Workers’ Compensation Court of Appeals vs. Deer River Health Care Center and MHA Insurance Co. and Essentia Health-Deer River and Berkley Risk Administrators Co. and Midwest Spine & Brain Institute and Essentia Health

Respondent Janet Hufnagel filed a workers’ compensation claim in 2015 for work

related aggravations to a low-back condition that resulted from an admitted work-related

injury in 2009. At all relevant times, Hufnagel worked at the same job, performing the

same duties, at the same physical location. But between the 2009 injury and the later

aggravations sustained in 2014 and 2015, Hufnagel’s employer and its insurer changed.

When Hufnagel sought benefits for the later aggravations, the 2009-injury employer denied

liability, asserting that the 2014 and 2015 injuries were subsequent injuries for which the

new employer and its insurer were liable. The new employer also denied liability,

declaring that the aggravations were a continuation of the 2009 injury and therefore the





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responsibility of the original employer and its insurer. Following a hearing on Hufnagel’s

petition for benefits, the compensation judge concluded that Hufnagel’s 2009 work-related

injury was a substantial contributing factor to the later aggravations but held the new

employer liable for reasonable medical and other benefits for the 2014 and 2015 injuries.

Hufnagel’s post-hearing motion for an award of contingent and excess attorney fees

was granted in part and denied in part. As it relates to Hufnagel’s claim for fees under

Minn. Stat. § 176.191, subd. 1 (2016), the compensation judge concluded that the dispute

presented by Hufnagel’s 2015 claim petition was only whether the 2009 injury “continued

to be a substantial contributing factor” to Hufnagel’s later aggravations, and was not a

dispute between employers. Accordingly, the compensation judge denied the motion for

fees under this statute. The Workers’ Compensation Court of Appeals (WCCA) reversed,

holding that the compensation judge failed to fully consider the extent to which each

employer sought to shift liability to the other employer and that it was error to deny the

motion for fees under Minn. Stat. § 176.191, subd. 1. Concluding that the attorney had not

been adequately compensated for the time spent providing effective representation to

Hufnagel, the WCCA vacated the compensation judge’s fee award and remanded for

reconsideration in light of the correct legal standard. We affirm the decision of the WCCA.

FACTS

This appeal arises out of workers’ compensation claims filed by Janet Hufnagel for

back injuries she sustained while working as a certified nursing assistant. Hufnagel was

employed by Deer River Health Care in 2009 when she suffered a work injury to her low

back. Deer River and its insurer, MHA Insurance Co., (collectively “Deer River”) paid





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Hufnagel’s medical benefits incurred in connection with treating the 2009 work-related

injury. In 2010, 2011, and 2012, Deer River’s independent medical examiner evaluated

Hufnagel, concluded that her back condition arose out of the 2009 work-related injury, and

determined that the recommended medical treatments were reasonable and would allow

Hufnagel, who continued to work with restrictions, to return to work without restrictions.

In January 2014, after a fourth independent medical examination, Deer River’s independent

medical examiner again concluded that Hufnagel’s low-back condition was related to the

2009 work-related injury. In early 2014, Hufnagel and Deer River entered into a stipulation

to resolve the remaining issues related to Hufnagel’s claim for medical benefits and

temporary total disability benefits for the 2009 injury.

In 2013, while Hufnagel continued to work as a certified nursing assistant, her

employer, Deer River, was acquired and became Essentia Health–Deer River (“Essentia”)

and also changed its workers’ compensation insurer. In August 2014, now working for

Essentia, Hufnagel experienced increased low-back pain, which required time off work and

medical treatment. When notified of this injury, Essentia denied liability, concluding that

Hufnagel’s “current need for medical treatment is a continuation of the prior work injury

from 2009 which is under a different insurer.” Hufnagel then suffered an additional

aggravation to her low-back condition in June 2015. In July 2015, Hufnagel filed a claim

petition, seeking temporary total disability and medical benefits for the 2014 and 2015

injuries.

In October 2015, Hufnagel returned to the same doctor who had completed the four

previous independent medical examinations for Deer River. On this occasion, for the first





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time, the independent medical examiner concluded that Hufnagel’s 2009 low-back injury

had “resolved”; the 2014 low-back injury was “temporary in nature” and had also resolved;

and the 2015 injury was a substantial contributing cause to Hufnagel’s current condition

and, thus, the responsibility of Essentia, not Deer River. Deer River therefore denied

liability for Hufnagel’s claimed benefits and moved to join Essentia and its insurer as

parties in the proceeding before the compensation judge after Hufnagel declined to do so.

