Clark v. PacificorpClark v. Pacificorp
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Two cases have been consolidated for appeal to this court. Clark v. Pacificorp comes to us upon certification from the Federal District Court for the Eastern District of Washington. Whitten v. Associated Building Components was tried in state court. The Department of Labor and Industries appealed to the Court of Appeals, and Ms. Whit-ten moved for consolidation with Clark v. Pacificorp because three of the certified questions were identical to the issues involved in her case. Both cases involve third party tort litigation under the Industrial Insurance Act, and in both cases the Department of Labor and Industries (hereinafter the Department) appeared to protect its interests.
The federal court certified five questions concerning the implication of the tort reform act of 1986 on the third party chapter of the Industrial Insurance Act. The central issue is: does
In
Clark v. Pacificorp,
Ms. Clark filed a wrongful death action against Pacificorp following the death of her husband due to a work-related accident. At the time of his death, Mr. Clark was employed by Trees, Inc. Trees, Inc., was an
Clark and Pacificorp entered settlement negotiations and agreed that, pursuant to a finding by the trier of fact that the employer (Trees, Inc.) was at fault, Ms. Clark would not be required to reimburse the Department for compensation benefits paid to date and would continue to receive benefits. The Department filed a special appearance memorandum to contest the parties’ suggested plan. The Department maintains that, as trustee of the state compensation funds, it is entitled to be made a party to this action and to be afforded notice and an opportunity to be heard. The Department further contends that because the plaintiff failed to comply with the notice requirements trader the Industrial Insurance Act in the original action, 1 she should not be entitled to eliminate the reimbursement requirement.
In
Whitten v. Associated Building Components,
Ms. Whitten filed an action against Associated Building Components,
2
as the general contractor at the jobsite, to recover damages for the death of her husband. Mr. Whitten was employed by Krueger Sheet Metal Company, which had subcontracted with Associated Building Components to install roofing on an office building. Krueger is immune from suit under the Industrial Insurance Act. At the time of filing, Ms. Whitten did not send the statutory notice to the Department. Ms. Whitten settled with Associated Building Components. She then filed a motion to eliminate the
In Clark v. Pacificorp, the federal court found, and the plaintiff conceded, that the notice provisions of the Industrial Insurance Act were not satisfied. However, it also found that the Department was on notice of plaintiffs election to proceed against a third party and of plaintiff s retention of counsel in this matter. Furthermore, the court allowed Clark to refile her action, thereby curing any defect in notice. Likewise in Whitten v. Associated Building Components, while the plaintiff did not comply with the statutory notice requirements, the Department had actual notice of the third party action and eventually filed a motion to intervene, which was granted.
Washington‘s Industrial Insurance Act is the exclusive remedy for a worker who is injured while in the course of employment.
The heart of the controversy in both cases concerns the parties’ different interpretations of the effect of the tort reform act of 1986 on the Industrial Insurance Act‘s third party chapter. Two new sections were added under the tort reform act — Laws of 1986, ch. 305, § 401 (codified at
The federal court has certified five questions to us concerning these two statutes. We will address each one separately.
I
Did the failure of the plaintiffs to comply with the notice requirements of
(1) ... If an action is filed by the . . . beneficiary, a copy of the complaint must be sent by registered mail to the department . . .
(2) A return showing service of the notice on the department . . . shall be filed with the court . . ..
(Italics ours.) This section does not specify “when” the notice must be sent. However,
The statute provides the beneficiary shall give notice of the third party action to the Department when the action is filed. The word “shall” is presumed to be used in the imperative sense. Singleton v. Frost, 108 Wn.2d 723, 728, 742 P.2d 1224 (1987) (citing 2A N. Singer, Statutory Construction § 57.03 (4th ed. 1984)).
Furthermore,
We believe the notice provision is mandatory. While it is not a prerequisite for establishing jurisdiction between the beneficiary and the third party, it is a condition precedent for establishing jurisdiction to apply
II
Did the filing of the new action (United States District Court cause CS-90-097-JLQ), coupled with the Department‘s timely receipt of a copy of the new complaint pursuant to
The respondents contend that they have substantially complied with the notice requirement, no prejudice has resulted, and that it would be unjust, as well as impractical, to ignore these actions and begin anew:. We agree.
