Varnell v. Union Carbide, CA

• Decision Date: 15 November 1989
• Docket Number: No. CA,CA
• Citation: 779 S.W.2d 542,29 Ark.App. 185
• Parties: Doris VARNELL, Appellant, v. UNION CARBIDE and American Motorists, Appellees. 89-26.
• Court: Arkansas Court of Appeals

Page 542

779 S.W.2d 542

29 Ark.App. 185

Doris VARNELL, Appellant, v. UNION CARBIDE and American Motorists, Appellees.

No. CA 89-26.

Court of Appeals of Arkansas En Banc.

Nov. 15, 1989.

John Dodge, Rogers, for appellant.

Sidney P. Davis, Jr., Fayetteville, for appellees.

CORBIN, Chief Judge.

Appellant was employed as a machine operator's adjuster for appellee, Union Carbide, on July 25, 1985, when she injured her back while stepping off a step. The employer's non-occupational group insurance carrier paid medical benefits for appellant and also, together with the employer, made payments to appellant of $300.00 per week from July 29, 1985, through November 24, 1985, and $40.00 per week from November 24, 1985, through January 27, 1986, as benefits under a sick pay plan provided by the employer.

A hearing was held before an administrative law judge on February 27, 1986, to determine appellant's entitlement to workers' compensation benefits. Appellant contended that she sustained a compensable accidental injury which entitled her to temporary total disability benefits, permanent partial disability benefits, medical expenses, and a controverted attorney's fee. Appellee contended that appellant had not suffered a compensable work-related injury but alternatively argued that if appellant sustained a compensable injury, it was entitled to credit for the weekly disability benefits and medical expenses previously paid by its group insurance carrier.

The administrative law judge concluded by opinion rendered February 23, 1987, that appellant sustained an injury arising out of and in the course of her employment and that she was temporarily totally disabled from July 26, 1985, to a date yet to be determined. The issue of permanent partial disability was premature at the time of the hearing and was held in abeyance. The administrative law judge also found that appellee was responsible for all reasonable and necessary medical expenses incurred by appellant as a result of her injury. Additionally, the law judge found that appellee was entitled to credit for all amounts previously paid by it and its group insurance carrier toward medical expenses and temporary total disability benefits. In addition, the administrative law judge awarded an attorney's fee on the amounts of weekly benefits and medical expenses previously paid to appellant under the group insurance coverage which was fully funded by appellee but limited the fee to the difference between benefits awarded and those already paid.

Appellant appealed to the Workers' Compensation Commission, contending that the administrative law judge erred in granting appellee credit for the amounts already paid toward her disability and medical expenses by appellee and its group carrier. Appellant also contended that the law judge erred in limiting the amount of attorney's fees to the difference between benefits awarded and benefits already paid. By opinion entered September 8, 1988, the Commission affirmed the opinion of the administrative law judge in all respects.

On appeal, appellant argues the same two points she argued at the Commission level. We reverse on both issues and remand.

I.

IT WAS ERROR FOR APPELLEE TO BE AWARDED CREDIT FOR ALL DISABILITY BENEFITS RECEIVED BY THE CLAIMANT AS A RESULT OF GROUP INSURANCE COVERAGE AND FOR AMOUNTS PAID IN EXCESS OF THE COMPENSATION RATE UNDER THE GROUP INSURANCE POLICY.

The issue in this point for reversal is whether the payments made by appellee were "advance payments for compensation" allowing for a setoff against previous payments or whether they were "sick pay benefits" for which no setoff is allowed. Appellant argues that the payments were not intended to be advance payments for compensation but "were strictly fringe benefits and taxable as income" to her. Appellee argues and the Commission held that the previous payments were advance payments for compensation and appellees were, therefore, entitled to a setoff against payments already made.

The statute around which this controversy centers is Arkansas Code Annotated Section 11-9-807 (1987) which provides:

If the employer has made advance payments for compensation, he shall be entitled to be reimbursed out of any unpaid installment or installments of compensation due. If the injured employee receives full wages during disability, he shall not be entitled to compensation during the period.

