Flanigan v. Department of Labor & Industries

869 P.2d 14, 123 Wash. 2d 418, 1994 Wash. LEXIS 130

• Court: Washington Supreme Court
• Decided: March 3, 1994
• Docket: 59298-5; 59307-8
• Status: Published

Opinions

Johnson, J.

In these two consolidated cases we review conflicting decisions from different divisions of the Court of Appeals. In each case, the spouse of a worker killed on the job obtained workers’ compensation benefits and also recovered damages for loss of consortium in a suit against a third party. The Department of Labor and Industries (Department) claimed a portion of each third party recovery as reimbursement for the workers’ compensation benefits it had paid.

We hold the Department’s right to reimbursement does not extend to a spouse’s third party recovery for loss of consortium. We affirm the Court of Appeals, Division Three, in Flanigan v. Department of Labor & Indus., 65 Wn. App. 119, 827 P.2d 1082 (1992), and reverse the Court of Appeals, Division One, in Downey v. Department of Labor & Indus., 65 Wn. App. 200, 827 P.2d 1101 (1992).

I

Facts

Flanigan v. Department of Labor & Indus.

Janice Flanigan’s husband died from injuries suffered while working on a job which was covered by Washington’s workers’ compensation act, the Industrial Insurance Act, RCW Title 51. The Department of Labor and Industries granted her application for surviving spouse’s benefits. Flanigan then sued a third party tortfeasor, both individually and as representative for her husband’s estate. She recovered $189,000 for her own loss of consortium.¹ She also recovered for her husband’s estate an award of $94,468.50 in economic damages.

The Department claimed reimbursement from the proceeds of the entire recovery, including Janice Flanigan’s separate award for loss of consortium. According to the parties’ stipulation, the Department asserted a lien against the entire third party recovery in the amount of $82,522.89; the Department demanded reimbursement in the amount of $39,735.40; and no benefits or compensation were to be paid until the excess recovery of $70,717.37 had been offset.² The Board of Industrial Insurance Appeals (Board) affirmed the Department’s order.

The Spokane County Superior Court reversed the Board on summary judgment. The Court of Appeals, Division Three, affirmed the Superior Court. Flanigan v. Department of Labor & Indus., supra. The Department obtained discretionary review in this court.

Downey v. Department of Labor & Indus.

Charles Downey contracted employment-related asbestosis and obtained workers’ compensation benefits. He and his wife, Miriam Downey, sued third parties and recovered a total award of $184,875 as compensation both for his asbestosis and her loss of consortium. The Department’s policy, which is not being challenged here, is to allocate 80 percent of asbestosis awards to the worker and 20 percent to the spouse for loss of consortium. The Department asserted against Charles Downey’s 80 percent share the Department’s right to be reimbursed for the benefits it had paid him. The Department did not initially assert its reimbursement right against Miriam Downey’s 20 percent share. Nevertheless, after Charles Downey died and Miriam Downey began receiving a pension as a surviving spouse, the Department determined it would use her 20 percent share as a source of reimbursement of her pension payments. According to the parties’ stipulation, the amount of this reimbursement is $11,369.57.

The Board, after an initial proposed order in favor of Miriam Downey, reversed itself and ruled the Department’s right of reimbursement applied to the loss of consortium recovery. The Board’s order was upheld on summary judgment in the King County Superior Court. The Court of Appeals, Division One, affirmed. Downey v. Department of Labor & Indus., supra. Miriam Downey obtained discretionary review in this court.

We have consolidated the two cases for review in this court. The issue in common is whether the Department’s right of reimbursement extends to a surviving spouse’s third party recovery for loss of consortium.

