WASH. ELEM. SCH. DIST. v. INDUSTRIAL COM'N

• Decision Date: 13 January 2000
• Docket Number: No. 1CA-IC98-0191.,1CA-IC98-0191.
• Citation: 196 Ariz. 67,993 P.2d 468
• Parties: WASHINGTON ELEMENTARY SCHOOL DISTRICT, Petitioner Employer, Frank Gates Service Co., Petitioner Carrier, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Kathleen Corso Whitney, Respondent Employee.
• Court: Arizona Court of Appeals

993 P.2d 468

196 Ariz. 67

WASHINGTON ELEMENTARY SCHOOL DISTRICT, Petitioner Employer, Frank Gates Service Co., Petitioner Carrier, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Kathleen Corso Whitney, Respondent Employee.

No. 1CA-IC98-0191.

Court of Appeals of Arizona, Division 1, Department A.

January 13, 2000.

Ronald H. Moore, P.C. by Ronald H. Moore, Phoenix, Attorney for Petitioner Employer and Carrier.

The Industrial Commission of Arizona by Anita R. Valainis, Chief Counsel, Phoenix, Attorney for Respondent.

J. Terence Fox, Phoenix, Attorney for Respondent Employee.

O P I N I O N

BERCH, Judge.

¶ 1 In this statutory special action we review an award granting a workers' compensation claimant additional disability compensation. The question presented is whether, once the claimant's injury is determined to be work-related and therefore compensable by workers' compensation, an employer is entitled to reimbursement from the claimant's workers' compensation benefits for all short-term disability payments made to her or only for those payments that could be deducted from her workers' compensation benefits during each month in which she received such benefits. Because we conclude that Arizona law requires reimbursement from workers' compensation benefits received of all disability benefits paid, see Ariz. Rev.Stat. Ann. ("A.R.S.") § 23-1068(B) (1995), we set aside the award and decision upon review.

FACTUAL AND PROCEDURAL HISTORY

¶ 2 Respondent Employee Kathleen Whitney ("Claimant"), a physical education teacher, injured her back while working for Petitioner Employer, Washington Elementary School District. In December of 1996, Claimant suffered a flare-up of a back injury for which she requested workers' compensation benefits in January 1997. The claim was denied and Claimant timely protested.

¶ 3 Because her claim for workers' compensation benefits had been denied, Claimant requested short-term disability benefits under the District's short-term disability ("STD") insurance plan for its employees. That plan provided insurance benefits for "nonoccupational injur[ies]" and made the receipt of short-term disability benefits and workers' compensation benefits mutually exclusive—that is, one could not receive both.

¶ 4 Claimant received STD benefits from March 4, 1997, through June 6, 1997, when the school term ended, and from September 17, 1997, when the new term began, until October 17, 1997, when her back condition was determined to be a compensable work-related injury and her short-term disability benefits were terminated. From March through October, 1997, Claimant received STD payments totalling $10,229.18. The workers' compensation award entitled Claimant to temporary total disability payments of $1200.00 per month for the period from January 21, 1997 until October 17, 1997, for a total of $11,033.98; but she was notified that she would receive only $804.80 and the District would receive $10,229.18 as reimbursement for the STD payments it had made to Claimant,¹ pursuant to the authority in A.R.S. section 23-1068(B).

¶ 5 Claimant requested that the Commission investigate whether the ordered reimbursement was excessive. See A.R.S. §§ 23-1061(J) (1995) (authority to investigate), 23-1068(B) (reimbursement of STD payments). Following hearings and the submission of post-hearing memoranda, the administrative law judge ("ALJ") issued an award granting Claimant $4724.54 additional temporary disability compensation.

¶ 6 The award was affirmed on administrative review. The District then timely filed a special action petition. This Court has jurisdiction pursuant to A.R.S. sections 12-120.21(A)(2) (1992) and 23-951(A) (1995), and Rule 10 of the Arizona Rules of Procedure for Special Actions.

