Indiana Law Review


Recent Developments in Workers' Compensation

Ruth C. Vance*

I. Introduction

During the last year, workers' compensation has received consid-

erable attention from the courts, the legislature, and the governor's

office. The court of appeals issued a controversial decision barring

common law claims for sexual harassment under the exclusive remedy
provision. Indiana joined the majority of states that make some stat-
utory provision for vocational rehabilitation, by adding a new chapter
to the Workers' Compensation Act. In addition, Governor Bayh de-

termined that Indiana's workers' compensation system is in need of

reform, and he appointed a task force to make recommendations to
the legislature. This Article will review the previous year's major court

decisions and legislation, and outline the legislative recommendations

of the task force.

II. Case Law

A. The Exclusivity Provision

Because Title VII of the Civil Rights Act of 1964 does not allow

compensatory or punitive damages to victims of sexual harassment,'

plaintiffs have looked to alternative claims that, if successful, could

provide compensatory and punitive damages for the emotional distress

that sexual harassment may cause. Sexual harassment claims may be
categorized as either nonphysical sexual discrimination and harassment

or physical sexual assault. Alternative claims in the tort areas of assault

and battery, invasion of privacy, defamation, interference with an

advantageous business relationship, and intentional infliction of emo-

tional distress have been advanced in different jurisdictions with varying

success in the face of the exclusivity provision of state workers' com-

pensation acts. The Indiana Court of Appeals recently has held that

* Assistant Professor of Law, Valparaiso University. I would like to thank Sue

Collins, my research assistant, and Terri Graham, my secretary, for their help in producing
this Article.

1. 42 U.S.C. §§ 1981 to 2000h-6 (1988).



976 INDIANA LAW REVIEW [Vol. 24:975

the exclusivity provision of the Indiana Workers* Compensation Act

bars actions for both sexual harassment and sexual assault.^

In Fields v. Cummins Employees Federal Credit Union ^^ Sue Fields
brought an action against both her employer and her supervisor, alleging

sexual harassment, assault and battery, intentional infliction of emo-

tional distress, interference with an advantageous business relationship,

and negligent retention by the employer. Fields alleged that her su-

pervisor at the credit union told her that he would give her a better

performance review if she would go to bed with him, requested re-

peatedly that she go to bed with him, and stated repeatedly that Fields

would be promoted if she would sleep with him. She also alleged that

he often touched her on her back, buttocks, and shoulders, and at-

tempted to kiss her. The employer and the supervisor argued that
Fields's sole remedy was under the Workers' Compensation Act, and

that her tort claims against both her employer and her supervisor were

barred by the exclusive remedy provision. The defendants also argued
that Title VII and the Indiana Civil Rights Act pre-empted Fields*s

cause of action. The trial court accepted the defendants* arguments
and granted them summary judgment.

On appeal, the Indiana Court of Appeals held that Title VII and
the Indiana Civil Rights Act did not pre-empt Fields's cause of action.'*

The appellate court agreed with the trial court that Fields*s tort claims

against her employer were barred by the exclusive remedy provision

of the Workers* Compensation Act, and the court affirmed the award

of summary judgment to the employer,^ However, the court reversed
the summary judgment granted in favor of the supervisor, finding that
Fields*s tort claims against her supervisor were not barred by the

exclusive remedy provision.^

The court examined the facts and determined that the three statutory

jurisdictional prerequisites were met: **(!) personal injury or death by

accident; (2) personal injury or death arising out of employment; and

(3) personal injury or death arising in the course of employment.**^

The Indiana Supreme Court, in Evans v. Yankeetown Dock Corp.,^

2. Arrow Uniform Rental, Inc. v. Suter, 545 N.E.2d 832, 833 (Ind. Ct. App.

1989); Fields v. Cummins Employees Fed. Credit Union, 540 N.E.2d 631, 636 (Ind. Ct.
App. 1989).

3. 540 N.E.2d 631.

4. Id. at 639-40.

5. Id. at 637.

6. Id. at 638.

7. Id. at 634-35.

8. Id. at 633 (citing Evans v. Yankeetown Dock Corp., 491 N.E.2d 969 (Ind.

1986)).



1991] WORKERS' COMPENSATION 977

had held that these three elements, which the Workers' Compensation

Board uses to determine if there is workers* compensation coverage,

should also be used by courts to determine if they have jurisdiction

over the plaintiff's lawsuit.^ If all three prerequisites are met, the

exclusive remedy provision of the Workers' Compensation Act precludes

any other rights or remedies that an employee might have against her

employer for personal injury or death. '°

Although Fields admitted that the events complained of happened

in the course of her employment, she argued that her injuries were

not accidental and did not arise out of her employment. Fields asserted

that an injury would have to result from a single event to be accidental.

The court rejected Fields 's argument, and relied on Hansen v. Von
Duprin, Inc.,^^ in which a supervisor caused a worker mental injuries

by repeatedly playing jokes on the worker that took advantage of her

fear of guns. The Fields court found no distinction between the repeated
practical jokes in Hansen and the repeated sexual harassment in Fields 's
situation, and thus found that Fields's injuries were *'by accident. "'^

The court of appeals also found that the **personal injury or death
arising out of employment" prerequisite was met.'^ The court stated
that **[a]n accident arises out of employment if it has its origin in a

risk connected with that employment and flowed as a rational con-

sequence from the employment. "'"^ The court then proceeded to find

a causal nexus between the supervisor's acts and Fields's employment.'^

The court reasoned, much as the supreme court did in Evansy^^ that
Fields's tort claims were based on an employment relationship existing

between herself and Cummins. '^ The court stated that Fields therefore
could not rely on the causal connection between her injuries and her

employment relationship in the tort claim and also deny that the

9. Id. (citing Evans, 491 N.E.2d at 973).

10. Id. at 633-34.

11. Id. at 634 (citing Hansen v. VonDuprin, Inc., 507 N.E.2d 573 (Ind. 1987)).

12. Id. at 635.

13. Id.

14. Id.

15. Id.

16. Evans was a wrongful death action brought by Evans's personal representative

against Evans's employer after an insane coworker shot and killed Evans while he was

drinking coffee on the employer's premises right before the start of the shift. 491 N.E.2d

969, 970 (Ind. 1986). The court held that the wrongful death action was barred by the

exclusive remedy provision of the Workers' Compensation Act because the claim was

based on the existence of the employment relationship and a causal connection between

the death and the employment. Id. at 976. In other words, Evans's death arose out of

his employment. Id.

17. Fields, 540 N.E.2d at 635.



978 INDIANA LAW REVIEW [Vol. 24:975

connection existed for purposes of overcoming the exclusive remedy

provision of the Workers* Compensation Act.'^ The court of appeals
further found unpersuasive Fields*s argument that her employer was

responsible under the doctrine of respondeat superior for the acts of

her supervisor. The court reasoned that because the supervisor acted

on his own initiative and not in the service of his employer, his acts
were outside the scope of his employment, and the doctrine of res-

pondeat superior did not apply. '^

In considering Fields*s tort claims against her supervisor, the court

of appeals found it necessary to go beyond the three jurisdictional

prerequisites to determine if the supervisor could also invoke the ex-

clusive remedy provision. The court relied on Martin v. Powell^^^ which

found that a coemployee could be immune from suit under the exclusive
remedy provision only if the coemployee was acting in the course of

employment when the plaintiff suffered compensable injuries.^' The
Fields court found that the supervisor's alleged acts could not have

been for the employer's benefit. ^^ Therefore, the supervisor's acts were

not within the scope of his employment and did not arise out of his

employment." Consequently, the court of appeals allowed Fields to

proceed with her tort claims against her supervisor.

The court of appeals found that the fact that Fields 's employer

did not pay any medical bills or benefits under the Workers' Com-
pensation Act was irrelevant.^'^ Rather, it found that the only relevant

inquiry was whether the three statutory jurisdictional prerequisites were

present. 2^ The court's statement indicates that the use of the same three

statutory elements to determine jurisdiction and compensability is prob-

lematic. The problem in a sexual harassment situation is that the court

can determine that the Workers' Compensation Board has exclusive

jurisdiction, but the Board can later decide that the sexual harassment

claim is not compensable under the Workers' Compensation Act. In

a sexual harassment situation, benefits likely would not be payable

because medical attention is unnecessary and earning capacity would

18. Id.

19. Id. at 636.

20. Id. at 637-38 (citing Martin v. Powell, 477 N.E.2d 943 (Ind. Ct. App. 1985)).

21. Id. at 637 (citing Martin, All N.E.2d at 945). The court in Martin held that

the injured worker could sue her coemployee for injuries she received when he pulled a

chair out from under her at work, because during that act of horseplay, he was not

acting within the course of his employment. Martin, All N.E.2d at 945. The Martin court

seems to have used the term "course of employment" as "scope of employment" is used.

22. Fields, 540 N.E.2d at 638.

23. Id.

lA. Id. at 637.

25. Id.



1991] WORKERS' COMPENSATION 979

not be lost. It seems odd to bar a tort action by holding that workers'

compensation is the plaintiff's sole remedy when, in fact, workers'

compensation affords the plaintiff no remedy.

Also during this survey period, the Indiana Court of Appeals barred

an action for physical sexual assault and battery, and held that workers'

compensation afforded the plaintiff her only remedy.^^ In Arrow Uni-
form Rental, Inc. v. Suter,^'' the plaintiff alleged that she was sexually
assaulted and battered by three coemployees during a Christmas party

held on the employer's premises during regular work hours. Following

the precedent set in Fields, the court found that the injury happened

by accident because the assault and battery were unexpected. ^^ Relying

on the reasoning in Fields, the court held that the injury arose out

of the employment and occurred in the course of employment. ^^ In

this case, the manager was not involved in the alleged assault and

battery, and therefore enjoyed the same immunity under the exclusive

remedy provision as the employer.

The coverage of workers with mental injuries caused by mental

stimulus at the workplace may provide the rationale for using the
exclusive remedy provision to bar tort claims for sexual harassment. ^°

Many types of workplace stress also can be the basis of harassment
or discrimination claims. Accordingly, the possibility of overlap between

workers' compensation stress claims and tort claims is great. For ex-

ample, in addition to the usual three-part analysis that most states use

to determine whether an injury is compensable under a workers' com-

pensation act, the Wyoming Supreme Court determined in a sexual
harassment suit alleging assault and battery and intentional infliction

of emotional distress that the mental injury resulting from the ha-

rassment was compensable under the Workers' Compensation Act.^'

Although not mentioned by the Indiana Court of Appeals, a factor

leading to the decision to bar the plaintiff's sexual harassment tort

claims may have been the compensability of mental injuries caused by
mental stimulus. ^^ Courts that have held that the exclusive remedy

26. Arrow Uniform Rental, Inc. v. Suter, 545 N.E.2d 832, 833 (Ind. Ct. App.

1989).

27. 545 N.E.2d 832.

28. Id. at 833.

29. Id.

30. See D. DeCarlo & M. Minkowitz, Workers Compensation Insurance and
Law Practice 289-90 (1989).

31. Baker v. Wendy's of Montana, Inc., 687 P. 2d 885 (Wyo. 1984) (the court

decided that the statutory definition of "injury" included mental injury; therefore, the

mental injuries suffered by these victims of sexual harassment would be compensable under

the Workers' Compensation Act, and their tort claims were barred).

32. Hansen v. VonDuprin, Inc., 507 N.E.2d 573, 576 (Ind. 1987).



980 INDIANA LAW REVIEW [Vol. 24:975

provision does not bar sexual harassment tort claims against the em-

ployer generally have relied on the strong public policy against sexual

harassment in the workplace evidenced by Title VII of the Civil Rights

Act of 1964 and various state civil rights laws."