II

Analysis

The Industrial Insurance Act (Act) is based on a compromise between workers and employers, under which workers become entitled to speedy and sure relief, while employers are immunized from common law responsibility. RCW 51.04.010; see McCarthy v. Department of Social & Health Servs., 110 Wn.2d 812, 816, 759 P.2d 351 (1988); Reese v. Sears, Roebuck & Co., 107 Wn.2d 563, 571, 731 P.2d 497 (1987), overruled on other grounds in Phillips v. Seattle, 111 Wn.2d 903, 909-10, 766 P.2d 1099 (1989). The compromise abolishes most civil actions arising from on-the-job injuries and replaces them with an exclusive remedy of workers’ compensation benefits. RCW 51.04.010.

This compromise provides certain advantages to employees and their beneficiaries. An employee or beneficiary may obtain timely compensation and need no longer show the standard elements of a common law cause of action, including fault on the part of the employer. See RCW 51.04.010; Reese, 107 Wn.2d at 571. Instead, an employee or beneficiary generally qualifies for workers’ compensation benefits merely by suffering an injury or disease during the course of an employment covered by the Act. See RCW 51.32.010, .015, .180.

In return, employers are shielded from the full range of damages available to injured workers under the common law. Even when an employee is killed or seriously injured on the job, the employee is entitled only to workers’ compensation benefits, and these benefits are calculated as a lesser percentage of the employee’s salary. See RCW 51.32.050, .060, .090.

Benefits calculated in this manner by their very nature do not provide full compensation for the damages incurred. At the most, the benefits cover only certain out-of-pocket expenses, such as a portion of lost wages. They cannot take into account noneconomic damages, such as an employee’s own pain and suffering or a spouse’s loss of consortium.³ The extent of a spouse’s loss of consortium depends in no way upon the employee’s salary level.

Employees and their beneficiaries are limited, for the most part, to the receipt of these workers’ compensation benefits. An employee cannot sue the employer and neither can the employee’s beneficiaries. Thus, an employer is immune from a suit brought by an employee’s spouse, not only when the spouse is attempting to recover damages suffered by the employee, but also when the spouse suffers separate and distinct damages, such as a loss of consortium. See Provost v. Puget Sound Power & Light Co., 103 Wn.2d , 696 P.2d 1238 (1985); Ash v. S.S. Mullen, Inc., 43 Wn.2d 345, 261 P.2d 118 (1953), overruled on other grounds in Lundgren v. Whitney’s Inc., 94 Wn.2d 91, 614 P.2d 1272 (1980).

Yet a spouse suffering loss of consortium damages has one additional avenue for recovery. As an exception to the Act’s abolition of civil actions, the Legislature enacted RCW 51.24, authorizing employees and their beneficiaries to increase their compensation by suing third parties under traditional tort principles. RCW 51.24.030. If the employee or beneficiary prevails in a third party action, the Department is entitled to a large portion of the recovery. Under RCW 51.24.060(1)(a)-(c), the recovery is divided and distributed in the following order: (1) attorney fees are paid; (2) 25 percent of the balance goes to the plaintiff employee or beneficiary; and (3) the Department "shall be paid the balance of the recovery made, but only to the extent necessary to reimburse the [Department ... for compensation and benefits paid”. Former RCW 51.24.060(1)(c). Any remaining balance is paid to the employee or beneficiary.⁴ RCW 51.24.060(1)(d).

Allowing these third party actions serves two functions. First, it spreads responsibility for compensating injured employees and their beneficiaries to third parties who are legally and factually responsible for the injury. Because third parties are not part of the compromise underlying the Act, they are not entitled to immunity from civil actions. Second, it permits the employee to increase his or her compensation beyond the Act’s limited benefits. See Maxey v. Department of Labor & Indus., 114 Wn.2d 542, 549, 789 P.2d 75 (1990); see also O’Rourke v. Department of Labor & Indus., 57 Wn. App. 374, 382, 788 P.2d 17, review denied, 115 Wn.2d 1002 (1990); Bankhead v. Aztec Constr. Co., 48 Wn. App. 102, 107-08, 737 P.2d 1291 (1987).

