Kaiser Foundation Hospitals v. Workmen's Comp. Appeals Bd.

• Court: California Supreme Court
• Writing for the Court: WRIGHT
• Citation: Kaiser Foundation Hospitals v. Workmen's Comp. Appeals Bd., 117 Cal.Rptr. 678, 13 Cal.3d 20, 528 P.2d 766 (Cal. 1974)
• Decision Date: 05 December 1974
• Parties: , 528 P.2d 766 KAISER FOUNDATION HOSPITALS et al., Petitioners, v. WORKMEN'S COMPENSATION APPEALS BOARD, State of California, et al., Respondents. L.A. 30321. In Bank

Page 678

117 Cal.Rptr. 678

13 Cal.3d 20, 528 P.2d 766

KAISER FOUNDATION HOSPITALS et al., Petitioners, v. WORKMEN'S COMPENSATION APPEALS BOARD, State of California, et al., Respondents.

L.A. 30321.

Supreme Court of California,

In Bank.

Dec. 5, 1974.

Walter A. Stringfellow III, William R. Russell and Thelen, Marrin, Johnson & Bridges, Los Angeles, for petitioners.

Charles Lawrence Swezey, Sheldon C. St. Clair, Thomas J. McBirnie, Philip M. Miyamoto, T. Groezinger, James J. Vonk, George S. Bjornsen and Robert A. La Porta, San Francisco, for respondents.

BURKE, ^* Justice.

In this case we consider the question whether the Workmen's Compensation Appeals Board has authority to reduce the size of an otherwise proper medical or hospital services lien (see Lab.Code, § 4903, subd. (b)), upon an injured employee's compensation recovery, on the ground that such reduction would be 'fair and equitable' in light of a compromise and release of the employee's compensation claims with the employer and his insurer.

We have concluded that, in the absence of the lienholder's consent, the board has no authority to reduce a valid lien solely to accommodate such a settlement. We further hold, however, that the lienholder in such a situation must establish at least a prima facie case that the treatment rendered was for an injury allegedly received in the course and scope of employment and, therefore, properly the subject of a claim for workmen's compensation upon which a medical or hospital services lien might attach.

In the instant case, employee Keifer had filed a claim for compensation, alleging that he had developed a heart condition as a result of his work with the state (Department of Building and Safety). Keifer died in December 1971 and his widow filed a supplemental claim for benefits. In October 1971 petitioners, who had provided medical and hospital care to Keifer, filed with the board a request for allowance of a lien in the amount of $4,420.50.

In July 1972 Mrs. Keifer and the State Compensation Insurance Fund entered into a compromise and release agreement whereunder her claim was settled for the sum of $17,236, of which $1,815 was to be paid to petitioners. The agreement recited in part that the reason for the compromise was 'The question of death arising in the course and scope of employment is in issue. . . . The parties wish to avoid the risk of litigation. Defendants desire to buy their peace. . . .' The referee approved the compromise (Lab.Code, § 5002), and subsequently ruled that petitioners be paid $1,815 in satisfaction of their lien. Petitioners sought reconsideration by the board, and in November 1973 the board denied the same, holding that it had authority to reduce petitioners' lien on the basis of the substantial doubt whether or not Keifer's injury and death were industrially caused. ¹ Petitioners seek our review of the board's decision, contending that under the applicable authorities the board is without power to reduce for 'equitable' reasons an otherwise valid lien for medical and hospital services. We agree.

The subject of workmen's compensation liens is covered in Labor Code sections 4903 et seq. Under section 4903, the board 'may determine, and allow as liens against any sum to be paid as compensation . . . (b) The reasonable expense incurred by or on behalf of the injured employee, as provided by Article 2 of Chapter 2 of Part 2 of this division (medical and hospital treatment) . . ..' ² Other subdivisions of section 4903 provide for liens for legal services, burial expenses, family living expenses, and unemployment compensation benefits.

Thus, as a general rule, the board 'may allow, as a lien against an award pursuant to Labor Code, section 4903, subdivision (b), the reasonable expenses incurred for or on behalf of an injured employee in obtaining 'medical and hospital' treatment for an industrial injury by one who is obligated to furnish such treatment for a nonindustrial disability only, where such expenses have been assumed under the mistaken belief that the disability was nonindustrial.' (Dept. of Employment v. Ind. Acc. Com., 227 Cal.App.2d 532, 539--540, 38 Cal.Rptr. 739, 744; see Foremost Dairies v. Industrial Acc. Com., 237 Cal.App.2d 450, 579, 47 Cal.Rptr. 173; Gerson v. Industrial Acc. Com., 188 Cal.App.2d 735, 11 Cal.Rptr. 1.)

