Struhs v. Protection Technologies, Inc.

• Decision Date: 20 December 1999
• Docket Number: No. 24885.,24885.
• Citation: 992 P.2d 164,133 Idaho 715
• Parties: Marvin A. STRUHS, Claimant-Appellant, v. PROTECTION TECHNOLOGIES, INC., dba American Protective Services, Employer, and Wausau Insurance Companies, Surety, Defendants-Respondents.
• Court: Idaho Supreme Court

992 P.2d 164

133 Idaho 715

Marvin A. STRUHS, Claimant-Appellant, v. PROTECTION TECHNOLOGIES, INC., dba American Protective Services, Employer, and Wausau Insurance Companies, Surety, Defendants-Respondents.

No. 24885.

Supreme Court of Idaho, Pocatello, August 1999 Term.

December 20, 1999.

Goicoechea Law Offices, Chtd., Idaho Falls, for appellant. Michael R. McBride argued.

Bowen, Gardner & Bailey, Boise, for respondents. Alan R. Gardner argued.

KIDWELL, Justice.

Marvin Struhs appeals from a decision by the Industrial Commission awarding his employer's insurance company a subrogated interest in Struhs' third-party settlement for injuries sustained in a work-related automobile accident. We affirm.

I. FACTS AND PROCEDURAL HISTORY

A. Facts.

Marvin Struhs worked for American Protective Services (APS). APS and its successor, Protection Technologies, Inc., provided security services at the Idaho National Engineering Laboratory (INEL) (now INEEL). A member company of the Wausau Insurance Companies (Wausau) provided worker's compensation coverage for all INEL subcontractors, including APS. The United States Department of Energy (DOE) contracted with EG&G Idaho, Inc. (EG&G) to operate INEL facilities. EG&G paid worker's compensation premiums for all INEL contractors. The contract was an "allowable cost and fee contract" under which DOE monitored EG&G expenses to determine if they were reasonable and allowable under the terms of the contract. DOE paid actual costs for EG&G expenses, which included any payments EG&G made to Wausau Insurance Company for worker's compensation premiums.

On September 30, 1988, Struhs was driving a U.S. government vehicle at INEL in the course of work. Struhs was injured when a U.S. Army (Army) vehicle did not yield the right of way. Wausau paid Struhs $21,743.33 in worker's compensation benefits for his injuries.

Through his attorney Michael McBride, Struhs filed a notice of tort claim with the Army in September 1990. Wausau did not file a separate notice of tort claim. In September 1991, McBride wrote to Wausau. He advised Wausau that he was representing Struhs in a third-party claim against the Army and offered to represent the company for a 1/3 contingency fee. Soon afterwards, Wausau's Lawrence Spjute accepted McBride's offer of representation and the fee arrangement.

On March 12, 1992, the Army sent McBride a letter stating:

Because the United States was reimbursing the cost of workmens' compensation benefits pursuant to the government contract with Mr. Struhs' employer, the United States, as a "statutory employer", is entitled to a reduction of damages equal to the amount of workmens' compensation benefits received by Mr. Struhs from the insurer (Wausau Insurance) of Mr. Struhs' direct employer, [APS]. Runcorn v. Shearer Lumber Products, Inc., 690 P.2d 324 (Idaho 1984).

On March 30, 1992, McBride sent a copy of the Army's letter to Spjute. McBride asked Wausau's opinion on the Army's contention that it was entitled to reduce damages by the amount of worker's compensation benefits paid. To "push the file along," McBride set an arbitrary deadline of April 17, 1992, for Wausau's response. Spjute had retired in February 1992, however, and no one at Wausau answered McBride's letter. McBride himself did no independent research to determine whether the "statutory employer" exception of Runcorn applied to Struhs' case.

For the next three months, while a settlement with the Army was pending, McBride did not contact Wausau. He later testified that he did not believe that Wausau was interested in further action on the settlement. Nevertheless, McBride did not ask if Wausau wished to have him continue to represent it. On June 18, 1992, the Army paid Struhs $45,000 in full satisfaction of his claims. McBride inserted language into the settlement agreement that indicated that the settlement did not cover worker's compensation benefits.¹

In December 1992, Wausau contacted McBride, asking if anything had been done on Struhs' claim. McBride responded by sending Wausau a copy of the settlement. He explained that the Army, based on its understanding of Runcorn, had declined to pay damages equal to the amount of worker's compensation benefits received.

In August 1993, McBride wrote the Army inquiring about Wausau's claim against the Army. The Army replied that it had previously informed McBride that the United States could make only one payment on Struhs' claim. The Army also noted that it had not received notice of Wausau's claim within the two-year statute of limitations. Nevertheless, McBride made a written demand on the Army in August 1994 for the monies that Wausau had paid on Struhs' worker's compensation claim. Within a few months, the Army denied Wausau's claim because it had not been filed within the two-year statute of limitations for tort claims.