Allowing the Department to obtain reimbursement from the proceeds of a third party recovery likewise serves two roles, ensuring that:

(1) the accident and medical funds are not charged for damages caused by a third party and (2) the worker does not make a double recovery. In other words, the worker, under [the third party statute], cannot be paid compensation and benefits from the Department and yet retain the portion of damages which would include those same elements.

(Italics ours.) Maxey, 114 Wn.2d at 549; see also Clark v. Pacificorp, 118 Wn.2d 167, 185, 822 P.2d 162 (1991).

It is the concern over "double recovery” which is at issue here. The Department argues disallowing its right of reimbursement will allow claimants to receive a double recovery because they will receive workers’ compensation benefits as well as the undiminished third party recovery.

We reject the Department’s argument. The italicized language from Maxey reveals the fallacy in the Department’s position. As Maxey demonstrates, the employee receives a double recovery only if the third party recovery is for damages which are already compensated for by workers’ compensation benefits. Yet, as we have already discussed, workers’ compensation benefits do not compensate employees or their beneficiaries for noneconomic damages such as loss of consortium. Because the Department’s payment of benefits does not cover damages for loss of consortium, a beneficiary recovering these damages from a third party does not receive a "double recovery”. Rather, workers’ compensation benefits compensate for certain damages, and a recovery for loss of consortium compensates for separate damages. See Reichelt v. Johns-Manville Corp., 107 Wn.2d 761, 776, 733 P.2d 530 (1987) (characterizing loss of consortium as an "original injury” which is the subject of a separate and independent cause of action).

To the contrary, allowing the Department to reach this recovery would give an unjustified windfall to the State, at the expense of individual beneficiaries. Under the Department’s interpretation, the Department would be entitied to share in damages for which it has provided no compensation. We do not interpret statutes to reach absurd and fundamentally unjust results. See, e.g., Ski Acres, Inc. v. Kittitas Cy., 118 Wn.2d 852, 857, 827 P.2d 1000 (1992); In re Swanson, 115 Wn.2d 21, 28, 804 P.2d 1 (1990).

With these principles in mind, we turn to the precise statutory language here at issue. RCW 51.24.060 is phrased in terms of "reimbursing” the Department. The Act itself does not define this term. Absent a contrary legislative intent, we construe statutory language according to its plain and ordinary meaning. In re Estate of Little, 106 Wn.2d 269, 283, 721 P.2d 950 (1986). The term "reimburse” means "to pay back (an equivalent for something taken, lost, or expended) to someone : REPAY”. Webster’s Third New International Dictionary 1914 (1986). Here, the Department did not pay any compensation for loss of consortium. One cannot be "paid back” compensation one never paid in the first place.

Other courts, too, have denied reimbursement from recoveries for loss of consortium. See generally 2A Arthur Larson, Workmen’s Compensation § 74.36 (1988) (citing Michigan, Minnesota and Wisconsin as denying reimbursement, Illinois as allowing reimbursement, and Indiana as allowing reimbursement when the allocation of the third party recovery between loss of consortium claims and other claims is a transparent attempt to avoid reimbursement); see also Dionne v. Libbey-Owens Ford Co., 621 A.2d 414 (Me. 1993).

For these reasons, we hold the Department’s right of reimbursement does not extend to a spouse’s third party recovery for loss of consortium, although on different grounds than did Division Three in Flanigan. Division Three concluded third party actions for loss of consortium are not covered by the Act and its exclusivity clause, RCW 51.04.010; therefore, the Department had no statutory right to reimbursement. Under our holding, third party actions for loss of consortium are indeed covered by the Act, but the statutory right of reimbursement under RCW 51.24.060 does not reach these recoveries.

We must also address the issue of attorney fees in the Downey case. Miriam Downey requested attorney fees from the trial court. She renewed her request in her brief to the Court of Appeals, and again in her petition for review in this court.

