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

• Court: Supreme Court of Arizona
• Writing for the Court: FELDMAN; HOLOHAN
• Citation: 147 Ariz. 456,711 P.2d 595
• Parties: Richard ANDERSON, Petitioner Employee, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Trico Gins, Respondent Employer, State Compensation Fund, Respondent Insurance Carrier.
• Docket Number: No. 18071-PR,18071-PR
• Decision Date: 24 December 1985

Page 595

711 P.2d 595 147 Ariz. 456 Richard ANDERSON, Petitioner Employee,
v.
The INDUSTRIAL COMMISSION OF ARIZONA, Respondent,
Trico Gins, Respondent Employer,
State Compensation Fund, Respondent Insurance Carrier. No. 18071-PR. Supreme Court of Arizona, In Banc. Dec. 24, 1985.

[147 Ariz. 457]

Page 596

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

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[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.

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:

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 ... [147 Ariz. 459]

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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...