CALIFORNIA WESTERN STATES LIFE INSURANCE COMPANY v. INDUSTRIAL ACCIDENT COMMISSION (1962)

Viola B. Baird was employed by Virgil K. Benton, doing business as Benton Plating Service, on October 5, 1953, as an accountant. Benton Plating Service was a growing and expanding business and as the volume of its business increased Mrs. Baird's duties and responsibilities increased accordingly. During the period of her employment, branches of Benton Plating Service were established in Las Vegas, Nevada; San Diego, California; Houston, Texas; Newark, New Jersey; and Atlanta, Georgia. Mrs. Baird had charge of the books of all of these operations. During the entire time she was employed by Benton, she never took a vacation of two full weeks. Her longest vacation was in 1957 when she took a week and a half. In 1958 she took a vacation of less than two weeks at intervals. She did not take a vacation in 1959 because of the work load. During the last year and a half there were only five Saturdays on which she did not work. She also spent about ten Sundays at the office and often took work home. Her regular work day at the office was nine hours.

In March 1960 Mr. Benton hired a controller who would be Mrs. Baird's supervisor. The newly hired controller moved Mrs. Baird out of her private office and into the general office area. Immediately thereafter, during a heated discussion with Mr. Benton, Mrs. Baird collapsed and was removed to a hospital for treatment.

Mrs. Baird then applied to her employer's workmen's compensation insurance carrier for temporary disability benefits under the Workmen's Compensation Act, but her claim was denied. Due to this denial of workmen's compensation benefits, and upon a claim properly filed for unemployment compensation benefits, petitioner paid to Mrs. Baird $65 per week for the period commencing April 17, 1960, and ending August 13, 1960, making a total sum of $1,105. Mrs. Baird consented to the allowance of a lien to petitioner against any recovery of workmen's compensation benefits as a result of her claim against her employer and her employer's workmen's compensation insurance carriers. Copies of the notice and request for allowance of lien were filed with the commission and were duly served upon all the parties.

Subsequently, on December 2, 1960, Mrs. Baird entered into a compromise and release agreement with her employer and his workmen's compensation insurance carrier settling her claim in the lump sum of $8,500. Mrs. Baird's attorneys proposed as fees for their services to her the sum of $850. In the said compromise and release agreement it was proposed that petitioner's lien claim in the sum of $1,105 be decreased to $200 by a formula which had previously been used by the Industrial Accident Commission in the case of Davis v. Blaser, 24 Cal.Comp.Cases 100 (1958). Petitioner was not a party to this compromise and release and was never consulted during any of the negotiations leading up to the settlement.

By the Davis formula the parties to the settlement computed the total value of Mrs. Baird's claim as if she were to prevail in all of her contentions. Said computation was made as follows:

In the compromise and release agreement submitted by Mrs. Baird, her employer, and his workmen's compensation insurance carriers to the commission the amount of past and estimated future medical treatment in the sum of $3,000 was deducted from the lump sum settlement of $8,500, leaving the sum of $5,500. The compromise and release agreement then proposed that the lien of petitioner be allowed only in an amount that would bear the same ratio to the said sum of $5,500 that the total claimed lien (the amount which petitioner paid to Mrs. Baird in unemployment compensation benefits) bore to the total sum claimed by Mrs. Baird. Since petitioner's total lien claim was approximately 1/29th of the total amount claimed by Mrs. Baird ($1,105/$30,560.48), applying the so-called Davis formula the compromise and release proposed that petitioner's lien claim be reduced to 1/29th of the said sum of $5,500 or $200.

The commission approved the compromise and release on February 9, 1961, ordering that Liberty Mutual Insurance Company pay to Mrs. Baird the sum of $4,085; that Industrial Indemnity Company pay to Mrs. Baird the sum of $2,460; and that Liberty Mutual Insurance Company withhold the sum of $1,105 pending further order. On March 27, 1961, the commission rendered its order allowing the lien claim of petitioner in the sum of $250, adopting the formula proposed in the compromise and release. The commission based its conclusion upon the ground of the ‘uncertainty as to whether applicant's disability was industrial or whether her disability would have occurred in any event.’ The balance of the sum withheld ($855) was ordered paid to Mrs. Baird.

On April 14, 1961, petitioner filed with the commission its petition for reconsideration, praying for the commission to render its decision after reconsideration allowing petitioner's lien claim in full. On May 4, 1961, the commission rendered its order denying reconsideration, in which it in effect affirmed and adopted its previous order allowing the lien claim and the order approving compromise and release.

Petitioner then filed its petition for a writ of review of the decision of respondent Industrial Accident Commission approving the compromise and release executed between respondent employee Viola Baird and the workmen's compensation insurance carriers of respondent employer. This court thereupon ordered respondent Industrial Accident Commission to certify and file with this court a record of the proceedings before the commission in order that the same could be reviewed by this court.

