Stuckey v. Sturgis Pizza Ranch

• Decision Date: 12 January 2011
• Docket Number: No. 25605.,25605.
• Citation: 793 N.W.2d 378,2011 S.D. 1
• Parties: Michele G. STUCKEY, Appellee, v. STURGIS PIZZA RANCH and Nationwide Mutual Insurance Company, Appellants.
• Court: South Dakota Supreme Court

793 N.W.2d 378

2011 S.D. 1

Michele G. STUCKEY, Appellee,

v.STURGIS PIZZA RANCH and Nationwide Mutual Insurance Company, Appellants.

No. 25605.

Supreme Court of South Dakota.

Argued Oct. 6, 2010.

Decided Jan. 12, 2011.

Wm. Jason Groves, Rapid City, South Dakota, David S. Barari, Verne Goodsell of Goodsell Quinn, LLP, Rapid City, South Dakota, Attorneys for appellee.

Dennis W. Finch of Finch Maks, Prof. LLC, Rapid City, South Dakota, Attorneys for appellants.

SEVERSON, Justice.

[¶ 1.] Michele Stuckey initiated this workers' compensation proceeding to secure future benefits for a work-related injury. The Department of Labor did not award Stuckey a lump sum of future disability benefits, but it did award a partial lump sum to cover her attorney's fees, costs, and litigation expenses. It also approved a life care plan for Stuckey's future medical care. The circuit court reversed the Department's denial of a lump sum award of future disability benefits but affirmed all other aspects of the Department's decision. We affirm in part, reverse in part, and remand.

BACKGROUND

[¶ 2.] Stuckey was employed by the Pizza Ranch restaurant (Employer) in Sturgis, South Dakota. Stuckey suffered a work-related injury on October 8, 2003, when her left hand was crushed in a machine used to flatten pizza dough. She returned to work following the injury and worked until February 23, 2004. By that time, her condition had deteriorated significantly, and she was diagnosed with Reflex Sympathetic Dystrophy and Complex Regional Pain Syndrome. As a result of her injury, Stuckey is unable to care for herself, her family, and her residence. Sherequires assistance for personal care, meal preparation, and housekeeping.

[¶ 3.] At the time of her injury, Stuckey was the primary wage-earner for her family and the sole caretaker of her thirteen-year-old daughter and disabled husband. Her gross weekly wage was $298.52, and her net weekly wage was approximately $250. Based on the date of her injury, Stuckey's weekly workers' compensation rate is now $249, which Employer has consistently paid. Stuckey receives an additional $97 per month from Social Security. Her current sources of income include her weekly workers' compensation benefits, Medicare benefits, and Social Security benefits payable to her, her husband, and her daughter. Although her weekly workers' compensation benefits are not taxed, they partially offset her Social Security benefits.

[¶ 4.] In March 2004, Stuckey retained an attorney to represent her concerning product liability and workers' compensation matters. In August 2004, Stuckey's attorney filed a petition for hearing with the Department. Stuckey alleged that she is unable to return to work due to her injury and requested "medical benefits and disability benefits as may be determined by the Department." In November 2005, after she served her petition and a request for admissions, Employer agreed that Stuckey is permanently and totally disabled. In January 2006, the Department entered an order declaring Stuckey permanently and totally disabled and entitled to lifetime benefits under SDCL 62-4-7.

[¶ 5.] The case continued to resolve several issues, including:

1. Whether Stuckey is entitled to a lump sum award of future disability benefits under SDCL 62-7-6.

2. Whether Stuckey is entitled to a partial lump sum award of future disability benefits to cover her attorney's fees, costs, and litigation expenses under SDCL 62-7-6.

3. Whether the Department erred by approving a life care plan for Stuckey's future medical care.

In January 2008, Stuckey filed a partial motion for directed decision requesting approval of a life care plan. In March 2008, the Department granted Stuckey's motion but determined that genuine issues of material fact existed as to the reasonableness and medical necessity of two treatments in the life care plan. The Department addressed the remaining issues in April 2009. The Department did not award Stuckey a lump sum of future disability benefits, but it did award a partial lump sum to cover her attorney's fees, costs, and litigation expenses. The circuit court reversed the Department's denial of a lump sum award of future disability benefits but affirmed all other aspects of the Department's decision. Employer appeals.

ANALYSIS AND DECISION

[¶ 6.] 1. Whether Stuckey is entitled to a lump sum award of future disability benefits under SDCL 62-7-6.

[¶ 7.] Employer argues that the Department erred by awarding Stuckey a lump sum of future disability benefits under SDCL 62-7-6.¹ South Dakota's workers'compensation statutes do not favor lump sum awards. After all, the primary emphasis must be providing an injured employee with a reliable stream of income to replace lost wages. Steinmetz v. State, D.O.C. Star Acad., 2008 S.D. 87, ¶ 10, 756 N.W.2d 392, 396 (quoting Thomas v. Custer State Hosp., 511 N.W.2d 576, 580 (S.D.1994)).

