Potter v. Department of Retirement Systems, 24741-1-II.

• Decision Date: 26 May 2000
• Docket Number: No. 24741-1-II.,24741-1-II.
• Citation: 100 Wash.App. 898,999 P.2d 1280
• Parties: J. Heather POTTER, Respondent, v. DEPARTMENT OF RETIREMENT SYSTEMS, Appellant.
• Court: Washington Court of Appeals

999 P.2d 1280

100 Wash.App. 898

J. Heather POTTER, Respondent, v. DEPARTMENT OF RETIREMENT SYSTEMS, Appellant.

No. 24741-1-II.

Court of Appeals of Washington, Division 2.

May 26, 2000.

Jerome E. Westby, Asst. Atty. Gen., Olympia, for Appellant.

Will Hatch, Tacoma, for Respondent.

SEINFELD, J.

This Department of Retirement Systems (Department) appeal raises the question of when the statute of limitations began to run on J. Heather Potter's claim for duty disability retirement benefits. We agree with the Department that the limitation period began to run when Potter's compensable injury causing total incapacity became apparent, and we hold that an injury becomes apparent when a worker knows or should have known that she was no longer able to perform her work-related duties. Consequently, we reverse the superior court, which found the application to be timely filed and reversed the Department's denial of benefits.

FACTS

Potter became a member of the Public Employees' Retirement System in August 1968; in March 1983 she started working as a secretary for the Department of Labor and Industries (L & I). On March 2, 1984, Potter ruptured a disc in her lower back while lifting a box at work. She was hospitalized and in traction for two weeks, after which time she returned to work.

On March 26, Potter filed an accident report with L & I and soon started receiving benefits under the Industrial Insurance Act (IIA). She was unable to continue working and her last day of actual work at L & I was May 21, 1984.

In December 1984, Potter underwent back surgery to dissolve her herniated disc. She had a chemical reaction to the dye used in the procedure that worsened her back condition and increased her pain. This in turn led to serious psychiatric problems that apparently developed over time, including depression and an anger disorder that prevented her from working with others for any length of time.

In early 1986, Potter asked her attorney to investigate options for disability benefits. The attorney wrote to the Department for the necessary application forms, but he told Potter this act would be his last act as her representative. Although the attorney's letter, dated January 22, 1986, requested that the Department send the forms directly to Potter, apparently the Department sent the forms to the attorney, who later could not recall whether he received them or forwarded them to Potter. Potter made several more attempts, starting in 1987, to obtain the appropriate application forms, but the Department repeatedly told her that the two-year statute of limitations period had run. In one of her telephone calls to the Department, Potter spoke with an unidentified man who told her that she would not even be eligible to apply for duty disability retirement (DDR) benefits until she had been disability separated from her employment.

At the same time, Potter continued to receive IIA benefits. Then, on January 9, 1990, L & I terminated those benefits and instead granted Potter permanent partial disability. Potter appealed this decision and, for four years, continued her struggle to retain her IIA benefits. In December 1994, as a result of one of Potter's appeals, the Board of Industrial Insurance Appeals (BIIA) determined that Potter's physical and mental condition rendered her permanently and totally disabled as of May 10, 1994. On May 1, 1995, L & I disability separated Potter from her employment.

On May 20, 1996, Potter applied for DDR benefits, and on December 5, 1996, the Department again informed Potter that her application was untimely under the statute of limitations. A Petitions Examiner denied her petition for review and the Presiding Officer affirmed, after considering and finding inapplicable the case of Wagner v. Washington State Pub. Employees' Retirement Bd., 17 Wash.App. 164, 561 P.2d 1131 (1977).

Potter then petitioned the superior court for review. The superior court found the Wagner case to be applicable, determined that Potter's application was timely filed, and entered an order stating that her application for DDR benefits "was within 2 years of total disability and shall be granted by the Dept. of Retirement Systems with benefits and service credit accruals to begin May 1, 1995." The Department appeals from this order.

I. TIMELINESS OF APPLICATION

The decisive issue here is whether the statute of limitations barred Potter's appeal. This question turns on the applicability of Wagner to the facts of this case. Potter asserts that she did not have a compensable injury that qualified her for benefits until the BIIA declared her totally disabled. The Department disagrees, arguing that because Potter never returned to work, her status as a totally incapacitated employee dates from May 21, 1984 — her last day of work.

