Cascade Tissue Group Sales v. Hibbs

602 November 12, 2026 No. 1094 IN THE COURT OF APPEALS OF THE STATE OF OREGON In the Matter of the Compensation of James D. Hibbs, Claimant. CASCADE TISSUE GROUP SALES, American Zurich Insurance Company, and Sedgwick CMS - Portland, OR, Petitioners, v. James D. HIBBS, Respondent. Workers’ Compensation Board 2203916; A183523 Submitted October 22, 2026. Katherine Caldwell filed the opening brief for petitioners. Kevin Domanico and Reinisch Wilson P.C. filed the reply brief for petitioners. Julene M. Quinn filed the answering brief for respondent. Before Aoyagi, Presiding Judge, Kamins, Judge, and Pagán, Judge. AOYAGI, P. J. Reversed. Cite as 354 Or App 602 (2026) 603 604 Cascade Tissue Group Sales v. Hibbs AOYAGI, P. J. In this workers’ compensation case, self-insured employer Cascade Tissue Group Sales (Cascade) seeks judicial review of a Workers’ Compensation Board order assessing a penalty and attorney fees against Cascade for unreasonably closing a claim without sufficient information. Cascade raises two assignments of error on review, arguing that the board erred as a matter of law or, alternatively, that its order is not supported by substantial evidence. We agree as to the former and, accordingly, reverse. CLAIM CLOSURE GENERALLY The crux of the issue in this case is whether Cascade had sufficient information for it to be reasonable to close claimant’s claim. We therefore begin with an overview of the claim-closure procedure. All citations to administrative rules are to those in effect when Cascade issued the closure notice for claimant.1 For present purposes, we use “insurer” to refer to a third-party insurer or a self-insured employer. An insurer shall close a worker’s claim when “[t]he worker has become medically stationary and there is suffi- cient information to determine permanent disability.” ORS 656.268(1)(a). As to the latter, a closing medical examina- tion and report are required whenever there is a reasonable expectation of permanent disability. OAR 436-030-0020(2) (b). The closing report must include “detailed documentation of all measurements, findings, and limitations” regarding any permanent impairment due to an accepted condition. Id. Where a claimant has permanent impairments from mental illness, as is the case here, physicians are required to describe “permanent changes in mental function in terms of their affect on the worker’s activities of daily living (ADLs).” OAR 436-035-0400(3). The severity of the impair- ment is an objective medical finding. See ORS 656.726(4)(f)(B) (“Impairment is established by a preponderance of medical 1 For OAR chapter 436, division 030, the operative rules were those effective July 1, 2022, and published in WCD Admin. Order 22-056. For OAR chapter 436, division 035, the operative rules were those effective June 7, 2022, and published in WCD Admin. Order 22-052. Cite as 354 Or App 602 (2026) 605 evidence based upon objective findings.”); OAR 436-035- 0013(1) (“Findings of impairment are objective medical find- ings that measure the extent to which a worker has suffered permanent loss of use or function of a body part or system.”). There are different groupings of mental disorders for pur- poses of impairment rating. At issue in this case is “[l]oss of function attributable to permanent symptoms of affective dis- orders, anxiety disorders, somatoform disorders, and chronic adjustment disorders.” OAR 436-035-0400(5). There are three “classes” of impairment for disorders in that group—Classes 1, 2, and 3—”with gradations within each class based on the severity of the symptoms/loss of function.” Id. For example, for Class 3, the gradations are “[m]inimal (50%), mild (66%), or moderate (81%).” OAR 436-035-0400(5)(c). A physician who conducts a closing medical exam- ination is to use the methods for making findings described in the administrative rules and report the findings to the insurer “in the form and format required” by the rules. OAR 436-035-0007(9) (“Methods used by the examiner for mak- ing findings of impairment are the methods described in these rules and further outlined in Bulletin 239, and are reported by the physician in the form and format required by these rules.”). It is then the insurer’s responsibility to issue a notice of closure after applying all relevant statutes and rules. OAR 436-030-0020(3) (“When determining disability and issuing the Notice of Closure, the insurer must apply all statutes and rules consistent with their provisions[.]”). As part of doing so, the insurer must