Hertz Corp. v. Indus. Claim Appeals Office of Colo.
| Decision Date | 13 September 2012 |
| Docket Number | No. 11CA2339.,11CA2339. |
| Parties | HERTZ CORPORATION and Reliance Insurance Company/ Colorado Insurance Guaranty Exchange, through Western Guaranty Fund Services, Petitioners, v. INDUSTRIAL CLAIM APPEALS OFFICE of the State of Colorado and Robert G. Rodriguez, Respondents. |
| Court | Colorado Court of Appeals |
OPINION TEXT STARTS HERE
Ritsema & Lyon, P.C., Thomas L. Kanan, Denver, Colorado; McCrea & Buck, LLC, Bruce B. McCrea, James B. Buck, Denver, Colorado, for Petitioners.
John W. Suthers, Attorney General, Alice Q. Hosley, Assistant Attorney General, Denver, Colorado, for Respondent Industrial Claim Appeals Office.
Horowitz & Burnett, P.C., Robert M. Horowitz, Denver Colorado; Clisham, Satriana & Biscan, LLC, Patricia Clisham, Denver, Colorado, for Respondent Robert G. Rodriguez.
Opinion by Judge MILLER.
¶ 1 In this workers' compensation proceeding, the Colorado Insurance Guaranty Association (CIGA) appeals from the final order issued by the Industrial Claim Appeals Office (Panel), which disallowed it from taking a credit or offset against interest earned on the multiple third-party recoveries obtained by claimant, Robert G. Rodriguez. The interest included both the investment income generated by several lump-sum settlements and the interest component embedded in a statutorily required, court-ordered annuity investment. At issue is the breadth of CIGA's subrogation right under section 8–41–203, C.R.S.2011. We affirm.
¶ 2 The parties have stipulated to the relevant facts. In 1990, claimant, who was then employed by Hertz Corporation, sustained an industrial injury which required the amputation of his left index finger. He later developed reflex sympathetic dystrophy in his left extremity and underwent substantial treatment for that condition, including nerve blocks. In 1995, the physician administering a nerve block to claimant accidentally injected him with a toxic substance, instead of the correct anesthesia. While undergoing emergency surgery to correct the effects of the injection, claimant was over-sedated and experienced cardiac arrest, resulting in a profound anoxic brain injury and memory loss. Claimant cannot work, has required twenty-four-hour supervision, and has resided in an assisted living facility for brain-injured individuals.
¶ 3 Claimant received a workers' compensation award of ongoing medical benefits and permanent total disability (PTD) benefits. He also received the following third-party recoveries for malpractice:
1. A lump-sum settlement payment of $1,050,000 from the physician administering the nerve block, which included $50,000 for claimant's wife's loss of consortium claim;
2. A lump-sum settlement payment of $1,020,219.60 from the same physician for a separate, arbitrated issue;
3. A lump-sum settlement payment of $1,000,000 from another physician; and
4. A judgment against the hospital involved of $1,020,589.90 for future medical expenses and noneconomic losses and $133,806.98 for future lost earnings. The judgment represented the reduced present value of the jury's verdicts, which totaled $3,806,800.
¶ 4 Following the deduction of amounts for attorney fees and costs, the amount necessary to satisfy the existing subrogation lien of employer's insurer (CIGA's predecessor), and the amount designated to cover claimant'swife's loss of consortium claim, claimant's conservator deposited the remaining proceeds from settlements one and three into interest-bearing accounts. The conservator deposited the proceeds from the second settlement into a court-approved structured settlement trust to provide claimant with monthly periodic payments of $9,667 funded by government treasuries, beginning in June 1997 and payable for eighty-two months. The funds, including interest, were to be used for claimant's support, maintenance, health, education, and welfare.
¶ 5 The district court in the hospital lawsuit ordered the judgment in that case payable by periodic payments, as was legally required at that time under the Health Care Availability Act. See Ch. 100, sec. 1, §§ 13–64–201 to –213, 1988 Colo. Sess. Laws 612–17; HealthONE v. Rodriguez, 50 P.3d 879, 896 (Colo.2002). The court ordered each party to submit proposed forms of funding for the future periodic payments. It granted the hospital's proposal, which was to internally fund the periodic payments through an annuity contract with its qualified liability insurance provider. The court ordered the hospital's insurer to fund monthly, lifetime payments of $6,650.14 beginning in November 1998 for payment of future medical expenses and noneconomic losses and monthly payments of $792.15 beginning in November 1998 and ending in 2024 for future lost earnings. The periodic payments included components of principal from the amount of the present value judgment and interest earned. The court, again, expressly entered judgment on the payment obligations assumed by the hospital's insurer “so that [claimant would have] a clear remedy in the event of non-payment.”