Fields may not foreclose all lawsuits for sexual harassment in the
workplace. A suit for sexual harassment against the employer may be
brought if the alleged acts were intentional and performed or directed

by the employer or its alter ego.''* In National Can Corp, v. Jova-
novichy^^ a machinist with a serious back injury alleged that his employer

intentionally assigned him heavy labor, despite the employer's knowl-

edge of the back injury, because the employer resented the machinist's

filing of grievances and wanted the machinist to resign. Although the

court held that the machinist's action failed because he did not prove

that the employer had the specific intent to harm him, the court implied
that, given the right set of facts, an intentional tort exception to the

exclusive remedy provision may be available.'^ The court stated that
**it would be a total perversion of the humanitarian purposes of the

Act to permit an employer to use the Act as a shelter against liability

for an intentional tort."" The court also stated that **[i]t must be
shown that the actor was the employer, one acting pursuant to em-
ployer's direct order or one acting as the alter ego of the corporation."'*

The court in Fields did not address this narrow exception expressed
in National Can; therefore, this exception still appears to be available.

During the 1990 spring session of the Indiana General Assembly,

House Bill 1085,'^ coauthored by Representative Robert E. Hayes (D-

33. See Ford v. Revlon, Inc., 153 Ariz. 38, 734 P.2d 580 (1987); Hart v. National

Mortgage & Land Co., 189 Cal. App. 3d 1420, 235 Cal. Rptr. 68 (1987); Byrd v.
Richardson-Greenshields Sec, Inc., 552 So. 2d 1099 (Fla. 1989); Millison v. E.L du Pont

de Nemours & Co., 101 N.J. 161, 501 A.2d 505 (1985); Hogan v. Forsyth Country Club
Co., 79 N.C. App. 483, 340 S.E.2d 116 (1986); Palmer v. Bi-Mart Co., 92 Or. App.

470, 758 P.2d 888 (1988).

34. Shelby v. Truck & Bus Group Div. of Gen. Motors Corp., 533 N.E.2d 1296
(Ind. Ct. App. 1989); National Can Corp. v. Jovanovich, 503 N.E.2d 1224 (Ind. Ct.
App. 1987).

35. 503 N.E.2d 1224.

36. Id. at 1234.

37. Id. at 1232.

38. Id. at 1233 n.l3.

39. The House Bill reads as follows:

SECTION 1. IC 22-3-2-6 IS AMENDED TO READ AS FOLLOWS:
Sec. 6. The rights and remedies granted to an employee subject to IC 22-3-2

through IC 22-3-6 on account of personal injury or death by accident shall

exclude all other rights and remedies of such employee, his personal represen-

tatives, dependents or next of kin, at common law or otherwise, on account



1991] WORKERS' COMPENSATION 981

Columbus) and Representative John Thomas (R-Brazil), was introduced
to provide additional remedies for employees alleging sexual or racial

harassment. This bill would have amended the exclusive remedy pro-
vision to provide an exception for claims of sexual or racial harassment.

The bill was later amended so that employers may be found liable for
sexual or racial harassment only if they participated or acquiesced in

the harassment through the conduct of their supervisory or management

personnel. "^^ The amended bill passed the House on the third reading.

House Bill 1085 received a complete overhaul in the Senate and in the

conference committee."^' The conferees agreed on what was essentially

of such injury or death, except for:

(1) remedies available under IC 16-7-3.6; or

(2) statutory or common law remedies av£iilable to an employee alleging
sexual or racial harassment that occurs in the course of the employee's

employment,

H.B. 1085, 106th Ind. Gen. Assembly, 2d Sess. (1990) (version considered by the House

Judiciary Committee).

40. The bill provides the following:

SECTION 1. IC 22-3-2-6 IS AMENDED TO READ AS FOLLOWS:
Sec. 6. The rights and remedies granted to an employee subject to IC 22-3-2

through IC 22-3-6 on account of personal injury or death by accident shall

exclude all other rights and remedies of such employee, his personal represen-

tatives, dependents or next of kin, at common law or otherwise, on account
of such injury or death, except for:

(1) remedies available under IC 16-7-3.6; or

(2) statutory or common law remedies available to an employee alleging
sexual or racial harassment that occurs in the course of the employee's

employment.

Employers shall only be held liable for torts related to sexual or racial harassment

if the employer participated in, encouraged, condoned or ratified such tortious

conduct through the actions or inactions of its supervisory or management

personnel.

H.B. 1085, 106th Ind. Gen. Assembly, 2d Sess. (1990) (version passed by the House).

41. The House Bill reads as follows:

SECTION 1. IC 22-9-1-6 IS AMENDED TO READ AS FOLLOWS:

(m) If, upon all the evidence, the commission finds a person has engaged in

sexual or racial harassment in violation of this chapter, the commission shall

cause to be served on the person an order requiring:

(1) the person to cease and desist from the unlawful harassment; and

(2) the person to pay the complainant not more than three hundred percent

(300<^o) of the wages, salary, or commissions the complainant earned, or

would have earned had the complainant been working, for each day after

notice of the complaint was given, but not to exceed one (1) year, if the

commission finds that the complainant notified the person, the commission,

or a local commission established by ordinance under section 12.1 of this

chapter in writing of the unlawful harassment; and

(3) the person to take further affirmative action as will effectuate the



982 INDIANA LAW REVIEW [Vol. 24:975

a civil rights bill that imposed potential liability of three times what

the complainant would have earned had the complainant been working

each day after notice of the complaint was given/^ The maximum
amount imposed would have been the complainant's earnings for one
year/^ Before it could be voted on by the full House and Senate, the
bill went to the House Rules Committee for approval; it died in the

purposes of this chapter, including the following:

(A) To restore the complainant's losses incurred as a result of the unlawful
harassment, as the commission may consider necessary to assure justice,
but is limited to wages, salary, or commissions.

(B) To require the posting of notice setting forth the public policy of
Indiana concerning civil rights and the respondent's compliance with the

policy in places of public accommodations.

(C) To require proof of compliance to be filed by the respondent at periodic
intervals.

(D) To require a person who has been found to be in violation of this
chapter and who is licensed by a state agency authorized to grant a license
to show cause to the licensing agency why the person's license should not
be revoked or suspended.

SECTION 2. IC 22-9-1-6.1 IS ADDED TO THE INDIANA CODE AS A NEW
SECTION TO READ AS FOLLOWS:
Sec. 6.1. (a) If the commission:

(1) fails to make a determination on a complaint of sexual or racial

harassment in violation of this chapter within one hundred eighty (180)

days after receiving the complaint; or

(2) finds within one hundred eighty (180) days no probable cause to believe

that a person has engaged in sexual or racial harassment in violation of

this chapter; the complainant may bring a civil cause of action for the
sexual or racial harassment alleged in the complaint filed with the com-

mission.

(b) If subsection (a) applies, the commission shall issue a right to sue letter

to the complainant upon the request of the complainant.

(c) A civil cause of action under subsection (a) must be filed not later
than ninety (90) days after:

(1) the date of issuance of the right to sue letter by the commission if

subsection (a)(1) appHes; or

(2) the date of receipt by the complainant of the commission's finding

that no probable cause exists to believe that a person has engaged in

sexual or racial harassment if subsection (a)(2) applies.

(d) A complainant bringing a successful civil action under subsection (a)
is entitled to reasonable attorney's fees.

(e) In a civil action under subsection (a), a complainant is Hmited to the

same remedies that may be ordered by the commission under section 6 of
this chapter.

Amended Engrossed H.B. 1085, 106th Ind. Gen. Assembly, 2d Sess. (1990) (unanimously
approved conference committee report version that died in the House Rules Committee).

42. See text of House Bill 1085, supra note 41.

43. Id.



1991] WORKERS' COMPENSATION 983

committee/'^ Practitioners should watch for additional ''anti-Fields''

bills in the next session of the General Assembly.

B. Retaliatory Discharge In Workers* Compensation Cases

In 1973, the Indiana Supreme Court started a national trend by

finding a public policy exception to the firmly entrenched employment-

at-will doctrine in the area of workers' compensation. The employment-

at-will doctrine provides that an employer may terminate an employee's
employment for any reason or no reason at all."^^ The court carved

out an exception to the doctrine by holding that firing an employee

for exercising the statutory right to file a workers' compensation claim

violated public policy. "^^ Following Indiana's lead, several other states

have recognized a cause of action for retaliatory discharge when an
employee is fired for filing a workers' compensation claim."^^ Although

other states have created more exceptions to the employment-at-will
doctrine,"^^ Indiana courts have narrowly construed the public policy

exception created in Frampton v. Central Indiana Gas Co^^
During the last year, the Indiana Court of Appeals has continued

to narrowly interpret the public policy exception to the employment-

at-will doctrine enunciated in Frampton .^^ In Peru Daily Tribune v.

44. Id.

45. See generally Feinman, The Development of the Employment at Will Rule, 20

Am. J. Legal Hist. 118 (1976).
46. Frampton v. Central Ind. Gas Co., 260 Ind. 249, 252-53, 297 N.E.2d 425,

428 (1973).

47. See, e.g., Hansen v. Harrah's, 100 Nev. 60, 675 P.2d 394 (1984); Clanton v.

Cain-Sloan Co., 677 S.W.2d 441 (Tenn. 1984); Sventko v. Kroger Co., 69 Mich. App.

644, 245 N.W.2d 151 (1976).
48. See Duldulao v. Saint Mary of Nazareth Hosp. Center, 115 111. 2d 482, 505

N.E.2d 314 (1987) (employee handbook created a binding contract, taking employee out

of at-will employment); Palmateer v. International Harvester Co., 85 111. 2d 124, 421

N.E.2d 876 (1981) (employee fired for informing police of coemployee's criminal activities

had action for retaliatory discharge), appeal denied, 140 111. App. 3d 857, 489 N.E.2d

474 (1986); Russ v. Pension Consultants Co., 182 111. App. 3d 769, 538 N.E.2d 693 (1989)
(employee fired for refusing to engage in illegal conduct had action for retaliatory discharge);

Nees V. Hocks, 272 Or. 210, 536 P.2d 512 (1975) (employee fired for serving on jury

had action for retaliatory discharge).

49. 260 Ind. 249, 297 N.E.2d 425 (1973). After Frampton, the Indiana Supreme

Court has recognized only two other public policy exceptions to the employment-at-will

doctrine. See McClanahan v. Remington Freight Lines, Inc., 517 N.E.2d 390 (Ind. 1988)
(an exception to employment-at-will recognized when an employee is terminated for refusing
to violate the law); Romack v. Public Serv. Co., 511 N.E.2d 1024 (Ind. 1987) (an exception
to employment-at-will recognized when after negotiations an employee relinquishes lifetime
employment with one employer so that the employee can take what has been represented

as lifetime employment with another employer).

50. See Smith v. Electrical Sys. Div. of Bristol Corp., 557 N.E.2d 711 (Ind. Ct.

App. 1990); Peru Daily Tribune v. Shuler, 544 N.E.2d 560 (Ind. Ct. App. 1989).



984 INDIANA LAW REVIEW [Vol. 24:975

Shulery'^ Toni Shuler, a part-time newspaper sales representative, fell

and hurt her knee at work. The day that Ms. Shuler informed her

supervisor that she needed surgery on her knee, he terminated her

employment. The supervisor's only reason for terminating Ms. Shuler

was that he could not afford to have a salesperson absent. No evidence
of unsatisfactory job performance existed. The Indiana Court of Ap-

peals held that sufficient evidence supported the trial court's decision

that Shuler had been discharged in retaliation for filing a workers'

compensation claim." The court followed the reasoning in Frampton

that a public policy exception to the general employment-at-will rule

exists if the employee is terminated for exercising a statutorily conferred

right, in this case, the right to file a workers' compensation claim."

Later in the year, the Indiana Court of Appeals in Smith v. Electrical

System Division of Bristol Corp. declined to extend the rule established

in Frampton to cover a situation in which a recipient of workers'
compensation benefits was fired because the medical leave was longer

than the leave allowed by the company's absence control policy.^'* The

court distinguished Smith from Frampton by noting that the employer
in Smith did not take retaliatory action when the worker applied for
workers' compensation benefits." The court found that the absence
control policy was a neutral policy that did not violate the law because

it created only an incidental detriment to an injured worker.^^

The court also considered whether the absence control policy vi-

olated Indiana Code section 22-3-2-15, which prohibits an employer
from using any device to avoid obligations under the Workers' Com-
pensation Act." The court reasoned that the workers' compensation

benefits paid by an employer are economic benefits, and that the benefit

of indefinitely maintaining an injured worker's employment status is

non-economic.^^ The court concluded that an employer is not obligated
to provide this non-economic benefit under the Act, and therefore the

absence control policy did not violate the statute.'^ Although the ex-

ception created in Frampton is still alive and well. Smith indicates that
the Indiana Court of Appeals is not ready to expand Frampton.

