Flanigan v. Department of Labor and Industries

Decision Date03 March 1994
Docket NumberNos. 59298-5 and 59307-8,s. 59298-5 and 59307-8
Citation869 P.2d 14,123 Wn.2d 418
CourtWashington Supreme Court
PartiesRichard FLANIGAN, deceased, Respondent, v. DEPARTMENT OF LABOR AND INDUSTRIES of the State of Washington, Petitioner. Miriam DOWNEY, Petitioner, v. DEPARTMENT OF LABOR AND INDUSTRIES of the State of Washington, Respondent.

Christine O. Gregoire, Atty. Gen., Beverly Norwood Goetz, Asst., Seattle, for the state.

Castel, Schnautz & Hilfer, Richard J. Hilfer, Seattle, for petitioner Downey.

Paine, Hamblen, Coffin, Booke & Miller, Mary M. Palmer, Spokane, for respondent Flanigan.

JOHNSON, Justice.

In these two consolidated cases we review conflicting decisions from different divisions of the Court of Appeals. In each case, the spouse of a worker killed on the job obtained workers' compensation benefits and also recovered damages for loss of consortium in a suit against a third party. The Department of Labor and Industries (Department) claimed a portion of each third party recovery as reimbursement for the workers' compensation benefits it had paid.

We hold the Department's right to reimbursement does not extend to a spouse's third party recovery for loss of consortium. We affirm the Court of Appeals, Division Three, in Flanigan v. Department of Labor & Indus., 65 Wash.App. 119, 827 P.2d 1082 (1992), and reverse the Court of Appeals, Division One, in Downey v. Department of Labor & Indus., 65 Wash.App. 200, 827 P.2d 1101 (1992).

I. FACTS

Flanigan v. Department of Labor & Indus.

Janice Flanigan's husband died from injuries suffered while working on a job which was covered by Washington's workers' compensation act, the Industrial Insurance Act. RCW Title 51. The Department of Labor and Industries granted her application for surviving spouse's benefits. Flanigan then sued a third party tortfeasor, both individually and as representative for her husband's estate. She recovered $189,000 for her own loss of consortium. 1 She also recovered for her husband's estate an award of $94,468.50 in economic damages.

The Department claimed reimbursement from the proceeds of the entire recovery, including Janice Flanigan's separate award for loss of consortium. According to the parties' stipulation, the Department asserted a lien against the entire third party recovery in the amount of $82,522.89; the Department demanded reimbursement in the amount of $39,735.40; and no benefits or compensation were to be paid until the excess recovery of $70,717.37 had been offset. 2 The Board of Industrial Insurance Appeals (Board) affirmed the Department's order.

The Spokane County Superior Court reversed the Board on summary judgment. The Court of Appeals, Division Three, affirmed the Superior Court. Flanigan v. Department of Labor & Indus., supra. The Department obtained discretionary review in this court.

Downey v. Department of Labor & Indus.

Charles Downey contracted employment-related asbestosis and obtained workers' compensation benefits. He and his wife, Miriam Downey, sued third parties and recovered a total award of $184,875 as compensation both for his asbestosis and her loss of consortium. The Department's policy, which is not being challenged here, is to allocate 80 percent of asbestosis awards to the worker and 20 percent to the spouse for loss of consortium. The Department asserted against Charles Downey's 80 percent share the Department's right to be reimbursed for the benefits it had paid him. The Department did not initially assert its reimbursement right against Miriam Downey's 20 percent share. Nevertheless, after Charles Downey died and Miriam Downey began receiving a pension as a surviving spouse, the Department determined it would use her 20 percent share as a source of reimbursement of her pension payments. According to the parties' stipulation, the amount of this reimbursement is $11,369.57.

The Board, after an initial proposed order in favor of Miriam Downey, reversed itself and ruled the Department's right of reimbursement applied to the loss of consortium recovery. The Board's order was upheld on summary judgment in the King County Superior Court. The Court of Appeals, Division One, affirmed. Downey v. Department of Labor & Indus., supra. Miriam Downey obtained discretionary review in this court.

We have consolidated the two cases for review in this court. The issue in common is whether the Department's right of reimbursement extends to a surviving spouse's third party recovery for loss of consortium.

II. ANALYSIS

The Industrial Insurance Act (Act) is based on a compromise between workers and employers, under which workers become entitled to speedy and sure relief, while employers are immunized from common law responsibility. RCW 51.04.010; see McCarthy v. Department of Social & Health Servs., 110 Wash.2d 812, 816, 759 P.2d 351 (1988); Reese v. Sears, Roebuck & Co., 107 Wash.2d 563, 571, 731 P.2d 497 (1987), overruled on other grounds in Phillips v. Seattle, 111 Wash.2d 903, 909-10, 766 P.2d 1099 (1989). The compromise abolishes most civil actions arising from on-the-job injuries and replaces them with an exclusive remedy of workers' compensation benefits. RCW 51.04.010.

