Mannel v. Industrial Com'n of Arizona

• Decision Date: 17 May 1984
• Docket Number: No. 1,CA-IC,1
• Citation: Mannel v. Industrial Com'n of Arizona, 688 P.2d 1045, 142 Ariz. 153 (Ariz. App. 1984)
• Parties: Florence E. MANNEL, Petitioner, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Department of Transportation, Respondent Employer, State Compensation Fund, Respondent Carrier. 3021.
• Court: Arizona Court of Appeals

Page 1045

688 P.2d 1045

142 Ariz. 153

Florence E. MANNEL, Petitioner, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent Department of Transportation, Respondent Employer State Compensation Fund, Respondent Carrier.

No. 1 CA-IC 3021.

Court of Appeals of Arizona Division 1, Department B.

May 17, 1984.

Rabinovitz, Dix & Rehling, P.C. by Bernard I. Rabinovitz, Tucson, for petitioner.

Sandra Day, Chief Counsel, Indus. Com'n of Arizona, Phoenix, for respondent.

Robert K. Park, Chief Counsel, State Compensation Fund by James F. Crane, Tucson, for respondents Employer and Carrier.

OPINION

GREER, Judge.

This is a special action review of an Industrial Commission award granting death benefits, but subjecting them to the compensation insurer's credit from an A.R.S. § 23-1023 lien on specified proceeds from the employee's settlement of his claim with the third party tortfeasor. The issue presented is whether present death benefits that had not matured when the employee's third party claim against the tortfeasor was settled are subject to the credit. We hold that the benefits are subject to the credit, and therefore affirm the award.

The petitioner (wife or widow) is the only dependent of the deceased employee. In September, 1978, the employee suffered a compensable industrial injury caused by negligent third parties. The employee successfully claimed worker's compensation benefits, and he and his wife sued the third parties. ¹ The parties subsequently settled released the third party tortfeasors from all present and future claims, ² and received the settlement proceeds. The compensation carrier approved the settlement, received reimbursement of compensation already paid to the employee ($24,655.57), and reserved a credit against future liability ($90,194.70), ³ which credit would diminish as the worker's benefits accrued.

After this settlement and approval, the employee's disability benefits continued to accrue, and the compensation carrier applied them to reduce the credit. In April 1982, the employee died. The employee's right to future disability benefits ceased, but the widow's right to death benefits matured. A.R.S. § 23-1045(B), A.R.S. § 23-1046. The credit balance was then approximately $79,000.

The widow claimed death benefits. The compensation carrier denied the claim, and in the alternative subjected the death benefits to the outstanding credit. At the scheduled hearings, the widow established that the industrial injury caused the employee's death. She also testified that she did not know how much of the original settlement proceeds remained, but that what remained was hers by right of survivorship. The administrative law judge issued the award granting death benefits, but subjecting them to the credit. The award was affirmed on administrative review, and this special action followed.

A.R.S. § 23-1023 states, in relevant part:

A. If an employee entitled to compensation under this chapter is injured or killed by the negligence or wrong of another not in the same employ, such injured employee, or in event of death his dependents, may pursue his remedy against such other person.

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C. If he proceeds against such other person, compensation and medical, surgical and hospital benefits shall be paid as provided in this chapter and the insurance carrier or other person liable to pay the claim shall have a lien on the amount actually collectable from such other person to the extent of such compensation and medical, surgical and hospital benefits paid.

These subsections concern the same subject; they therefore are interpreted as a whole. Talley v. Industrial Commission, 137 Ariz. 343, 670 P.2d 741 (App.1983). The general purposes of this statutory lien are to require the third party to pay what he would normally pay if there were no workers' compensation, to reimburse the carrier for its compensation expenditure, and to allow the compensation beneficiary to enjoy the excess of the damage recovery over compensation. 2A A. Larson, Workmen's Compensation Law § 74.16(a) (1983). This statutory lien is an exception to the general rule that an insurance company may not be an assignee or a subrogee of its insured's tort claim. Talley v. Industrial Commission, slip op. at 5-6. The statutory terms determine whether a lien is allowed. Sunstate Equipment Corp. v. Industrial Commission, 135 Ariz. 477, 662 P.2d 152 (App.1983). If a lien is allowed, it applies to the entire third party recovery (less expenses and attorney's fees), even though this recovery includes damages not compensated under workers' compensation (such as pain and suffering, loss of pleasures in life, and a spouse's loss of consortium). Liberty Mutual Insurance Co. v. Western Casualty & Surety Co., 111 Ariz. 259, 527 P.2d 1091 (1974).