The lien attaches to 'compensation' to be paid to the injured employee of his dependents. 'Compensation' is defined as 'the measure of the responsibility which the employer has assumed for injuries or deaths which occur to employees in his employment when subject to this division. . . .' (Lab.Code, § 5001.) Accordingly, the term includes any amounts to be paid by the employer and its insurer under a compromise and release agreement approved by the Board. (Aetna Life Ins. Co. v. Ind. Acc. Com., 38 Cal.2d 599, 604, 241 P.2d 530; Garcia v. Industrial Accident Com., 41 Cal.2d 689, 693, 263 P.2d 8.) As we recently stated, 'It is settled law that an approved compromise and release agreement has the same force and effect as an award made after a full hearing. (Citations.)' Ogden v. Workmen's Comp. Appeals Bd., 11 Cal.3d 192, 196, 113 Cal.Rptr. 206, 208.) In Aetna, we expressly held that a section 4903 lien would attach to the amount payable under a compromise and release agreement.

Although the language of section 4903 appears to grant the board wide discretion to grant or deny liens (see also Lab.Code, § 4906, set forth in fn. 2, Ante) that discretion is limited to determining whether or not the amount of the lien is reasonable in relation to the medical services rendered to treat that employee's injuries. Thus, this court has held that the board is without discretion to disallow a lien if the claimant has established that he furnished services or living expenses of value in connection with an industrial accident. (Bryant v. Industrial Acc. Com., 37 Cal.2d 215, 220, 231 P.2d 32.) ³ And in County of Contra Costa v. Industrial Acc. Com., 212 Cal.App.2d 585, 586, 28 Cal.Rptr. 303, 304, the Court of Appeal held that: 'once it has determined the amount due the lien claimant, the commission has discretion neither to deny the lien nor, save for prorating where the award is insufficient to cover all liens, ⁴ to reduce it (Bryant v. Industrial Acc. Comm. (supra), 37 Cal.2d 215, 231 P.2d 32; and see Garcia v. Industrial Acc. Comm., 162 Cal.App.2d 761, 328 P.2d 531). It is for the Legislature, rather than the courts, to determine whether the discretion here sought should be vested in the commission. We cannot amend the statute to grant such discretionary power, and the Legislature has notably failed to do it in the 11 years since Bryant was decided.'

Although the Contra Costa decision did not mention the fact, the Legislature in a 1957 amendment did provide the board with discretionary power to reduce liens for unemployment compensation benefits, in the event of a compromise and release of a disputed claim for compensation. In 1957 Labor Code section 4904 ⁵ was amended to provide in pertinent part as follows:

'In the case of agreements for the compromise and release of a disputed claim for compensation, the applicant and defendant may propose to the appeals board, as part of the compromise and release agreement, an amount out of the settlement to be paid to any lien claimant Claiming under subdivision (f) or (g) of Section 4903 (liens for unemployment compensation disability benefits and unemployment compensation benefits). The determination of the appeals board, subject to petition for reconsideration and to the right of judicial review, As to the amount of lien allowed under subdivision (f) or (g) of Section 4903, whether in connection with an award of compensation or the approval of a compromise and release agreement, Shall be binding on the lien claimant, the applicant, and the defendant, insofar as the right to benefits paid under the Unemployment Insurance Code for which the lien was claimed.' (Italics added.)

We held in California-Western States Life Ins. Co. v. Industrial Acc. Com., 59 Cal.2d 257, 28 Cal.Rptr. 872, 379 P.2d 328, that the foregoing amendment was intended to permit the board, in approving a compromise and release, to reduce the amount of an unemployment benefits lien. ⁶ As we stated in that case (pp. 267--268, 28 Cal.Rptr. p. 878, 379 P.2d p. 334, '. . . the 1957 amendment of section 4904, providing for the procedure for a compromise agreement, does not sanction an arbitrary reduction of the (lien) claim but a 'proposal' as to the 'amount out of the settlement to be paid to' the lien claimant. The proposal is to be submitted to, but not to bind, the commission. . . . ( ) We find no merit in its (petitioner/lien claimant's) various attacks upon the (allocation) formula, which . . . does no more than compute the total amount of the respective claims for temporary and permanent disability as if they prevailed, and then reduces them proportionately according to the actual amount of the settlement. ( ) Thus we cannot ac cept the argument that the commission improperly applied the formula because it allowed liens In full for attorneys' fees, As well as for incurred and anticipated medical costs, while it proportionately reduced petitioner's lien. The proper allocation of the amounts to be awarded for temporary as compared to permanent disability is one matter; The legal and medical expenses are another. If the U.C.D. (unemployment compensation disability) lien cannot apply to permanent disability payments it could not apply to such an item as medical costs. We find no abuse of the commission's discretion in proportionately reducing the amounts for disability and in allowing the attorney's and medical liens.' (Italics added.)

The Cal-West case thus indicates that although, in a compromise situation such as the instant case, ⁷ the board may reduce unemployment benefit liens by reason of the 1957 amendment to section 4904, it has...