Opinion
W.C. No. 4-501-441
February 25, 2004
FINAL ORDER
The claimant seeks review of an order of Administrative Law Judge Coughlin (ALJ) which determined that the proceeds of a lump sum settlement are subject to attachment pursuant to § 8-43-204(4), C.R.S. 2003. The claimant contends the statute is "substantive," and is not applicable to this claim because the injury occurred before May 31, 2001, the effective date of the statute. We reverse.
The claimant sustained a compensable injury on April 25, 2001. On May 31, 2001, the General Assembly enacted § 8-43-204(4), which provides that if the claimant owes child support and the state Child Support Enforcement Agency (CSE), intervenor in this case, files a notice of administrative lien and attachment with the insurer, "all proceeds of any award, lump sum settlement, and the indemnity portion of any structured settlement shall be subject to said garnishment and attachment." 2001 Colo. Secs. Laws, ch. 214 at 721 (HB 1264).
In October 2002, the Denver CSE filed a lien with the employer's workers' compensation insurer claiming a right to 50 percent of the claimant's benefits to offset past-due court ordered child support. The lien was in the amount of $6,815.83. In December 2002, the claimant and the respondents agreed to settle workers' compensation claim for $25,000. Of this amount, $19,206.98 was paid to the claimant and the remainder was placed in trust pending resolution of the lien issue. At the time the settlement was approved, the total child support obligation was $5,793.83.
The ALJ ruled that § 8-43-204(4) involves a procedural amendment to the Act and applies to all settlements entered into on and after May 31, 2001, the effective date of HB 1264. Further, the ALJ determined the amount of the lien is governed by the date the settlement was approved. Thus, the ALJ concluded that all proceeds of the settlement are subject to attachment.
On review, the claimant contends that § 8-43-204(4) is a substantive amendment to the Act and does not apply to this claim because the date of injury was prior to May 31, 2001. The claimant relies on our decision in McBride v. Denver Mineral Engineers, W.C. No. 4-449-355 (November 27, 2002), as authority. We agree with the claimant's argument.
Rights and liabilities in workers' compensation cases are determined by the law in effect on the date of the claimant's injury. However, procedural changes are applicable to pending cases unless the statute expresses the contrary intent. Kinninger v. Industrial Claim Appeals Office, 759 P.2d 766 (Colo.App. 1988).
Generally, workers' compensation indemnity benefits were not subject to attachment to pay claims for court-ordered child support until 1987. The statute was amended in 1987 to permit such attachment, but (PPD) benefits were excepted from the new law and remained immune from attachment. Section 8-42-124(1), C.R.S. 2003; 1987 Colo. Sess. Laws, ch. 113 at 594; In re Marriage of Hamby, 954 P.2d 635 (Colo.App. 1997). However, in HB 1264, the same bill which enacted § 8-43-204(4), the General Assembly amended § 8-42-124(6), C.R.S. 2003, and for the first time subjected PPD benefits to attachment to pay child support claims.
We held in McBride v. Denver Mineral Engineers, supra, that the portion of HB1264 which amended § 8-42-124(6) was a"substantive" because it affects the right of injured workers' to receive and dispose of workers' compensation PPD benefits free of liens. Prior to the 2001 amendment, the social policy of the General Assembly was to prioritize the rights of injured workers over those of dependent children with respect to PPD benefits because PPD benefits were considered inadequate to compensate for the workers' loss of earning capacity. In re Marriage of Hamby, supra. Under this state of the law, the General Assembly considered garnishment of earnings after the injured worker returned to work to be an adequate remedy for past due child support.
Although McBride did not consider whether § 8-43-204(4) constitutes a substantive amendment which should be given only prospective effect, we consider that case to be instructive. Full and final settlement of workers' compensation cases in a lump sum is permitted by § 8-43-204(1), C.R.S. 2003. In our experience, the vast majority, if not all full and final settlements involve some consideration for payment of, or the surrender of the right to claim PPD benefits, as well relinquishment of the right to reopen the claim to seek PPD benefits in the future. Thus, to the extent § 8-43-204(4) is read to permit a lien against lump sum settlements where the injury occurred before May 31, 2001, a claimant's right to receive compensation for PPD free and clear of any liens would be compromised. Further, such a construction could well discourage settlements since claimants would be reluctant to enter into lump sum settlements with the understanding that proceeds allocated to PPD benefits would be subject to a lien, whereas PPD benefits awarded by admission or order would not.