The purpose of the notice requirement is to protect the Department‘s interest as trustee of the compensation fund. The courts of this state have long protected this interest.
See Arthun v. Seattle,
137 Wash. 228, 242 P 16 (1926) (it is for the benefit of the State, in administering the accident fund, that the third party election was created);
In re Estate of Kinsman,
44 Wn. App. 174, 721 P.2d 981 (1986) (Department can refuse to approve a settlement which is deficient in repaying the Department‘s hen);
Maxey v. Department of Labor & Indus.,
114 Wn.2d 542, 547, 789 P.2d 75 (1990) (“The entire scheme of
The statutory notice is also designed to protect the Department‘s property interest in its lien. See Maxey, 114 Wn.2d at 546-47 (the Department‘s lien is a property interest). Before the Department may be deprived of its property rights, the statute requires notice reasonably calculated to apprise it of the pendency of an action which might deprive it of those rights. See Peck, Washington‘s Partial Rejection and Modification of the Common Law Rule of Joint and Several Liability, 62 Wash. L. Rev. 233, 255 (1987) (loss of the hen will adversely affect employer‘s experience rating, which loss without notice and an opportunity to be heard offends the concept of due process of law).
The purpose behind the notice requirement is met in both Clark v. Pacificorp and Whitten v. Associated Building Components. Both plaintiffs filed the requisite “notice of election to pursue third party” with the Department. In both cases, the Department was aware of the third party litigation through correspondence with plaintiffs’ attorneys.
In
Clark v. Pacificorp,
the federal court allowed the plaintiff to dismiss without prejudice and refile a new action. The court then consolidated the old and new cases as a matter of judicial economy. In the new action, Clark timely served the Department in accordance with
In Whitten v. Associated Building Components, the court entered findings of fact and conclusions of law, allocating fault to the employer, and an order granting leave to intervene. The Department appealed, and Ms. Whitten moved to have the case consolidated with Clark v. Pacificorp. Again, the Department did in fact have notice of the proceedings, participated to a certain extent in the action, and is now a named party. Although not timely served with a copy of the complaint, this does not preclude actual notice, nor does it create prejudice.
We have recently reaffirmed:
[T]he guiding principle in construing provisions of the Industrial Insurance Act is that the Act is remedial in nature and is to be liberally construed in order to achieve its purpose of providing compensation to all covered employees injured in their employment, with doubts resolved in favor of the worker.
Dennis v. Department of Labor & Indus., 109 Wn.2d 467, 470, 745 P.2d 1295 (1987).
m
Do
“[T]he primary purpose of the provision permitting allocation of fault to an entity with immimity was to provide relief for defendants in workers’ compensation third party tort actions“. Peck, 62 Wash. L. Rev. at 245. Another purpose behind
Subjecting every entity (the beneficiaries, the employers, and the third party defendants) to a determination of fault is fair in light of the interests at stake, the plaintiffs’ interests in recovering damages, and the Department‘s interest in protecting its lien.
Participation by each entity ensures a just allocation of fault. The plaintiff receives the compensation benefits and the third party damages. Tb the extent the third party‘s share of fault exceeds that of the employer, the plaintiff must reimburse the Department. If the employer‘s share of fault is greater than that of the third party, the plaintiff is not required to reimburse the Department. 6
The language of
Having established the trier of fact is required to conduct a “determination of fault” hearing, we now address the nature and extent of such a hearing. In view of the fact
In determining the percentages of fault, a trial by jury is not required. In
Glover,
we indicated the trial court was not required to conduct a minitrial in making a reasonableness determination. We stated that in conducting a reasonableness hearing, the trial judge has discretion “to weigh each case individually.” 98 Wn.2d at 718. In the present case, this discretion can be applied to the judge‘s decision as to the use of evidence, affidavits, depositions and five testimony during the hearing. The following guidelines for determination of fault hearings under
The parties shall comply with the notice requirements for third party actions as required byRCW 51.24.030(2) and .080(1) and (2) and as further defined in this opinion.
Before the worker and third party enter a settlement agreement, a hearing shall be held to determine the fault of all at-fault entities. The procedures set forth inRCW 4.22.060(1) shall be followed.