This compromise provides certain advantages to employees and their beneficiaries. An employee or beneficiary may obtain timely compensation and need no longer show the standard elements of a common law cause of action, including fault on the part of the employer. See RCW 51.04.010; Reese, 107 Wash.2d at 571. Instead, an employee or beneficiary generally qualifies for workers' compensation benefits merely by suffering an injury or disease during the course of an employment covered by the Act. See RCW 51.32.010, .015, .180.

In return, employers are shielded from the full range of damages available to injured workers under the common law. Even when an employee is killed or seriously injured on the job, the employee is entitled only to workers' compensation benefits, and these benefits are calculated as a lesser percentage of the employee's salary. See RCW 51.32.050, .060, .090.

Benefits calculated in this manner by their very nature do not provide full compensation for the damages incurred. At the most, the benefits cover only certain out-of-pocket expenses, such as a portion of lost wages. They cannot take into account noneconomic damages, such as an employee's own pain and suffering or a spouse's loss of consortium. 3 The extent of a spouse's loss of consortium depends in no way upon the employee's salary level.

Employees and their beneficiaries are limited, for the most part, to the receipt of these workers' compensation benefits. An employee cannot sue the employer and neither can the employee's beneficiaries. Thus, an employer is immune from a suit brought by an employee's spouse, not only when the spouse is attempting to recover damages suffered by the employee, but also when the spouse suffers separate and distinct damages, such as a loss of consortium. See Provost v. Puget Sound Power & Light Co., 103 Wash.2d 750, 696 P.2d 1238 (1985); Ash v. S.S. Mullen, Inc., 43 Wash.2d 345, 261 P.2d 118 (1953), overruled on other grounds in Lundgren v. Whitney's Inc., 94 Wash.2d 91, 614 P.2d 1272 (1980).

Yet a spouse suffering loss of consortium damages has one additional avenue for recovery. As an exception to the Act's abolition of civil actions, the Legislature enacted RCW 51.24, authorizing employees and their beneficiaries to increase their compensation by suing third parties under traditional tort principles. RCW 51.24.030. If the employee or beneficiary prevails in a third party action, the Department is entitled to a large portion of the recovery. Under RCW 51.24.060(1)(a)-(c), the recovery is divided and distributed in the following order: (1) attorney fees are paid; (2) 25 percent of the balance goes to the plaintiff employee or beneficiary; and (3) the Department "shall be paid the balance of the recovery made, but only to the extent necessary to reimburse the [D]epartment ... for compensation and benefits paid". Former RCW 51.24.060(1)(c). Any remaining balance is paid to the employee or beneficiary. 4 RCW 51.24.060(1)(d).

Allowing these third party actions serves two functions. First, it spreads responsibility for compensating injured employees and their beneficiaries to third parties who are legally and factually responsible for the injury. Because third parties are not part of the compromise underlying the Act, they are not entitled to immunity from civil actions. Second, it permits the employee to increase his or her compensation beyond the Act's limited benefits. See Maxey v. Department of Labor & Indus., 114 Wash.2d 542, 549, 789 P.2d 75 (1990); see also O'Rourke v. Department of Labor & Indus., 57 Wash.App. 374, 382, 788 P.2d 17, review denied, 115 Wash.2d 1002, 795 P.2d 1155 (1990); Bankhead v. Aztec Constr. Co., 48 Wash.App. 102, 107-08, 737 P.2d 1291 (1987).

Allowing the Department to obtain reimbursement from the proceeds of a third party recovery likewise serves two roles, ensuring that:

(1) the accident and medical funds are not charged for damages caused by a third party and (2) the worker does not make a double recovery. In other words, the worker, under [the third party statute], cannot be paid compensation and benefits from the Department and yet retain the portion of damages which would include those same elements.

(Italics ours.) Maxey, 114 Wash.2d at 549, 789 P.2d 75; see also Clark v. Pacificorp, 118 Wash.2d 167, 185, 822 P.2d 162 (1991).

It is the concern over "double recovery" which is at issue here. The Department argues disallowing its right of reimbursement will allow claimants to receive a double recovery because they will receive workers' compensation benefits as well as the undiminished third party recovery.

We reject the Department's argument. The italicized language from Maxey reveals the fallacy in the Department's position. As Maxey demonstrates, the employee receives a...

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