Martinez v. State Workman's Compensation Ins. Fund
| Decision Date | 21 November 1989 |
| Docket Number | No. 1,CA-CIV,1 |
| Citation | 788 P.2d 113,163 Ariz. 380 |
| Parties | Louis MARTINEZ and Jane Doe Martinez, husband and wife, Plaintiffs-Appellants, v. STATE WORKMAN'S COMPENSATION INSURANCE FUND of the State of Arizona, and the City of Phoenix, Defendants-Appellees. 9868. |
| Court | Arizona Court of Appeals |
The single issue raised in this appeal is whether a workers' compensation carrier can assert a lien, for amounts it has paid to an injured worker, against the Arizona Property and Casualty Insurance Guaranty Fund. We hold that it cannot.
The issue arose from the following undisputed facts. The appellant, Louis Martinez, was injured in the course of his employment as a Phoenix police officer when a motorist negligently struck him. The motorist was insured by Great Global Assurance Company, which became insolvent after the accident. Martinez's claim against the motorist was subsequently assumed by the Arizona Property and Casualty Insurance Guaranty Fund (Guaranty Fund), pursuant to A.R.S. sections 20-661 et seq. (Supp.1988).
As a result of Martinez's injuries, the State Compensation Fund paid Martinez workers' compensation benefits totalling $1,025.14. Martinez subsequently settled his claim against the motorist with the Guaranty Fund. The Compensation Fund asserted a lien pursuant to A.R.S. section 23-1023(C) against the amount the Guaranty Fund owed Martinez on the settlement. The lien was to reimburse the Compensation Fund for the amount it had paid Martinez.
Martinez filed a declaratory judgment action against the Compensation Fund, seeking a ruling that A.R.S. section 23-1023 does not authorize a lien against the Guaranty Fund. On cross-motions for summary judgment, the trial court entered summary judgment in favor of the Compensation Fund. Martinez brought this appeal.
This appeal involves the interpretation of two statutory schemes. The pertinent provision of the workers' compensation statutes, A.R.S. section 23-1023, allows an injured employee to seek recovery against the person who caused the injury if that person does not work for the same employer. It also gives the compensation carrier a lien against any such recovery for amounts the carrier has paid the injured employee. The statute states:
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.
....
C. If he [the employee] 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. (Emphasis added)
A.R.S. § 23-1023(A) and (C). The purposes of the lien provision are:
[T]o 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.
Mannel v. Industrial Comm'n, 142 Ariz. 153, 155, 688 P.2d 1045, 1047 (App.1984), cert. denied, 469 U.S. 1212, 105 S.Ct. 1183, 84 L.Ed.2d 331 (1985) (citing 2A A. Larson, Workmen's Compensation Law, § 74.16(a) (1983)). Because this statutory lien runs counter to the general rule that an insurer may not be the assignee or subrogee of its insured's tort claim, the terms of the statute dictate whether a lien is allowed. Mannel, 142 Ariz. at 155-56, 688 P.2d at 1047-48.
The other statutory scheme we must interpret relates to the Arizona Property and Casualty Insurance Guaranty Fund established under A.R.S. sections 20-661 et seq., the purpose of which is to cover claims against insolvent insurers. A covered claim is defined as:
[A]n unpaid claim, including one for unearned premium, which arises out of and is within the coverage of an insurance policy to which this article applies issued by an insurer,....
A.R.S. § 20-661(3) (Supp.1988). Exclusionary language critical to our decision adds:
Covered claim does not include any amount due any reinsurer, insurer, insurance pool or underwriting association as subrogation recoveries or otherwise ....
Id. (emphasis added). The Guaranty Fund essentially steps into the shoes of the insolvent insurer by assuming all of the insurer's "rights, duties and obligations" on covered claims. A.R.S. § 20-667(C) (Supp.1988).
Martinez's first argument is that the workers' compensation statute does not authorize the filing of a lien against the Guaranty Fund. He relies on the language of A.R.S. section 23-1023. Subsection (A) states that an employee may pursue a remedy against "such other person" (the tort-feasor), and subsection (C) states that the worker's compensation carrier will have a lien on the amount collectable from "such other person." Martinez argues that "such other person" refers only to the negligent tort-feasor. Because the Guaranty Fund is not the negligent tort-feasor, he insists that the lien is not authorized.