assign the claimant a dis- ability rating based on the physician’s objective findings. If the physician’s findings fall “between the listed impairment values,” the insurer is to use the higher rating: “[O]nly impairment values listed in these rules are to be used in determining impairment. Prorating or interpolat- ing between the listed values is not allowed. For findings that fall between the listed impairment values, the next higher appropriate value is used for rating.” OAR 436-035-0007(12). Once the insurer issues a notice of claim closure, the claimant has 60 days to request reconsideration by the director. ORS 656.268(5)(e). The insurer also may request 606 Cascade Tissue Group Sales v. Hibbs reconsideration, but “based only on disagreement with the findings used to rate impairment,” and such request must be made within seven days. Id. Upon issuance of the direc- tor’s reconsideration order, any party who objects to it “may request a hearing under ORS 656.283 within 30 days from the date of the reconsideration order.” ORS 656.268(6)(g); see also ORS 656.268(9) (limiting the hearing to issues raised and preserved before the director or arising out of the recon- sideration order). That hearing will take place before an administrative law judge (ALJ), who then issues a written order. ORS 656.283(3)(a). The ALJ may impose a penalty in some circumstances, including if a notice of closure is found “not reasonable,” ORS 656.268(5)(f), and also may assess an attorney fee if statutorily authorized. The reasonableness of a notice of closure must be evaluated based on the informa- tion available to the insurer at the time of closure. Snyder v. SAIF, 287 Or App 361, 371, 402 P3d 743 (2017). The ALJ’s order becomes final in 30 days, unless a party “requests a review by the Workers’ Compensation Board under ORS 656.295.” ORS 656.289(3). If board review is requested, the board conducts its review based on the existing record and such oral or written argument as it may receive. ORS 656.295(5). “The board may affirm, reverse, modify or supplement the order of the [ALJ] and make such disposition of the case as it determines to be appropriate.” ORS 656.295(6). The board’s order becomes final in 30 days, unless a party “appeals to the Court of Appeals for judicial review pursuant to ORS 656.298.” ORS 656.295(8). In the event of an appeal, we conduct our review based “on the entire record forwarded by the board.” ORS 656.298(7). ANALYSIS We turn to the specifics of this case. The histori- cal facts are undisputed. Claimant was injured at work in 2016. Cascade accepted his claim for a cervical strain and concussion. The claim was closed six months later, but then reopened for newly accepted conditions of anxiety disorder, somatic symptom disorder, and unspecified depressive dis- order. In 2021, claimant was deemed medically stationary and referred for a closing medical examination. Cite as 354 Or App 602 (2026) 607 Dr. Schneider performed the closing medical exam- ination. His stated task was to determine “the extent of per- manent impairment” from claimant’s three accepted mental conditions. Schneider issued a 19-page report containing his findings, which were made with reference to OAR 436-035- 0400. As to the anxiety disorder, Schneider found claimant’s impairment to be “Class 3, minimal to mild: 58 percent.” As to the depressive disorder, Schneider found claimant’s impairment to “again * * * fall within the minimal to mild range of class 3” at “Class 3: 58 percent.” As to the somatic symptom disorder, Schneider found claimant’s impairment to be “Class 3, mild: 66 percent.” Cascade used Schneider’s findings to rate claim- ant’s permanent impairment for purposes of claim closure. On July 5, 2022, it issued a notice of closure, recognizing “66 percent loss of the whole person for impairment to your [b] rain” based on “Class 3 Mild” impairment. Both claimant and Cascade requested reconsideration. On reconsideration, although claimant had not challenged the closure itself, the notice of closure was ordered to be rescinded due to Schneider’s findings being insufficient to determine whether claimant’s impairment was minimal, mild, or moderate. Claimant then requested a hearing, seeking a penalty for unreasonable clo- sure based on the reconsideration decision. After a hearing, the ALJ found that Cascade “acted unreasonably by clos- ing this claim without seeking clarification as to what level of impairment claimant actually has[,]” specifically with respect to the anxiety and depressive disorders for which