Sunstate Equipment Corp. v. Industrial Com'n of Arizona, 1

• Decision Date: 17 February 1983
• Docket Number: CA-IC,No. 1,1
• Citation: Sunstate Equipment Corp. v. Industrial Com'n of Arizona, 662 P.2d 152, 135 Ariz. 477 (Ariz. App. 1983)
• Parties: SUNSTATE EQUIPMENT CORPORATION, Petitioner Employer, State Compensation Fund, Petitioner Carrier, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, George E. McClellan, Respondent Employee. 2782.
• Court: Arizona Court of Appeals

Page 152

662 P.2d 152

135 Ariz. 477

SUNSTATE EQUIPMENT CORPORATION, Petitioner Employer State Compensation Fund, Petitioner Carrier, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent George E. McClellan, Respondent Employee.

No. 1 CA-IC 2782.

Court of Appeals of Arizona Division 1, Department C.

Feb. 17, 1983.

Rehearing Denied Mar. 30, 1983.

Review Denied Apr. 26, 1983.

Robert K. Park, Chief Counsel, State Compensation Fund by John R. Greer, Phoenix, for petitioners employer and carrier.

James A. Overholt, Acting Chief Counsel, the Indus. Com'n of Arizona, Phoenix, for respondent.

Neal S. Sundeen, P.C. by Neal S. Sundeen, Phoenix, for respondent employee.

OPINION

CONTRERAS, Judge.

In this special action review of an Industrial Commission award, one legal issue is presented: whether A.R.S. § 23-1023(C) provides a workers' compensation carrier with a lien on the employer's uninsured motorist coverage paid to an employee injured at work. We hold that the statute does not provide the compensation carrier with such a lien and therefore affirm the award.

The parties stipulated to the facts, which we summarize. The respondent employee (employee), while driving his employer's automobile in the course and scope of his employment, was injured in an accident caused by an uninsured motorist. The employer carried workers' compensation coverage with the petitioner carrier, and also carried uninsured motorist coverage with another carrier covering the automobile that the employee was driving. The employee received workers' compensation benefits of $1,130.30. He also received a recovery of $5,000.00 by reason of his employer's uninsured motorist coverage. It was further stipulated that unless the compensation carrier has a lien and is able to recover an amount equal to the benefits it has disbursed from the amount collected by the employee under the uninsured motorist provision of the employer's policy, the employer's loss ratio will be adversely affected and result in an increase in the premium rate the employer must pay for workers' compensation coverage, as well as decrease dividends otherwise payable to the employer.

The administrative law judge determined that the petitioning compensation carrier had no lien. The award was affirmed on administrative review and this special action followed. We first consider the statute involved.

A.R.S. § 23-1023 in relevant part provides:

A. If an employee entitled to compensation under this chapter is injured or killed by the negligence or wrong of another not in the same employ, such injured employee ... may pursue his remedy against such other person.

....

C. If he proceeds against such other person, compensation and medical, surgical and hospital benefits shall be paid as provided in this chapter and the insurance carrier ... liable to pay the claim shall have a lien on the amount actually collectible from such other person to the extent of such compensation and medical, surgical and hospital benefits paid.

(emphasis added).

Petitioners properly characterize the present case as one of original impression. Prior cases involving the coordination of uninsured motorist insurance and workers' compensation centered on the validity of auto liability policy provisions setting off workers' compensation payments against the employee's uninsured motorist coverage. See State Farm Mut. Auto. Ins. Co. v. Karasek, 22 Ariz.App. 87, 523 P.2d 1324 (1974) (in which Division One held that a policy provision reducing an employee's uninsured motorist coverage by the amount of workers' compensation benefits received was void); see also Allied Mut. Ins. Co. v. Larriva, 19 Ariz.App. 385, 507 P.2d 997 (1973) (in which Division Two held that (1) a policy provision reducing an employee's uninsured motorist coverage by the amount of workers' compensation benefits received was invalid and (2) that a policy provision denying uninsured motorist coverage which would inure to compensation carrier's benefit was inapplicable to employee's insurance). In contrast, in the present case, the compensation carrier claims a statutory right to a lien on the employer's uninsured motorist coverage paid to an employee injured at work.

These distinctions are relevant. An employer's auto liability policy need not cover an employee injured at work. See A.R.S. § 28-1170(E). This elimination of double coverage applies to uninsured motorist insurance. See State Farm Mut. Auto. Ins. Co., 22 Ariz.App. at 90, 523 P.2d at 1327 (dictum); Allied Mut. Ins. Co., 19 Ariz.App. at 388, 507 P.2d at 1000 (dictum). It is our opinion that because the present case involves a statutory lien and not a contractual setoff, § 23-1023 determines whether the...