51. 544 N.E.2d 560 (Ind. Ct. App. 1989)

52. Id. at 564.

53. Id. at 563.

54. Smith, 557 N.E.2d at 712-13.

55. Id. at 713.

56. Id. at 712-13.

57. Id. at 713.

58. Id.

59. Id.



1991] WORKERS' COMPENSATION 985

C. Mental Stimulus - Mental Injury Accidents

In contrast to the narrow approach that the Indiana Court of

Appeals has taken in creating exceptions to the employment-at-will

doctrine, Indiana courts have liberally granted workers* compensation

coverage to employees who suffer mental injuries brought about by
mental stimuli. In 1987, the Indiana Supreme Court ruled that the

same standard should be used in both mental and physical injury cases

to determine if the injury arose out of the employment.^ In Hansen

V. Von Duprin, the court found that the employee could recover

workers' compensation for mental injury caused when her supervisor
intentionally preyed on her fear of guns by repeatedly harassing her

with such acts as firing a cap gun and jabbing her in the ribs from

behind as if holding a gun.^'

In determining if the three requirements for compensability were

met, the court found that whether the injury is mental or physical,

the injury must be causally connected with the employment to meet

the
*

'arising out of the employment" requirement." The court reasoned
that requiring mental injuries to result from greater stress than the

usual day-to-day stress of employment would be a step back to the

original definition of '*by accident" as an
*

'untoward or unexpected

event. "^^ This definition of accident was rejected in Evans v. Yan-

keetown Dock Corp, and replaced with "unexpected injury or death. "^"^

The problem with this reasoning is that in Hansen, the court focused
on the causation or the "arising out of the employment" requirement,
and not the "by accident" requirement that the Evans court considered
when it discussed the "untoward or unexpected event" notion." The
Hansen court followed the Evans court's lead in rejecting the "unusual
or unexpected event" definition of "by accident," and also rejected
the "unusualness" test for determining causation.^^ However, the court

neglected to set out a definite test for causation, probably because the

causation issue was easy to resolve in Hansen,
^"^

Relying on Hansen as precedent, the court of appeals in North
Clark Community Hospital v. Goines^^ found that the Workers' Com-

60. Hansen v. Von Duprin, 507 N.E.2<i 573, 576 (Ind. 1987).
61. Id. at 577.

62. Id. at 576.

63. Id.

64. Id. at 575 (citing Evans v. Yankeetown Dock Corp., 491 N.E.2d 969 (Ind.

1986)).

65. See Spengler, Hansen v. Von Duprin: Have the Floodgates Opened to Work-
men's Compensation Claims?, 21 Ind. L. Rev. 453, 458 (1988).

66. Id. at 459.

67. Id.\ Hansen, 507 N.E.2d at 575.

68. 545 N.E.2d 30 (Ind. Ct. App. 1989).



986 INDIANA LAW REVIEW [Vol. 24:975

pensation Act provided coverage when a third party caused a sudden
mental stimulus that was not directed at the employee.^^ In North Clark

Community Hospital, a nurse's aide took the vital signs of a female
patient whose husband was visiting her. After leaving the room, the

nurse's aide heard two gunshots. She correctly assumed that the patient's

husband had shot the patient and then shot himself. The nurse's aide

suffered depression from hearing the shooting. The court had no
difficulty in finding that two of the compensability requirements were

met: the injury occurred **by accident" and **in the course of em-

ployment. "^°

The court then focused on whether a causal connection existed

between the injury and the employment so that the injury would meet

the third requirement of **arising out of the employment." The court
followed Hansen by ruling that a mental injury did not require a
different standard from a physical injury in proving causation.^' The
court stated that a causal connection would exist if *'the accident arises

out of a risk which a reasonably prudent person might comprehend

as incidental to the employment at the time of entering into it, or

when the facts show an incidental connection between the conditions
under which [the] employee works and the injury. "^^ The court held
that because of the circumstances surrounding the accident, the aide's

risk and resulting injury were incidentally related to the employment. ^^

The hospital argued that a causal connection between the depression
and the employment could not be shown because the stimulus was not
directed at the employee. The court refused to require any additional

causation requirements for recovery for mental injuries.^"* The court
analogized this case to third party assault cases, which use an '^increased

risk" test to determine causal connection, and which yield the same

result on compensability.^^ The risk actually incurred by the nurse's
aide and the risk of assault by a third party not connected to the

employment fall into the category of neutral risks. A majority of courts
finds accidents resulting from neutral risks compensable if the risk was

increased because of the employment.''^ The court found that the aide's

job exposed her to increased contact with the public in the form of

69. Id. at 32.

70. Id. at 31.

71. Id.

11. Id. (quoting Lasear, Inc. v. Anderson, 99 Ind. App. 428, 434, 192 N.E. 762,

765 (1934)).

73. Id. at 32.

74. Id. at 31.

75. Id. at 31-32.

76. See 1 A. Larson, The Law of Workmen's Compensation § 11.11 (1990).



1991] WORKERS' COMPENSATION 987

patients and visitors; therefore, an analogy between the present case

and third party assault cases would not change the result.''^ Even though

the court demonstrated how the increased risk test would apply, its
decision was based on the risk being incidental to the employment. ^^

Using this test is consistent with the test that does not add requirements

for causation in mental injury cases. Through North Clark Community
Hospital, Indiana moves one step closer to enunciating an explicit

causation standard in mental injury cases.

D. Employer's Obligation to Indemnify

Third-Party Tortfeasors

During the survey period, the court of appeals decided that an

employer can agree to indemnify a third party for an employee's injuries

caused by the employer's negligence. ^^ In Indianapolis Power & Light
Co. V. Brad Snodgrass, Inc.,^^ J.A. House, Inc. served as the general

contractor on an air conditioning project at an Indianapolis Power &
Light (IPL) station. Brad Snodgrass, Inc. was one of House's sub-

contractors. The contract between House and Snodgrass contained an

indemnity provision stating that Snodgrass would indemnify House and
IPL for bodily injury and property damage due to Snodgrass's work.
IPL's job specifications also included a similar indemnity provision.

One of Snodgrass's employees was injured on the job and brought a
negligence suit against IPL and House. ^' IPL and House filed a third-
party complaint against Snodgrass, relying on the indemnity provision

in the contract and on common law theories of indemnity to recover
for liability imposed on them for the worker's injuries attributable to

Snodgrass's negligence:^^ IPL and House appealed the trial court's
grant of summary judgment to Snodgrass. ^^

The negligence action against IPL and House required the court
to address how Indiana's Comparative Fault Act affects third-party
complaints for indemnification. The court noted that, taken together,
the Workers' Compensation Act and the Comparative Fault Act ex-

cluded the employer from liability.^'* The exclusive remedy provision
of the Workers' Compensation Act prevented the injured worker from

suing the employer for negligence, ^^ and the Comparative Fault Act

77. North Clark Community Hosp., 545 N.E.2d at 32.
78. Id.

79. Indianapolis Power & Light Co. v. Brad Snodgrass, Inc., 548 N.E.2d 1197,
1200-01 (Ind. Ct. App. 1990).

80. Id.

81. Id. at 1197.

82. Id.

83. Id.

84. Id. at 1198.

85. Id. (citing Ind. Code § 22-3-2-6 (1988)).



988 INDIANA LAW REVIEW [Vol. 24:975

excluded the employer from the apportionment of fault process.*^ Thus,

under the Comparative Fault Act, all the fault, including that of an

immune employer, had to be allocated among the plaintiff, the de-
fendant, and any nonparty, which by definition does not include the

employer.*^

The court found that any vicarious liability of IPL and House

resulted from the apportionment process under the Comparative Fault

Act and not from the doctrine of respondeat superior, which Snodgrass

had relied on in its motion for summary judgment.^^ Indeed, Snodgrass
could not be included in the apportionment of fault under Indiana's

Comparative Fault Act.^^ Therefore, the court found that IPL and
House could be held vicariously liable for Snodgrass's negligence. ^^ The
court further held that because Snodgrass had agreed to indemnify

IPL and House for any vicarious liability due to its negligence, the
portion of Snodgrass's fault had to be determined.^' The court reversed

the trial court's decision and remanded the case for a determination

of the amount of Snodgrass's vicarious liability. ^^

E. Employer's Right to Reimbursement from a
Third-Party Tortfeasor

In Calvary Temple Church, Inc. v. Paino,^^ the court of appeals

explored the issue of employer reimbursement rights when the injured
worker and a third party reach an agreement that does not meet the

definition of a settlement under Indiana Code section 22-3-2-13. The
court also found that the employer is obligated to pay its pro rata

share of the injured worker's attorney fees.^"*

In Calvary Temple, the injured worker received temporary total

disabihty in accordance with an agreement filed with the Workers'

Compensation Board. The employer's insurer agreed to pay permanent
partial impairment to the injured worker on March 18, 1988. The
injured worker then sued a third-party tortfeasor and reached an agree-

ment with him on May 3, 1988.^^ The agreement did not mention the

86. Id. (citing Ind. Code § 34-4-33-2(a) (1988)).
87. Id. at 1198-99.

88. Id. at 1199.

89. Id. at 1200.

90. Id.

91. Id.

92. Id. at 1201. This decision was appealed to the Indiana Supreme Court, and

oral argument was heard September 19, 1990. At the time of this writing, the decision

had not been released.

93. 555 N.E.2d 190 (Ind. Ct. App. 1990).

94. Id. at 194.

95. Id. at 192.



1991] WORKERS' COMPENSATION 989

injured worker's employer or its insurer, nor was the agreement signed

by them. The trial court did not dismiss the lawsuit or enter a lien

protecting the insurer's reimbursement rights.^^ A single hearing member
found the employer liable for the injured worker's medical expenses

and permanent partial impairment because the injured party's agreement

with the third-party tortfeasor was not technically a settlement as defined

by Indiana Code section 22-3-2-13.^'' The full board affirmed the award.^^

On appeal, the court found that the employer was liable for medical
expenses and permanent partial impairment before the injured worker

entered into the agreement with the third party. ^^ Because the Workers'

Compensation Board ordered that the employer be reimbursed from

any final settlement between the injured worker and the third party,

the court found it unnecessary to determine whether the agreement was

a settlement as defined by Indiana Code section 22-3-2-13.'^

The court also affirmed a settled rule that the employer is obligated

to pay its pro rata share of the injured worker's costs and expenses

in asserting the third-party claim. '^' The employer benefits not only

by being reimbursed by the third party, but also by having liability

for future compensation payments terminated. Therefore, the pro rata

share of attorney fees should be based on the amount of benefits
already paid and the amount remaining to be paid minus the costs
and expenses of bringing the claim. '^^^ Additionally, the court found

that the Workers' Compensation Board acted within its authority in

awarding interest on the judgment. '^^

F. Statute of Limitations

The only case concerning the statute of limitations decided during

the survey period was R.L. Jeffries Trucking Co. v. Cain.^^"^ Jeffries

Trucking involved a worker who was severely injured in a truck accident
that occurred as he made a delivery for his employer. One of the
worker's injuries required amputation of his left leg at the hip. Over

time, the injured worker developed debilitating muscle spasms and boils

at the amputation site. Within two months of the accident, the worker

entered into a Form 12 agreement with the employer's insurer to pay

96. Id.

97. Id.

98. Id.

99. Id. at 193-94.

100. Id.

101. Id. at 194.

102. Id.

103. Id. at 195.

104. 545 N.E.2d 582 (Ind. Ct. App. 1989).