After Essentia was joined as a party, Hufnagel underwent a sixth independent

medical examination, this time with Essentia’s medical expert. This examiner concluded

that Hufnagel’s “subjective” complaints of pain were “unsubstantiated” by the physical

examination. Thus, the examiner reported that no medical treatment or care was necessary

for the 2009, 2014, and 2015 injuries. In the alternative, the examiner opined that the

“worst-case scenario” was a mild back strain in 2009 that was resolved within 6 weeks or

less. After this report was received, Hufnagel’s attorney reminded Essentia that Essentia

denied liability for the 2014 injury, explicitly attributing liability for Hufnagel’s low-back

condition to the “significant work injury of 2009.” The attorney noted that he did not ask

Essentia to do anything “in regard to admitting any responsibility for any 2014 or 2015

injury,” because Hufnagel’s claim petition sought benefits from Deer River based on the

2009 injury.

After a hearing, the compensation judge found that “[a] preponderance of the

evidence supports a finding that the medical care received by the employee was reasonable,

necessary, and causally related to the work injuries of June 22, 2009, August 14, 2014 and

June 10, 2015.” Furthermore, “[a] preponderance of the evidence supports a finding that





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the work-related injury of June 22, 2009, continues to be a substantial contributing factor

to the employee’s current condition, need for medical treatment, and disability.” However,

the compensation judge found that “[a] preponderance of the evidence fails to support that

any apportionment between these injuries is appropriate, as the August 14, 2014 and

June 10, 2015 injuries were temporary in nature.” Essentia was held liable for Hufnagel’s

temporary total disability and medical benefits associated with the 2014 and 2015 injuries,

with no apportionment. There was no specific finding of liability regarding the 2009 injury

because the 2014 stipulation between Hufnagel and Deer River resolved that issue.

Neither party appealed the October 27, 2016 Findings and Order by the

compensation judge. Later, the attorney filed a Statement of Attorney Fees requesting

compensation for a total of 78.15 hours, including $31,120.47 in excess Roraff/Irwin fees.1

Alternatively, the statement requested attorney fees under Minn. Stat. § 176.191 (2016),

which states that where “a dispute exists between two or more employers,” “[w]hen

liability has been determined . . . [t]he claimant shall be awarded a reasonable attorney fee,

to be paid by the party held liable for the benefits.” Id., subd. 1. Essentia and Deer River

both objected to the Statement of Attorney Fees.



1 Roraff/Irwin fees are additional attorney fees that may be awarded for recovery of medical benefits in cases where the contingent fee does not adequately compensate the attorney for the representation provided. See Irwin v. Surdyk’s Liquor, 599 N.W.2d 132, 142 (Minn. 1999) (remanding to the WCCA for determination of reasonable fee award based on multiple factors); Roraff v. State Dep’t. of Transp., 288 N.W.2d 15, 15–16 (Minn. 1980).





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The compensation judge held a separate hearing on Hufnagel’s motion for attorney

fees. Although the parties stipulated that the attorney’s hourly fees were reasonable, the

compensation judge concluded that:

[The attorney]’s itemization of time . . . is excessive in light of the nature of the results obtained. In his itemization, [the attorney] failed to differentiate the time he spent in connection with his efforts to establish causation for the June 22, 2009 date of injury (for which no benefits were awarded) and his efforts to establish causation for the August 14, 2014 and June 10, 2015 dates of injury (for which benefits were awarded).



Because there was no award of benefits specifically for the 2009 injury, the compensation

judge concluded that the employee’s counsel was not entitled to attorney fees for time spent

establishing the 2009 injury.

Thus, the compensation judge’s fee award focused on the contingent and excess fees

to be awarded for establishing the 2014 and 2015 injuries. First, attorney fees were

calculated under Minn. Stat. § 176.081 (2016), which provides for certain contingent

attorney fee awards. Second, after finding that the contingent-fee award would not

adequately compensate the attorney for his representation, the compensation judge found,

“[b]ased on a preponderance of the evidence, [Hufnagel’s attorney] is entitled to $8,000.00

in excess Roraff/Irwin attorney fees relative to the August 14, 2014 and June 10, 2015 dates

of injury.”

Third, the compensation judge concluded, again based on a preponderance of the

evidence, that Hufnagel was not entitled to an award of attorney fees under Minn. Stat.

§ 176.191, subd. 1, because “the dispute in this matter was not primarily between the

insurers.” Rather, the compensation judge concluded, “the sole issue of real importance





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was whether the work injury of June 22, 2009, continued to be a substantial contributing

factor in the employee’s ongoing physical condition.”

