Opinion
W.C. No. 3-998-279.
October 27, 2011.
FINAL ORDER
The respondents seek review of an order and corrected order of Administrative Law Judge Friend (ALJ) dated May 23, 2011, and June 16, 2011, respectively, that disallowed the respondent-insurer Colorado Insurance Guaranty Association (CIGA) from taking a credit or offset on the interest earned from the claimant's chosen investments arising from his third-party settlements. The claimant seeks review of the ALJ's order and corrected order that allowed CIGA to take a credit or offset on the interest embedded in the court-ordered periodic payments made by the medical malpractice carrier, COPIC, arising from the claimant's third-party lawsuit. We affirm the ALJ's order disallowing CIGA to take a credit on the claimant's chosen investments and reverse the ALJ's order allowing CIGA to take a credit for interest earned on the court-ordered periodic payments.
The pertinent facts are taken from the record and from the ALJ's findings of fact. On October 5, 1990, the claimant sustained a work injury of traumatic amputation of his left index finger while in the course and scope of his employment for employer. Shortly thereafter, the claimant developed reflex sympathetic dystrophy (RSD) in his left upper extremity.
On August 8, 1995, the claimant was undergoing a Bier block for his RSD, when the physician administering the block accidentally injected the claimant with phenol, a toxic substance. On August 10, 1995, the claimant was undergoing surgery to correct the effects of the injection. During this surgery, the claimant was over-sedated, resulting in cardiac arrest and a profound anoxic brain injury and memory loss. Since this time, the claimant has been unable to work and has required 24 hour supervision and residence at an assisted living facility for brain injured individuals. The insurer was ordered to pay necessary medical treatment for the claimant and to pay permanent total disability benefits commencing August 10, 1995.
Subsequently, through his conservator, the claimant brought lawsuits against the two physicians and the hospital that were involved in his previous medical care. The claimant eventually settled his lawsuits against the two physicians. Pursuant to the trial court's orders, the proceeds from these settlements against the physicians were deposited into accounts in which the claimant's conservator chose to invest, and the monies earned interest and other returns.
The claimant fully satisfied the predecessor net lien of CIGA, the employer's workers' compensation carrier. Since the satisfaction of CIGA's net lien, neither CIGA nor its predecessor has paid any workers' compensation benefits to the claimant.
On April 29, 1998, a jury entered a verdict in favor of the claimant and against the hospital. Pursuant to the Health Care Availability Act (HCAA), C.R.S. § 13-64-101 et seq., the verdict was required to be reduced to present value. The court entered judgment for the present value of future lost earnings in the amount of $133,806.98 payable in periodic payments terminating on December 31, 2024. The court also entered judgment for the present value of future medical expenses and noneconomic losses in the amount of $1,020,589.90 payable in periodic payments and terminating upon the death of the claimant. Ex. 7.
After the jury verdict was reduced to a present value judgment and attorneys' fees were paid, the trial court requested that the parties submit competing annuities based on the judgment amounts to be paid over specified time periods. The trial court's request for a proposed form of funding for future periodic payments was made pursuant to § 13-64-207, C.R.S. of the HCAA. The trial court eventually accepted the annuities proposed by the hospital, which was that $1,020,589.90 was available to purchase the future medical expenses and noneconomic losses annuity, and $133,806.98 was available to purchase the future lost earnings annuity. This resulted in the hospital's liability carrier, COPIC, being ordered to fund periodic payments of $6,650.14 per month for life beginning November 17, 1998, for payment of future medical expenses and noneconomic losses, including interest (medical annuity). COPIC also was ordered to fund $792.15 per month for future lost earnings from November 17, 1998, to December 31, 2024, including interest (earnings annuity). Embedded in the stream of payments of each of the two annuities is the principal of each present value judgment amount, plus interest earned.