¶ 6 Claimant later moved in this proceeding for an order compelling CIGA to begin payments for PTD and medical benefits on a continuing basis and to pay past-due benefits. He claimed that he had used up all compensable third-party proceeds and was eligible for reinstatement of workers' compensation benefits. He also requested an order disallowing CIGA from offsetting any of the interest earned or any interest contained in the annuitized payments for loss of future earnings and medical costs.
¶ 7 The issue raised at the hearing on claimant's motion to compel was whether CIGA's subrogation rights included a claim to an offset or credit for the interest generated by the invested settlement proceeds and the interest embedded in the stream of periodic payments. Based on claimant's expert's report, the interest component in the periodic payments alone totaled $1,865,570.
¶ 8 The ALJ first determined that the interest and other returns earned on the invested settlement proceeds were not subject to offset by CIGA. The ALJ reasoned that CIGA had a subrogation right only for the compensation and expenses for which it was liable under the Workers' Compensation Act and only for those amounts paid by the third-party tortfeasor. The ALJ concluded that CIGA had no right to an offset or credit for the interest earned on the invested settlement proceeds because the interest did not represent either an item for which CIGA was liable or an amount recovered from a third-party tortfeasor. However, the ALJ found that CIGA was entitled to an offset for the annuitized periodic payments, including the embedded interest, because such interest was “part of the funding mechanism used to pay Claimant the full benefit of the amount awarded by the jury as ordered by the District Court for lost earnings and medical expenses” and represented the “type of benefits that CIGA would be required to pay, but for the recovery against the negligent third party.”
¶ 9 The ALJ found that claimant's medical-related expenses exceed $20,000 per month. The ALJ also correctly recognized that CIGA was not entitled to a credit for or an offset against noneconomic damages and calculated a credit of $372,535.42, beginning on February 1, 2011, to be applied against claimant's continuing medical-related expenses. The ALJ also calculated a monthly net credit of $7,096.48, which was to continue to be applied after the exhaustion of CIGA's other credit and would require CIGA to pay claimant the difference between his monthly medical-related expenses and the net credit for that month.
¶ 10 On review, the Panel adopted the ALJ's reasoning regarding the interest earned on “claimant's chosen investments from the third-party settlements” and upheld that part of the ALJ's order that disallowed CIGA from taking a credit or offset for such interest or other returns. As for the interest component in the court-ordered periodic payments, the Panel held that it was not subject to CIGA's subrogation interest because it was not part of the economic and medical benefits claimant was entitled to recover from the tortfeasor or the workers' compensation insurer. The Panel concluded that the interest component instead reflected the yield produced by the investment of claimant's present value judgment. Therefore, the Panel set aside that part of the ALJ's order that had granted CIGA an offset or credit based on the interest component.
¶ 11 CIGA appeals both the determination that it is not allowed to take a credit or offset against the interest component in the periodic payments paid to claimant by the hospital's insurer and the interest and investment returns earned on the physician settlements.
¶ 12 When an ALJ's findings of fact are supported by substantial evidence, we are bound by them, § 8–43–308, C.R.S.2011, but an agency's decision that misconstrues or misapplies the law is not binding. Paint Connection Plus v. Indus. Claim Appeals Office, 240 P.3d 429, 431 (Colo.App.2010). Thus, we review de novo questions of law or the application of law to undisputed facts. Hire Quest, LLC v. Indus. Claim Appeals Office, 264 P.3d 632, 635 (Colo.App.2011). Although we review an administrative agency's conclusions of law de novo, we typically give deference to its interpretation of a statute it is charged to administer. Specialty Rests. Corp. v. Nelson, 231 P.3d 393, 398 (Colo.2010).
¶ 13 Section 8–41–203(1), C.R.S.2011, provides the workers' compensation insurance carrier with a subrogation right to the proceeds received by the claimant for economic damages awarded in a third-party lawsuit against the tortfeasor. Ch. 317, sec. 29, § 8–41–203(1), 1990 Colo. Sess. Laws 1843–44, the applicable version of the statute at the time of claimant's injury, provided, in relevant part, as follows:
If any employee entitled to compensation under articles 40 to 47 of this title is injured or killed by the negligence or...
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