Petitioner raises two principal issues:

1. Does the Industrial Accident Commission have the jurisdiction to approve a compromise and release to which the lien claimant (petitioner) was not a party, reducing the claimant's lien claim without making a specific finding as to the entitlement of Mrs. Baird to temporary disability benefits and the period of such entitlement? (See the language of Lab.Code, secs. 4904 and 5003.)

2. If it were proper in approving a compromise to reduce the amount of petitioner's statutory lien claim (with or without a finding as to temporary disability), would it be in derogation of petitioner's constitutional rights to reduce it by a formula that allows other liens (denominated in Lab.Code, sec. 4903 along with petitioner) in full?

Section 4903 of the Labor Code provides in part as follows: ‘The commission may determine, and allow as a lien against any amount to be paid as compensation:

‘(f) * * * The amount of unemployment compensation disability benefits which have been paid under or pursuant to the Unemployment Insurance Code in those cases where, pending a determination under Division 4 of this code, there was uncertainty whether such benefits were payable under the Unemployment Insurance Code or payable hereunder; provided, however, any lien under this subdivision shall be allowed and paid as provided in Section 4904.’

Prior to 1957 section 4904 of the Labor Code provided as follows: ‘If notice in writing is given to the insurer, or to the employer if uninsured, setting forth the nature and extent of any claim that is allowable as a lien, the claim is a lien against any amount thereafter payable as compensation, subject to the determination of the amount and approval of the lien by the commission. The commission may order the amount of such claim, as determined and allowed by it, to be paid directly to the person entitled, either in a lump sum or in installments.’

This was the law in effect at the time the Supreme Court decided the cases of Bryant v. Industrial Accident Commission, 37 Cal.2d 215, 231 P.2d 32; and Aetna Life Insurance Co. v. Industrial Accident Commission, 38 Cal.2d 599, 241 P.2d 530, which are relied upon by petitioner. These cases are discussed hereinafter.

In 1957 the Legislature amended section 4904 of the Labor Code so that it now reads as follows: ‘If notice is given in writing to the insurer, or to the employer if uninsured, setting forth the nature and extent of any claim that is allowable as a lien, the claim is a lien against any amount thereafter payable as compensation, subject to the determination of the amount and approval of the lien by the commission. In determining the amount of lien to be allowed for unemployment compensation disability benefits under subdivision (f) of Section 4903 the commission shall allow such lien in the amount of benefits which it finds were paid for the same day or days of disability for which an awarded of compensation for temporary disability indemnity is made. In the case of agreements for the compromise and release of a disputed claim for compensation, the applicant and defendant may propose to the commission, as part of the compromise and release agreement, an amount out of the settlement to be paid to any lien claimant claiming under subdivision (f) of Section 4903. The determination of the commission, subject to petition for reconsideration and to the right of judicial review, as to the amount of lien allowed under subdivision (f) of Section 4903, whether in connection with an award of compensation or the approval of a compromise and release agreement, shall be binding on the lien claimant, the applicant, and the defendant, insofar as the right to benefits paid under the Unemployment Insurance Code for which the lien was claimed. The commission may order the amount of any lien claim, as determined and allowed by it, to be paid directly to the person entitled, either in a lump sum or in installments.’

Section 5003 requires in part: ‘Every release or compromise agreement shall be in writing and duly executed, and the signature of the employee or other beneficiary shall be attested by two disinterested witnesses or acknowledged before a notary public. The document shall specify:

‘(f) In the event a claim of lien under subdivision (f) of Section 4903 has been filed, the number of days and the amount of temporary disability indemnity which should be allowed to the lien claimant. [Amended by Stats.1953, ch. 554, sec. 1; Stats.1957, ch. 1977, sec. 3].’

It is repondents' position that the preceding amendments sanction the practice of the instant case, wherein the commission approved a compromise (to which the petitioner was not a party) which reduced the lien claim without making any findings as to the period during which the employee would be entitled to compensation for temporary disability nor as to the amount paid in compensation by petitioner during that period.

We do not agree with respondents' contentions. It is axiomatic that in analyzing statutes for the purpose of finding and effectuating the legislative intent ‘regard is to be had not so much to the exact phraseology in which the intent has been expressed as to the general tenor and scope of the entire scheme embodied in the enactments.’ (County of Los Angeles v. Frisbie, 19 Cal.2d 634, 639, 122 P.2d 526, 529.)

It has been repeatedly held that the Workmen's Compensation Act and the Unemployment Insurance Act are to be construed together to effect the legislative purpose of avoiding a duplication of payments and encouraging the prompt payment of benefits under the Unemployment Insurance Act. (Aetna Life Insurance Co. v. Industrial Acc. Com., supra; Fireman's Fund Indem. Co. v. Industrial Acc. Com., 170 Cal.App.2d 412, 339 P.2d 225; Garcia v. Industrial Accident Com., 41 Cal.2d 689, 263 P.2d 8.) The statutory lien contemplated by sections 4903 and 4904 is designed to promote prompt payment by the disability carrier when, as in the instant case, there is a dispute as to whether the accident is industrially caused and the workmen's compensation carrier denies a claim for temporary disability benefits. (Garcia v. Industrial Accident Com., supra, p. 693, 263 P.2d 8.) As a practical matter it is realized that ‘the proper conduct of the business of an insurance company carrying unemployment compensation disability benefit insurance would inevitably tend to make it delay payments to the workman in doubtful cases pending determination of the question as to whether the disability was compensable under the Workmen's Compensation Act, unless such carrier could be assured that payments advanced under such circumstances would in all proper cases be recoverable upon determination of the controlling facts.’ (Garcia v. Industrial Accident Com., supra, p. 693, 263 P.2d p. 10; Aetna Life Ins. Co. v. Industrial Acc. Com., supra, p. 603, 241 P.2d p. 530.)

