Marron v. Industrial Commission

Citations: 176 Ariz. 515; 862 P.2d 888; 146 Ariz. Adv. Rep. 76; 1993 Ariz. App. LEXIS 185Docket: No. 1 CA-IC 92-0175

Court: Court of Appeals of Arizona; August 31, 1993; Arizona; State Appellate Court

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Ruben Marrón challenges an Arizona Industrial Commission decision awarding a present lien credit to the State Compensation Fund based on his gross recovery from a structured settlement following an industrial injury from a 1988 auto accident. Marrón argues that the lien credit should instead be calculated using the present value of his structured settlement, valued at $600,000, rather than the total gross recovery of $921,600. The Fund had previously paid $64,944.25 on Marrón's claim and claimed a lien credit of $644,830.97, calculated by deducting costs, attorney fees, and lien repayment from the gross recovery. The administrative law judge upheld the Fund's calculation, referencing Arizona case law that allows the carrier's lien to extend to the total recovery, including post-judgment interest. The court noted that the structure of the settlement does not alter the lien's applicability, and any perceived inequity should be addressed by the legislature, not the courts. Consequently, the court affirmed the Fund's lien credit amount. After the administrative law judge's decision, Marrón filed a special action, with jurisdiction established under relevant Arizona statutes.

The court independently addresses legal issues, relying on case law to interpret legislative intent from statutory language and context. A liberal interpretation is applied in favor of workers' compensation claimants. The statute at issue, Section 23-1023.A, allows injured workers or their dependents to claim workers' compensation while also pursuing civil action against third-party tortfeasors. Section 23-1023.C establishes that a compensation carrier has a lien on any amount collected from a third party, after deducting reasonable expenses and attorneys' fees. Arizona law permits a carrier to assert a lien credit for potential future workers' compensation benefits against the recoverable amount in third-party actions. The parties agree that case law supports the Fund's entitlement to a lien credit from the claimant's total recovery, but they dispute the definition of "total recovery" in the context of structured settlements. The petitioner argues that since the statute does not explicitly detail how to determine the lien credit for structured settlements, its existence relies on judicial interpretation. Conversely, the Fund asserts that the statutory language is clear and defines "total recovery" as the full third-party recovery, thus allowing for a present lien credit under a structured settlement.

The concept of 'total recovery' is not straightforward, contrary to the Fund's assertion. Jurisprudence indicates that 'total recovery' is clearly defined only in the context of a direct recovery by an individual workers' compensation claimant, where it encompasses all damages, including non-compensable tort damages such as pain and suffering. However, in cases involving segregated recoveries, such as a spouse's loss of consortium, the application of section 23-1023.C lacks clarity. The court previously noted this ambiguity in Martinez v. Indus. Comm’n, deciding to structure the carrier’s lien to align with the statute's intended purpose.

Furthermore, the question of whether post-judgment interest constitutes part of 'total recovery' was resolved, with the court identifying a lack of specification regarding when a lien attaches. The lien is determined to attach only upon actual payment to the claimant. Additionally, the meaning of 'total recovery' becomes ambiguous in structured settlements, where both the gross recovery amount and the timing of payments are critical. The Fund's objections to delayed lien repayment highlight this complexity, as the statute offers no guidance in these circumstances.

The Minnesota Supreme Court's decision in Hagen v. Venem is relevant, as it addressed a similar statutory interpretation. The court concluded that 'total proceeds' refer to the present value of a structured settlement, not merely the gross total. This was based on the understanding that when entering into a structured settlement, the employee receives both immediate cash and the present value of future payments, which reflects what a third-party tortfeasor would need to pay upfront for the settlement amount.

The court clarified that while the statute permits a credit for workers’ compensation carriers, such credit does not extend to returns on the employee’s investment from a lump sum recovery. If the carrier were allowed a credit based on the gross payout from a structured settlement, it would effectively receive a credit for investment returns akin to a lump sum payment, which is not the legislature's intent. The court agreed with the Hagen court's interpretation, emphasizing that the statute does not support an 'investment credit' for structured settlements when no similar credit exists for lump sum payments.

Moreover, the Fund's claim for a present lien credit based on gross future payments was deemed unfair, as it exceeded the present value of the settlement. The court interpreted "total recovery" in A.R.S. 23-1023.C to mean the present value of a structured settlement, ensuring that the carrier’s lien credit reflects the actual value of the settlement at the time the lien attaches. This interpretation prevents inconsistencies between claimants who purchase their own annuities versus those receiving third-party purchased annuities.

Absent a specific agreement between carriers and claimants, carriers cannot claim present lien credits for gross future payments tied to structured settlements; instead, they must either calculate lien credits based on present value or accrue credit as payments are made. The court set aside the award, emphasizing that statutory liens are meant to ensure third-party payments cover compensation expenses while allowing claimants to benefit from any excess recovery. The passage also references Minnesota's reimbursement and credit calculation processes for workers’ compensation carriers, highlighting a similar framework in other states regarding structured settlements and lien credits.