DISCUSSION

¶ 7 The District's short-term disability insurance policy provides temporary payments for injuries or illnesses that are not work related.² It specifically excludes from coverage those claims that result from work-related injury or illness because those claims are compensable by workers' compensation. See A.R.S. §§ 23-901 (1996) (workers' compensation scope and definitions), 23-1021 (Supp. 1997-1998) (right of employee to compensation). Thus, when Claimant's injuries were found, at her request, to be compensable work-related claims, she became ineligible for disability benefits under the District's insurance policy and responsible to repay any amounts she received as STD payments or allow the District to retain those amounts from the workers' compensation benefits to which she was entitled. To effectuate the reimbursement, the District withheld funds from Claimant's workers' compensation benefits, relying for its authority to do so on A.R.S. section 23-1068(B), which provides as follows:

[I]f ... disability benefits are paid or otherwise provided by an employer to ... an employee for an injury ... for which medical or compensation benefits payable pursuant to this article have been denied ..., and such injury ... is subsequently determined to be compensable under this article, such employer ... shall be entitled to a direct payment out of, or a direct credit against, the medical or compensation benefits payable under this article in the amount of the benefits previously paid or provided....

¶ 8 Section 23-1068(B) applies whenever disability benefits have been paid for disabilities for which workers' compensation benefits were initially denied but later granted, a situation that occurred in this case. The question before us is whether the statute requires reimbursement of disability payments to the employer from an employee's workers' compensation benefits even in those months during which the employee did not receive STD payments, if such payments are necessary to fully reimburse the employer for STD benefits paid. The ALJ determined that the answer was "no." We disagree.

¶ 9 Claimant contends that once her claim was initially determined not to be work related, she became eligible for STD benefits. She interprets A.R.S. section 23-1068 and the District's insurance plan as requiring reimbursement only of the $1200.00 per month in workers' compensation benefits for which she was later determined to be eligible, for the months in which she also received an STD payment. Thus, according to Claimant, for the months in which she did not receive disability benefits but received workers' compensation benefits, the District could offset nothing; and for the months in which Claimant received disability benefits less than $1200.00, the District could offset only the actual amount of disability benefits paid in that particular month. Claimant maintains that the District's insurance plan authorizes her to keep the additional STD benefits paid. Because the District had offset the total amount of disability benefits paid to Claimant, regardless of the month in which the payment was received, the ALJ awarded Claimant $4724.54. We conclude that the statute and public policy compels a different result.³

¶ 10 Claimant advances two arguments in support of her position. The first is that this Court's opinion in Moreno v. Industrial Comm'n, 164 Ariz. 374, 793 P.2d 131 (App. 1990), which interprets A.R.S. section 23-1068(B) and involves a claimant who received both workers' compensation benefits and long-term disability ("LTD") payments, compels the result she seeks. There, we held that those who pay workers' compensation benefits are entitled to direct reimbursement for amounts previously paid as long-term disability benefits. See id. at 377, 793 P.2d at 134.

¶ 11 As relevant to this case, in Moreno a worker received disability benefits for an injury that left him with a permanent partial impairment. See id. at 374-75, 793 P.2d at 131-32. After his workers' compensation benefits claim was closed, the insurer paid the claimant maximum long-term disability benefits, unreduced by the workers' compensation benefits the worker was receiving. See id. The disability insurance plan at issue in Moreno allowed employees to receive simultaneous disability and workers' compensation benefits, but included a provision reducing the disability insurance payments by any workers' compensation benefits payable to the claimant. See id. The carrier sought reimbursement for the overpayments, but the claimant refused. See id. at 375, 793 P.2d at 132. The employer then paid the carrier for the overpayment of disability benefits and took a credit against claimant's retroactive workers' compensation benefits, see id., as did the employer in the case before us, pursuant to A.R.S. section 23-1068(B). We held that the statute anticipates precisely "this type of recoupment of an overpayment." Moreno, 164 Ariz. at 377, 793 P.2d at 134.

¶ 12 Moreno differs from the case before us in an important respect: The long-term disability policy at issue there specifically allowed a claimant to receive both workers' compensation and long-term disability payments for the same injury. See id. at 374-76, 793 P.2d at 131-33. The plan in Moreno, unlike the District's plan, was not a mutually exclusive plan. See id. The STD plan at issue here affords payment only for injuries that are not work related. It does not pay benefits for work-related claims such as Claimant's. Nonetheless, the court in Moreno required full repayment of overpaid benefits, a resolution that supports the holding we reach in this case.

¶ 13 Claimant's second argument is that the language of the District's STD plan, like the LTD plan at issue in Moreno, allows reimbursement to be withheld only from each monthly payment as it is made, and therefore reimbursement may not, in any given month, exceed the amount of the STD payment she actually received. To the extent that her STD payment for a month exceeds the monthly workers' compensation benefit, she maintains that she is entitled to keep the difference. As authority for her position, she relies upon Moreno and the language of the District...