Simon v. State Compensation Ins. Authority

Citation946 P.2d 1298
Decision Date20 October 1997
Docket NumberNo. 95SC304,95SC304
Parties97 CJ C.A.R. 2296 Mark SIMON, Cheryl Simon, and Malachai Simon, Petitioners, v. The STATE COMPENSATION INSURANCE AUTHORITY, the State Compensation Insurance Fund, and the Colorado Compensation Insurance Authority, Respondents.
CourtSupreme Court of Colorado

Andrew T. Brake, P.C., Lee T. Judd, Anthony J. Kohler, Denver, for Petitioners.

Gale A. Norton, Attorney General, Martha Phillips Allbright, Chief Deputy Attorney General, Richard A. Westfall, Solicitor General, Garth C. Lucero, Deputy Attorney General Timothy R. Arnold, Deputy Attorney General, Gregg E. Kay, First Assistant Attorney General, Beverly Fulton, Assistant Attorney General, Civil Litigation Section, Tort Litigation, Vaughan, Reeves & DeMuro, David R. DeMuro, Special Assistant Attorney General, Denver, for Respondents.

Justice MULLARKEY delivered the Opinion of the Court.

The petitioners, Mark Simon (Simon), his wife, Cheryl Simon, and their son, Malachai Simon (collectively the Simons), challenge Simon v. State Compensation Insurance Authority, 903 P.2d 1139 (Colo.App.1994), where the court of appeals affirmed a judgment entered by the trial court dismissing state and federal claims asserted against respondents, the Colorado Compensation Insurance Authority (the CCIA), and its predecessors, the State Compensation Insurance Authority (the SCIA) and the State Compensation Insurance Fund (SCIF). We granted certiorari to review the court of appeals' determination that the Simons could not pursue a claim based on alleged violations of 42 U.S.C. § 1983 (1988) because the CCIA is not a person for purposes of that statute. 1 We reverse.

I.

This action stems from Mark Simon's attempts to obtain workers' compensation benefits from the CCIA. In addition to other federal and state claims, the Simons alleged that the CCIA violated 42 U.S.C. § 1983 (1988) by wrongfully withholding benefits. For the purposes of our review, because the district court dismissed the action for failure to state a claim pursuant to C.R.C.P. 12(b), we take the allegations as stated in the Simons' complaint as true. See Shapiro & Meinhold v. Zartman, 823 P.2d 120, 122-23 (Colo.1992); Destefano v. Grabrian, 763 P.2d 275, 278 (Colo.1988).

According to the Simons' complaint, Mark Simon and his business partners obtained a workers' compensation insurance policy with the SCIF in 1982. In 1984, Simon became a sole proprietor. At that time, Simon notified the SCIF that he was the insured and continued to pay his insurance premiums from that date through January 1985.

On or about January 15, 1985, Simon sustained a pelvic injury during the course of his employment and filed a claim with the SCIF. At that time, the SCIF denied Simon's claim on the grounds that, as a sole proprietor, he was not covered under the terms of the policy. Simon successfully challenged the SCIF's decision before an administrative law judge (ALJ) and the Industrial Claims Appeals Panel (the Panel) affirmed. Both the ALJ and the Panel found that Simon's injuries were covered by the terms of the policy that was issued to Simon.

On July 1, 1987, the SCIF's responsibility for payments of claims pursuant to Simon's policy was assumed by the newly created SCIA. See §§ 8-54-102, -102.5, 3B C.R.S. (1986). Although it had been determined that Simon's injury was covered by the policy, the SCIA disputed Simon's entitlement to temporary disability benefits or medical benefits. Simon sought administrative relief from the SCIA's determination, and an ALJ concluded that Simon was entitled to benefits. On appeal, the ALJ's ruling was affirmed by the Panel. The SCIA subsequently filed a general admission of liability regarding Simon's temporary and total disability and obtained an offset because Simon had settled his third party tort claim.

On July 1, 1989, the SCIA's responsibilities were assumed by the newly created CCIA. See § 8-45-101, 3B C.R.S. (1990). The CCIA failed to make any disability payments to Simon until September of 1992. In addition, during this period of time Simon became involved in the legislative process relating to workers' compensation laws in Colorado. According to Simon, as a result of his involvement in the legislative process, the CCIA released confidential and/or false information about him in an effort to discredit him.

The Simons filed the present action on April 13, 1993. The Simons' complaint contained state law claims of bad faith and breach of fiduciary duty, outrageous conduct, loss of consortium, interference with familial relations, and invasion of privacy. The complaint also alleged that the CCIA had violated state and federal law with respect to the publication of "false, confidential and/or private statements." Finally, the complaint alleged that the CCIA was liable for violations of 42 U.S.C. § 1983 (1988). According to the Simons, the CCIA's conduct violated their equal protection and due process rights guaranteed by the Fourteenth Amendment to the United States Constitution.