Schneider found “minimal to mild” impairment. The ALJ acknowledged that Cascade “[a]rguably” acted reasonably, given that the “deficiency in Dr. Schneider’s report was not readily apparent,” given that Cascade used the higher value of “mild” in closing the claim (which the ALJ described as “commendable”), and given that claimant himself did not raise any issue of premature closure on reconsideration. But he ultimately found the closure unreasonable and, on that basis, assessed a penalty under ORS 656.268(5)(f) and an attorney fee under ORS 656.382(1). Cascade appealed to the board. In a 2-1 decision, the majority of the board adopted the ALJ’s order and assessed an additional attorney fee under ORS 656.382(3). 608 Cascade Tissue Group Sales v. Hibbs Cascade seeks judicial review of the board’s order. In its first assignment of error, Cascade argues that the board erred as a matter of law in finding that there was insuf- ficient information to close the claim and that the closure was thus unreasonable. In its second assignment of error, Cascade argues in the alternative that the board’s order is not supported by substantial evidence as to the sufficiency of the information for claim closure. Because it is disposi- tive, we address only the first assignment. We begin with preservation, which is contested. ORAP 5.45(1) requires preservation of error in a lower court for us to consider an issue on appeal, and the same require- ment applies to administrative proceedings. VanSpeybroeck v. Tillamook County, 221 Or App 677, 690, 191 P3d 712 (2008). Preservation rules are “pragmatic as well as pru- dential,” and the “touchstone” is “procedural fairness to the parties and to the [lower tribunal].” Peeples v. Lampert, 345 Or 209, 220, 191 P3d 637 (2008). “We evaluate whether an issue is adequately preserved in light of the underlying pur- poses of the preservation rule—to allow the [lower tribu- nal] to consider a contention and correct any error, to allow the opposing party an opportunity to respond to a conten- tion, and to foster a full development of the record.” State v. Bordeaux, 323 Or App 60, 70, 522 P3d 900 (2022), rev den, 371 Or 60 (2023) (internal quotation marks omitted). Here, having reviewed the record, we conclude that Cascade adequately preserved its claim of error. Whether it was reasonable for Cascade to close the claim based on Schneider’s findings was squarely before the board. Claimant takes issue with the fact that Cascade did not expressly cite OAR 436-035-0007(12) to the board, but we do not view that as controlling, especially when Cascade’s position was aligned with the substance of that rule. See State v. Hitz, 307 Or 183, 188, 766 P2d 373 (1988) (whereas it “ordinarily is essential” to raise an issue below to preserve it for appeal, it is less essential to “identify[ ] a source for a claimed position,” and least essential to “mak[e] a particular argument” (emphases omitted)). The claim of error is adequately preserved. We proceed to the merits. The board’s determination that Cascade acted unreasonably in closing the claim turns Cite as 354 Or App 602 (2026) 609 on a purported deficiency in Schneider’s findings regarding claimant’s anxiety and depressive disorders. In the board’s view, Schneider’s finding of “minimal to mild” impairment from each of those disorders was unclear regarding the gra- dation of impairment, such that Cascade needed to seek clarification from Schneider before it could close the claim. Recall that claimant’s mental disorders are all subject to OAR 436-035-0400(5)(c), which provides for three grada- tions in Class 3—”[m]inimal (50%), mild (66%), or moderate (81%).” Cascade argues that the board “erroneously equated the ‘findings’ that must be provided by the medical expert in the closing report with the ‘rating’ that must be performed by [the] carrier.” Relatedly, Cascade argues that OAR 436- 035-0007(12) necessarily contemplates that physicians’ objective findings on permanent impairment will sometimes be expressed in percentages of impairment that lie between the listed impairment values for the applicable rating rules and instructs insurers how to handle that exact situation— by using the higher rating. In response, claimant defends the board’s order. Claimant agrees with Cascade that “the attending physician provides the ‘findings,’ and the insurer at closure then rates that finding of impairment.” Claimant argues, however, that Schneider’s “minimal to mild” finding was unclear and made it impossible for Cascade to rate claimant’s perma- nent