Davidson v. Sullivan, No. 90-2190

• Decision Date: 06 May 1991
• Docket Number: No. 90-2190
• Citation: 942 F.2d 90
• Parties: , Unempl.Ins.Rep. (CCH) P 16238A Albert E. DAVIDSON, Plaintiff, Appellee, v. Louis W. SULLIVAN, M.D., Secretary of Health and Human Services, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 90

942 F.2d 90

34 Soc.Sec.Rep.Ser. 389, Unempl.Ins.Rep. (CCH) P 16238A

Albert E. DAVIDSON, Plaintiff, Appellee, v. Louis W. SULLIVAN, M.D., Secretary of Health and Human Services, Defendant, Appellant.

No. 90-2190.

United States Court of Appeals, First Circuit.

Heard May 6, 1991.

Decided Aug. 21, 1991.

Steve Frank, Atty., Appellate Staff, Civ. Div., Dept. of Justice, with whom William Kanter, Atty., Appellate Staff, Civ. Div., Dept. of Justice, Stuart M. Gerson, Asst. Atty. Gen., Washington, D.C., and Jeffrey R. Howard, U.S. Atty., Concord, N.H., were on brief, for defendant, appellant.

Elizabeth R. Jones with whom Moquin & Daley, P.A., Manchester, N.H., were on brief, for plaintiff, appellee.

Before CAMPBELL, Circuit Judge, BOWNES, Senior Circuit Judge, and TORRES, ^* District Judge.

BOWNES, Senior Circuit Judge.

The Secretary of Health and Human Services ("the Secretary") appeals the decision of the district court reversing the Social Security Administration's ("SSA") reduction of the plaintiff's social security disability benefits pursuant to 42 U.S.C. § 424a, the "offset" provision. Specifically, the Secretary challenges the court's exclusion of the plaintiff's permanent impairment award under N.H.Rev.Stat.Ann. ("RSA") 281:26 from the offsettable amount. For the reasons that follow, we reverse.

I. BACKGROUND

In May 1985 plaintiff Albert E. Davidson was awarded weekly worker's compensation benefits pursuant to RSA 281:23 in the amount of $208 per week for a work-related injury. ¹ One year later the plaintiff settled his worker's compensation case for a lump sum of $17,000. According to the settlement breakdown the total amount represented $4,368 ($208 per week for twenty-one weeks) for lost wages under RSA 281:23; $1,000 for future medical bills; and $11,632 for permanent partial impairment under RSA 281:26.

In September 1987 plaintiff was determined to be eligible for retroactive disability insurance benefits under the Social Security Act, 42 U.S.C. § 423 ("the Act"). When SSA learned of the plaintiff's lump sum worker's compensation award, it informed him that, pursuant to 42 U.S.C. § 424a, ² that award would be offset against his disability benefits, deducted at a weekly rate of $208. Plaintiff challenged this determination, and on reconsideration, SSA reduced the offsettable amount by $3,400 for attorney's fees, leaving a balance of $13,600 to be offset against social security benefits. Plaintiff then requested a hearing before an Administrative Law Judge ("ALJ"), claiming that the $11,632 portion of his settlement for permanent partial impairment was not subject to offset. The ALJ issued a decision holding that the entire $13,600 represented a payment in lieu of weekly worker's compensation benefits and must therefore be offset against plaintiff's social security benefits. This decision was affirmed by the Appeals Council.

Plaintiff brought this action in district court, claiming that the Secretary erred in including in the offset amount that part of the lump sum award representing compensation for permanent bodily loss under RSA 281:26. The district court adopted the reasoning in Lemire v. Secretary of Health and Human Services, 682 F.Supp. 102 (D.N.H.1988), which had decided the identical issue. The court held that "disability" as used in the federal offset provision, which requires reduction of social security benefits when the claimant receives "disability" benefits under a worker's compensation law, 42 U.S.C. § 424a(a), applies only to benefits received for the loss or impairment of a claimant's earning power. Concluding that plaintiff's award for partial permanent bodily loss pursuant to RSA 281:26 was not an award to compensate for loss of earning capacity, the district court held that the Secretary had erred in offsetting those benefits under § 424a and granted plaintiff's motion to reverse the Secretary's decision.

II. DISCUSSION

42 U.S.C. § 424a(a) requires that social security disability benefits paid pursuant to 42 U.S.C. § 423 be reduced for any month during which the individual receives "periodic benefits on account of such individual's total or partial disability (whether or not permanent) under ... a workmen's compensation law or plan of the United States or a State...." Where an individual receives both worker's compensation benefits and social security benefits, the total benefits received may not exceed eighty percent of his predisability income. 42 U.S.C. § 424a(a). ³ The offset provision was enacted to prevent the duplication of disability benefits that had resulted in payments in excess of predisability earnings, which was perceived by Congress to have "reduced the incentive of the worker to return to the job, and impeded the rehabilitative efforts of the state programs." Richardson v. Belcher, 404 U.S. 78, 82-83, 92 S.Ct. 254, 258, 30 L.Ed.2d 231 (1971).