Under the Administrative Procedure Act, the court may grant relief from an agency order when (1) the decision is based upon an error of law; (2) the decision is not based upon substantial evidence; or (3) the decision is arbitrary or capricious. RCW 34.05.570;¹ Valley Fruit v. State Dep't of Revenue, 92 Wash.App. 413, 416, 963 P.2d 886 (1998), review denied, 137 Wash.2d 1017, 978 P.2d 1098 (1999). The burden of demonstrating the invalidity of agency action is on the party asserting invalidity, and the court will grant relief on appeal only if it determines that the action complained of has substantially prejudiced the person seeking judicial relief. RCW 34.05.570(1).

We review the administrative decision directly, based on the record before the agency. Alpine Lakes Protection Soc'y v. Washington State Dep't of Natural Resources, ___ Wash.2d ___, 979 P.2d 929, 936 (1999). We review conclusions of law under the error of law standard and may substitute our judgment for that of the agency. State Dep't of Ecology v. Lundgren, 94 Wash.App. 236, 241, 971 P.2d 948, review denied, 138 Wash.2d 1005, 984 P.2d 1035 (1999).

Employees enrolled in the Public Employees' Retirement System may obtain retirement benefits because of an on-the-job injury if they apply within two years of their "injury." RCW 41.40.200. This statute provides, in pertinent part:

(1) ... [U]pon application of a member, or his or her employer, a member who becomes totally incapacitated for duty as the natural and proximate result of an accident occurring in the actual performance of duty ... without willful negligence on his or her part, shall be retired subject to the following conditions:

(a) That the medical adviser, after a medical examination of such member made by or under the direction of the medical adviser, shall certify in writing that the member is mentally or physically totally incapacitated for the further performance of his or her duty and that such member should be retired;

(b) That the director concurs in the recommendation of the medical adviser;

(c) That no application shall be valid or a claim thereunder enforceable unless, in the case of an accident, the claim is filed within two years after the date upon which the injury occurred....

RCW 41.40.200.

In the only case interpreting the statute of limitations provision of this statute, this court held that the limitation period begins to run when the injury becomes "apparent," rather than from the date of the accident. Wagner, 17 Wash.App. at 169, 561 P.2d 1131.

In Wagner, an employee of the Mason County Highway Department tore his knee cartilage on September 11, 1970. 17 Wash. App. at 165, 561 P.2d 1131. Doctors performed surgery the following day and, after a few weeks of convalescence, Wagner returned to work and continued working until June 22, 1973. Wagner, 17 Wash.App. at 165, 561 P.2d 1131. The stipulated facts in the case stated:

(H)is employment was terminated due to his inability to engage in work requiring squatting, stooping, bending and general agility of movement or in the out of doors, and thus became totally incapacitated for duty, which total incapacity was likely to be permanent and has continued to the present;

That Edward Wagner's time off from work following the September 12, 1970 surgery on his knee was convalescent in nature and not apparently totally incapacitating for duty for any substantial period of time and was fully compensated by Workmen's Compensation insurance;

That his total incapacity for duty did not appear until June 22, 1973 when his employment was terminated and he has since sought employment on numerous instances but without success and has been found to be totally disabled under the Federal Social Security Act by reason of the combined effect of his knee condition resulting from his awkward squatting and training in any other field combined with the disadvantages arising from his limited educational attainments terminated by his leaving the 8th grade in 1937;

That Edward Wagner's total incapacity for duty is the natural and proximate result of an accident occurring in the actual performance of duty, while in the service of an employer, Mason County, without willful negligence on the part of Edward Wagner.

Wagner, 17 Wash.App. at 165-66, 561 P.2d 1131.

The Retirement Board denied Wagner's claim, concluding:

1. That Edward Wagner was totally disabled during and immediately following the knee surgery which he had on September 12, 1970. He was at that time eligible to apply for disability benefits and failed to do so. Therefore, the injury was first disabling as of that date. His failure to apply within two years of that date clearly places him outside the requirements of RCW 41.40.200.

2. Even if the disability did not become totally disabling until June 22, 1973, the application was filed more than two years subsequent to the date upon which the injury occurred—September 11, 1970—and is hereby precluded under RCW 41.40.200.

Wagner, 17 Wash.App. at 166, 561 P.2d 1131.

Wagner argued that the phrase, "the date upon which the injury occurred," in the context of the Retirement Act, is not limited to the day of the...