impairment. He contends that, in finding the impair- ment “minimal to mild,” Schneider essentially found that two ratings applied and left it to Cascade to “choose a rat- ing,” either arbitrarily or by improperly using its own “med- ical expertise.” Having considered all of the parties’ arguments, we conclude that the board erred. We start from the premise on which both parties agree—that the physician who con- ducts the closing medical examination must make objective findings on permanent impairment, which the insurer must then use to rate the permanent impairment. That is con- sistent with OAR 436-035-0007(12), which provides, “For findings that fall between the listed impairment values, the next higher appropriate value is used for rating.” (Emphases 610 Cascade Tissue Group Sales v. Hibbs added.) We understand OAR 436-035-0007(12) to require insurers to use the physician’s findings to rate permanent impairment, to prohibit insurers from “[p]rorating or inter- polating between the listed values” in rating impairment, and to require insurers to instead use “the next higher appropriate value” if the findings fall between listed values. Given the difference between findings and ratings, Cascade cannot be found to have acted unreasonably in closing the claim. Schneider’s findings are clear. Schneider found claimant’s anxiety disorder to be “Class 3, minimal to mild: 58 percent”; found claimant’s depressive disorder to “again * * * fall within the minimal to mild range of class 3” at “Class 3: 58 percent”; and found claimant’s somatic symp- tom disorder to be “Class 3, mild: 66 percent.” Cascade used those findings to rate claimant’s permanent impairment as “Class 3 Mild,” based on the Class 3 gradations in OAR 436-035-0400(5)(c)—minimal (50%), mild (66%), and moder- ate (81%)—and the requirement in OAR 436-035-0007(12) to use the higher rating for “findings that fall between the listed impairment values.” There is no dispute regarding Schneider’s find- ing of “Class 3, mild: 66 percent” impairment from the somatic symptom disorder. As for the anxiety disorder and the depressive disorder, for each of those, Schneider made an objective finding of the precise percentage of claimant’s impairment, 58 percent, and we do not see how identifying 58 percent as falling between “minimal (50%)” and “mild (66%)” made his findings ambiguous or otherwise insuffi- cient. Schneider found a specific percentage of impairment. That percentage falls between the listed impairment val- ues for minimal (50%) and mild (66%), so, under OAR 436- 035-0007(12), Cascade was required to use the higher rating of Class 3 mild, which it did. There is nothing ambiguous about Schneider’s findings, nor did they fail to supply the necessary information for Cascade to rate the impairment. In so concluding, we necessarily disagree with claimant that the board could ignore Schneider’s “58 per- cent” findings in evaluating whether his report provided sufficient information for Cascade to rate claimant’s perma- nent impairment and close the claim. We also disagree that Cite as 354 Or App 602 (2026) 611 Schneider’s description of 58 percent as “minimal to mild,” or “within the minimal to mild range,” equates to a find- ing of “minimal or mild” and left it for Cascade to “choose a rating” at will or by improper use of “medical expertise.” The natural reading of “minimal to mild,” or “within the minimal to mild range,” is that the found percentage of impairment (58%) falls between the defined values for mini- mal (50%) and mild (66%), which is true. And OAR 436-035- 0007(12) dictates which rating Cascade had to “choose” in that scenario—the higher one. In rating claimant’s impair- ment as Class 3 mild based on Schneider’s findings, Cascade simply applied the law. See OAR 436-030-0020(3) (“When determining disability and issuing the Notice of Closure, the insurer must apply all statues and rules consistent with their provisions[.]”). It did not exercise “medical expertise” (as claimant argues) or do something “commendable” (as the ALJ suggested). There was no reason for Cascade to seek “clarification” from Schneider before rating impairment, when Schneider’s findings provided all the necessary infor- mation, and OAR 436-035-0007(12) dictated how to use it. Based on the information that it had at the time of closure, Cascade cannot be said to have acted unreason- ably in closing the claim without sufficient information to rate claimant’s permanent impairment. The board therefore erred in assessing a penalty and attorney fees. Reversed.