The compensation judge’s attorney fees order was appealed to the WCCA. The

WCCA held that the employers had “rendered apportionment a significant issue in this case

and greatly increased the burden on the employee’s counsel to provide effective

representation” by seeking to place sole liability on each other. Hufnagel v. Deer River

Health Care Ctr., No. WC17-6057, 2017 WL 6507806, at *5 (Minn. WCCA Dec. 5, 2017).

Consequently, the WCCA concluded that denying the request for a fee award under section

176.191 denied the attorney “adequate compensation” for the representation provided. Id.

As for the Roraff/Irwin fees, the WCCA held that the compensation judge had

“inappropriately treated the time spent on the 2009 injury as unreasonable.” Id. at *6. The

WCCA explained that it was inappropriate to treat the time spent on the 2009 injury as

unreasonable because “[a]ttorneys are obligated to fully and thoroughly prepare for [a]

hearing. This preparation will, without the aid of hindsight, include various theories of the

case, some of which may be unsuccessful. Such a result does not make the time spent

unreasonable.” Id. The WCCA held that in light of the denial of any fee under Minn. Stat.

§ 176.191 and the determination that Hufnagel’s attorney was not entitled to any

compensation for the time spent on the 2009 injury, “the employee’s counsel was not

awarded adequate compensation for his service to the employee in this case.” Hufnagel,

2017 WL 6507806, at *5. Accordingly, the WCCA vacated the March 16, 2017 Findings

and Order regarding attorney fees. Id. Essentia sought review of the WCCA’s decision,

and we issued a writ of certiorari.





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ANALYSIS

I.

This appeal requires us to consider whether the compensation judge erred in

concluding that there was no dispute between Hufnagel’s two employers that would entitle

her to an award of attorney fees under Minn. Stat. § 176.191. Minnesota Statutes

§ 176.191, subd. 1, states in relevant part:

Where compensation benefits are payable under this chapter, and a dispute exists between two or more employers or two or more insurers . . . [w]hen liability has been determined, . . . [t]he claimant shall also be awarded a reasonable attorney fee, to be paid by the party held liable for the benefits.



Id. (emphasis added). The plain language of the statute uses the word “shall”—making the

award to a claimant, such as Hufnagel, mandatory. See Minn. Stat. § 645.44, subd. 16

(2016) (“ ‘Shall’ is mandatory.”). The prerequisite for that mandatory award—“a dispute

. . . between two or more employers or two or more insurers”—is at issue in this appeal.

We have recognized that it is important for an employee to have legal representation

in a case such as this, where both employers deny liability and the employee is “drawn into

litigation because of an employers-insurers’ dispute as to which is liable for payment.”

Lease v. Pemtom, 232 N.W.2d 424, 428 (Minn. 1975). There is a “pragmatic need” for

legal representation in these circumstances because the employee’s right to compensation

benefits is at risk as the employers or their insurers “endeavor to minimize the employee’s

disabilities” in an effort to minimize their respective liability. Id. (citation omitted). In

fact, we have recognized that “it is not uncommon that an employee sustains successive

work-related injuries while employed by two or more employers.” Id. at 429. If those





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“successive employers want to pursue their rights to litigate liability for payment of

benefits,” then the Legislature has stated that employers are liable for the attorney fees the

employee incurs. Id. See also Sundquist v. Kaiser Eng’rs, Inc., 456 N.W.2d 86, 88 (Minn.

1990) (stating that a fee award under section 176.191, subdivision 1 is proper “even though

the compensability of an injury” is at issue when the dispute was primarily between the

insurers).

Accordingly, in such disputes employees are entitled to attorney fees under Minn.

Stat. § 176.191 after a determination is made as to which one (or more) of the employers

or insurers that disclaim liability is in fact liable for the employee’s workers’ compensation

benefits. See Lease, 232 N.W.2d at 427–29. Employees are entitled to reimbursement “for

costs incurred for attorneys’ services in protecting not only [the] right to but the amount of

benefits owed by the disputing employers.” Id. at 429. See also Kirchner v. County of

Anoka, 410 N.W.2d 825, 830 (Minn. 1987) (explaining that fees may be awarded under

Minn. Stat. § 176.191 in cases where two or more employers dispute the employee’s right

to benefits). In Patnode v. Lyon’s Food Products, Inc., 251 N.W.2d 692, 693 (Minn. 1977),

a case where the “sole issue of real importance was whether there should be apportionment

between the insurers of liability,” we held that the assessment of fees was “consistent with

the purpose of § 176.191.” We noted in that case that the record “clearly permit[ted] the

inference that despite initial denials of liability, . . . both insurers at least implicitly

conceded that [the] employee was entitled to compensation from one or the other.” Id.