The judge has discretion as to the evidence and testimony (whether by affidavit, deposition or five witnesses) presented during the hearing.
The judge‘s decision must be reasonable and supported by substantial evidence.
The purpose of the hearing is to allocate fault among all at-fault entities.
The determination is to be made by a judge, and not by juiy. SeeRCW 4.22.060(1) , which provides the “court” is to conduct a reasonableness hearing.
Does a finding of employer or coemployee fault pursuant to
In attempting to determine the intent of the Legislature, where we are uncertain from examining the language of the act itself, new legislation is presumed to be in line with prior judicial decisions in a field of law. Glass v. Stahl Specialty Co., 97 Wn.2d 880, 888, 652 P.2d 948 (1982). Washington has adopted comparative negligence; has a policy of protecting state compensation funds; and has a statutory scheme of providing adequate compensation, not full tort damages, in work-related injuries. Therefore, we shall examine this statute in light of the history of the Industrial Insurance Act, the underlying purposes of the third party chapter, the principles of comparative negligence and tort reform, and finally, we shall look at how other states have dealt with the issue.
An elimination of the right to reimbursement is contrary to the longstanding purposes of the Industrial Insurance Act. The act was created to provide sure and certain relief for injured workers and their beneficiaries. It was created through compromise. Both employees and employers gave up their common law rights and defenses in exchange for a no-fault system of compensation. The employer received immunity from suit, and the employee received compensation and benefits deemed by the Legislature to be sufficient recompense. In 1957, the Legislature amended the act to allow injured workers to sue third parties. At the same time, it protected the state funds by providing for reimbursement.
8
Washington courts have
Likewise, the courts have upheld the Department‘s right to reimbursement. This court recently held in Maxey v. Department of Labor & Indus., 114 Wn.2d 542, 789 P.2d 75 (1990) that the third party statute accomplishes two things: it allows a worker to recover full damages from the party who is legally and in fact responsible, and it permits the worker to receive certain compensation and benefits,
but mandates reimbursement to the Department so that (1).. . 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 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.) 114 Wn.2d at 549. The underlying purposes of the act are defeated if the right is eliminated, and the plaintiff may be made more than whole at the expense of the compensation fund.
The principle of comparative negligence requires a finding of reduction, not ehmination, of the statutory right to reimbursement. “[T]he only satisfactoiy method of dealing with a multiple party accident through comparative negligence is to bring all the parties into court in a single action, apportion the fault and then allocate the damages based on this apportionment.”
Comparative Negligence, Recent Washington Legislation,
49 Wash. L. Rev. 705, 715 (1974). Washington has adopted “pure” comparative negligence.
Under the tort reform act of 1986, the Legislature abolished joint and several liability. It also incorporated a section of the act,
The tort reform act of 1986 injects an element of fault into a traditionally no-fault system. Therefore, it should be narrowly construed. A broad construction, elimination of the Department‘s hen, would abolish 80 years of workers’ compensation law. A narrow construction,- reduction of the hen, carries out two longstanding principles of workers’ compensation law: fair and adequate compensation of the worker, 9 and protection of the state workers’ compensation fund. It also furthers the principles of tort reform: to “create a fairer and more equitable distribution of liability among parties at fault.” Laws of 1981, ch. 27, § 1.
The respondents contend there is no indication the Legislature intended to reduce the right to reimbursement. The
The article, in effect, supports both parties’ arguments in this case. The article indicates the right to reimbursement is eliminated, thereby providing support for respondents. However, the article also supports the Department‘s contention that elimination of the right would be contrary to the longstanding purposes behind the Industrial Insurance Act. The article points out several flaws in the act. Our interpretation resolves the ambiguity and eliminates the flaws.
To further support their contention, respondents cite certain comments made by representatives during a House floor debate. These comments do not resolve the ambiguity
In dealing with the issue of apportioning fault to an employer in workers’ compensation third party litigation, the courts of other states have adopted various approaches. Relying on comparative negligence principles, California holds that where an employer is negligent, his right to reimbursement is reduced in proportion to his share of fault. The California Supreme Court, in Associated Constr. & Eng‘g Co. v. Workers’ Comp. Appeals Bd., 22 Cal. 3d 829, 587 P.2d 684, 150 Cal. Rptr. 888 (1978), stated that comparative negligence is “a ‘system under which liability for damage will be borne ... in direct proportion to . . . respective fault‘“. 22 Cal. 3d at 842 (quoting Li v. Yellow Cab Co., 13 Cal. 3d 804, 532 P.2d 1226, 119 Cal. Rptr. 858, 78 A.L.R.3d 393 (1975)). Therefore, the court reasoned, a third party tortfeasor should be allowed to plead the employer‘s negligence as a partial defense, and the trier of fact should determine the employer‘s degree of fault.