Thereafter, the claimant requested an order compelling CIGA to begin payments for permanent total disability and medical benefits on a continuing basis and to pay the claimant past due benefits. In his request for relief, the claimant argued that he had used up all compensable third-party proceeds and was eligible for reinstatement of workers' compensation medical and disability benefits. Additionally, the claimant requested, in part, entry of an order disallowing CIGA from offsetting any of the interest earned or any interest contained in the annuity payments for loss of future earnings and medical costs.
A hearing was held on March 11, 2011, on whether CIGA was entitled to take a credit or offset against the interest and returns that the claimant's investments earned and whether CIGA was entitled to take a credit or offset against the interest embedded in the medical and earnings annuities. At the hearing, the respondents argued that it was entitled to take a credit or an offset against all income that has been generated from the claimant's investments, including the embedded interest from the earnings and medical annuity payments. During the hearing, the claimant's economic and statistics expert, Dr. McNulty, testified on cross-examination, that in order to meet the obligation to pay the claimant the total amounts required per the trial court's order, there was a principal component and an interest component included within the amounts. Tr. at 80-86. According to Dr. McNulty, the interest component had to be included in the monthly payouts to achieve the monthly payment that the trial court ordered to be paid to the claimant. Tr. at 86.
On May 23, 2011, the ALJ entered his findings of fact, conclusions of law, and order. In his order, the ALJ ruled that the claimant's interest and other returns earned on the claimant's investments are not subject to offset by CIGA. The ALJ also ruled that "except for the non-economic portion of the periodic payments, the payments made by COPIC, including the embedded interest, is offset from the liability of CIGA." Conclusions at 7. The ALJ reasoned as follows:
The periodic payments made by COPIC, on behalf of HealthOne, consist of a principal and embedded interest component. The interest embedded in the annuity payments is part of the funding mechanism used to pay Claimant the full benefit of the amount awarded by the jury as ordered by the District Court for lost earnings and medical expenses. These are precisely the type of benefits that CIGA would be required to pay, but for the recovery against the negligent third party. Conclusions at 7.
The ALJ found the claimant received a third party lump sum recovery of $1,050,000 and an additional lump sum recovery of $1,020,219.60 as a result of a settlement with one of the physicians, a third lump sum recovery of $1,000,000 as a result of a settlement with another physician, and a jury verdict against the hospital totaling $3,606,800 for medical and other health care expenses, and $200,000 for noneconomic losses including disfigurement, for a total of $3,806,800. The ALJ also found that the jury verdict was reduced to judgment, with a present value as follows: future medical expenses and noneconomic losses in the amount of $1,020,589.90 and future lost earnings in the amount of $133,806.98. Additionally, the ALJ found that the claimant's current medical-related expenses exceed $20,000 per month.
The ALJ entered a corrected order dated June 16, 2011, wherein he ordered that beginning on February 1, 2011, CIGA's credit of $372,535.42, plus its monthly net credit of $7,096.48 shall be applied against the claimant's continuing medical-related expenses and when exhausted, CIGA shall pay each month to the claimant the difference between the claimant's medical-related expenses and the net credit for that month.
The respondents and the claimant filed petitions to review the ALJ's order and corrected order.
I.
On review, the respondents argue that the ALJ erred in ruling that CIGA is disallowed from taking a credit or offset for the interest or returns earned on the claimant's chosen investments from his third-party settlements. The respondents specifically contend that § 8-41-203, C.R.S. provides that the right of subrogation shall extend to all monies collected from the third parties causing the injury for all economic damages, including the interest or returns that the claimant earned on his chosen investments. The respondents assert that if the claimant were to retain the interest and other returns generated from the amounts collected from his tort recoveries, then this would constitute a windfall which would not benefit the claimant but, instead would benefit his family. According to the respondents, this would constitute an impermissible double recovery. We disagree with the respondents' arguments and affirm the ALJ's order disallowing CIGA a credit or offset on the interest or other returns earned on the claimant's chosen investments from the third-party settlements.