The hearing judge relied on Triste v. Industrial Commission, 25 Ariz.App. 489, 544 P.2d 706 (1976) as authority for the award. The widow contends that Triste is not controlling due to factual differences and new arguments that she raises which were not addressed in Triste.

In Triste, the carrier was entitled to have its death benefit obligation offset by a § 23-1023 lien on settlement proceeds. The deceased employee had had a compensable back injury, but while undergoing surgery for it suffered a cardiac arrest. He was comatose for over three years until he died. Before his death, his wife sued for medical malpractice in the capacity of his guardian and next best friend of the minor children. With the compensation carrier's consent, she settled and executed a general release for all present and future claims. After the employee died, the wife and her minor children claimed workers' compensation death benefits. Benefits were granted, but offset by a lien on the settlement proceeds. On review, the claimants conceded that the lien properly applied to offset the widow's death benefits and would properly apply to offset the children's, provided the children were properly represented in the third party settlement; claimants argued the children were not properly represented. The court rejected the challenge to the representation and affirmed the award.

The widow argues that Triste is factually different. She contends the third party suit in that case must have involved a wrongful death claim because the children otherwise had no separate claim for relief. It is true that children do not have a separate claim, Jeune v. Del E. Webb Construction Co., 77 Ariz. 226, 269 P.2d 723 (1954), overruled on other grounds City of Glendale v. Bradshaw, 108 Ariz. 582, 503 P.2d 803 (1972) (recognizing spouse's claim for loss of consortium), however it does not follow that the children sued the third party for wrongful death. The children had potential wrongful death claims. A valid compromise of those claims subjected their subsequently matured death benefits to the lien credit: "[I]f the settlement was a valid compromise of the potential claims of the children, then the carrier would be entitled to set off the net amount of the settlement proceeds after deducting the expenditures for the deceased against its obligation for payment of death benefits." Triste v. Industrial Commission, 25 Ariz.App. at 491, 544 P.2d at 708 (emphasis added).

Triste therefore is not factually distinct. Here the widow also had a potential wrongful death claim which she compromised. The case at bar is even stronger, because unlike the children in Triste, here the widow had an actual claim for loss of consortium when the claim was settled.

The widow next argues that Triste did not address the statutory interpretation arguments that she now presents. We agree. Triste resolved only the narrow question of whether the children's claims were effectively compromised. Although it did not address her arguments, it assumed a rule contrary to the widow's position. Triste interpreted § 23-1023(C) to give the compensation carrier "a lien in the amount actually collectible from the [third party tortfeasor] to the extent of the carrier's obligation for compensation benefits." Triste v. Industrial Commission, 25 Ariz.App. at 491, 544 P.2d at 708 (emphasis added). Compensation benefits include medical benefits, disability benefits, and death benefits. See A.R.S. § 23-901(4). Furthermore, this interpretation is consistent with the general purpose of the lien statute to reimburse the carrier for its compensation expenditure.

The widow argues that this interpretation conflicts with the terms of § 23-1023. She relies on the general principle that disability benefits are distinct from death benefits. We agree that benefits are an independent statutory right that do not derive from the decedent. A worker's compromise of his rights to workers' compensation medical expenses and disability benefits does not affect the rights of his dependent's death benefits. See, e.g., Kay v. Hillside Mines, Inc., 54 Ariz. 36, 91 P.2d 867 (1939); accord 2 A. Larson, supra, § 64. We disagree, however, that this general principle supports the widow's statutory interpretation arguments.

The widow first argues that the lien applies to only the employee's third party recovery because subsection (A) allows only the injured employee to "pursue his remedy against such other person." A.R.S. § 23-1023(A) (emphasis added). This interpretation of "his" ignores the immediately preceding phrase referring to the employee's dependents if he should die. ⁴

Additionally, the widow's interpretation is anomalous because the injured employee and his dependents may have simultaneous civil remedies: a survival action brought by the personal representative for the decedent's estate, see In Re Estate of Milliman, 101 Ariz. 54, 415 P.2d 877 (1966); Barragan v. Superior Court, 12 Ariz.App. 402, 470 P.2d 722 (1970), and a wrongful death action brought in the name of the personal representative or the surviving spouse for the benefit of the statutory beneficiaries, see A.R.S. §§ 12-611, 12-612, 14-3110....