Special Fund Div. v. Industrial Com'n of Arizona

• Decision Date: 17 February 1998
• Docket Number: No. CV-97-0322-PR,CV-97-0322-PR
• Parties: , 263 Ariz. Adv. Rep. 3 SPECIAL FUND DIVISION, Petitioner, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, St. Charles Company, Respondent Employer, Liberty Mutual Insurance Group, Respondent Carrier, Wayne O. Burrell, Respondent Employee.
• Court: Arizona Supreme Court

Page 541

953 P.2d 541

191 Ariz. 149, 263 Ariz. Adv. Rep. 3

SPECIAL FUND DIVISION, Petitioner, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, St. Charles Company, Respondent Employer, Liberty Mutual Insurance Group, Respondent Carrier, Wayne O. Burrell, Respondent Employee.

No. CV-97-0322-PR.

Supreme Court of Arizona,

En Banc.

Feb. 17, 1998.

Industrial Commission of Arizona By Paula R. Eaton, Phoenix, for Special Fund Division.

Industrial Commission of Arizona By Anita R. Valainis, Phoenix, for Industrial Commission.

Cross & Lieberman, P.A. By Lawrence H. Lieberman, Lisa M. Ashbrook, Phoenix, for St. Charles Company and Liberty Mutual Insurance Group.

Taylor & Associates By Richard E. Taylor, Phoenix, for Wayne O. Burrell.

OPINION

FELDMAN, Justice.

¶1. The court of appeals set aside an Industrial Commission award and decision for reimbursement under A.R.S. § 23-1065(C). Special Fund Div. v. Industrial Comm'n (Burrell), 189 Ariz. 162, 939 P.2d 795 (App.1997). We granted review to clear up confusion in a number of court of appeals cases by deciding whether a written record establishing the existence of a pre-hiring disability, coupled with contemporaneous oral testimony regarding the nature of the disability, was sufficient to establish the employer's knowledge required under § 23-1065(C). We have jurisdiction pursuant to Ariz. Const. art. 6, § 5(3) and A.R.S. § 12-120.24; see also Rule 23(c)(3), Ariz.R.Civ.App.P.

FACTS

¶2. In May 1988, Wayne O. Burrell ("Claimant") applied for a position as a serviceman with St. Charles Co., a manufacturer of kitchen cabinets. On his Application for Employment, Claimant indicated he could lift over fifty pounds, did not suffer from any physical, mental, or emotional limitations that would limit his ability to lift, served in the U.S. Army from 1969-80, and had a "service related disability." In explanation of the disability, Claimant wrote "wounded in combat Nam." In a Pre-Employment Information Form, Claimant indicated he served in Vietnam, was a disabled veteran, and did not have any mental or physical handicaps.

¶3. St. Charles' human resources manager, Randal Dickason, interviewed Claimant, discussed the nature and extent of his disability, and hired him. At the hearing in this case, Claimant testified he informed Dickason at the interview that his service disability was post-traumatic stress disorder ("PTSD"), and as a result, he needed to work outside of the manufacturing plant and away from people. When asked whether he recalled a similar conversation with Claimant, Dickason replied, "Yes. Well, I don't recall the exact words. I remember that he did not want to work in the high volume production environment in the kinds of deadlines that were required in the manufacturing plant." Dickason testified that he learned about Claimant's helicopter crash while in military service and his bad back, but accepted Claimant's statement that he could do the lifting required of a serviceman. Dickason stated that he learned Claimant had a service-related disability from the application form and his subsequent pre-employment discussion with Claimant.

¶4. In October 1992, Claimant sustained an industrial back injury at St. Charles and filed a workers' compensation claim. The carrier ("Liberty Mutual") closed the claim with permanent impairment and applied for reimbursement from the Special Fund Division ("Fund") for Claimant's preexisting PTSD pursuant to A.R.S. § 23-1065. ¹ The Fund stipulated that Claimant's PTSD qualified for reimbursement under § 23-1065(C)(3)(n). ² The only contested issue was whether Liberty Mutual could satisfy the "written records" requirement of § 23-1065(C)(2), which requires that the employer "establish[ ] by written records" that it had knowledge of the impairment when the employee was hired.

¶5. The administrative law judge awarded reimbursement, stating:

Although the applicant's written records were not a model of clarity, the answers alerted the employer to the existence of the mental impairment. In spite of the impairment, the employer hired and retained the applicant and accommodated the post traumatic stress disorder.

The award was affirmed on administrative review, and the Fund brought a special action in the court of appeals.