990 INDIANA LAW REVIEW [Vol. 24:975

workers' compensation benefits; the agreement was approved by the

Workers' Compensation Board. More than two years after the accident
but less than two years after the last payment under the original award,

the injured worker filed a Form 14, requesting review of the agreement
based on a change in conditions. '^^ The form alleged permanent total
disability and permanent partial impairment. The employer moved to
dismiss, arguing that the injured worker's application was barred by

the statute of limitations because the application was filed more than
two years after the date of the accident. '^^ The single hearing officer

denied the employer's motion to dismiss, and the full Board affirmed. '^^

The employer appealed the award of permanent total disability and
all past and future medical expenses allowed by statute. '°^

The employer raised two significant issues on appeal: 1) whether

an employer can be bound by a Form 12 agreement entered into by
the injured worker and the employer's insurer when the employer was
not a party to the agreement, and 2) whether the statute of limitations

barred the injured worker's Form 14 application for permanent total
disability and permanent partial impairment. ^^^ Addressing the first

issue, the employer argued that it could contest the injured worker's

status as an employee because the employer was not a party to the

Form 12 agreement. ''° In reaching its decision, the court of appeals
relied on a Georgia case in which the court held that the insurer is

the alter ego of its insured.'*' The Indiana court noted that both Georgia
and Indiana statutorily define

*

'employer" to include the employer's

insurer.''^ The court held that in the absence of mistake, fraud, or

duress, the employer could not escape the admission of liability created

by the Board's approval of the Form 12 agreement.''^
The statute of limitations issue required the court to determine

which statute governed. The employer relied on Indiana Code section
22-3-3-3, which requires a claim for injuries resulting directly from the

accident to be filed within two years of the accident.'''* The injured
worker argued for the application of Indiana Code section 22-3-3-27,

105. Id. at 583.

106. Id.

107. Id.

108. Id. at 585.

109. Id. at 586.

no. Id.

111. Id. (citing Tuck v. Fidelity & Casualty Co. of N.Y., 131 Ga. App. 807, 207
S.E.2d 210 (1974)).

112. Id. at 586-87 (comparing Ga. Code Ann. § 114-101 (Supp. 1990) and Ind.
Code § 22-3-6-1 (Supp. 1990)).

113. Id.

114. Id. at 588.



1991] WORKERS' COMPENSATION 991

which requires a claimant whose condition changes to file for a mod-
ification of an award within two years of the last payment made under
the original award. ^'^ The court stated that if the accident had directly

caused the injured worker's condition, his claim would be barred; but

if his condition had resulted from the original injuries, his claim would

be considered timely filed under Indiana Code section 22-3-3-27."^

Although the injured worker claimed permanent total disability and

permanent partial impairment, the Board characterized its award as

one for only permanent total disability.''^ The court noted that the

Board's finding that the muscle spasms and boils had developed at the

amputation site supported the conclusion that the permanent disability

resulted from the amputation and not the accident."^ Because no case

law existed that distinguished direct harm from resulting harm in the
disability area, the court examined decisions distinguishing the types

of harm in the area of impairment. The court cited cases holding that
Indiana Code section 22-3-3-27 controls in cases of impairment not
directly caused by the accident, and decided that the reasoning should

be extended to cover disability not directly caused by the accident."^

In support of the extension, the court pointed to Form 14, which
includes a change in disability as one of the reasons for a review. '^^

The court also noted that the application of Indiana Code section 22-
3-3-27 was consistent with the humanitarian purposes of the Workers'

Compensation Act.'^'

G. Credit

During the survey period, the court of appeals decided that the

state should be entitled to a credit for Public Law 35 salary benefits
paid against an award for permanent total disability. '^^ In Indiana v.

Doody, a totally disabled state worker had received his full salary from
the state for one year pursuant to Indiana Code section 4-15-2-6.'"

The board then awarded him $166 per week for the period of permanent
total disability, 500 weeks, beginning at the date of the accident. The

115. Id.

116. Id.

117. Id. at 588-89.

118. Id. at 588.

119. Id. at 589.

120. Id.

121. Id.

122. Indiana v. Doody, 556 N.E.2d 1357, 1360-61 (Ind. Ct. App. 1990).

123. Formerly Ind. Code § 4-15-2-5(b) (West 1981) (repealed in 1982). Although
Indiana Code § 4-15-2-5(b) was deleted, Indiana Code § 22-3-3-23(b) (West 1990) continues
to refer to it, presumably through an oversight in the amendment process.



992 INDIANA LAW REVIEW [Vol. 24:975

disabled worker requested a judgment on the award because the state

refused to pay permanent total disability benefits for the year that he

received the full salary.
'^"^

The court noted that both Indiana Code section 22-3-3-8 and section
22-3-3- 10(b) provide for the payment of total permanent disability

benefits. ^^^ The Board did not specify under which statute the award

was being made. This omission was confusing because section 22-3-3-

23(b) provides for a credit against payments made under section 8,
but does not provide for a credit for payments made under section
10.^2^ By looking at the dollar figures of the award, the court was

able to determine that the total permanent disability payments were

made under section 8, entitling the state to a credit for the Public
Law 35 salary benefits.'^'' In allowing the credit, the court noted that
Indiana Code section 22-3-3-23(b) only refers to a credit for temporary

total disability, but the court assumed that the omission of total

permanent disability was a clerical error because another clerical error

existed in reference to an Indiana Code section 4-15-2-5(b) citation. ^^^

Further, the court did not believe that the legislature would decide to

allow a credit for section 8 temporary total disability benefits, disallow

a deduction for section 10 benefits, and not decide whether to allow

a credit or deduction for section 8 total permanent disability benefits. ^^^

In a footnote, the court criticized the third district court's inter-

pretation of Indiana Code section 22-3-3-23(a) and (b) in Indiana State
Highway Department v. Robertson. ^^^ The first district in Doody sug-
gested that the third district had used section 23(a) and section 23(b)

interchangeably, without making a distinction between the deductions

mentioned in section 23(a) and section 23(b) and the credit mentioned

124. Doody, 556 N.E.2d at 1359.

125. Id. at 1360.

126. Id. Indiana Code § 22-3-3-23(b) (1988) reads as follows:

(b) Payments to state employees under the terms of IC 4-15-2-5(b) shall be

taken as a credit by the state against payments of compensation for temporary

total disability during the time period in which the employee is eligible for

compensation under both IC 4-15-2-5(b) and section 8 of this chapter. After a

state employee is ineligible for payments under IC 4-15-2-5(b) and if he is still

eligible for payments for temporary total disability under section 8 of this chapter,

any payments for temporary total disability shall be deducted from the amount

of compensation payable under section 10 of this chapter. Payments to state

employees under the terms of IC 4-15-2-5(b) may not be deducted from com-
pensation payable under section 10 of this chapter.

127. Doody, 556 N.E.2d at 1360.

128. Id. at 1361 n.6.

129. Id.

130. Id. at 1361 n.7 (discussing Robertson, 482 N.E.2d 495 (Ind. Ct. App. 1985)).



1991] WORKERS' COMPENSATION 993

in section 23(b). '^' The Robertson court had held that providing a PubUc

Law 35 salary to a state worker did not remove the matter from the
Workers' Compensation Act or its exclusive remedy provision because

such removal would make Indiana Code section 22-3-3-23(a) unneces-
sary. '^^ Because section 23(a) is general and section 23(b) specifically

refers to Public Law 35 salary benefits, the Robertson court must have
used section 23(b) in its analysis. The confusion the court is experiencing

in interpreting Indiana Code section 22-3-3-23 should signal the legislature

that this statute needs clarification.

H. Occupational Disease

Some states have interpreted their workers' compensation acts to
cover occupational disease, while others have created separate occupa-

tional disease statutes.'" In 1937, Indiana enacted a separate Occupational

Diseases Act'^"* because its Workers' Compensation Act had not been

interpreted broadly enough to cover workers who had contracted oc-
cupational diseases. Although the public policy behind both the Workers'

Compensation Act and the Occupational Diseases Act is the same, each

act has its own definitions and procedures. '^^ Because of the similarities
between the two acts and because the Occupational Diseases Act has

generated little case law, courts have sometimes looked to workers'

compensation statutes and case law to interpret occupational disease

statutory provisions. '^^ Both the Indiana Supreme Court and the Seventh

Circuit faced questions about Indiana's Occupational Diseases Act during

this survey period.

1. Definition of Disability

.

—The Indiana Supreme Court in Spauld-
ing V. International Bakers Services, IncJ^'' interpreted the definitions

of ** disablement" and **disability" in the Occupational Diseases Act.'^^

The two plaintiffs suffered compensable occupational diseases and filed
claims for total permanent disability with the Workers' Compensation

Board. The court of appeals found that the workers' compensation
standard should not be used in an occupational disease case to assess

131. Id.

132. Robertson, 482 N.E.2d at 498.

133. IB A. Larson, The Law of Workmen's Compensation § 41.10 (1985).
134. IND. Code §§ 22-3-7-2 to -38 (1988).
135. See Ind. Code §§ 22-3-7-10 and 22-3-6-1 (1988).
136. Buford v. American Teh & TeL Co., 881 F.2d 432, 434-35 (7th Cir. 1989)

(used workers' compensation cases to make decision); Spalding v. International Bakers
Servs., Inc., 550 N.E.2d 307, 308 (1990) (administrative law judge on case used workers'

compensation standard to assess total permanent disability claim).

137. 550 N.E.2d 307 (Ind. 1990).

138. See Ind. Code § 22-3-7-9(e) (1988).



994 INDIANA LAW REVIEW [Vol. 24:975

total permanent disability, and that the appHcable standard was found

in the Occupational Diseases Act definitions of **disability" and
*

'dis-

ablement. "»39

The supreme court granted transfer to determine how the definition
of those terms in the Occupational Diseases Act should be applied to

assess total permanent disability.""^ The supreme court found the defi-

nition of "disability*' as the state of being ^'disabled from earning full

wages at the work in which the employee was engaged when last exposed

to the hazards of the occupational disease by the employer from whom
he claims compensation or equal wages in other suitable employment. "''^'

The supreme court found that this definition does not indicate whether

disability should also be defined in levels of severity. ^'^^ After reviewing

other portions of the Act providing for temporary total disability, tem-

porary partial disability, and total permanent disability, the court de-

termined that reading the definition of '^disability" as the inability to

earn full wages would render the different benefits for different levels

of disability unnecessary.'"*^ Therefore, the court found that the definition

of a disability as a loss of wage-earning capacity also includes aspects

of severity and duration that are not mentioned in subsection 9(e).''"

The court further stated that to obtain total disability, the claimants

must show that they were permanently unable to earn any wages at

their last jobs or in any "other suitable employment. '''"^^

In comparing the Occupational Diseases Act definition of "disability''

to the definition under the Workers' Compensation Act, the court noted

that under the Workers' Compensation Act, disability refers to the

capacity to work, while under the Occupational Diseases Act disability

refers to the capacity to earn wages. '"^ The court also noted that although

the standards were quite similar, circumstances may occur in which
different results would be reached using the two standards.'"*^

2. Exclusivity Provision.—In a case of first impression, the Seventh
Circuit determined whether the Indiana Supreme Court would find an

intentional act exception to the exclusive remedy provision of the Oc-

cupational Diseases Act.'"*^ In Buford v. American Telephone & Telegraph

139. Spaulding, 550 N.E.2d at 308.

140. Id.

141. Id. at 309 (citing Ind. Code § 22-3-7-9(e) (1988)).
142. Id. at 310.

143. Id.

144. Id.

145. Id.

146. Id.

147. Id.

148. Buford V. American Tel. & Tel. Co., 881 F.2d 432 (7th Cir. 1989).



1991] WORKERS' COMPENSATION 995

Co.y the plaintiff was exposed to benzene in her position as a lab

technician. The company doctor diagnosed the plaintiff as suffering from
chronic leukopenia, but did not inform her as to her condition. The

plaintiff alleged that she contracted chronic leukopenia because of her

working conditions and that despite her employer's knowledge that she

was being exposed to benzene and other carcinogens, she was not provided

with the proper safety equipment.''*^ Moreover, she alleged that her

employer had concealed the danger and the doctor's diagnosis from

her.'^^ The court ruled that the trial court correctly found that the

plaintiff's chronic leukopenia was compensable under the Occupational

Diseases Act.'^*

Because the Indiana Supreme Court had never decided whether the

exclusive remedy provision of the Occupational Diseases Act had any

exceptions, the Seventh Circuit referred to workers' compensation cases

regarding that issue. The court noted that the intentional tort exception

first recognized in National Can Corp. v. Jovanovich^^^ and then further
limited in House v. D.P.T., Inc,^^^ applied only in cases involving violent
crime. '^"^ Relying on Evans v. Yankeetown Dock Corp.,^^^ the court
analyzed the language of the Workers' Compensation Act and the Oc-

cupational Diseases Act defining compensable injuries and diseases. The

court noted that there was no language in the Occupational Diseases

Act similar to the workers' compensation requirement that the injury

occur **by accident. "'^^ In some states, the **by accident" requirement

is the basis for recognizing an exception for an intentional tort.'"