Neither the claimant nor the respondents dispute that the version of § 8-41-203, C.R.S. which was in effect on the date of the claimant's injury, is the version that applies in this action. On the date of the claimant's injury, § 8-41-203, C.R.S. specifically provided in pertinent part as follows:
(1)(a) . . . If such injured employee or, in case of death, such employee's dependents elect to take compensation under said articles, the payment of compensation shall operate as and be an assignment of the cause of action against such other person to the . . . insurance carrier liable for the payment of such compensation. Said insurance carrier shall not be entitled to recover any sum in excess of the amount of compensation for which said carrier is liable under said articles to the injured employee, but to that extent said carrier shall be subrogated to the rights of the injured employee against said third party causing the injury. If the injured employee elects to proceed against such other person, the . . . insurance carrier, as the case may be, shall contribute only the deficiency, if any, between the amount of the recovery against such other person actually collected and the compensation provided by said articles in such case. The right of subrogation provided by this section shall apply to and include all compensation and all medical, hospital, dental, funeral, and other benefits and expenses to which the employee or the employee's dependents are entitled under the provisions of said articles, including articles 65 and 66 of this title, or for which the employee's employer or insurance carrier is liable or has assumed liability. (emphasis added)
Thus, § 8-41-203, C.R.S. by its terms limits the carrier's recovery to the amount of compensation for which it is liable. See Kirkham v. Hickerson Bros. Truck Co., 29 Colo. App. 303, 485 P.2d 513 (1971).
The Colorado Supreme Court previously has held that a court may not judicially amend a statute or add words that are not implicitly contained in the language of a statute. Rather, a statute is to be construed in a manner that assumes the General Assembly's failure to include particular language is a statement of legislative intent. See Specialty Restaurants Corp. v. Nelson, 231 P.3d 393 (Colo. 2010); Turbyne v. People, 151 P.3d 563, 567 (Colo. 2007) ("We do not add words to the statute or subtract words from it.")
We find the Colorado Court of Appeals' holding in Husson v. Meeker, 812 P.2d 731 (Colo. App. 1991) to be instructive in this action. In Husson, the claimant was injured in 1981 and elected to receive benefits under the Workers' Compensation Act. Pursuant to § 8-52-108, C.R.S. (1986 Repl. Vol. 3B) (now codified at § 8-41-203, C.R.S.), this election operated as an assignment to the insurer, the Fund, of any cause of action the claimant may have had against third parties up the limits of the insurer's liability. Thereafter, the claimant entered into a subrogation agreement with the Fund in accordance with § 8-52-108, C.R.S. Under the agreement, the Fund would continue to pay medical and other benefits to the claimant on the condition that, in the event he recovered against a third-party for his injury, the claimant "shall pay out of such recovery a sum equal to [the Fund's] liability." The claimant brought a third-party action against the manufacturer of the equipment that caused his injuries, and he ultimately settled that case without the Fund's consent, in breach of the subrogation agreement which required the agreement of the insurer before settlement. Eventually, the claimant paid $91,570.15 to the Fund from the proceeds of the settlement of his third-party action. The Fund then filed suit against the claimant for the interest on $91,570.15. The trial court ultimately granted summary judgment in favor of the claimant, ruling that despite the claimant's breach of the subrogation agreement, the Fund had been paid the amount of its liability in accordance with § 8-52-108(1) and the subrogation agreement and, therefore, the Fund was barred from any further recovery including prejudgment interest. Importantly, here, the Court also held that there was no provision contained within § 8-52-108, C.R.S. that allowed for interest:
We find it significant that there is no provision in § 8-52-108 for interest either expressly or by reasonable implication, see Kraus v. Artcraft Sign Co., 710 P.2d 480 (Colo. 1985) ("We have uniformly held that a court should not read nonexistent provisions into the [Workers'] Compensation Act."), but that the Act does provide for payment of interest to an injured employee who is not promptly paid. Section 8-52-109(2), C.R.S. (1986 Repl. Vol. 3B). "The legislature certainly knows how to deal with interest in this area, and we therefore cannot infer that it was through mere inadvertence that it failed to provide for the interest that [the insurer] seeks." Lakin v. Daniel Marr Son Co., 126 N.H. 730, 495 A.2d 1299 (1985) (construing similar provisions of the New Hampshire Workers' Compensation Act). Id. at 733.