¶6. The court of appeals set aside the award. The majority held that oral testimony acquired contemporaneously with written records of a disability cannot serve to satisfy the written records requirement to establish an employer's knowledge of a claimant's preexisting disability as required by § 23-1065(C)(2). Special Fund Div. (Burrell), 189 Ariz. at 162, 939 P.2d at 795. Thus the interview between Dickason and Claimant was irrelevant for purposes of determining whether § 23-1065(C) had been satisfied. The majority concluded that the written records only established "the employer's knowledge of an impairment other than the one on which the apportionment claim is based" and thus set aside the award. Id. at 165, 939 P.2d at 798.

¶7. Judge Fidel dissented, arguing that when a general reference to disability is provided in the written record, oral evidence demonstrating that the employer inquired and learned of the specific disability in question will satisfy § 23-1065(C)(2). He reasoned that the written record established the employer's knowledge of Claimant's general service-related disability and that the employer contemporaneously inquired and learned of Claimant's specific PTSD disability, thus satisfying § 23-1065(C)(2). Id. at 167, 939 P.2d at 800. (Fidel, J., dissenting).

DISCUSSION

¶8. The underlying purpose of the Workers' Compensation Act is to compensate an employee for lost earning capacity and thus prevent the worker from becoming a public charge during periods of disability. Mail Boxes v. Industrial Comm'n, 181 Ariz. 119, 888 P.2d 777 (1995). Thus, in determining the amount of compensation to be awarded a disabled employee, consideration is given to preexisting injuries as well as the industrial incident. See § 23-1044(D). Compensation for the entirety of a worker's disability is intended to save a disabled worker from destitution that would result from being only partially compensated for total lost earning capacity. ARTHUR LARSON, LARSON'S WORKER'S COMPENSATION LAW § 59.31(a) (1992). Therefore, an employer who hires an individual with preexisting injuries assumes the risk of compensating that employee for such preexisting injuries should the employee suffer an additional permanent physical impairment. See A.R.S. § 23-1065. Historically, this potential outcome resulted in severe employer discrimination toward disabled workers. Professor Larson explains that as "soon as it became clear that a particular state had adopted a rule requiring an employer to bear the full cost of total disability for loss of the crippled worker's remaining leg or arm, employers had a strong financial incentive to discharge all handicapped workers who might bring upon them this kind of aggravated liability." LARSON, supra § 59.31(a).

¶9. To remedy that situation, all states have adopted some form of second injury fund that ameliorates the employer's burden in such cases. Id.; see also Special Fund Div. v. Industrial Comm'n (Morin), 182 Ariz. 341, 345, 897 P.2d 643, 647 (App.1994) (citing State Compensation Fund v. Harris, 26 Ariz.App. 9, 10, 545 P.2d 971, 972 (1976)). In Arizona, § 23-1065 provides that when certain requirements are met, the employer or insurance carrier and the Fund share liability for the injured employee's disability. § 23-1065(C)(4). Thus, § 23-1065 serves the important remedial purpose of promoting "the hiring of handicapped workers by relieving the employer of increased compensation liability resulting from the combination of preexisting impairments and industrial injuries." Country Wide Truck Serv. v. Industrial Comm'n, 181 Ariz. 410, 411, 891 P.2d 877, 878 (App.1994); see also Schuff Steel Co. v. Industrial Comm'n, 181 Ariz. 435, 443, 891 P.2d 902, 910 (App.1994). Generally, we construe remedial statutes liberally to achieve the special purpose underlying the legislation. E.g., Royall v. Industrial Comm'n, 106 Ariz. 346, 348, 476 P.2d 156, 158 (1970).

¶10. One of the prerequisites for an employer to be reimbursed by the Fund is that the "employer establish[ ] by written records that the employer had knowledge of the permanent impairment at the time the employee was hired...." § 23-1065(C)(2). The fundamental purpose of the written records requirement is to condition the Fund's liability in conformity with the remedial purpose of the legislation. Since the rationale behind the legislation is to negate the impact of the prior injury on the employer's hiring or retention decision, the written records requirement extends Fund liability only to those cases in which the employer was aware of the injury. See, e.g., Country Wide, 181 Ariz. at 412, 891 P.2d at 879 ("the inquiry should be whether the impairment is such that an employer who knew of it and its extent would more likely than not significantly consider it when making a decision to hire or retain the employee."). Our court of appeals has also observed that the written records requirement serves the purposes of protecting against spurious or collusive claims on the one hand and obviating the necessity of litigating whether the employer had such knowledge on the other hand. Transporting Renewable Resources, Inc. v. Industrial Comm'n, 185 Ariz. 543, 917 P.2d 272 (App.1996). However, we emphasize that the "writing requirement is merely evidentiary, and must be sensibly construed so as not to defeat the statute's larger remedial purpose." Special Fund (Burrell), 189 Ariz. at 165, 939 P.2d at 798 (Fidel, J., dissenting) (emphasis added) (citations omitted). The larger purpose, of course, is to promote the hiring of disabled or handicapped workers. We therefore interpret the statute in the manner that best carries out the legislative purpose....