Anderson v. Industrial Com'n of Arizona, 18071-PR

Decision Date24 December 1985
Docket NumberNo. 18071-PR,18071-PR
Citation147 Ariz. 456,711 P.2d 595
PartiesRichard ANDERSON, Petitioner Employee, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Trico Gins, Respondent Employer, State Compensation Fund, Respondent Insurance Carrier.
CourtArizona Supreme Court
Kenneth Allen, Rabinovitz & Associates, P.C. by Bernard Rabinovitz, Robert Grabb, Tucson, for petitioner

Dennis Kavanaugh, Chief Counsel, Industrial Com'n., John Greer, State Compensation Fund, Phoenix, James Crane, State Compensation Fund, Tucson, for Trico Gins/State Compensation Fund.

Jones, Skelton & Hochuli by William Jones, Calvin Harris, Phoenix, for American Ins. Assoc./Arizona Chamber of Commerce, amicus curiae.

Fennemore, Craig, von Ammon, Udall & Powers, P.C. by Scot Butler, III, Evans, Kitchel & Jenckes, P.C. by John Main, Jr., Phoenix, for Arizona Self-Insurer's Assoc. amicus curiae.

FELDMAN, Justice.

We granted review in this workers' compensation case to examine whether A.R.S. § 23-1024(A) may be construed to require a finding that a worker's acceptance of compensation benefits is a waiver of his constitutional tort remedy against his employer. The worker argues that such a construction of the statute violates art. 18, §§ 6 & 8 of the Arizona Constitution. Review was granted pursuant to Rule 23, Ariz.R.Civ.App.P., 17A A.R.S. We have jurisdiction pursuant to Ariz. Const. art. 6, § 5(3) and A.R.S. § 12-120.24.

FACTS
1. The System

This case cannot be understood without a preliminary description of the Arizona worker's compensation system. In theory, a covered worker may choose between the compensation system and the tort system. The choice must be made by written rejection of the compensation system and filed with the employer before injury. A.R.S. § 23-906(C). With some exceptions not relevant to this case, our law provides that for those who fail to reject, the compensation system is the employee's "exclusive remedy against the employer or any co-employee acting in the scope of his employment...." A.R.S. § 23-1022(A). Thus, an injured employee who has failed, before injury, to reject the workers' compensation system may not maintain a common law tort action against his employer. However, the foregoing provisions are applicable only when the employer has complied with A.R.S. § 23-906(D) by posting a notice to employees. The notice must inform employees that they will be covered by the "compulsory compensation law" and are "deemed" to have accepted such coverage and waived their common law remedies unless they have "specifically reject[ed] the provisions of the compulsory compensation law ... prior to any injury sustained, ..." § 23-906(D).

The employer in the case before us allegedly failed to post the notice required by § 23-906(D). In such situations § 23-906(E) provides that an employee injured while the notices were not posted "shall Thus, with respect to employers who comply with § 23-906(D) a worker is deemed by operation of law to have waived his common law rights unless there is a rejection of workers' compensation by notice before injury. With respect to a non-complying employer, however, the worker may make an election after injury; he may either accept compensation or maintain a tort action against his employer. A.R.S. § 23-1024 provides that such a choice may be made in the following manner:

                [147 Ariz. 458] [not] be deemed to have accepted" the compensation scheme, so that "it shall be optional for such employee, ... to accept compensation under the provisions of this chapter or maintain other action against the employer."   The other action, of course, is whatever common law tort remedies may be applicable
                

Choice of remedy as waiver of alternate remedy.

A. An employee ... who accepts compensation waives the right to exercise any option to institute proceedings in court against his employer or any co-employee ...

2. The Occurrence

Petitioner sustained a severe injury to his left leg on January 29, 1983, when a co-employee started a cotton gin while petitioner was exposed to uncovered blades. At the time, petitioner was seventeen years of age. He was hospitalized for over six weeks and underwent multiple operations in a successful effort to save his leg. His injury caused extreme pain, and he was medicated with morphine, tranquilizers, muscle relaxants and sleeping medications. During the course of his hospitalization, his mother brought him claim forms from the State Compensation Fund (Fund), the employer's compensation carrier. Petitioner signed the claim forms, accepted a compensation check sent to him by the Fund, endorsed it and gave it to his mother to negotiate. The Fund also paid medical benefits. Eventually, petitioner retained the services of an attorney who notified the Fund that petitioner did not wish to pursue a worker's compensation claim. The attorney tendered back the compensation benefits that petitioner had received, but not the medical benefits that the Fund had expended for petitioner's medical and hospital expenses. Soon after, petitioner filed a tort action against the employer, the co-employee and others. The issue we face is whether that action can be maintained or whether petitioner waived it by accepting the compensation check.