The same inference is permissible, and apparent, here. The efforts by the employers

and their insurers to shift the focus from one to the other began when Essentia denied





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liability for Hufnagel’s 2014 aggravation, noting that any needed medical treatment was

the responsibility of “a different insurer”—apparently, Deer River. But, the fifth

independent medical examination required by Deer River, in 2015, found that the 2009

injury had resolved, assigning cause for any ongoing low-back issues to the 2015 injury.

The implication from this examination that Essentia was the liable employer was

sufficiently apparent, at least to Deer River, because it asked Hufnagel to join Essentia in

the workers’ compensation litigation. Once Essentia was joined (by Deer River), the sixth

independent medical examination, ordered by Essentia’s insurer, concluded that

Hufnagel’s 2009 injury had resolved and there was no medical treatment reasonably

necessary due to the 2014 and 2015 injuries. In other words, it is reasonable to infer that

whatever may have been the reasonably necessary medical treatment for the 2009 injury,

Essentia concluded that no medical treatment was necessary for the 2014 and 2015

aggravations that occurred when Hufnagel was employed by Essentia.

We conclude that it was error for the compensation judge to determine that the

dispute in this case was not primarily between the insurers, but instead was a dispute

focused on whether the 2009 injury was a substantial contributing factor to the 2014 and

2015 injuries. We agree with the WCCA that “[t]his determination fail[ed] to consider the

degree to which the two employers sought to place on each other the sole responsibility for

payment of the employee’s benefits.” Hufnagel, 2017 WL 6507806, at *5. Whether the

2009 injury was a substantial contributing factor in Hufnagel’s ongoing physical condition

was, at its heart, a dispute about which employer, Deer River or Essentia, was liable for the

benefits to which Hufnagel would be entitled for the 2014 and 2015 injuries. Thus, like





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Patnode, this is a case where, in the compensation judge’s own words, the “sole issue of

real importance” was how liability should be apportioned between two different employers

and insurers. We agree with the WCCA that the efforts by each employer to shift

responsibility to the other employer “greatly increased the burden on [Hufnagel]’s counsel

to provide effective representation.” Hufnagel, 2017 WL 6507806, at *5. We therefore

hold that Hufnagel was entitled to receive reasonable attorney fees under Minn. Stat.

§ 176.191, subd. 1.

II.

We next address the compensation judge’s conclusion that Hufnagel is not entitled

to recover attorney fees for the time her attorney spent in establishing the 2009 injury. This

legal effort by Hufnagel’s attorney resulted from various arguments by Deer River and

Essentia about whether the 2009 injury was a substantial contributing factor to Hufnagel’s

2014 and 2015 injuries. Although the case before the compensation judge was not itself

about an award of benefits specific to the 2009 injury, some amount of time and effort by

Hufnagel’s attorney was still necessary to adequately prepare for and respond to the

arguments the employers raised regarding the 2009 injury and its relationship to the 2014

and 2015 injuries. The compensation judge’s order notes that “this case involved three

dates of injuries spanning over seven years, two employers and insurers, and a number of

medical and legal issues with respect to the dates of injuries.” The acknowledgement of

three dates of injuries over 7 years also implicitly acknowledges that the 2009 injury was

an important part of this case. Although no compensation was awarded to the employee





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for the 2009 injury as a result of this litigation, the 2009 injury was directly related to the

benefits the employee successfully obtained for the 2014 and 2015 injuries.

We expect that attorneys will carefully and thoroughly prepare to represent their

clients. See Minn. R. Prof. Conduct 1.1 (“A lawyer shall provide competent representation

to a client. Competent representation requires the legal knowledge, skill, thoroughness,

and preparation reasonably necessary for the representation.”); id. cmt. 5 (“Competent

handling of a particular matter includes . . . . adequate preparation.”); cf. Lease,

232 N.W.2d at 428–29 (emphasizing the importance of representation for the employee in

liability disputes between employers). This process requires considering, preparing for,

and responding to alternative arguments and theories that might win or lose a case for the

client. Careful and thorough preparation will almost inevitably involve some amount of

time that may, or may not, be crucial to whichever argument eventually prevails. Attorneys

should be compensated for the preparation required to thoroughly represent their clients

and not just for time spent developing the argument that is ultimately successful.

Therefore, an award of reasonable fees should be adequate to compensate an employee’s

attorney for the value of the representation provided, including for the time reasonably

necessary to thoroughly prepare.2

For the foregoing reasons, we affirm the decision of the Workers’ Compensation

Court of Appeals.