The court should then deduct the employer‘s percentage share of the employee‘s total recovery from the third party‘s liability — up to the amount of the workers’ compensation benefits assessed against the employer. Correspondingly, the employer should be denied any claim of reimbursement — or any lien ... to the extent that his contribution would then fall short of his percentage share of responsibility for the employee‘s total recovery.
(Footnote omitted.) 22 Cal. 3d at 842. See also Kemerer v. Challenge Milk Co., 105 Cal. App. 3d 334, 164 Cal. Rptr. 397 (1980) (injured employee‘s negligence would not be imputed to otherwise nonnegligent employer to reduce amount of reimbursement rights).
Some jurisdictions allow “contribution” by a negligent employer in the form of offsetting damages by the amount of compensation benefits paid.
See Leonard v. Johns-Manville Sales Corp.,
309 N.C. 91, 305 S.E.2d 528 (1983). Idaho
Kansas has enacted a statute which reduces an employer‘s hen against the judgment in a third party action by the percentage the employer has been adjudged to be at fault.
See
Some other jurisdictions have adopted a different rule, holding that the statutory right to reimbursement is not affected by the employer‘s negligence. In
Taylor v. Delgarno Transp., Inc.,
100 N.M. 138, 667 P.2d 445 (1983), the New Mexico Supreme Court held “[although a jury may apportion liability to an employer under the ‘pure’ comparative negligence standard,
none
of this apportioned negligence
shall
reduce the employer‘s right of reimbursement, regardless of the jury‘s finding.” 100 N.M. at 141. The court declined to follow the California decision in
Associated Constr. & Eng‘g Co. v. Workers’ Comp. Appeals Bd., supra,
because California‘s workers’ compensation case law and statutes are different than New Mexico‘s. In
Stroud v. Dorr
Rather, we find persuasive the reasoning of the California court. 11 The central objective is to allocate responsibility between a negligent employer and a third party tortfeasor (to the extent consistent with the employer‘s statutory immunity from tort liability), and prevent the employer from taking advantage of his own wrong. Associated Constr. & Eng‘g Co. v. Workers’ Comp. Appeals Bd., supra. Idaho and Alaska have also found this reasoning to be persuasive.
We can only conclude that
Under this method, the employer‘s share of fault is measured against the amount of benefits and compensation paid (benefits paid), and the right to reimbursement is reduced accordingly. This is accomplished by determining the employer‘s share of damages (which is computed by multiplying the plaintiff‘s total amount of damages by the employer‘s percentage of fault), and comparing that amount against the dollar amount of the benefits paid (the Department‘s lien). 12
V
Does
Const. art. 1, § 12 provides: “No law shall be passed granting to any citizen, class of citizens, or corporation other than municipal, privileges or immunities which upon the same terms shall not equally belong to all citizens, or corporations.” The parties do not make an argument that article 1, section 12 and the equal protection clause of the Fourteenth Amendment should be construed independently based upon the factors set out in State v. Gunwall, 106 Wn.2d 54, 720 P.2d 808, 76 A.L.R.4th 517 (1986). Therefore, we will only consider the federal argument. 13 Ford Motor Co. v. Barrett, 115 Wn.2d 556, 568-69, 800 P.2d 367 (1990). The central command of the federal equal protection clause is that the government may not treat classes of people differently unless there is a reasonable basis for the differentiation. Haddenham v. State, 87 Wn.2d 145, 550 P.2d 9 (1976).
The standard of review in workers’ compensation cases is minimum scrutiny, or the rational basis test.