Petitioner claims that at the time he signed the various forms and endorsed the compensation check he was not competent to understand the nature of his acts and was unaware that he was accepting compensation. Petitioner attempted to withdraw his claim, and a hearing was held at which the administrative law judge (ALJ) heard evidence on both sides of this question. The ALJ found that petitioner had the capacity to understand and had understood that he was accepting compensation. On review, the court of appeals held that the ALJ's finding was supported by the evidence. See A.R.S. §§ 23-943 and 23-951. We agree.

However, the ALJ did not make a specific finding on petitioner's second argument. Petitioner contends that A.R.S. § 23-1024(A) cannot be constitutionally interpreted to permit a finding that an employee waived his common law tort remedies by knowing acceptance of compensation unless the injured employee also knew that the acceptance of compensation would constitute such a waiver. Petitioner claims that he had no such knowledge. The ALJ made no finding on this point because he deemed it legally irrelevant. A majority of the court of appeals agreed, holding that "[a] waiver occurs even if the worker did not know of his alternative remedies or of the consequences of his acceptance of compensation." Anderson v. Industrial Commission, (No. 1 CA-IC 3161, Memorandum Decision, filed January 17, 1985; slip op. at 7.) The court relied on Southwest Cooperative Wholesale v. Superior Court, 13 Ariz.App. 453, 477 P.2d 572 (1970) which held that the "statutorily defined act of ...

accepting benefits operated as a binding waiver of the right to sue an allegedly non-complying employer, regardless of any lack of knowledge." Id. at 457, 477 P.2d at 576, citing Ream v. Wendt, 2 Ariz.App. 497, 410 P.2d 119 (1966).

3. The Issue

Petitioner argues that such an interpretation of § 23-1024(A) is contrary to our decision in State ex rel Industrial Commission v. Pressley, 74 Ariz. 412, 250 P.2d 992 (1952) (Pressley III ). He argues that under Pressley III there can be no waiver of common law remedies by the mere acceptance of a compensation check, unless the injured worker is aware both that he is accepting compensation and that by so doing he is choosing between available remedies. Petitioner claims that this result is mandated by art. 18, §§ 6 & 8 of the Arizona Constitution. In order to decide the question we must briefly examine the history of the relevant constitutional provisions.

WAIVER OF COMPENSATION RIGHTS UNDER THE ARIZONA CONSTITUTION

As adopted in 1912, our constitution provided as follows:

Section 8: The legislature shall enact a workman's compulsory compensation law ... by which compulsory compensation shall be required to be paid ...; provided, that it shall be optional with said employee to settle for such compensation, or retain the right to sue said employer as provided by this constitution.

Ariz. Const. art. 18, § 8 (1912). The recognition that the injured workman might "retain the right to sue said employer as provided by this constitution" was, of course, a reference to the following:

The right of action to recover damages for injuries shall never be abrogated, and the amount recovered shall not be subject to any statutory limitation.

Ariz. Const. art. 18, § 6. 1

Against this constitutional background, a worker's compensation act was passed by the first legislature in 1912. (Laws 1912, Ch. 89). Consistent with the dictates of the constitution, that act gave the employee an option to settle for compensation or pursue common law remedies against the employer, but provided that an election to take compensation would be deemed as having been made unless the employee rejected compensation prior to injury and elected to retain common law remedies. Id., Section 14.

In Consolidated Arizona Smelting Company v. Ujack, 15 Ariz. 382, 139 P. 465 (1914) this court held that portion of the statute unconstitutional because it conflicted with the portion of art. 18, § 8 which stated, "it shall be optional with said employee to settle for such compensation or retain the right to sue." Reading the plain language, we reasoned that no meaningful election could be made before injury and that, therefore, an employee must be given the right to choose compensation or to sue after injury. We stated that the "employee's right to exercise this option being a constitutional right, legislation is impotent to deprive him of it." Id. at 387, 139 P. at 467. This right was affirmed in Industrial Commission of Arizona v. Crisman, 22 Ariz. 579, 199 P. 390 (1921), when we again struck down a re-enacted statutory prior injury requirement, explaining that compensation...

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