All of plaintiff's benefits were awarded under the New Hampshire worker's compensation law. One portion, not at issue here, was awarded under RSA 281:23, "Compensation for Total Disability." ⁴ The remainder, exclusive of attorney's fees and future medical expenses, was awarded under RSA 281:26, "Scheduled Permanent Impairment Award." ⁵ It is this award that plaintiff claims, and the district court held, is exempt from the federal offset provision. Plaintiff relies on the Lemire decision, which held that New Hampshire distinguishes between "disability" awards for loss of earning ability and "scheduled" awards for the loss of a body part, only the former of which are to be offset under § 424a. See Lemire, 682 F.Supp. at 104-105. Based on our interpretation of New Hampshire law, we disagree. ⁶

In the leading case of Ranger v. New Hampshire Youth Development Center, 117 N.H. 648, 377 A.2d 132 (1977), Chief Justice Kenison analyzed the state worker's compensation statute in a comparison of the two provisions pertinent here. Ranger had suffered a work-related injury to his eye in 1966, for which he received worker's compensation benefits for lost wages under section 23. Then, in 1975, his doctor determined he had suffered permanent loss of sight, entitling him to a scheduled permanent impairment award under section 26. Id. 377 A.2d at 133. The sole issue in the case was which date--when the injury occurred or when the subsequent loss of the injured body part was disclosed--was the reference point from which to calculate a claimant's benefits. Id. It was in the context of arriving at the latter as the operative date that the New Hampshire Supreme Court explained that scheduled permanent impairment awards are "in addition to and wholly independent of" the other, i.e. "disability," benefits provided in the statute. Id. 377 A.2d at 134. After discussing the history of the scheduled benefits provision, the Ranger court stated, "It is now an additional award which compensates for injury regardless of whether there is an actual wage loss. 2 A. Larson, The Law of Workmen's Compensation § 58.11 (1976). To this extent it is unrelated to the other benefits available under the statute." Id.

By this language, we do not understand the Ranger court to have distinguished between awards for disability and those for mere injury. Worker's compensation, as explained by the author of the treatise cited by the Ranger court, was set up to compensate injured workers for the impairment of their earning capacity, or disability, resulting from work-related injury. 2 A. Larson, The Law of Workmen's Compensation § 57.14 (1989) ("Larson"). Scheduled permanent impairment awards of the type provided by RSA 281:26, however, do not fall outside the general theory of compensation for disability. As Larson explains, under the "schedule principle," members of the body are listed and a fixed number of weeks of compensation for their loss is prescribed. Although this amount is to be paid regardless of any actual loss of wages, it is "quite clear that the schedule was never intended to be a departure from or an exception to the wage-loss principle." Larson § 57.14(c) at 10-53-54. Rather, the schedule of listed permanent impairments was warranted because "the gravity of the impairment supported a conclusive presumption that actual wage loss would sooner or later result...." Id. at 10-54. See Ladner v. Secretary of H.E.W., 304 F.Supp. 474, 476 (S.D.Miss.1969) (under federal Longshoremen's and Harbor Workers' Compensation Act, " 'loss of wage earning capacity and its extent are conclusively established when one of the enumerated physical impairments is proven to have arisen out of the employment' " (citation omitted)); Adams Insulation Co. v. Industrial Commission of Ariz., 163 Ariz. 555, 558, 789 P.2d 1056, 1059 (1990) (en banc) (compensation under scheduled permanent impairment provision based not on actual loss of earning capacity but on "presumption that the injuries result in a specified percentage of permanent partial loss of earning capacity"); Ernest DiSabatino & Sons, Inc. v. Apostolico, 260 A.2d 710, 713 (Del.Super.1969) (scheduled permanent impairment provision of statute "based upon a presumption that the nature of a scheduled injury is such that the reduction in the earning capacity will continue into the future whether or not an actual wage loss is incurred" (emphasis original)), aff'd, 269 A.2d 552 (Del.Super.1970).

The New Hampshire Ranger court announced no more than this in declaring that scheduled awards are paid out "regardless of whether there is an actual wage loss." 377 A.2d at 134 (emphasis added). Moreover, the specific section of the Larson treatise cited by the court as authority for that proposition underscores the essential commonality between scheduled benefits and wage-loss, or so-called disability, benefits. Reiterating that the individual's actual predisability earnings are immaterial to the amount of the scheduled award, Larson continues:

This is not, however, to be interpreted as an erratic deviation from the...