However, in Evans, the court defined "by accident" as an unexpected

injury or death, which indicates that the character of the tort is un-

important.'^^ Therefore, no distinction on which to base an exception

to the exclusivity provision exists. The Seventh Circuit followed the
Evans court's reasoning that once all the statutory prerequisites were

met for jurisdiction under the Workers' Compensation Board, no com-

mon law causes of action would be recognized. '^^ Thus, the Seventh
Circuit refused to recognize an intentional tort exception to the exclusivity

provision in the Indiana Occupational Diseases Act.'^

149. Id. at 433.

150. Id.

151. Id. BX 434.

152. Id. (citing National Can Corp., 503 N.E.2d 1224 (1987)).
153. Id. (citing House, 519 N.E.2d 1274 (Ind. Ct. App. 1988)).
154. Id.

155. Id. at 435 (citing Evans, 491 N.E.2d 969 (Ind. 1986)).

156. Id.

157. Id.

158. Id.

159. Id.

160. Id. at 436.



996 INDIANA LAW REVIEW [Vol. 24:975

III. Statutes and Regulations

A. Statutory Changes

As the major statutory change during the survey period, '^^ the leg-

islature added a chapter on vocational rehabilitation to the Workers'

161. The following are additional legislative changes affecting Indiana Workers'

Compensation:

Ind. Code §§ 22-3-2-2, 22-3-7-2 (Supp. 1990). These statutes generally exempt mu-
nicipal firefighters and police officers from coverage under both the Workers' Compensation

Act and the Occupational Diseases Act. A provision was added under both acts to protect
those police officers and firefighters when the common council has elected to procure
insurance to insure the employees for medical benefits. The provision states that if the

medical benefits provided under the insurance policy terminate before the employee is

fully recovered, then the common council must continue the benefits until the employee
no longer needs them.

Ind. Code §§ 36-8-12-8(a), (b), (e) (Supp. 1990). Subsections (a) and (b) raised the
insurance policy coverage requirement from $40,000 to $60,000, which would be payable

to the beneficiary or estate of a voluntary firefighter who dies from a work-related injury
or to the volunteer firefighter who becomes totally and permanently disabled from an
on-the-job injury for a continuous period of at least 260 weeks. Subsection (e), which

addresses the liability coverage of volunteer firefighters, adds a sentence stating that a

voluntary firefighter is not liable for punitive damages for any act performed within the

scope of the firefighter's duties. Id.

Ind. Code § 36-8-12-10(a) (Supp. 1990). The chapter of the Code on volunteer fire
companies added coverage under the Workers' Compensation Act and the Occupational

Diseases Act for a volunteer who works for an ambulance company. Coverage was also
expanded from medical treatment to include burial expenses as provided in the Workers'

Compensation Act and the Occupational Diseases Act. Id.

Ind. Code §§ 22-3-3-19, 22-3-7-13 (Supp. 1990). Two changes were made to the
presumptive dependency statutes in the Workers' Compensation Act and the Occupational

Diseases Act. The age of presumptive dependency was raised from eighteen to twenty-

one. The other provision that was changed had required husbands, but not wives, to

prove that they were physically and financially incapable of self-support in order to be

a presumptive dependent. That provision had been ruled unconstitutional in K-Mart Corp.

V. Novak, 521 N.E.2d 1346 (Ind. Ct. App. 1988), and was changed to treat husbands

the same as wives.

Ind. Code § 22-3-3-29 (Supp. 1990). Language in the statute pertaining to the rights
and privileges of an employee or dependent under a guardianship was changed from

"mentally incompetent or a minor" to "under guardianship." The amendment also changed

the permissive language of the guardian's right to claim and exercise any right or privilege

of the employee or dependent to mandatory language. Id.

Ind. Code §§ 22-3-5-5(a), (d) (Supp. 1990). Before this amendment to the insurance
chapter of the Workers' Compensation Act, the Workers' Compensation Board approved

all insurance policy forms. The amendment requires that insurance policy forms now be
approved by the Department of Insurance. Before the amendment, subsection (d) required

that if an insurer failed or refused to pay a final award or judgment or refused to comply

with the Workers' Compensation Act, the approval of the insurance policy form was

revoked, and the form had to be resubmitted to the Workers' Compensation Board. The



1991] WORKERS* COMPENSATION 997

Compensation ActJ^^ Although most states provide for some sort of

vocational rehabilitation in their statutes, there is no commonly accepted
definition of vocational rehabilitation.*^^ States and commentators fashion

amendment provides that the Workers' Compensation Board will not accept any further

proofs of insurance until the insurance company complies with the final award, the

judgment, or the Workers' Compensation Act. Id.

Ind. Code §§ 27-7-2-1.1 to -38 (Supp. 1990). The workers' compensation chapter of
the insurance code was overhauled to change the rate-making process for workers' com-

pensation insurance policies to promote competitive pricing. The purpose of the change

was to lower the cost of insurance and make the premiums reflect market conditions. Id.
162. Indiana Code § 22-3-12 was added to the Indiana Code as a new chapter to

read as follows:

Chapter 12. Vocational Rehabilitation

Sec. 1. An injured employee, who as a result of an injury or occupational
disease is unable to perform work for which the employee has previous training

or experience, is entitled to vocational rehabilitation services necessary to restore

the employee to useful employment.

Sec. 2. When any compensable injury requires the filing of a first report of
injury by an employer, the employer's worker's compensation insurance carrier

or the self-insured employer shall forward a copy of the report to the central

office of the department of human services office of vocational rehabilitation
at the earlier of the following occurrences:

(1) When the compensable injury has resulted in temporary total
disability of longer than twenty-one (21) days.

(2) When it appears that the compensable injury may be of such a
nature as to permanently prevent the injured employee from returning

to the injured employee's previous employment.

Sec. 3. Upon receipt of a report of injury under section 2 of this chapter,
the office of vocational rehabilitation shall immediately send a copy of the

report to the local office of vocational rehabilitation located nearest to the

injured employee's home.

Sec. 4. (a) The local office of vocational rehabilitation shall, upon receipt of

the report of injury, immediately provide the injured employee with a written

explanation of:

(1) the rehabilitation services that are available to the injured employee;

and

(2) the method by which the injured employee may make application
for those services.

(b) The office of vocational rehabilitation shall determine the eligibility of
the injured employee for rehabilitation services and, where appropriate, develop

an individualized rehabilitation plan for the employee.

(c) The office of vocational rehabilitation shall implement the rehabilitation

plan. After completion of the rehabilitation program, the office of vocational

rehabilitation shall provide job placement services to the rehabilitated employee.

Sec. 5. Nothing contained in this chapter shall be construed to affect an

injured employee's status regarding any benefit provided under IC 22-3-2 through

IC 22-3-7.

Ind. Code § 22-3-12 (Supp. 1990).
163. See generally , Note, Vocational Rehabilitation for the Industrially Injured

Worker, 28 U. Fla. L. Rev. 101, 102 (1975).



998 INDIANA LAW REVIEW [Vol. 24:975

definitions responsive to their own philosophic goals. For example, one
state defines vocational rehabilitation as **[a]ssisting in the return of an

injured worker to gainful employment at a justifiable cost, within a

reasonable time after he is injured, or contracts an occupational dis-

ease."*^ Another state defines vocational rehabilitation in terms of its

purpose *'to return the injured employee to a job related to the employee's

former employment or to a job in another work area which produces

an economic status as close as possible to that the employee would have

enjoyed without disability. "^^^ The International Association of Industrial

Accident Boards and Commissions, in its model program, defines vo-

cational rehabilitation as **the restoration of an occupationally disabled

employee to his/her optimum physical, mental, vocational, and economic
usefulness. '*'^^ A common thread in the above definitions is that they
focus on the subjective goals of vocational rehabilitation rather than

objectively setting forth the process for vocationally rehabilitating the

occupationally disabled employee. Indiana's new statute states that its
goal is **to restore the employee to useful employment, "'^^ but does not

define the term '* useful employment." Similar to other state statutes,

Indiana's statute focuses on a subjective goal.

In 1972, the National Commission on State Workmen's Compen-
sation Laws issued a report that included eighty-four recommendations

for improving workers' compensation systems. '^^ Of the eighty-four re-
commendations, twelve concerned rehabilitation.'^^ The commission con-

164. International Ass'n of Indus. Accident Bds. & Comm'ns, An Overview
OF Vocational Rehabilitation in Workers' Compensation 5 (1984) (citing Nev. Admin.

Code ch 616, § 8 (1987)).
165. Minn. Stat. Ann. § 176-102 (West 1990).

166. International Ass'n of Indus. Accident Bds. & Comm'ns, An Analysis of
Workers' Compensation Rehabilitation Laws and Programs of the Member Juris-
dictions 10 (1987) [hereinafter Laws and Programs].

167. IND. Code § 22-3-12-1 (Supp. 1990).
168. See generally Report of the Nat'l Comm'n on State Workmen's Compen-

sation Laws (1972).
169. The following are the twelve recommendations concerning rehabilitation:

R4.1 We recommend that the worker be permitted the initial selection of his
physician, either from among all licensed physicians in the State or from a panel
of physicians selected or approved by the workmen's compensation agency.

R4.2 We recommend there be no statutory limits of time or dollar amount
for medical care or physical rehabilitation services for any work-related im-

pairment.

R4.3 We recommend that the workmen's compensation agency have discretion
to determine the appropriate medical and rehabilitation services in each case.

There should be no arbitrary limits by regulation or statute on the types of

medical services or licensed health care facilities which can be authorized by

the agency.



1991] WORKERS' COMPENSATION 999

eluded that **[i]n general, workmen's compensation is not doing an

effective job of assuring that workers with work-related disabilities [are]

helped to recover lost abilities and to return to their previous jobs, or,

where this is impossible, to learn substitute skills. "^^°

In response to the commission report, the majority of states estab-

lished vocational rehabilitation programs. In 1976, only twenty-seven

states had some type of rehabilitation program.'^' The January 1990

analysis of workers' compensation laws prepared and pubUshed by the

United States Chamber of Commerce lists South Carolina as the only
state without a specific statutory provision regarding vocational reha-

bilitation.
'^^

Moreover, the Indiana Legislative Services Agency's Sunset Audit

of the Industrial Board (now the Workers' Compensation Board) rec-

ommended the addition of a vocational rehabilitation program to the

R4.4 We recommend that the right to medical and physical rehabilitation
benefits not terminate by the mere passage of time.

R4.5 We recommend that each workmen's compensation agency establish a
medical-rehabilitation division, with authority to effectively supervise medical

care and rehabilitation services.

R4.6 We recommend that every employer or carrier acting as employer's agent
be required to cooperate with the medical-rehabilitation division in every instance

when an employee may need rehabilitation services.
R4.7 We recommend that the medical-rehabilitation division be given the

specific responsibility of assuring that every worker who could benefit from
vocational rehabilitation services be offered those services.

R4.8 We also recommend that the employer pay all costs of vocational
rehabilitation necessary to return a worker to suitable employment and authorized

by the workmen's compensation agency.