Here, we conclude that the ALJ properly ruled that CIGA is not entitled to take a credit or offset for the interest or other returns that the claimant has earned on his chosen investments from the third-party settlements. As detailed above, under the version of § 8-41-203, C.R.S. that was in effect on the date of the claimant's injury, it specifically provided that when an injured employee brings a claim against a third party responsible for causing the injury, the insurance carrier is only entitled to recover that sum for which it is liable to the claimant under the Act. Further, under § 8-41-203, C.R.S., the workers' compensation insurer "shall not be entitled to recover any sum in excess of the amount of compensation for which said carrier is liable. . . ." CIGA was not liable to the claimant for the amount of the interest or returns earned on his chosen investments. Rather, CIGA was liable to the claimant for wage losses and medical expenses. The interest or returns that the claimant recovered from his chosen investments was earned only due to his depositing the settlement amounts into an interest bearing account and into a structured settlement trust, as required by the trial court. Additionally, if CIGA were entitled to take a credit or offset for the interest or returns on the claimant's chosen investments, then CIGA would recover a sum in excess of the amount of compensation for which it is liable to the claimant. Moreover, as stated in Husson, there is no provision in § 8-41-203, C.R.S. that allows CIGA to take a credit or offset on the interest that the claimant earned from his chosen investments. Were we to hold otherwise, this would violate well-established rules of statutory construction and amount to a judicial amendment of § 8-41-203, C.R.S. or amount to adding words that are not implicitly contained in the language of a statute. See Specialty Restaurants Corp. v. Nelson, supra; Turbyne v. People, supra.
Further, in its Brief In Support, the respondents argue that the ALJ erred in interpreting "actually collected" in § 8-41-203, C.R.S. to mean that money which the claimant actually collected from the tortfeasors. According to the respondents, the plain and ordinary meaning of "actually collected" means the amount of money recovered, which includes the earnings on the money. Contrary to the respondents' argument, however, § 8-41-203, C.R.S. does not explicitly or implicitly provide that CIGA is entitled to a credit or offset for the interest or returns that the claimant earned on his investments. Rather, we conclude that the plain language of § 8-41-203, C.R.S. refers to that amount which is "actually collected" from the third party that caused the claimant's injury. Specialty Rests. Corp. v. Nelson, 231 P.3d at 402 (Colo. 2010) (noting that workers' compensation statutes should be interpreted "according to their plain language").
Additionally, we disagree with the respondents' argument that if CIGA is not permitted to claim a credit or offset against the interest or returns that the claimant has earned on his chosen investments, then the claimant or his family would receive a windfall or a double recovery. Contrary to the respondents' argument, however, the claimant has not received a windfall or a double recovery for the same injury. The amount of interest that the claimant has earned on his chosen investments is not the equivalent to recovering economic and medical benefits from both the tortfeasor and the workers' compensation carrier. Rather, the interest merely represents "an equitable remedy for the loss of use of funds during the accrual period." Dionysius v. Graphics Packaging Co., W. C. Nos. 4-326-855, 4-338-888, 4-338-884 (June 9, 2000); see generally Subsequent Injury Fund v. Industrial Claim Appeals Office, 899 P.2d 271 (Colo. App. 1994).
II.
