Holding that its decades-old adoption of the equitable misrepresentation defense in Hilt Truck Lines, Inc. v. Jones, 204 Neb. 115, 281 N.W.2d 399 (1979) was “clearly erroneous,” the Supreme Court of Nebraska, on December 9, 2011, reversed the judgment of the review panel of the state’s Workers’ Compensation Court and remanded the case for determination of whether the claimant was entitled to benefits without regard to the employer’s misrepresentation defense [see Bassinger v. Nebraska Heart Hosp., 282 Neb. 835, 2011 Neb. LEXIS 132 (Dec. 9, 2011)]. Under Hilt Truck Lines, false statements made in connection with an employment application could bar benefits for a subsequent work-related injury if (1) the employee knowingly and willfully made a false representation as to his or her physical condition; (2) the employer relied upon the false representation and this reliance was a substantial factor in the hiring; and (3) there was a causal connection between the false representation and the subsequent injury [quoting Larson’s Workers’ Compensation Law, § 66.04].
In the instant case, Bassinger began working as a certified nurse aide (CNA) for the employer/hospital in March 2006. Just prior to her employment, she completed a hospital’s preemployment questionnaire that asked questions about her history of work-related injuries and her physical condition. She disclosed a 1996 back injury while working as a CNA in a nursing home, but did not report a 2001 back injury working at a medical center in Lincoln, in spite of the fact that she settled a workers’ compensation claim related to the injury for a lump-sum payment of $5,000. In April 2008, while lifting a patient at the employer’s hospital facility, she injured her back and experienced instant pain in her lower back and down her leg. When she sought workers’ compensation benefits, the WCJ dismissed her claim, finding that she had failed to disclose the 2001 injury at the Lincoln medical center. The WCJ condlued that the hospital satisfied the causation component of the misrepresentation defense because the hospital would not have hired her had she truthfully reported her previous injury.
The review panel reversed the trial judge’s order, concluding that the hospital was required to show a direct causal relationship between the 2001 injury that Bassinger concealed and her 2008 injury, that it was insufficient just to show that had it known of her injury, it would have refrained from hiring her. The review panel remanded the case for further findings on causation.
The hospital appealed, contending the review panel erred in determining that the trial judge applied the wrong causation standard. Bassinger cross-appealed, contending the trial judge and the review panel improperly applied a misrepresentation defense that the Workers’ Compensation Act did not authorize.
The supreme court noted that in Hilt Truck Lines, it had adopted the Larson test [Larson, § 66.04] and affirmed the Workers’ Compensation Court’s finding that the evidence was insufficient to show a causal connection between the driver’s misrepresentations (prior driving while intoxicated convictions) and his subsequent accident. The court observed that the statute relied upon by the hospital, Neb. Rev. Stat. § 48-102, created an affirmative defense for injury caused by an employee’s willful negligence. Yet persons who misrepresented their physical condition to obtain employment were applicants, not employees. The court concluded that the statutory defense under § 48-102 did not apply to applicants.
The Nebraska court observed that at least 12 courts, besides the Nebraska court, had adopted the “Larson rule,” that other courts either currently held that an applicant’s misrepresentations to obtain employment could not bar workers’ compensation benefits absent statutory authorization or had held this before the defense was codified by statute. The Nebraska high court agreed with this latter group of states, indicating that it was for the legislature to impose any limitations or exceptions upon the employee’s statutory right to recover compensation. The misrepresentation defense resurrected barriers to compensation based on an employee’s fault and conflicted with a legislative intent to reduce litigation by eliminating most employer defenses.
The court indicated that the “Larson rule” reflected a concern that it was inequitable to permit an employer to deny compensation benefits after it has obtained the employee’s services for an extended period, that it also reflected a concern that an applicant’s misrepresentations about his or her physical condition could frustrate the employer’s attempt to protect itself from liability for the aggravation of a previous injury or a causally related injury, and that both of these concerns were obviously issues of public policy. The court acknowledged that the “Larson rule” balanced these concerns through a unique application of rescission and estoppel rules. The employer was estopped from rescinding the contract for the employee’s misrepresentation about his or her physical condition unless the misrepresentation resulted in the very injury that the employer was attempting to protect itself from by asking the applicant to respond to questions about his or her physical condition and work-related injuries. The court concluded that while the Larson rule might reflect a laudable goal, it was the Legislature’s function through the enactment of statutes to declare what is the law and public policy. The Workers’ Compensation Court had no equity jurisdiction; the Supreme Court itself had no authority to apply equitable principles to alleviate the harshness of a claimant’s recovery under the Act. The holding in Hilt Truck Lines was, accordingly, erroneous.