Shortly before the Army denied Wausau's claim, McBride filed a complaint in federal district court seeking reimbursement from the Army for Wausau's subrogated interest. On December 2, 1994, Wausau informed McBride that it no longer wished him to pursue a separate recovery from the Army. Wausau demanded $21,127.53 from the settlement Struhs had already received from the Army, less costs and attorney fees. McBride withdrew as attorney for Wausau in the civil action. The federal district court dismissed the civil action with prejudice when Wausau failed to pursue the action.

B. Procedural History.

On August 20, 1993, Struhs (represented by McBride) filed a worker's compensation complaint with the Industrial Commission. Wausau answered on September 13, 1993, responding that Struhs was due no further benefits and, "[i]n fact, defendants are subrogated to third-party recovery and presently owed money by claimant." On July 28, 1995, Wausau filed a complaint with the Industrial Commission against McBride, Goicoechea Law Offices, and Struhs seeking subrogation. The Industrial Commission recharacterized the complaint as an amended answer to Struhs' complaint.

Wausau and Struhs stipulated to the facts, exhibits, and legal issues before the Industrial Commission.

The Referee issued a decision on April 29, 1998, deciding all issues in favor of Wausau. The Industrial Commission adopted the Referee's Findings of Fact, Conclusions of Law, and Recommendation. Struhs moved for reconsideration, which the Industrial Commission denied on July 8, 1998. Struhs filed a notice of appeal on August 3, 1998.

II. STANDARD OF REVIEW

When this Court reviews a decision of the Industrial Commission, it reviews questions of fact only to determine whether substantial and competent evidence supports the Commission's findings. Ogden v. Thompson, 128 Idaho 87, 88, 910 P.2d 759, 760 (1996). This Court "views all facts and inferences in the light most favorable to the party who prevailed before the Commission." Boley v. State, Industrial Special Indem. Fund, 130 Idaho 278, 280, 939 P.2d 854, 856 (1997). However, this Court exercises free review over questions of law that are presented. Ogden v. Thompson, 128 Idaho at 88, 910 P.2d at 760. Constitutional issues and the construction and application of legislative acts are pure questions of law over which this Court exercises free review. Idaho State Ins. Fund v. Van Tine, 132 Idaho 902, 905-06, 980 P.2d 566, 569-70 (1999).

III. ANALYSIS

A. An Employer May Exercise Its Right of Subrogation Under I.C. § 72-223(3) When It Has Voluntarily Paid Worker's Compensation Benefits.

An employer that pays worker's compensation to an injured employee may be reimbursed out of the recovery from a liable third party. I.C. § 72-223. The statute provides, "If compensation has been claimed and awarded, the employer having paid such compensation or having become liable therefor, shall be subrogated to the rights of the employee, to recover against such third party to the extent of the employer's compensation liability." I.C. § 72-223(3). Within the worker's compensation title, the term "award" usually (but not always) refers unambiguously to action by the Industrial Commission. Struhs asserts that the "claimed and awarded" language in the statute requires that worker's compensation benefits must be "awarded" by an action of the Industrial Commission before an employer has a right to subrogate.

A statute is ambiguous where the language is capable of more than one construction. See Killeen v. Vernon, 121 Idaho 94, 97, 822 P.2d 991, 994 (1991). In construing an ambiguous statute, this Court attempts to ascertain legislative intent through examining factors such as the statute's language, the reasonableness of a proposed interpretation, and the policy underlying the statute. Kootenai Elec. Coop., Inc. v. Washington Water Power Co., 127 Idaho 432, 435, 901 P.2d 1333, 1336 (1995); see also Davaz v. Priest River Glass Co., 125 Idaho 333, 336, 870 P.2d 1292, 1295 (1994).

The wording of I.C. § 72-223(3) dates to 1971, when the legislature recodified the worker's compensation title. 1971 Idaho Sess. Laws ch. 124. The legislative purpose was, in part, to "prescrib[e] the rights, duties, obligations and liabilities of employers, employees and sureties." Id. The dual purposes of subrogation under I.C. § 72-223 are to achieve an equitable distribution between responsible parties "by assuring that the discharge of an obligation be paid by the person who in equity and good conscience ought to pay it" and "to prevent the injured claimant from obtaining a double recovery for an injury." Presnell v. Kelly, 113 Idaho 1, 3, 740 P.2d 43, 45 (1987). Neither of these purposes would be served by a rule that forbids recovery by an employer who voluntarily pays benefits. Such a rule would undercut expeditious payment of claims by sureties and result in delay and unnecessary litigation.

Our previous decisions have consistently recognized an employer's subrogation rights where the employer voluntarily paid benefits. For instance, in Barnett v. Eagle...