The CCIA filed a motion to dismiss the Simons' complaint on the grounds that the state law claims were barred by the Colorado Governmental Immunity Act (Immunity Act), sections 24-10-101 to -120, 10A C.R.S. (1988), and that the § 1983 claim was inapplicable because the CCIA was not a person for the purposes of that statute. 2 The district court agreed with the CCIA and dismissed the action.

On appeal, the court of appeals affirmed the district court's judgment. First, the court of appeals held that the state law claims were properly dismissed pursuant to the Immunity Act. The court of appeals also held, relying on Austin v. State Industrial Insurance System, 939 F.2d 676 (9th Cir.1991), and Wigger v. McKee, 809 P.2d 999 (Colo.App.1990), that the CCIA was an arm of the state and not a person for the purposes of § 1983 liability. According to the court of appeals, whether a government entity is an "arm of the state" is determined "by balancing the entity's independent powers with those entirely dependent on the state." Simon, 903 P.2d at 1145. As previously noted, we granted certiorari solely to review the court of appeals' conclusion as to the CCIA's status under 42 U.S.C. § 1983 (1988).

II.

The State Compensation Insurance Fund (SCIF) was established by the General Assembly in 1915. The SCIF was developed to allow employers to secure compensation for injured employees or the dependents of injured employees by paying a premium into the SCIF. See ch. 179, sec. 20, 1915 Colo. Sess. Laws 515, 529. At the time of Simon's injury, the SCIF was a division of the State Department of Labor and Employment. See § 8-54-101(1), 3 C.R.S. (1973). The SCIF administered itself under the direction of a manager who was appointed by the director of the State Department of Labor and Employment. See §§ 8-54-102, -104(1), 3 C.R.S. (1973). The General Assembly also created an advisory council to assist the manager which consisted of the commissioner of insurance and twelve other members who were appointed by the governor. See § 8-54-103(1), 3 C.R.S. (1973). Of the twelve appointees, two were members of the General Assembly, eight were employers insured with the SCIF, and two were employees whose employers were insured with the SCIF. See id.

On July 1, 1987, the monies from the SCIF were transferred to the newly created SCIA Fund. See § 8-54-102(1), 3B C.R.S. (1986). The duties for administering SCIA Fund were transferred to the SCIA on January 1, 1987. See § 8-54-102.5(1), 3B C.R.S. (1986). Unlike the SCIF, the powers of the SCIA were vested in a board of five directors appointed by the governor with the consent of the senate. See § 8-54-102.5(2), 3B C.R.S. (1986). The board consisted of the executive director of the Department of Labor and Employment, three employers insured with the SCIA, and one other member who was either an employee whose employer was insured with the SCIA or a concerned citizen. See id. The board had the power to appoint a manager of the SCIF Fund, develop and approve an annual budget, establish general policies and procedures for the administration of the SCIF Fund, promulgate regulations, review and recommend legislation pertaining to workers' compensation, and fix the rates to be charged for compensation insurance. See §§ 8-54-102.5(5), -105, 3B C.R.S. (1986).

In 1990, the legislature created the Colorado Compensation Insurance Authority (CCIA) and Fund. Similar to the SCIA, the CCIA is administered by a board of directors appointed by the governor. See § 8-45-101(2)(a), 3B C.R.S. (1996 Supp.). However, the CCIA board consists of seven members, and the statute does not require the executive director of the Department of Labor and Employment to be a member. See id. Instead, that board position now must be filled by a person "experienced in the management and operation of insurance companies." Id.

The monies in the respective Funds of the CCIA and its predecessors have been used to pay "losses sustained or liabilities incurred under the contracts or policies of insurance" issued to employers. See ch. 179, sec. 22, 1915 Colo. Sess. Laws 515, 529-30; § 8-54-102(4), 3B C.R.S. (1986); § 8-45-102(4), 3B C.R.S. (1996 Supp.). Each entity has been required to fix the lowest possible rate consistent with a solvent fund and the creation and maintenance of a reasonable surplus. See ch. 179, sec. 28, 1915 Colo. Sess. Laws 515, 533; § 8-54-109, 3B C.R.S. (1986); § 8-45-106, 3B C.R.S. (1996 Supp.). In addition, the state treasurer has been the custodian of each Fund. See ch. 179, sec. 66, 1915 Colo. Sess. laws 515, 552; § 8-54-221, 3B C.R.S. (1986); § 8-45-118, 3B C.R.S. (1996 Supp.). However, with respect to the SCIA Fund and the CCIA Fund, the General Assembly included a provision that monies of the Fund were not to be transferred or revert to the state general fund at the end of the fiscal year. See §...

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