Skagit Motel v. Department of Labor & Indus.,
107 Wn.2d 856, 859, 734 P.2d 478 (1987). A challenge to a legislative classification under minimum scrutiny triggers three questions: (1) Does the classification apply alike to all members within the designated class? (2) Do reasonable grounds exist to support the classification‘s distinction between those within
The Department claims that
A statutory classification dealing with economic legislation is presumed to be rational and the burden is on the challenger to prove that it is unconstitutional.
Skagit,
107 Wn.2d at 860. The Department has failed its burden of proof. Furthermore, a rational basis
does
exist for singling out employers and coemployees: under the Industrial Insurance Act they are immune from suit.
The classification under
To summarize then, we answer the certified questions as follows:
1. The failure of the plaintiffs to comply with the notice requirements of
2. The filing of the new action coupled with the Department‘s timely receipt of a copy of the complaint pursuant to
3.
4. A finding of employer or coemployee fault pursuant to
5.
Dore, C.J., Brachtenbach, Dolliver, Andersen, and Smith, JJ., and Callow, J. Pro Tem., concur.
After modification, further reconsideration deified December 16, 1991.
Notes
following the certification hearing, plaintiff moved for voluntary dismissal without prejudice. The motion was granted. Plaintiff then refiled her action and served the required notice upon the Department. The federal court consolidated the new case with the original.
Because Associated Building Components has settled with Ms. Whitten, it is not a party to this appeal.
Hereafter, we will refer only to beneficiaries, although the act applies equally to both workers and beneficiaries. Likewise, all references to the Department also apply to self-insurers.
The Department contends that it was harmed by the fact that the plaintiff and Pacificorp had a time advantage in collecting evidence and interviewing witnesses. While the Department did not receive the requisite notice of the third party action, it was aware of the accident, it had received Clark‘s notice of intent to sue the third party, and it did have an opportunity to conduct discovery. The Department sent a safety inspector to investigate the accident. It could have, at that time or anytime thereafter, questioned witnesses and obtained evidence.
This result is consistent with the Legislature‘s intent to have a third party tortfeasor replenish the state fund where feasible. This intent is evidenced by the fact that
For example, subsection (c) requires the Department to pay its proportionate share of attorney fees. The Legislature could not have intended to totally eliminate the right to reimbursement yet still require the Department to pay a proportionate share of fees.
It further protected the state funds by requiring written approval by the Department if any settlement would result in a deficiency to be satisfied out of state funds.
The goal of the Industrial Insurance Act is to provide “sure and certain relief” to injured workers and their families,
not
to award full tort damages.
The problem may be eliminated when the third party chapter is read as a whole. Notice must be provided to the Department when a third party action is filed. See discussion under section I.
While we adopt the reasoning of the California court, we do not adopt the method. California‘s workers’ compensation scheme is different from Washington‘s. It provides the employer a “subrogation interest“, which includes a credit against future payments, while Washington law provides a “reimbursement right“; California allows three methods of insurance while Washington allows two; and California retains joint and several liability whereas Washington has significantly modified the doctrine. Thus there is reason to apply a different method in this state. Our formula for reducing the Department‘s right to reimbursement is slightly different from the California method, based on the differences between the two states’ workers’ compensation schemes.
To illustrate: where the worker‘s damages are $100,000, the employer has been determined to be 10 percent at fault, and the Department has paid $30,000 in benefits, the following formula applies:
Employer‘s share of fault: $100,000 (total damages) x 10 percent = $10,000:
$30,000 (benefits paid)
-10,000 (reduction for employer fault)
$20,000 (amount to be reimbursed)
Where the benefits paid are less than the employer‘s share of fault, the Department must continue to pay benefits until the total paid equals the employer‘s share of fault:
$30,000 (benefits paid)
-40,000 (reduction for employer fault)
Department owes $10,000 in benefits.
And where the employer‘s share of fault exceeds the third party‘s share of fault, the right to reimbursement is eliminated.
We note it is not necessary to include the worker’s total entitlement in the formula. As shown in the second example, the Department must pay benefits until the amount paid corresponds to the employer‘s share of fault. Under
We have in the past recognized that article 1, section 12 may provide broader protection than that provided in the Fourteenth Amendment equal protection clause. Darrin v. Gould, 85 Wn.2d 859, 868, 540 P.2d 882 (1975). However, where, as here, the parties have not briefed the issue nor asked us to consider it, we interpret article 1, section 12 using the federal analysis.