distance, lifting up, carrying and putting down his young granddaughter, and driving a motorcycle, car and truck. In the tapes, Foster was not observed doing anything that he was incapable of doing long before the C&R was entered into. In June 1988, at the employer's request, Dr. Newman examined the employee and sent to the employer a physical capacities evaluation stating that the employee could 1) sit, stand and walk for four consecutive hours; 2) sit, stand and walk eight hours during a normal workday; 3) lift 10 to 20 pounds frequently and 35 to 50 pound occasionally; 4) bend, squat, twist, crawl occasionally; and 5) drive automotive equipment with mild restriction. These are precisely the activities being done by Foster in the tapes. It must also be remembered that Dr. Fu and Dowler, who evaluated and tested Foster on behalf of the employer after we issued our D&O in August 1988 and before the C&R was approved in August 1989, did not change their opinions that Foster was only permanently and partially disabled after reviewing the tapes.

Finally, the language of the C&R indicates that the employer did not necessarily believe Foster to be permanently and totally disabled. in stating the reason for compromise, the document states "A dispute over the nature and extent of applicant's permanent total disability, if any, . . . ." (Emphasis

added).

Based on all these factors, we conclude that the employee did not perpetrate a "fraud," as that word is defined above, upon the employer inducing the employer to enter into the C&R in question. Accordingly, the petition to set aside that C&R must be denied.

Next, the employer seems to contend that the C&R should set aside because it entered into the agreement believing that Foster suffered from some type of disability, and the video tapes reveal that he is not disabled at all. We disagree. As noted previously, nearly every doctor who has examined and evaluated Foster since 1969, has found him to suffer a permanent impairment. We find nothing in the record which indicates that other doctors disagree with Dr. Voke's assessment in December 1986 that the employee was permanently and partially disabled. It is also important to note that West, Henry and Foster, Jr., all testified that when they worked with the employee on some odd job during the last couple of years, the employee did not do the heavy work.

The last question raised by the employer is whether the C&R should be modified to reflect the fact that the employee earned approximately $4,000.00 in 1987 and 1988. This request raises two difficulties. First, a C&R agreement is entered into by the parties after they have considered of the respective strengths and weaknesses of their case, and negotiate accordingly. It would be impossible (and inappropriate) for us to now speculate what the parties would have done, if anything, if they had known of the employee's small income during the period in question. Second, and most important, is the fact that, while there was evidence that Foster earned approximately $4,000.00 in 1987 and 1988, there is also undisputed testimony from Foster that because of operating expenses, he actually lost money. Accordingly, we find no basis to modify the C&R as requested.

The employer's petition to set aside or modify the C&R approved by us on August 9, 1989 is denied and dismissed.

Dated at Anchorage, Alaska, this 21st day of March, 1990.

ALASKA WORKERS' COMPENSATION BOARD

/s/ Russell E. Mulder
Russell E. Mulder, Designated Chairman

/s/ RL Whitbeck Sr
Richard L. Whitbeck, Member

/s/ DW Richards
David W. Richards, Member

REM/rem/jpc

If compensation is payable under terms of this decision, it is due on the date of issue and penalty of 20 percent will accrue if not paid within 14 days of the due date unless an interlocutory order staying payment is obtained in Superior Court.

APPEAL PROCEDURES

A compensation order may be appealed through proceedings in Superior Court brought by a party in interest against the Board and all other parties to the proceedings before the Board, as provided in the Rules of Appellate Procedure of the State of Alaska.

A compensation order becomes effective when filed in the office of the Board, and unless proceedings to appeal it are instituted, it becomes final on the 31st day after it is filed.

CERTIFICATION

I hereby certify that the foregoing is a full, true and correct copy of the Decision and Order in the matter of James E. Foster, employee/applicant; v. Aspoetis Construction, Inc., employer; and Employers Fire insurance, insurer/defendants; Case No. 8101937; dated and filed in the office of the Alaska Workers' Compensation Board in Anchorage, Alaska, this 21st day of March, 1990.

Clerk

SNO