The claimant contends that the ALJ erred in ruling that the interest earned on the court-ordered periodic payments is subject to offset or credit by CIGA. According to the claimant, the ALJ has relied on an unrelated medical malpractice statute coupled with the claimant's incapacitation to impermissibly provide CIGA with a windfall of nearly $2 million on interest returns from the annuities. The claimant argues that CIGA's subrogation rights are limited, however, to those items identified in § 8-41-203, C.R.S. and interest is not included in such subrogation rights. The respondents argue, on the other hand, that the periodic payments which the claimant continues to receive via the annuities, are specifically for the claimant's medical costs and lost wages. The respondents contend that CIGA's subrogation interest extends to any of the claimant's rights to recover against the tortfeasor for the same injuries for which he is entitled to workers' compensation benefits. The respondents argue that the interest earned on the annuities properly constitutes payment for which CIGA is entitled to take credit. The respondents, therefore, contend that CIGA's lien should attach as the claimant actually receives money, and to hold otherwise would deprive CIGA of its right to subrogate against all money which the claimant collects from third parties. We agree with the claimant and reverse the ALJ's order allowing CIGA to take a credit for interest earned on the court-ordered periodic payments.
We find the holding in Suburban Delivery v. Workers' Compensation Appeal Board, 858 A.2d 219 (Penn. Cmwlth. 2004) to be persuasive. In Suburban, the claimant sustained injuries in a work-related automobile accident. The claimant settled his third-party tort action for $1,435,000, which included a total cash upfront payment of $807,777 plus $627,223 for the purchase price of an annuity. The annuity provided for guaranteed monthly payments of $3,000 over 30 years, commencing in January 2000, and specific lump sum payments of $50,000, $100,000 and $100,000, respectively, to be made in December 2006, December 2010, and December 2012. The tort action settlement release and the claimant's attorney's fees were based on the present value of the settlement. The employer requested subrogation and a credit for funds that the claimant received from the third-party tort claim structured settlement of his negligence lawsuit. The claimant paid the employer's insurance carrier $151,154.34 to satisfy in full its net subrogation lien, based upon the present value of the claimant's annuity. The workers' compensation judge found no reason to use any figure other than the present value of the settlement for calculating the amount to be repaid the employer's carrier.
On appeal, the employer argued that repayment of its subrogation lien should have been calculated on the minimum guaranteed payout of $2,137,777 rather than on the settlement's present value of $1,435,000. The Workers' Compensation Appeal Board (Board) affirmed.
The employer appealed, requesting reversal of the Board's order, and requesting use of the future value of the claimant's annuity in calculating the employer's pro rata share of attorney's fees, future credits, and any grace periods in computing its subrogation lien. The court affirmed the Board's order, reasoning in pertinent part as follows:
An annuity is merely an investment of money and annuities have a cost. We . . . do not see any reason why Defendant should get benefit from the return on Claimant's investment in the annuity. If, in a non-annuity situation, Claimant took a portion of the settlement money received and invest[ed], no one would reasonably argue that Defendant should have a subrogation interest in the return on Claimant's investment. Thus, here, where Defendant's subrogation lien has been satisfied with the up-front money, Defendant's future subrogation should be calculated on the remaining amount that Claimant received from his settlement, i.e. the amount of money used to purchase the annuity, not the amount of money that the annuity may ultimately earn. Id. at 222.
Here, we conclude that the ALJ's order allowing CIGA to take a credit for the interest that was earned on the court-ordered periodic payments or earned on the annuities, is not supported by applicable law. Section 8-43-301(8). Section 8-41-203, C.R.S. specifically provided that the insurance carrier was only entitled to subrogation in the amount of the sum for which the carrier was liable under the Act to the injured employee. Section 8-41-203, C.R.S. states that "the right of subrogation . . . include[s] all compensation and all medical, hospital, dental, funeral, and other benefits and expenses to which the employee [is] entitled . . . or for which the . . . insurance carrier is liable. . . ." The actual cost of the earnings and medical annuities, aside from the non-economic portion of the periodic payments, represents the claimant's true economic wage losses and medical expenses and is the amount for which CIGA would be liable to the claimant under the Act. The cost of the annuities is the equivalent to the present value of the judgment, or the value today of an amount of money in the future. Further, as detailed above, there is no provision in the Act applicable to this action which states that a workers' compensation carrier, such as CIGA, is liable to the claimant for interest earned on annuities. Additionally, as detailed above, if CIGA were entitled to a credit or offset for the interest on the annuities, then CIGA would be recovering a sum in excess of the amount of compensation for which it would be liable under the Act to the claimant, in direct contravention of the provisions of § 8-41-203, C.R.S.