R4.9 We recommend that the workmen's compensation agency be authorized
to provide special maintenance benefits for a worker during the period of his

rehabilitation. The maintenance benefits would be in addition to the worker's

other benefits.

R4.10 We recommend that each State establish a second injury fund with
broad coverage of pre-existing impairments.

R4.11 We recommend that the second injury fund be financed by charges
against all carriers, State funds, and self-insuring employers in proportion to

the benefits paid by each, or by appropriations from general revenue, or by

both sources.

R4.12 We recommend that workmen's compensation agencies publicize second
injury funds to employees and employers and interpret eligibility requirements

for the funds liberally in order to encourage employment of the physically

handicapped.

Id. at 79-84.

170. Id. at 81.

171. Laws and Programs, supra note 166, at 14.
172. United States Chamber of Commerce, History of Workers' Compensation

AND Employer's Liability, 1990 Analysis of Workers' Compensation Laws 28-29.



1000 INDIANA LAW REVIEW [Vol. 24:975

Workers' Compensation Act.'"'' Presumably in response to the Sunset

Audit, the Indiana legislature considered vocational rehabilitation for

the first time in the 1988 spring session.*'''* Although the reform activity

during that session focused on increasing workers' compensation and

occupational disease benefits, vocational rehabilitation was also an im-

portant issue. '^^ Senate Bill 402, essentially a benefits bill, was amended

to include a relatively comprehensive vocational rehabilitation provision. '^^

173. The Sunset Audit stated:

Effective rehabilitation programs, both physical and vocational, not only help

workers regain their pre-injury physical and income earning capabilities, but can

also help hold down workers' compensation costs over the long run. The purpose
of rehabilitation services is to minimize the losses which occur as a result of

an industrial accident. Rehabilitation can be considered as part of medical care

and has the same basic purpose as medical care — to cure and relieve the
employee from the effects of the injury. The idea is to provide those services

which will speed the return of the worker to his job. The positive by-product

of effective rehabilitation is that the system is not overloaded with costly numbers

of permanently injured workers (either partially or totally).

Office of Fiscal Review, Ind. Legis. Servs. Agency, 6 Sunset Audit on Industrial

Board and Workers' Compensation System 91 (1987); see also Ind. Code § 4-26-3-25

to -25.7 (1988) (section requires that certain state agencies including the Industrial Board

and the Workers' Compensation System be systematically reviewed to determine whether

they should be continued, and to examine the organizational characteristics that enhance

or hinder efficiency and effectiveness).

174. See generally Subject Index to House and Senate Journals, 1988 Session
(of the twenty-three bills indexed under Workmen's Compensation, five of those bills

focused on increases in the benefits scheme) [hereinafter Index]; see also Gary Post

Tribune, Nov. 15, 1987, Business Section.

175. Index, supra note 174. Representative Boatwright offered the vocational re-

habilitation amendment to Senate Bill 402 on February 5, 1988, and it passed on a roll

call vote of 68 yeas to 28 nays. Indiana House Journal, 1988 Session at 424 [hereinafter

House].

176. The vocational rehabilitation provision of Senate Bill 402 reads as follows:

SECTION 1. IC 22-3-3-4.5 IS ADDED TO THE INDIANA CODE AS A NEW
SECTION TO READ AS FOLLOWS: Sec. 4.5(a) An injured employee who,
as a result of an injury, is unable to perform work for which the employee

has previous training or experience, is entitled to vocational rehabilitation services,

including retraining and job placement, necessary to restore the employee to

useful employment. The cost of the vocational rehabilitation shall be paid by

the employer.

(b) If vocational rehabilitation services are not voluntarily offered and accepted,

a member, on the member's own motion or upon application of the employee,
carrier, or employer, after affording the parties an opportunity to be heard,

may refer the employee to a facility approved by the industrial board for
evaluation of the need for, and kind of service, treatment, or training necessary

and appropriate to render the employee fit for a remunerative occupation. Upon
receipt of the report of the facility, a member may order that the services and
treatment recommended in the report be provided at the expense of the employer.



1991] WORKERS' COMPENSATION 1001

The amended bill passed the House of Representatives, but the Senate

dissented from the House amendments on vocational rehabilitation, which

were subsequently stripped from the bill in conference committee. '^^ The

benefits element of Senate Bill 402 became Public Law 95 J^^ Although
vocational rehabilitation did not survive the conference committee, it

remained alive as an issue worthy of study, assigned to the Interim

Study Committee on Insurance Issues. '^^

In the fall of 1988, the Interim Study Committee on Insurance Issues

Subcommittee on Vocational Rehabilitation held three meetings. '*° By
consensus, the committee approved two recommendations on vocational

rehabilitation:

1. The General Assembly should examine mandating the com-

pilation of certain statistical data by the Worker's Com-
pensation Board.

2. The General Assembly should impose a requirement that

worker's compensation recipients be informed by either the

employer, the worker's compensation carrier, or the Workers'

Compensation Board that vocational rehabilitation services

are available through the Office of Vocational Rehabilitation

of the Indiana Department of Human Services. The notice

(c) A member may order that any employee participating in vocational re-
habilitation is entitled to receive additional payments for transportation or for

any extra and necessary expense during the period arising out of the employee's

program of vocational rehabilitation.

(d) Vocational rehabilitation training, treatment, or service may not extend
for more than fifty-two (52) weeks. However, a member, after review, may
extend the period for up to fifty-two (52) additional weeks.

(e) If there is an unjustifiable refusal to accept rehabilitation after a decision

of a member, the member shall order a loss or reduction of compensation in
an amount determined by the member for each week of the period of refusal,
except for specific compensation payable under section 10 of this chapter.

(0 If a dispute arises between the parties concerning application of this section,

any of the parties may apply for a hearing before the industrial board.
House, supra note 175, at 423.

177. See Indiana Chamber of Commerce, Legislative Report (Mar. 3, 1988)
(provisions removed from Senate Bill 402 and opposed by the Indiana Chamber of
Commerce included "mandatory vocational rehabilitation of up to 104 weeks").

178. See Senate Journal, 1988 Session at 525 [hereinafter Senate] (information

provided through contact with the Indiana Legislative Services Bureau); House, supra note

175, at 645.

179. Minutes of the Vocational Rehab. Subcomm. of the Interim Study Comm.
ON Ins. Issues, Inddvna House of Representatives, September 20, 1988.

180. The subcommittee meetings were held Sept. 20, 1988, Sept. 27, 1988, and Oct.

18, 1988.



1002 INDIANA LAW REVIEW [Vol. 24:975

shall be given in writing, on a form devised by the Workers'

Compensation Board. '^*

In the 1989 spring session of the General Assembly, companion

vocational rehabilitation bills were introduced in the House and Senate. '^^

Reform recommendations that had been rejected by the Interim Study

Committee provided the basis for Senate Bill 543. It was authored by

Senator Bushemi, and its companion House Bill 1385 was introduced

by Representative Boatwright.^^^ Like the earlier proposed amendment
to Senate Bill 402, this bill also specified when an injured worker is
entitled to vocational rehabiHtation, how to determine if the rehabilitation

181. Minutes of the Interim Study Comm. on Ins. Issues, Indiana House of
Representatives, Oct. 18, 1988.

182. See H.R. 1385, 106th Leg., 2d Sess., Indiana (1989); S. 543, 106th Leg., 2d

Sess., Indiana (1989).

183. Proposed S. 543 and H.R. 1385 provided:

SECTION 1. IC 22-3-12 IS ADDED TO THE INDIANA CODE AS A NEW
CHAPTER TO READ AS FOLLOWS:
Chapter 12. Vocational RehabiHtation

Sec. 1. An injured employee who, as a result of an injury or occupational
disease, is unable to perform work for which the employee has previous training

or experience, is entitled to vocational rehabilitation services necessary to restore

the employee to useful employment. The cost of the vocational rehabilitation

shall be paid by the employer.

Sec. 2. (a) The vocational rehabilitation division is established within the

worker's compensation board.

(b) The board shall employ a director and the vocational rehabilitation coun-

selors necessary to provide the screening and identification of potential vocational

rehabiHtation recipients under this chapter.

Sec. 3. (a) The board shall determine, at the earliest time possible, whether

a recipient of worker's compensation or occupational diseases benefits is eligible

for vocational rehabilitation services under this chapter.

(b) The determination of eligibility for vocational rehabilitation services and

of awards for additional benefits under section 4 of this chapter may be made
by any of the following:

(1) A member of the worker's compensation board.
(2) The full worker's compensation board.

(3) The director of the vocational rehabilitation division.

Sec. 4. Vocational rehabilitation benefits under this chapter may be awarded
for up to fifty-two (52) weeks. Benefits may be awarded for more than fifty-
two (52) weeks as determined necessary by any of the individuals listed in section

(3)(b) of this chapter.

Sec. 5. (a) The vocational rehabilitation division shall certify providers qualified

to provide vocational rehabilitation services under this chapter. The division shall

maintain a list of certified providers.

(b) Providers certified under this section may be either public sector or private
sector providers.

H.R. 1385, 106th Leg., 2d Sess., Indiana (1989); S. 543, 106th Leg., 2d Sess., Indiana

(1989).



1991] WORKERS' COMPENSATION 1003

goal has been reached, and v/ho is to pay the cost.'^"* Senate Bill 543

went beyond the Senate Bill 402 amendments in clearly placing the

control and direction of vocational rehabilitation with the Workers'

Compensation Board by establishing a vocational rehabilitation division

within the Board. '^^ The bill also authorized the hiring of additional

staff, provided a framev/ork for determining eligibility, and required

certification of providers of vocational rehabilitation services.'*^ Like the

Senate Bill 402 amendment, this bill contained a fifty-two-week limit

for vocational rehabilitation benefits.'*^

House Bill 1385, the companion to Senate Bill 543, died without a

hearing in the last days of the session. Representatives opposed to

workers' compensation reform failed to attend the remaining meetings,

depriving the committee of the quorum needed to conduct business.'^*
Senate Bill 543 was referred to the Standing Pensions and Labor

Committee, where the bill was held by the chairman until late in the

session. '^^ Interest groups took the same position relative to proposed

Senate Bill 543 as they had taken relative to the vocational rehabilitation

amendment to Senate Bill 402 during the 1988 session.'^ The Indiana
Trial Lawyers' Association, providers of rehabilitation services, individual

labor organizations, and employee interest groups supported the proposed

vocational rehabilitation bill.'^' The Indiana Manufacturers Association

and the Indiana Chamber of Commerce, consistent with their testimony
before the Vocational Rehabilitation Subcommittee, would only support

referral of injured workers to the existing federal/state program with

no obhgation on employers to pay for the vocational rehabilitation. '^^

Senator Bushemi was forced to cut significant parts of his proposed

bill and to accept a simple referral mechanism, or Senate Bill 543 and

vocational rehabilitation would have died in committee like the companion

House Bill 1385.'^^ After consulting supporters of workers' compensation

184. See supra notes 176 & 183.
185. Id.

186. See supra note 183.

187. See supra notes 176 & 183.
188. Telephone conversations with the Honorable John Bushemi, Indiana State

Senator (Aug. 3, 1989, and Nov. 6, 1989) [hereinafter Telephone Conversations]; see also

Indiana State AFL-CIO, 89 State Ofhce Scoops No. 5 (Feb. 16, 1989) (copy on file
at the Indiana Law Review office).

189. Telephone conversations, supra note 188.

190. Id.

191. Id. See also AFL-CIO, Legislative Agenda for 1989 (unpublished manuscript)
(on file at the Indiana Law Review office).

192. Telephone conversations, supra note 188.

193. Id.; see also Indiana State AFL-CIO, State House Legislative Wrap-Up
at 1 (Oct. 1989).



1004 INDIANA LAW REVIEW [Vol. 24:975

reform, he decided that a simple referral or notice provision would be

at least a first step in a long-term reform effort.'^"* A stripped-down
Senate Bill 543 proceeded through the legislative process to become

Chapter 12 of Indiana's Workers' Compensation Act.'^^ Had Senate Bill
543 been enacted into law as proposed, Indiana would have had a solid

foundation for a comprehensive vocational rehabilitation program. In-

stead, the legislative process of compromise yielded statutory provisions

that are vague and lacking in administrative direction.