If the workman and the workman's compensation carrier are allowed to reduce the disability carrier's lien in a compromise which is in turn ‘rubber stamped’ by the commission, the disability carrier will hesitate to advance the temporary disability payments. This construction which obviates one of the prime considerations in the overall legislative pattern is untenable.

Nor are we compelled to accept respondents' construction by the precise language of the amendments. Subdivision (f) of section 5003 of the Labor Code requires that if a claim of lien under subdivision (f) of section 4903 is involved, the compromise and release should designate the number of days and the amount of temporary disability which should be allowed. Section 4904 provides that applicant and defendant may propose to the commission, as part of the compromise and release agreement, an amount out of the settlement to be paid to the lien claimant under subdivision (f) of section 4903. These provisions appear to merely require the compromising parties to submit evidence to the commission in regard to the lien claim of the same nature as is usually available in the hearings on an award situation as a matter of course.

Section 5313 which specifically requires the commission to make findings upon all facts involved in the controversy was significantly not amended in 1957, nor has it been amended since then. The commission must make a finding as to the number of days of applicant's temporary disability during which the disability carrier paid benefits and the amount of the benefits paid by the carrier. This is the amount of petitioner's lien claim.

Respondent commission in its order allowing lien claim stated that the basis of its decision in reducing petitioner's lien from $1,105 to $250 was the uncertainty whether applicant's injury was industrial or whether the disability would have occurred in any event.

Respondent commission argues that if it must determine whether the applicant would have been entitled to temporary disability benefits and the period of such entitlement, then the commission must determine whether there has been an industrial injury. If it determines that there has been such an injury, then it would not approve a compromise for a sum much smaller than the total potential liability (as it did here). The argument continues that if the commission determines there has not been an industrial injury, then the applicant receives nothing and there is no fund upon which petitioner could claim a lien. This argument was rejected in Aetna Life Insurance Co. v. Industrial Accident Commission, 38 Cal.2d 599, wherein the court answered at page 603, 241 P.2d at page 532, ‘However, in that event, the issue in which Aetna [the disability lien claimant] is interested would have been both heard and determined.’

Respondents assert that the Aetna decision has been abrogated by the 1957 amendments (Lab.Code, secs. 4903, subd. (f); 4904; and 5003, subd. (f)), but as our previous discussion indicates we do not believe that either the flat language of the amendments or a consideration of the policy factors involved will permit such interpretation.

(The parties do agree that one effect of the 1957 amendments is to overrule the holding of Bryant v. Industrial Accident Commission, 37 Cal.2d 215, 231 P.2d 32, to the extent that it held that a lien claim for disability insurance was allowable against the award for permanent disability benefits as well as the award for temporary disability benefits. The parties apparently agree with the dictum in Fireman's Fund Indemnity Co. v. Industrial Accident Commission, 170 Cal.App.2d 412, 339 P.2d 225, that as a result of the 1957 amendments the disability lien may only attach to an award of (workmen's) compensation for temporary disability indemnity. The Fireman's Fund case appears to be the only decision to have considered the effect of the 1957 amendments to date.)

In view of our decision that the actions of respondent commission are contrary to the intent of the California wage loss legislation, it becomes unnecessary to discuss petitioner's remaining contentions.

It is the duty of respondent commission, declared by statutory and case law, to make findings upon all facts involved in the controversy. (Horn v. Industrial Acc. Com., 128 Cal.App.2d 837, 847, 276 P.2d 673; California Comp. Ins. Co. v. Industrial Acc. Com., 128 Cal.App.2d 797, 806, 276 P.2d 148, 277 P.2d 442.) The 1957 amendments specify the exact matters which must be the subject of the findings in regard to a lien claim. It is established that an award cannot be allowed to stand which fails to find on material issues. (24 Cal.Comp.Cases, supra, p. 816; Pierson v. Industrial Acc.Com., 98 Cal.App.2d 598, 601, 220 P.2d 794.) The same standard applies to an order adjudicating a lien claim.

The order allowing lien claim and the order denying reconsideration are annulled and the cause is remanded to the Industrial Accident Commission for further proceedings in accordance with this opinion.

SCHOTTKY, Justice.

PEEK, P. J., and PIERCE, J., concur. Hearing granted; DOOLING, J., not participating.