Martinez cites two court of appeals cases construing the language of A.R.S. section 23-1023(C). In Sunstate Equip. Corp. v. Industrial Comm'n, 135 Ariz. 477, 662 P.2d 152 (App.1983), we held that uninsured motorist benefits payable to the injured employee under the employer's policy were not subject to a lien pursuant to A.R.S. section 23-1023(C). The court stated:
Our interpretation of the subject statute is predicated upon the basic principle of statutory construction that a statute which is unambiguous should be interpreted to mean what it plainly states unless an absurdity results. E.g., Balestrieri v. Hartford Accident & Indem. Ins. Co., 112 Ariz. 160, 540 P.2d 126 (1975). Subsection 23-1023(A) permits an injured employee to pursue his remedy against a tort-feasor (termed in the statute 'such other person'). An employee's recovery by reason of uninsured coverage is not an amount collectible from the tort-feasor (i.e., 'such other person').
Id. at 479, 662 P.2d at 154. In response to the carrier's contention that refusing to allow the lien would result in a double recovery to the employee, the court noted:
While we acknowledge that by disallowing a lien there may well result a double recovery for an employee and increased premiums for the employer, we are of the firm opinion that whether the employee receives a 'double recovery' is legally immaterial. Under the clear and unambiguous language of A.R.S. § 23-1023(C), no lien attaches to proceeds received by reason of uninsured motorist coverage, regardless of who pays the premium for such coverage.
Id. at 479-80, 662 P.2d at 154-55.
In a subsequent case, we held that a lien could not be asserted against a legal malpractice settlement paid by the injured employee's attorney. Travelers Ins. Co. v. Breese, 138 Ariz. 508, 675 P.2d 1327 (App.1983). The injured employee hired an attorney to pursue his remedy against a negligent third party. See A.R.S. § 23-1023(A). The attorney failed to file a complaint within the one-year California statute of limitations. The employee subsequently sued the attorney for malpractice and eventually settled. In the meantime, the workers' compensation carrier asserted a lien against any amount paid by the attorney on the malpractice claim. On appeal, this court concluded:
[A]ny lien which the insurance carrier has is against 'the amount actually collectible from such other person to the extent of such compensation and medical, surgical and hospital benefits paid.' (emphasis added). A.R.S. § 23-1023(C). The unequivocal language of this provision only gives Travelers a lien upon amounts actually collected from Union Oil, the party defined in § 23-1023(A), while no lien expressly arises from the statute on amounts collected from [the attorney], a person not responsible for any of Earl Breese's injuries.
Id. at 512, 675 P.2d at 1331. The court also pointed out:
[T]he only relevant factor to be considered is whether the amount of money collected is derived from 'such other person' as defined by A.R.S. § 23-1023. Id. Thus, A.R.S. § 23-1023(C) controls the extent to which an insurance carrier will be subrogated to the injured employee's recovery.
Id. (emphasis added). The Breese court rejected the carrier's "double recovery" argument, relying on the analysis in Sunstate.
Both Sunstate and Breese are distinguishable from this case because in both of them, the funds against which the carrier sought to assert its lien were paid from a source clearly unrelated to the negligent tort-feasor. The uninsured motorist benefits in Sunstate were paid out of the employer's coverage, which had no connection to the negligent tort-feasor. In Breese, the funds were paid by the employee's attorney, also unconnected to the tort-feasor.
In this case, however, the obligation was assumed and paid by the Guaranty Fund as a covered claim solely because of the tort-feasor's insurer's insolvency. The Guaranty Fund was essentially a backup insurer, standing in the insolvent insurer's shoes, and its funds were thus "derived from" the negligent third party, just as the insolvent insurer's would have been.
We conclude that there is nothing in the Compensation Fund statute that precludes the assertion of a lien against funds paid by the Guaranty Fund. We reach a different conclusion when we turn to the...
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