B. Policy Issues In Implementing Vocational Rehabilitation

In A Workers* Compensation System

1. Goals and Obligations of Vocational Rehabilitation.—A com-
prehensive vocational rehabilitation scheme must have a clearly stated

and objectively measurable goal. The goal provides the basis for key

policy decisions, such as who should be ehgible to receive vocational
rehabilitation benefits, what types of services should be provided, and

who should administer vocational rehabilitation.
The 1989 vocational rehabilitation amendment to the Indiana work-

ers' compensation law fails to estabhsh a clearly stated and objectively

measurable goal.'^ The new statute provides that the goal of vocational
rehabilitation is **to restore the employee to useful employment. "'^^ Yet,

the term **useful employment" is not defined and therefore invites

litigation. The statute offers no guidance as to whether the goal is to
return the worker to or near the worker's pre-injury earning capacity,

or whether a minimum wage position or a sheltered workshop position
constitutes **useful employment."

Indiana's vocational rehabilitation statute places the entire burden

of managing vocational rehabilitation on the federal/state program. How-
ever, the goals of vocational rehabilitation in the context of workers*

compensation differ fundamentally from the goals established by the

federal regulations that control federal/state vocational rehabihtation

programs.'^* The goal of rehabilitation within the workers' compensation
context is the prompt return of the worker to gainful employment, while

the goal of rehabilitation within the federal/state vocational rehabilitation

program — the Indiana Office of Vocational Rehabilitation — is a much

194. Telephone conversations, supra note 188.

195. Ind. Code § 22-3-12 (Supp. 1990); see text of statute, supra note 162.
196. See generally Ind. Code §§ 22-3-12-1 to -5 (Supp. 1990).
197. Id. § 22-3-12-1.

198. Laws and Programs, supra note 166, at 12 (citing the Report of the Nat'l
Comm'n on State Workmen's Compensation Laws).



1991] WORKERS' COMPENSATION 1005

broader mandate, the maximization of human potential. ^^ Efforts to
maximize the human potential of an injured worker are beyond the
purpose and scope of the workers' compensation system.

These differing goals raise issues concerning whether the goals of

the Workers' Compensation Act or the goals of the federal/state program

will control an injured worker's eligibility for vocational rehabilitation

and will control the content of the program.

2, Who Should Receive Vocational Rehabilitation^—Not every
worker who has been injured on the job is entitled to vocational re-
habilitation benefits.^^ To be entitled to rehabilitation benefits, an injured
worker must be left with a disability that brings the worker within the

eligibility criteria established either by statute or by administrative rule.

In Indiana, an inability to perform work for which the employee has

previous training or experience qualifies the employee for vocational

rehabilitation under the Workers' Compensation Act.2°' Without statutory

definition or administrative clarification, the eligibility criteria in the

vocational rehabilitation provision are problematic. Does the '*work for

which the employee has previous training or experience" refer to the

injured employee's customary occupation, or to any previous gainful

occupation? Courts in jurisdictions with similar entitlement criteria have

held that such work does not mean all work for which an injured
employee may have had previous training or experience, but rather the
employee's customary occupation. ^^^ To avoid litigation over the eligibility
criteria, Indiana should promulgate a clarifying statutory definition or

an administrative rule.

Indiana Code section 22-3-12-4(b) states that **[t]he office of vo-
cational rehabilitation shall determine the eligibility of the injured em-

ployee for rehabilitation services . . . ."^^^ This provision raises a question

about which agency's eligibility criteria are controlling. Will the Office

of Vocational Rehabilitation make use of each agency's eligibility criteria,
or will the eligibility criteria in the workers' compensation statute be

ignored? The lack of legislative guidance on coordinating the workers'

compensation system and the federal/state program, each with its in-

dividual goals and distinct eligibility criteria, threatens the administrative

viability of the vocational rehabilitation provisions.

199. Id. at 12-13.

200. Annotation, Workers' Compensation: Vocational Rehabilitation Statutes, 67

A.L.R. 4th 612, 625 (1989).

201. Ind. Code § 22-3-12-1 (Supp. 1990).
The statute reads that **[a]n injured employee, who as a result of an injury or

occupational disease is unable to perform work for which the employee has previous

training or experience, is entitled to vocational rehabilitation services necessary to restore

the employee to useful employment." Id.

202. Annotation, supra note 200, at 641-47.

203. iND. Code § 22-3-12-4(b) (Supp. 1990).



1006 INDIANA LAW REVIEW [Vol. 24:975

3. What Types of Services Should Be Available?—Once eligibility
is determined, the next step, according to Indiana Code section 22-3-

12-4(b), requires the Office of Vocational Rehabilitation to '^develop an

individualized rehabihtation plan for the employee. "^^ An individualized
rehabilitation plan is a projected combination of services designed to

achieve a specific goal.^^^

Federal/state programs are client-centered: the client selects an ed-

ucational objective, and the agency then determines whether the objective

is feasible, given the client's capability.^^ If the agency finds that the

educational objective is feasible, the agency formulates a plan and sup-

portive services designed to help the cUent reach the educational goal.^^''

For example, if a client and the agency agree that a college degree is

necessary to reach the client's career objective, the agency will supply

college tuition and related expenses even though a less costly plan could

return the client to work.^*^^

Under workers' compensation rehabilitation programs, the statutory

goal is to expediently return the employee to gainful employment, usually

under a scheme of priorities.^^ A plan designed to meet this goal would
require different services than a plan designed to meet the federal/state

program goal of maximizing human potential.

4. Who Should Pay for Vocational Rehabilitation'!—Workers' com-
pensation benefits, a recognized cost of doing business, should not be

shifted from the employer to the general public. Rehabilitation services

are an inherent part of the workers' compensation system — a system
based on the exchange of common law rights between employees and
employers and governed by the same rationale — this cost of production

204. Id.

205. Ofhce of Vocational Rehab., Ind. Dep't of Human Servs., What You
Should Know About Vocational Rehabilitation at 3-4.

206. Id.

207. Id.

208. Id.

209. See Letter from Robert J. Robinson to Professor Ruth C. Vance (Oct. 14,

1988) (discussion of priorities under Montana Vocational Rehabilitation Procedures and
attached memorandum); see, e.g., J. Lewis, The Illinois Workers' Compensation System:
A Report To The Governor, at 69 (1989) (This report discusses the findings of a study
of the Illinois workers' compensation system. The study analyzed the role of workers'
compensation in general and has a specific chapter that reviews medical and vocational

rehabilitation services); see also Niss, No Litigation Allowed: Maine Rehabilitation Statute
Revised, John Burton's Workers' Compensation Monitor, Sept./Oct., 1989, at 17-18;
Address by Douglas K. Langham, Workers' Compensation Conference at Storrs, Con-
necticut (May 1, 1987) (Speaker Langham's presentation concerned worker rehabilitation
in Michigan. A copy of the speech is on file at the Indiana Law Review office). Most
statutes do not have specific priority listings, but use administrative procedures to determine

proper priority status.



1991] WORKERS' COMPENSATION 1007

should be borne by the industry and the consumers of its goods.

The National Commission on State Workmen's Compensation Laws

recommended that **the employer pay all costs of vocational rehabilitation

necessary to return a worker to suitable employment and authorized by

the workmen's compensation agency. "^'° The 1977 report of the Pres-

ident's Inter-Departmental Workers' Compensation Task Force also rec-

ommended that:

The carrier/employer have the primary responsibility for devel-

oping and implementing a physical and/or vocational rehabili-

tation plan for any claimant whose prospect for re-employment

and return to former earning capacity would thereby be signif-

icantly improved. The carrier/employer should be fully liable

for all rehabilitation costs, including maintenance and necessary

travel expenses.^^'

Not only is the employer responsibility for vocational rehabilitation

consistent with the underlying philosophy of workers' compensation,

foundation studies and organizations within the workers' compensation

system recommend it.^'^
In response to these and other concerns regarding the implementation

and administration of Indiana's new vocational rehabilitation statute,
Governor Evan Bayh called a conference on vocational rehabilitation

for September 29, 1989.^'^ This conference was the first step in providing

an educational forum to discuss alternative methods of providing vo-

cational rehabilitation services to Indiana citizens injured in the work-

place. In issuing his call for a conference on vocational rehabilitation.

Governor Bayh questioned whether a taxpayer-supported system is best.
The Governor also recognized the need for Indiana to decide on an

administrative structure to supervise vocational rehabilitation, monitor

plans, collect data, and resolve disputes. As Indiana's statute stands,
there is no monitoring of vocational rehabilitation services and, therefore,

no method of enforcing the notice provision. Also, the statute provides

no guidance on resolving disputes arising under vocational rehabilitation.

Further, the statute lacks a mandate to collect data, which is necessary

to study the system's cost and efficiency.

210. Laws and Programs, supra note 166, at 17 (citing the Report of the Nat'l
Comm'n on State Workmen's Compensation Laws).

211. Id. at 15 (citing the 1977 Report of the President's Inter-Departmental

Workers' Compensation Task Force).

212. Id.

213. Letter from Governor Evan Bayh (Aug. 29, 1989) (issuing vocational rehabil-
itation conference call).



1008 INDIANA LAW REVIEW [Vol. 24:975

If the legislature and the Workers' Compensation Board do not

address these issues, the Indiana courts will have to provide answers on

a piecemeal basis. Employees and employers will be forced to resort to

the uncertain, time-consuming, and costly litigation process — the very
problem that the workers' compensation system was originally designed

to avoid.

C. Workers' Compensation Board Administrative

Rule Proposal

During the survey period, the Workers' Compensation Board pro-

posed a rule concerning administrative hearing procedures for the ter-

mination of temporary partial or temporary total disability benefits.^'"*

Under the current rule, the employer or its insurer may unilaterally
terminate temporary partial or temporary total disability benefits without

first conducting a hearing.^^^ The proposal would provide for a pre-
termination hearing.^'^ The proposed rule requires the employer to notify

the employee and file an Application for Adjustment of Claim with the

Workers' Compensation Board before the employer terminates temporary

benefits. The employee could request a hearing before a single board

member within thirty days of receiving the employer's application. The
employer would have a right to appeal an adverse decision to the full

Board, but the employer would have to pay benefits during the pendency

of the appeal. The employee would also have the right to appeal an
adverse decision to the full Board, but benefits would be suspended

during the pendency of an employee's appeal. The proposed rule further
provides that terminating temporary benefits without following this pro-

cedure constitutes prima facie evidence of bad faith as defined in Indiana

Code section 22-3-4-12, and the employer would have to pay the em-
ployee's attorney fees.^'"'

214. 13 Ind. Reg. 1541-1542 (May 1, 1990) (proposal to amend Ind. Admin. Code
tit. 631, r. 1-1-27).

215. Ind. Admin. Code tit. 632, r. 1-1-27 (Supp. 1990).
216. 13 Ind. Reg. 1541 (May 1, 1990) (proposed Ind. Admin. Code tit. 631, r. 1-

l-27(b)).

217. The proposed rule reads as follows:

(a) No employer may terminate temporary partial/total disability benefits being
paid to an employee except upon advance written notice to the employee. This

advance written notice from an employer must be accomplished by the filing

of a worker's compensation board's Application for Adjustment of Claim with

the worker's compensation board, accompanied by a detailed explanation for

the proposed termination of benefits, all relevant medical reports, and all other

documentation that the employer relies upon to justify the proposed termination

of benefits, with a copy to be served on the employee.



1991] WORKERS' COMPENSATION 1009

A public hearing was held on the proposed rule on June 26, 1990.
The Workers' Compensation Board is withholding action on the proposed

rule pending the recommendations of a governor-appointed task force

(b) If the employee disagrees with the employer's proposed termination of

temporary partial/total disability benefits, the employee may within thirty (30)
days after receipt of the employer's Application for Adjustment of Claim submit

a request for a hearing with the board. If the employee's request has been made
within the allotted time period, temporary partial/total disability benefits may
not be terminated until a determination has been made after opportunity for

evidentiary hearing that termination of benefits was warranted on the basis of

medical evidence or testimony presented. This hearing shall not be held earlier

than seventy-five (75) days after the employee's filing of a request for hearing

unless the parties would so agree or in the absence of such agreement then for

good cause. Such hearing shall be held before a single member of the board
or other such person authorized by the board to hear and decide the case. A
full record shall be made of the proceedings.