Whether attorney fees are to be awarded in these cases is governed by RCW 51.52.130. See Carnation Co. v. Hill, 115 Wn.2d 184, 187, 796 P.2d 416 (1990). The relevant portion of the statute reads as follows:

Attorney and witness fees in court appeal.... If the decision and order of the [Board of Industrial Insurance Appeals] is reversed or modified and if the accident fund is affected by the litigation then the attorney’s fee fixed by the court for services before the court only . . . shall be payable out of the administrative fund of the department.

RCW 51.52.130.

The use of the term "court” in this statute has been interpreted to refer only to superior courts, not to higher courts of appeal. See Siegrist v. Simpson Timber Co., 39 Wn. App. 500, 504, 694 P.2d 1110, review denied, 103 Wn.2d 1037 (1985); O’Brien v. Industrial Ins. Dep’t, 100 Wash. 674, 681, 171 P. 1018 (1918); Boyd v. Pratt, 72 Wash. 306, 308, 130 P. 371 (1913). The statute has been amended many times since this interpretation was first given, but none of the amendments have been material to this point. See Siegrist, 39 Wn. App. at 504. Accordingly, attorney fees are allowable under RCW 51.52.130 only at the superior court level.

Under RCW 51.52.130, attorney fees are recoverable at the superior court level only if (1) the court reverses or modifies the Board’s order, and (2) the litigation affects the accident fund. Because we hold today the Superior Court should have reversed the Board’s order, Downey has met the first requirement.

Not as clear is whether the accident fund is affected by our decision. The parties have not briefed whether the accident fund would be affected by a reversal of the Board’s decision in this case. According to dictum in one of our cases, the accident fund is necessarily affected in any case where the employer is insured through the state fund and the court increases employee benefits. Johnson v. Tradewell Stores, Inc., 95 Wn.2d 739, 742, 630 P.2d 441 (1981). If this is indeed true, then a decision denying reimbursement of employee benefits would presumably have this effect as well. Our own review of 'the Act, however, does not reveal clear support for this proposition. The Act does not expressly state whether the Department’s reimbursement in this case would have gone into the accident fund or some other fund.

Accordingly, we remand Downey’s case for the Superior Court to make this determination. Because RCW 51.52.130 requires the superior court to fix the amount of the attorney fees, we instruct the parties to address the issue of the effect on the accident fund as part of their arguments regarding the fixing of the fee. If the superior court judge determines the accident fund is affected, then the judge will proceed to determine the proper amount of the attorney fees to be awarded. If the judge determines otherwise, then no attorney fees are to be awarded.

Ill

Conclusion

In summary, we affirm the Court of Appeals decision in Flanigan. We reverse the Court of Appeals decision in Downey and remand the case to the Superior Court for a decision as to attorney fees.

Utter, Brachtenbach, Dolliver, and Smith, JJ., concur.

1 We use the general term "loss of consortium” in this opinion to include its typical components of " 'loss of society, affection, assistance and conjugal fellowship, and . . . loss or impairment of sexual relations’ in the marital relationship.” Reichelt v. Johns-Manville Corp., 107 Wn.2d 761, 773, 733 P.2d 530 (1987) (quoting Ueland v. Pengo Hydra-Pull Corp., 103 Wn.2d 131, 132 n.1, 691 P.2d 190 (1984)).

2 he calculations underlying these figures can he found in Flanigan, 65 Wn. App. at 120 n.1.

3 We disapprove of the dictum to the contrary in Gillis v. Walla Walla, 94 Wn.2d 193, 196, 616 P.2d 625 (1980), a case construing the Washington Law Enforcement Officers’ and Fire Fighters’ Retirement System Act, not the Industrial Insurance Act.

4 thereafter, the employee or beneficiary is not entitled to receive additional workers’ compensation benefits until the additional benefits equal the remaining balance of the recovery paid to the employee or beneficiary. RCW 51.24-.060(1)(e).