This result is consistent with the holding in Eight Thousand West Corp. v. Stewart, 37 Colo. App. 372, 546 P.2d 1281 (1976). In Eight Thousand West, the claimant was awarded permanent total disability (PTD) benefits and submitted three requests for compensation in a lump sum. These requests were granted. In 1975, the claimant made an additional request for a lump sum payment which would exceed the statutory limit for PTD lump sum payments in effect at the time of the injury, but would not exceed the amount authorized by a post-injury amendment to the statute. The court held that, in the absence of a specific legislative directive, it would not give retrospective effect to an amendment so as to alter "civil liabilities already incurred." The court observed that insurance rates are computed based on the insurer's potential liability inherent in the statutory scheme which existed at the time of the injury.
Similarly, the claimant's right to receive PPD benefits free of competing claims was inherent in the statutory scheme at the time of the claimant's injury. In our opinion, that substantive right would be negatively affected if the claimant could not settle claims for PPD without having them subjected to the child support lien.
We are not persuaded by the CSE's reliance on Wood v. Beatrice Food Co., 813 P.2d 821 (Colo.App. 1991), for the proposition that the claimant's right to receive settlement proceeds did not "vest" until the settlement was approved. In Wood, the court held the claimant did not have the right to receive PPD benefits while the claimant was imprisoned. The statute authorizing the denial of benefits during imprisonment was enacted after the claimant's injury, and the statute specifically provided that it applied to individuals receiving compensation "who are confined in a jail or prison on or after the effective date of this act." 1986 Colo. Sess. Laws, ch. 71 at 517. The claimant was imprisoned when he was awarded benefits. The court held application of the statute to the claimant's benefits did not constitute retrospective legislation because PPD benefits were not awarded until after the date of imprisonment, and therefore did not "vest" until the "award."
Initially, we note that, unlike the statute interpreted in Wood, HB 1264 does not contain any express legislative statement concerning the date of applicability. Thus, unlike the situation in Wood, declining to give retrospective relief to § 8-43-204(4) would not contravene any specific legislative directive.
Moreover, subsequent to Wood, the courts have been more lenient with respect to the time when the right to PPD benefits is said to "vest." In Nunnally v. Wal-Mart Stores, Inc., 943 P.2d 26 (Colo.App. 1996), the court was called upon to decide when the right to PPD benefits "accrued" for purposes of paying dependent's benefits under § 8-41-503, C.R.S. 2003. The court held that the decedent's right to PPD benefits "accrues" when the right "vests" or comes into existence as an enforceable claim. Thus, the right to PPD benefits "vests" when the claimant reaches maximum medical improvement. See also Estate of Huey av. J.C. Trucking, Inc., 837 P.2d 1218 (Colo. 1992) (right to TTD benefits vested when claimant sustained a compensable injury as defined by statute regardless of date award entered).
In most cases, no full and final settlement will occur until the claimant has reached MMI and the degree of permanent impairment and need for future treatment, if any, becomes ascertainable. Thus, in most cases, the right to PPD benefits will "vest" before a settlement is reached.
For these reasons, we conclude that § 8-43-204(4) represents a substantive amendment to the law of workers' compensation. Therefore, the ALJ's order determining that the lump sum settlement is subject to the lien filed by CSE must be reversed.
IT IS THEREFORE ORDERED that the ALJ's order dated October 30, 2003, is reversed, and the claimant shall be entitled to receive the settlement proceeds free of the lien filed by CSE.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ David Cain
______________________________ Dona HalseyNOTICE
This Order is final unless an action to modify or vacate this Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, Colorado 80203, by filing a Petition to Review with the Court, within twenty (20) days after the date this Order was mailed, pursuant to § 8-43-301(10) and § 8-43-307, C.R.S. 2003. The appealing party must serve a copy of the Petition upon all other parties, including the Industrial Claim Appeals Office, which may be served by mail at 1515 Arapahoe, Tower 3, Suite 350, Denver, CO 80202.
Copies of this order were mailed to the parties at the addresses shown below on February 25, 2004 by A. Hurtado.
David Rodgers, 3124 Racine St., Aurora, CO 80011
ADP Total Source/Auto Transport, 5800 Windward Pkwy., Alpharetta, GA 30005
Royal Indemnity c/o Specialty Risks Services, P. O. Box 221700, Denver, CO 80222-8700
Division of Child Support Enforcement, 1575 Sherman St., 5th floor, Denver, CO 80203-1714
D. Dale Sadler, Esq., 5251 DTC Pkwy., #690, Greenwood Village, CO 80111 (For Claimant)
Heidi Hugdahl, Esq., 3900 E. Mexico Ave., #1000, Denver, CO 80210-3940 (For Respondents)
Laurie A. Schoder, Esq., State Services Section, 1525 Sherman St., 5th floor, Denver, CO 80203 (For Intervener Division of Child Support Enforcement)