Since compensation is a segment of a total income insurance system, it ordinarily does its share of the job only if it can be depended on to supply periodic income benefits replacing a portion of lost earnings. If a ... totally disabled worker gives up these reliable periodic payments in exchange for a large sum of cash immediately in hand, experience has shown that in many cases the lump sum is soon dissipated and the [worker] is right back where [she] would have been if [workers'] compensation had never existed.

Id. ¶ 8, 756 N.W.2d at 395 (quoting Enger v. F.M.C., 2000 S.D. 48, ¶ 11, 609 N.W.2d 132, 135). Lump sum awards "must be made in accordance with the goal of preserving future wage replacement benefits." Thomas, 511 N.W.2d at 581. Ultimately, "[t]he allowance of a lump sum award is the exception and not the general rule." Steinmetz, 2008 S.D. 87, ¶ 8, 756 N.W.2d at 395 (quoting Enger, 2000 S.D. 48, ¶ 11, 609 N.W.2d at 135).

[¶ 8.] But SDCL 62-7-6 does allow for a lump sum award of future disability benefits in certain circumstances. First, an injured employee must establish that a lump sum award is in her best interest. SDCL 62-7-6(1). Second, in the case of an injured employee who is permanently and totally disabled, a lump sum may be awarded if she establishes that she has an "exceptional financial need that arose as a result of reduced income due to the injury" or that a lump sum award is "necessary to pay attorney's fees, costs, and expenses." SDCL 62-7-6(2). The injured employee bears the ultimate burden of proving all facts essential to sustaining an award of compensation by a preponderance of the evidence. Darling v. W. River Masonry, Inc., 2010 S.D. 4, ¶ 11, 777 N.W.2d 363, 367 (citing Titus v. Sioux Valley Hosp., 2003 S.D. 22, ¶ 11, 658 N.W.2d 388, 390).

[¶ 9.] The issue whether a lump sum award is in Stuckey's immediate best interest has not been raised by the parties on appeal. We therefore turn to the question whether Stuckey established exceptional financial need. The circuit court, relying on Stuckey's unique circumstances and the reduction of her income following her injury, reversed the Department's conclusion that she failed to establish exceptional financial need:

There is no dispute that [Stuckey] has suffered a profound disability. Before the injury, [Stuckey] was the sole breadwinner for her family. As the result of her injury, [Stuckey] has lost the capacity to provide necessities for herself, her teenage daughter, and her husband who also suffers a disability.... As a result of her injury, [Stuckey's] income has been reduced. At the time of her injury, [Stuckey] was making $298.52 per week or $1,293.59 per month.... [Stuckey's] weekly workers' compensation amount is $249, which is $1,079 per month.... The report of Doris Eizember reveals that [Stuckey] receives an additional $97 per month from Social Security. With that amount, [Stuckey's] monthly income is $1,176. This means [Stuckey's] post-injury income is $117.59 less per month than prior to her injury and $1,411.08 less per year. In its April 6, 2009, Decision, the Department found that [Stuckey's] income did not substantially decrease. Likewise, [Employer] argues [Stuckey's] income "really did not even decrease." However, [Stuckey's] decrease in monthly income as a result of her injury is nearly 10%. While this percent decrease may not be substantial to a person who was making $5,000 a month prior to injury, that is not the case for a person in the position of [Stuckey].

[¶ 10.] The circuit court reviewed the Department's denial of a lump sum award of future disability benefits under the de novo standard of review. But to clarify, the determination whether to award a lump sum is a mixed question of law and fact and requires a compound inquiry. Steinmetz, 2008 S.D. 87, ¶ 6, 756 N.W.2d at 395; Enger, 2000 S.D. 48, ¶ 10, 609 N.W.2d at 134. See Stockwell v. Stockwell, 2010 S.D. 79, ¶ 15, 790 N.W.2d 52, 58. We are asked to review not only the Department's factual findings concerning exceptional financial need but also the Department's application of that legal standard to the facts.

[¶ 11.] Different standards of review apply to these two inquiries. The Department's findings of fact are, of course, reviewed under the clearly erroneous standard. See SDCL 1-26-36(5). But the standard of review for the second inquiry—the application of law to fact—depends on the nature of the inquiry:

If application of the rule of law to the facts requires an inquiry that is 'essentially factual'—one that is founded 'on the application of the fact-finding tribunal's experience with the mainsprings of human conduct'—the concerns of judicial administration will favor the [Department], and the [Department's] determination should be classified as one of fact reviewable under the clearly erroneous standard. If, on the other hand, the question requires us to consider legal concepts in the mix of fact and law and to exercise judgment about the values that animate legal principles, then the concerns of judicial administration will favor the appellate court,

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