Wernecke v. St. Maries School Dist.

• Citation: 147 Idaho 277,207 P.3d 1008
• Decision Date: 14 April 2009
• Docket Number: No. 34539.,34539.
• Parties: Patsy WERNECKE, Claimant-Appellant, v. ST. MARIES JOINT SCHOOL DISTRICT # 401, Employer, and State Insurance Fund, Surety, Defendants, and State of Idaho Industrial Special Indemnity Fund, Defendant-Respondent.
• Court: Idaho Supreme Court

207 P.3d 1008

147 Idaho 277

Patsy WERNECKE, Claimant-Appellant, v. ST. MARIES JOINT SCHOOL DISTRICT # 401, Employer, and State Insurance Fund, Surety, Defendants, and State of Idaho Industrial Special Indemnity Fund, Defendant-Respondent.

No. 34539.

Supreme Court of Idaho, Boise, January 2009 Term.

April 14, 2009.

Landeck, Westberg, Judge & Graham, P.A., Moscow, for appellant. Charles L. Graham argued.

Mallea Law Offices, Boise, for respondent. Kenneth L. Mallea argued.

J. JONES, Justice.

This is an appeal from an order of the Idaho Industrial Commission holding that a 1994 settlement agreement between Patsy Wernecke and the Industrial Special Indemnity Fund (ISIF) barred all future claims by Wernecke against ISIF. We reverse the order and remand for further proceedings.

I.

In 1990, Patsy Wernecke suffered an industrial injury while employed as a nurse's aide. She filed a worker's compensation complaint against her employer, the State Insurance Fund, and ISIF. Disputes arose between the parties regarding pre-existing impairment, causation, and total and permanent disability. Once she reached medical stability, three physicians evaluated Wernecke and all concluded that despite her injury she was capable of light work, subject to certain physical restrictions. Wernecke settled with her employer and the State Insurance Fund. She later entered into a lump sum settlement agreement (the Agreement) with ISIF, compromising her claim of total and permanent disability for the sum of $6,500.00.

The Agreement states: "Claimant [Wernecke] contends, and the Fund [ISIF] denies, that Claimant is totally and permanently disabled and unable to work and that the Fund is liable for a portion of Claimant's disability due to [pre-existing] conditions." The Agreement continues:

It is the contention of the Fund that there are disputes concerning: (1) whether Claimant suffered injuries as a result of an accident arising out of and in the course of employment on June 28, 1990; (2) whether Claimant is totally and permanently disabled; (3) whether Claimant has a pre-existing permanent physical impairment within the meaning of Section 72-332 Idaho Code; (4) if Claimant has a pre-existing physical impairment, whether said pre-existing impairment was manifest and constituted a hindrance or obstacle to Claimant obtaining employment; (5) whether in the event Claimant is totally and permanently disabled, Claimant has pre-existing impairments within the meaning of Section 72-332, Idaho Code, which contributed to said disability. ...

The Agreement goes on to bar Wernecke from recovering any additional compensation from ISIF for any claim of any nature. Wernecke, who was represented by an attorney, signed the Agreement, which the Commission approved in 1994.¹

Wernecke returned to work under the restrictions recommended by the examining physicians. Unfortunately, she sustained another injury in 2002 while working as a custodian. She filed a complaint against ISIF, her employer, and the State Insurance Fund, asserting that her pre-existing ailments, combined with a new shoulder injury, rendered her totally and permanently disabled. She settled her claims against the State Insurance Fund and her employer. ISIF, on the other hand, argued that the Agreement barred any further recovery from ISIF and filed a petition for a declaratory ruling pursuant to Rule 15 of the Commission's Judicial Rules of Practice and Procedure.² Wernecke argued that the Agreement violated the Worker's Compensation Act (the Act), and was therefore void. The Commission granted ISIF's petition, finding the Agreement valid. It further held that Wernecke's present claim against ISIF was barred by the doctrines of res judicata, collateral estoppel, and quasi-estoppel, and that she had waived her right to pursue another claim against ISIF. Wernecke appeals from the Commission's order.

II.

A. Standard of Review

We do not disturb the Commission's factual findings that are supported by substantial and competent evidence, but we exercise free review over the Commission's legal conclusions. Arel v. T & L Enters., Inc., 146 Idaho 29, 31, 189 P.3d 1149, 1151 (2008).

This case requires us to consider whether the Agreement is violative of the Act. Whether a contract violates a statute is a question of law for the Court to determine from all the facts and circumstances of each case. Trees v. Kersey, 138 Idaho 3, 6, 56 P.3d 765, 768 (2002). A contract made for the purpose of furthering any matter prohibited by statute is illegal, unenforceable, and void. Kunz v. Lobo Lodge, Inc., 133 Idaho 608, 611, 990 P.2d 1219, 1222 (Ct.App.1999) (citing Porter v. Canyon County Farmers' Mut. Fire Ins. Co., 45 Idaho 522, 525, 263 P. 632, 633 (1928)). When a court is faced with an illegal contract, it denies enforcement of the contract.³ Trees, 138 Idaho at 9, 56 P.3d at 771.