Moreover, in its Brief In Opposition, the respondents again argue that if CIGA is not permitted to claim an offset against the principal and interest portion of the annuities, then the claimant will receive a windfall or a double recovery. We disagree with the respondents' argument. As stated above, the amount of interest that the claimant has earned on the economic and medical annuities is not the equivalent of recovering economic and medical benefits from both the tortfeasor and the workers' compensation carrier. Further, the fact that § 13-64-205(1)(f) of the HCAA disallowed the claimant from recovering a lump sum and required him to instead invest the judgment in periodic payments, merely reflects the General Assembly's attempt to protect an incapacitated person from prematurely exhausting a judgment. See HealthONE v. Rodriguez, 50 P.3d 879 (Colo. 2002). The purchase of the earnings and medical annuities in this action merely is an investment of the claimant's prior judgment. Dionysius v. Graphics Packaging Co., supra; see generally Subsequent Injury Fund v. Industrial Claim Appeals Office, supra. As stated by the court in Suburban, a carrier's subrogation interest, such as CIGA's interest in this action, should not extend to the return on the claimant's investment in the annuities.
Section § 13-64-205(1)(f) of the HCAA provided in pertinent part as follows:
Within no more than three months after the entry of verdict by the trier of fact and before the court enters judgment for periodic payments, the plaintiff who meets the criteria set forth in this subsection (1) may elect to receive the immediate payment to the plaintiff of the present value of the future damage award in a lump-sum amount in lieu of periodic payments. In order to exercise this right, the plaintiff must:
We also note that to the extent the claimant is challenging the constitutionality of § 13-64-203, C.R.S., administrative agencies do not have authority to pass on this argument. This function may be exercised only by the judicial branch of government. Arapahoe Roofing Sheet Metal, Inc. v. Denver, 831 P.2d 451 (Colo. 1992). In any event, the Colorado Supreme Court previously has addressed the claimant's challenge in HealthONE v. Rodriguez, supra. In HealthONE, the Colorado Supreme Court held that it did not view "the distinction made between an `incapacitated person represented by a conservator' and a `non-incapacitated person' to be arbitrary or unreasonable." The Court further held that "the incapacitated person provision is rationally related to legitimate governmental objectives and thus conclude that it does not deny Rodriguez equal protection of the laws under the United States and Colorado Constitutions." Id. IT IS THEREFORE ORDERED that the ALJ's order and corrected order dated May 23, 2011, and June 16, 2011, respectively, is affirmed to the extent it ordered that CIGA is not entitled to a credit or offset for the interest and returns earned on the claimant's chosen investments from his third-party settlements.
IT IS FURTHER ORDERED that the ALJ's order is reversed to the extent that it allowed CIGA to take a credit or offset for the interest embedded in the periodic payments made by COPIC.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ Kris Sanko
______________________________ Robert M. Socolofsky
ROBERT G. RODRIGUEZ, Attn: L.ORI RODRIGUEZ, 17504 E PROGRESS DRIVE, CENTENNIAL, CO, (Claimant)
COLORADO INSURANCE GUARANTY ASSOCIATION, Attn: MICHAEL KRAMISH/ GARY HALE, C/O: WESTERN GUARANTY FUND SERVICES, DENVER, CO, (Insurer)
CLISHAM, SATRIANA BISCAN, LLC, Attn: PATRICIA CLISHAM, ESQ., DENVER, CO, (For Claimant)
MCCREA BUCK, LLC, Attn: BRUCE B. MCCREA, ESQ., DENVER, CO, (For Respondents)
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(II) Not be an incapacitated person, as defined in section 15-14-101(1), C.R.S.;. . . . (emphasis added)