The evidence reveals that Gene Bland, the employee relations manager for appellee, testified he was involved in the decision to treat appellant's injury as non-occupational based upon his belief that appellant had periodic back problems "due to whatever cause." Mr. Bland testified that an employee on non-occupational pay receives $40.00 a week from Metropolitan, one of appellee's insurance carriers, and appellee pays the remainder of money necessary to amount to a total of 85% of the employee's average weekly wages. Mr. Bland testified that the non-occupational pay plan is a noncontributory one to which the employees do not contribute. Bland testified that Blue Cross/Blue Shield of Arkansas is appellee's carrier for medical insurance and that, like the non-occupational coverage, is noncontributory.

The Commission's ruling that the payments to appellant were advance payments for compensation for which appellee was entitled to a credit was predicated upon the following reasoning contained in its opinion:

While Varnell cites several cases in which the credit was not allowed, the monies paid in those cases did not constitute "advance payments of compensation." For example, the employer's representative in Looney v. Sears, Roebuck & Company, 236 Ark. 868, 371 S.W.2d 6 (1963) admitted that a gratuity was intended. Similarly, the payments in Southwestern Bell Telephone Company v. Siegler, 240 Ark. 132, 398 S.W.2d 531 (1966) were labeled as "benefits" in the employee's handbook. In Varnell's case, however, the payments could not have been insurance "benefits" since the group health insurance company only paid $40.00 per week and the employer made up the deficit between that and 85% of the employee's weekly wage. It is also obvious that the monies were not payments in lieu of wages since the amount was less than Varnell's wages. Neither were they gratuities since the purpose was to compensate employees for the expenses of illnesses rather than to make a gift or provide a bonus.

Having eliminated other possibilities (as required by Siegler ), we conclude that the payments should be treated as advance payments of compensation. If such payments are not so treated, claimants who are dishonest could routinely collect from both the workers' compensation carrier and from the group health carrier. On the other hand, where the payment by the group carrier is the employer's mistake, the carrier would have a right of subrogation against the workers' compensation carrier, and the latter would eventually pay the same benefits twice, once to the claimant and once to the group carrier.

Finally, we find this case distinguishable from Emerson Electric v. Cargile, 5 Ark.App. 123, 633 S.W.2d 389 (1982), where the employee paid the entire premium, and the Court termed the plan a "private contract" having no relevance to the employees' workers' compensation rights. The plan here, by the way of contrast, was fully funded by Union Carbide. We find that Varnell's case is on all fours with Lion Oil Company v. Reeves, 221 Ark. 5, 254 S.W.2d 450 (1952), where the credit was allowed for payments intended to represent a percentage of wages, which is the situation here. If there is a conflict between Reeves and Cargile, a decision of the Arkansas Supreme Court obviously controls over a decision of the Arkansas Court of Appeals.

In the Lion Oil case relied upon by the Commission, the employer, a self-insurer, paid the employee amounts "aggregating full wages" during his injury period for which the employer received full credit for the excess of the amount paid over what the workers' compensation benefits would have been for that period of time. In making this determination to allow Lion Oil such credit, the court stated: "It is highly probable that Reeves [employee] thought the excess payments he received were gratuities, and certainly the oil company was endeavoring to provide for the workers' current needs." In Looney v. Sears Roebuck, 236 Ark. 868, 371 S.W.2d 6 (1963), the Supreme Court deemed it wise to limit the holding of Lion Oil to its own particular facts making a clear distinction between "advance payments of compensation" and payment of "wages and gratuities." Looney specifically held that the excess of wages paid over the weekly compensation award cannot be deducted from the award. Further, it held that the employer cannot make such payments and later claim credit for the excess against an award made. The Looney court declared that where it is shown that both parties intended that the payment be compensation in advance, the credit is allowed against future benefits. In the case at bar, we find no evidence suggesting such intent. At the beginning of the hearing before the administrative law judge, counsel for appellees stated that appellant had not been paid anything in the way of workers' compensation benefits and that appellant had not suffered a compensable injury.

While the reasoning by the Commission set out above may be a plausible alternative that is followed by a minority of jurisdictions, we believe the general rule set out in A. Larson, The Law of Workmen's Compensation Section 97.51(a) (1989), is the direction followed by Arkansas to wit:

As to the private pensions or health and accident insurance, whether provided by the employer, union, or the individual's own purchase, there is ordinarily no occasion for reduction of compensation benefits.

Judge Cracraft writing for a majority in Emerson Electric v. Cargile, 5 Ark.App. 123, 633 S.W.2d 389 (1982) in reliance upon Southwestern Bell...