In order to determine if the Agreement violates the Act, we must engage in statutory interpretation, which is an issue of law over which we exercise free review. In re Daniel W., 145 Idaho 677, 679, 183 P.3d 765, 767 (2008). Statutory interpretation begins with the literal language of the statute. Paolini v. Albertson's, Inc., 143 Idaho 547, 549, 149 P.3d 822, 824 (2006). The statute should be considered as a whole, and words should be given their plain, usual, and ordinary meanings. Id. When the statutory language is unambiguous, the plain meaning of the statute must be given effect, and the court need not consider rules of statutory construction. Payette River Prop. Owners Ass'n v. Bd. of Comm'rs of Valley County, 132 Idaho 551, 557, 976 P.2d 477, 483 (1999). It should be noted that the court must give effect to all the words and provisions of the statute so that none will be void, superfluous, or redundant. AmeriTel Inns, Inc. v. Pocatello-Chubbuck Auditorium Dist., 146 Idaho 202, 204, 192 P.3d 1026, 1028 (2008).

When interpreting the Act, we must liberally construe its provisions in favor of the employee in order to serve the humane purpose for which it was promulgated. Reese v. V-1 Oil Co., 141 Idaho 630, 633, 115 P.3d 721, 724 (2005); Davaz v. Priest River Glass Co., 125 Idaho 333, 337, 870 P.2d 1292, 1296 (1994). The Act is designed to provide sure and certain relief for injured workers and their families and dependents. Davaz, 125 Idaho at 337, 870 P.2d at 1296; I.C. § 72-201. The primary objective of an award of permanent disability benefits is to compensate the claimant for his or her loss of earning capacity. Davaz, 125 Idaho at 337, 870 P.2d at 1296. The purposes served by the Act leave no room for narrow technical constructions. Reese, 141 Idaho at 633, 115 P.3d at 724.

B. The Agreement Is Violative of the Act

Wernecke argues that Idaho Code section 72-318(2) prohibits any agreement wherein an employee waives his or her rights to compensation for future injuries. ISIF contends that section 72-318 applies only to agreements between employees and employers; that it does not prohibit employees from waiving claims arising from future injuries; and that, with regard to agreements between an employee and ISIF, an employee must be allowed to waive claims arising from future injuries since ISIF only pays compensation once for any covered employee.

1. Idaho Code Section 72-318(2) Applies to All Agreements Purporting To Waive Rights to Compensation Under the Act

Wernecke argues that the Agreement is void under Idaho Code section 72-318(2) because it relieves ISIF from its obligation to her resulting from any future injury or subsequent disability. ISIF asserts that section 72-318 only applies to agreements between employers and employees, and furthermore that it does not prohibit settling future claims. That section reads:

(1) No agreement by an employee to pay any portion of the premiums paid by his employer for workmen's compensation, or to contribute to the cost or other security maintained for or carried for the purpose of securing the payment of workmen's compensation, or to contribute to a benefit fund or department maintained by the employer, or any contract, rule, regulation or device whatever designed to relieve the employer in whole or in part from any liability created by this law, shall be valid. Any employer who makes a deduction for such purpose from the remuneration of any employee entitled to the benefits of this act shall be guilty of a misdemeanor.

(2) No agreement by an employee to waive his rights to compensation under this act shall be valid.

I.C. § 72-318 (emphasis added).

ISIF maintains that the only type of agreement prohibited by section 72-318 is one that relieves an employer of its obligations under the Act. Wernecke argues that ISIF's proffered interpretation is not supported by the case law and, further, that such an interpretation would render subsection (2) meaningless. According to Wernecke, subsection (1) addresses particular contracts between employers and employees, while subsection (2) addresses all agreements by an employee to waive his or her rights to compensation.

The cases on which ISIF relies to support its argument do not consider the issue of whether section 72-318(2) only applies to agreements between an employee and an employer. In Osick v. Public Employee Retirement System of Idaho, 122 Idaho 457, 835 P.2d 1268 (1992), we held that an agreement offsetting the amount an employee was receiving under worker's compensation against the employee's public employee retirement benefits did not violate section 72-318. Id. at 461, 835 P.2d at 1272. The agreement did not relieve the employer from its liability under the Act or otherwise reduce the employee's worker's compensation benefits. Id. Instead, only PERSI (the Public Employee Retirement system) was relieved of part of its liability to pay disability retirement benefits and the relevant Idaho law did not prohibit a reduction of disability retirement benefits. Id. Therefore, the claimant received his full...