(c) All such proceedings or medical reports shall be admissible so long as the

same have been exchanged between the parties at least five (5) days before the

hearing and so long as the medical opinions reasonably comply with the spirit

of IC 22-3-3-6(e), which sets forth the type of information which should generally

be set forth within a medical report. The admissibility of such medical reports

shall only be permitted for proceedings of this type and nature concerning the

cessation of temporary partial/total disability benefits.

(d) If the decision of the individual member is adverse to the employer, the
employer may appeal to the full board, but temporary partial/total disability
benefits must continue during the pendency of the appeal. If the decision is

adverse to the employee, benefits may be suspended, but the employee may
within twenty (20) days following the receipt of the decision appeal to the full

board. In the event an appeal is taken, then the full board shall review the

record of proceedings before the single worker's compensation board member
to determine whether the decision to permit the termination of benefits presented.

Such full board review shall be initially scheduled at the next regularly scheduled

full board session that has been scheduled at least thirty (30) days in advance

of the filing of the appeal to the full board. In the event that the appeal is

filed within the thirty (30) day period prior to the next full board's regularly

scheduled session, then that appeal shall be scheduled for the subsequent regularly

scheduled full board session.

(e) The termination of temporary partial/total disability benefits without the

proper notice as set forth in this section will be prima facie evidence of bad

faith as defined in IC 22-3-4-12, and the employer shall be liable for the

employee's attorney fees. The assessment of these attorney's fees shall be made
by the board pursuant to the procedures set forth in IC 22-3-4-12.

(f) IThe employer or such employer's insurance carrier shall file with the]

worker's compensation [board a memorandum prescribed by the] worker's com-
pensation [board showing payments made, the date of the employee's return to

work, the date of cessation and reason for termination of the payments, and

any other fact or facts pertaining to the cessation of said payments of com-

pensation and serve upon the employee or his dependents a copy thereof.]

Id. (the bracketed sections represent nonamended portions of the rule).



1010 INDIANA LAW REVIEW [Vol. 24:975

charged with making recommendations to reform Indiana's workers'

compensation system. ^'^ Task force recommendations for using inde-

pendent medical examiners in case of dispute, or recommendations for

granting the employee the right to choose the physician, if passed into

law by the legislature, could satisfy the oversight and due process concerns

of injured workers. If the legislature addresses these concerns, the Work-
ers' Compensation Board will probably find no need to enact its proposed

rule.

IV. Governor's Task Force on Workers' Compensation and
Occupational Disease Law Reform

In his 1990 State of the State Address, Governor Bayh said that

Indiana's Workers' Compensation Act, which was originally passed in

1929, is in desperate need of in-depth analysis and reform.^'^ The Gov-

ernor then proposed a task force to study the current law and make
recommendations . ^^°

In June, Governor Bayh appointed six members to the task force;

the task force is made up of three representatives of labor and three
representatives of management.^2' Rogelio Dominguez, Chair of the

Workers' Compensation Board, was appointed Chair of the task force.

To provide technical guidance, John H. Lewis was hired as a consultant
to the task force. Lewis served as General Counsel to the National

Commission on State Workers' Compensation Laws. He has also been
hired as a consultant to several other governors and state legislatures

to analyze state workers' compensation systems and to make recom-
mendations. Most recently. Governor Thompson hired Lewis to analyze
and to recommend changes in the IlUnois workers' compensation system.
Governor Bayh also appointed twenty-six people to a resource panel to

assist the task force. The members of the resource panel included rep-
resentatives of business, labor, the legal profession, the medical pro-

fession, and academia.

The resource panel was divided into five sub-committees: agency

infrastructure and data management, cost, self-insurance, medical care

218. See infra note 220 and accompanying text.

219. E. Bayh, The 1990 State of the State Address and The Bayh/O'Bannon 1990

Legislative Program (Jan. 9, 1990) (unpublished).

220. Id.

221. The task force members are Charles Deppert, Indianapolis, President of Indiana

State AFL-CIO; Scott Miller, South Bend, President and CEO of Burkhart Advertising,
Inc.; William Osos, Danville, Director, Region 3 UAW; James Robinson, Lanesville,
Chairman and Secretary of Ace Manufacture, Inc. and Chairman of Stem Wood, Inc.;
James Rogers, Carmel, Chairman and CEO of PSl Energy, Inc.; and Michael Sullivan,
Indianapolis, Business Manager of Sheet Metal Workers Local 20.



1991] WORKERS' COMPENSATION 1011

and physical rehabilitation, and compliance and safety initiatives. The

subcommittees analyzed Indiana's workers' compensation system in their

designated areas, and reported their findings and recommendations to

the consultant. The consultant used the subcommittees' findings and

recommendations in preparing the report that he presented to Governor

Bayh in December 1990.

Lewis's extensive report dealt with many areas of Indiana's workers'
compensation system, including administration, medical care, temporary

and permanent disability benefits, benefit delivery, occupational disease,

and methods of insurance. Lewis fully discussed each area by relating

the historical background, comparing Indiana's system to other states'

systems, and suggesting alternatives for improving Indiana's system to

make it efficient, cost-effective, and responsive to the needs of both
employees and employers. Of all the areas needing reform in Indiana's
workers' compensation system, Lewis focused on three as essential:

medical care, benefit levels, and administration.

The overriding concern in the area of medical care is the choice of

the treating physician. Currently, the employer has the statutory right

to choose the injured employee's physician. According to Lewis's surveys

of workers' compensation recipients, the statute does not have a sig-

nificant impact on how the physician is actually chosen. ^^^ In many
instances, the emergency room physician becomes the treating physician. ^^^

Lewis concluded that although medical costs are not significantly affected

by the method of choosing the treating physician, the dispute resolution

process is affected.^^"* An advantage in the dispute resolution process
belongs to the party controlling the choice of physician because the

treating physician's opinion, presumed to be favorable to the party

choosing the physician, probably will be accorded great evidentiary

weight. ^^^ Furthermore, if the employer chooses the physician, the em-

ployee likely will be forced to pay for an outside expert opinion in the

event of a dispute. ^^^ Lewis recommended that an option to change
physicians be granted to the party who does not have the initial choice,
with the added option of immediate recourse to the Workers' Com-
pensation Board.22^

Other medical care issues concerned cost and dispute resolution.

Lewis noted that Indiana's medical costs historically have been low, but

222. J. Lewis, Major Issues in the Indiana Worker's Compensation System
Report to the Governor, at 29 (Dec. 1990).

223. Id.

224. Id. at 30.

225. Id. at 30-31.

226. Id. at 31.

227. Id. at 35.



1012 INDIANA LAW REVIEW [Vol. 24:975

that that may be because of the low number of serious injuries in
Indiana.^^^ To contain medical costs, Lewis offered the possibilities of
the state instituting a fee schedule or of the insurers monitoring medical

costs. ^^^ Additionally, Lewis suggested that claimants should be protected

against lawsuits brought by medical providers to recover unpaid bills

associated with workers' compensation injuries by only allowing lawsuits

against the employer and insurer. ^'° Lewis also recommended the use of

independent medical examiners in disputes involving medical issues to

reduce the delay and the cost of each party hiring its own experts. ^^*

Lewis addressed both temporary total disability benefits and per-

manent disability benefits in his report. The report stated that temporary

disability benefits, which help to replace income lost during the healing

process, are limited to a maximum weekly benefit of $294, which is
11^0 of the state's average weekly wage.^^^ This maximum weekly benefit
is one of the lowest in the country.^^ The National Council on Com-
pensation Insurance reported that increasing the weekly benefit maximum
to $401 would increase employers' insurance premiums approximately
1.6%."'* Lewis noted that although many states' maximum weekly benefits
fluctuate according to the state average weekly wage so that legislative

action to change benefit levels is unnecessary, fixing a dollar amount

for the maximum weekly benefits allows the legislature to control costs."'
As in most states, Indiana's permanent impairment cases represent

a small portion of all cases, but the permanent impairment cases account

for most of the benefits paid."^ Even so, Indiana's maximum weekly
benefit for permanent impairments of $120 is less than half of the benefit

paid in several other states."^ Because raising Indiana's maximum weekly
benefit to equal the benefits paid in most of the other states would

increase insurance premiums at least 14<^o, Lewis recommended giving

greater benefits to those with more serious impairments who are likely
to suffer a greater wage loss."^ The insurance premium increase to raise
the benefit level of an injured worker with a 25% impairment from
$15,000 to $20,000 would be 7.1%."^

228. Id. at 34.

229. Id. at 36-37.

230. Id. at 37.

231. Id. at 37-38.

232. Id. at 44.

233. Id. at 43, 49

234. Id. at 50.

235. Id. at 50-51.

236. Id. at 53.

237. Id. at 59.

238. Id. at 61-62.

239. Id. at 62.



1991] WORKERS' COMPENSATION 1013

The Workers* Compensation Board administers Indiana's workers'

compensation laws on an annual budget of approximately $985,000,

which is about lO^o of the national average. ^'^^ The Board collects minimal

data and has no computer system that permits meaningful access to the

data. Data access is important to understanding and solving problems

in any workers' compensation system.^'*' Lewis recommended the purchase

of hardware and software with the capabilities of networking with other

agencies and receiving electronic reports of insurance carriers.^"*^ Lewis

estimated that such a system would require an initial investment of

$1,000,000 and annual maintenance of $300,000.2^*3

Lewis also discussed the existing controversy over the ability of the

employer or its insurer to unilaterally terminate temporary benefits with-

out first conducting a hearing.^"*^ Lewis then suggested several alternatives

that would accomplish the same purpose as holding a full board hearing

before terminating benefits.^^

Most of the recommendations in Lewis's report to Governor Bayh

were incorporated into legislation introduced in the House this spring

in the form of House Bill 1517. House Bill 1517 proposes twenty changes

to Indiana's workers' compensation and occupational disease statutes;

due to the bill's length, it is not reproduced in the footnotes. The House

Labor Committee held a hearing on House Bill 1517 on January 28,
1991, and passed out the bill by a vote of six-two on February 7,
1991 246

On March 28, the Senate Pensions and Labor Committee made
several amendments to House Bill 1517.^'*^ Major changes included re-

moving the employee choice of physician, extending the phase-in of the

increase in temporary total disability benefits from three years to four

years, lowering the benefit level increases for permanent impairment

awards, shortening the length of payment of temporary total disability

benefits from thirty days to fourteen days during a dispute, requiring

the party requesting an independent medical examination to pay the

cost, and removing the proposed self-insurance advisory board and self-

insurance guarantee fund.^"*^ Even though House Bill 1517 was based on
the compromise reached by representatives of both labor and manage-

240. Id. at 24.

241. Id.

242. Id. at 23.

243. Id. at 24.

244. Id. at 75.

245. Id. at 76.

246. Indiana Chamber of Commerce, 6 Legislative Report, at 1 (Feb. 15, 1991).
247. Indiana Chamber of Commerce, 12 Legislative Report, at 1 (Mar. 29, 1991).
248. Id.



1014 INDIANA LAW REVIEW [Vol. 24:975

ment, it appears that the bill is not receiving wide support in the legislature

and that reform of Indiana's workers' compensation system will be

piecemeal because of the political process.

V. Conclusion

Both the court decisions and the content of the vocational reha-

bilitation statute indicate that Indiana is maintaining a conservative

position regarding workers' compensation. The task force's organized

method of studying the workers' compensation system has yielded pro-

posed legislation that will reform Indiana's system to be responsive to

the needs of management and labor. The courts' and legislature's his-

torically conservative stance may change if the 1991 General Assembly
enacts the task force's reform recommendations. Nevertheless, the General

Assembly will maintain a crucial role in shaping the future direction of

Indiana's workers' compensation law.