PRUDENTIAL INSURANCE COMPANY OF AMERICA v. WORKERS COMPENSATION APPEALS BOARD (1977)

Prudential Insurance Company (Prudential) seeks a lien against respondent Thomas Wright's workers' compensation benefits. Prudential correctly contends Labor Code section 4903.1 requires the Board to acknowledge its lien claim in this case.¹

Wright was insured against any work-related disability under a policy issued by Prudential. The policy contained an integration provision to the effect that disability policy benefits are reduced by the amount of periodic benefits for loss of time the insured receives under any workers' compensation law.

When Wright suffered a back injury, Prudential provided him with long-term disability benefits without making any deduction for benefits Wright might have been entitled to under workers' compensation law (see gen. Silberg v. California Life Ins. Co., 11 Cal.3d 452, 113 Cal.Rptr. 711, 521 P.2d 1103). Wright filed a claim for workers' compensation benefits. Finding the injury arose in the course and scope of employment, the referee made an award. Wright was also reimbursed for self-procured medical treatment.

Prudential sought a lien against Wright's award for the benefits it had advanced and for which it was entitled to reimbursement under the integration clause. Prudential's requested lien and later petition for reconsideration were denied. The Board erroneously held that “(u)nder the particular facts of this case . . . Rowland (Rowland v. Workers' Comp. Appeals Bd., 66 Cal.App.3d 448, (136 Cal.Rptr. 1) mod. 67 Cal.App.3d 505c) is controlling and the Board is not obliged to allow claimant's lien against applicant's workers' compensation benefits.” The Board was of the further opinion Labor Code section 4903.1 was not pertinent to Prudential's lien claim. In its opinion and order denying reconsideration, the Board stated:

“Labor Code section 4903.1 is concerned with lien claims for ‘self-procured medical costs.’ There is no evidence, and lien claimant makes no claim, that it afforded to applicant health or medical treatment under the long term disability policy. Therefore, section 4903.1 of the Labor Code is inapposite to the present matter.”

The general rule pertaining to liens against workers' compensation is found in Labor Code section 4901. “No claim for compensation nor compensation awarded, adjudged, or paid, is subject to be taken for the debts of the party entitled to such compensation except as hereinafter provided.” Compensation benefits may be encumbered before payment, but only to the extent as provided by law (Ogdon v. Workmen's Comp. Appeals Bd., 11 Cal.3d 192, 197, 113 Cal.Rptr. 206, 520 P.2d 1022).

Labor Code section 4903.1 is an exception to the general prohibition against liens. The question presented here is whether Labor Code section 4903.1 allows a group disability insurer, who has provided benefits to a worker and is entitled to reimbursement, to assert a lien against the worker's compensation benefits. This question is one of first impression.

The relevant portions of Labor Code section 4903.1 provide:

“The appeals board, before issuing its award or approval of any compromise of claim, shall determine, on the basis of liens filed with it, whether any benefits have been paid or services provided by a health care service plan, a group disability policy, a self-insured employee welfare benefit plan, or a hospital service contract, and its award or approval shall provide for reimbursement for benefits paid or services provided under such plan as follows:

“ . . .icy

“(b) When the referee issues an award finding that an injury or illness arises out of and in the course of employment, and makes an award for reimbursement for self-procured medical costs, the appeals board shall allow a lien, to the extent of benefits paid or services provided, for the effects of the industrial injury or illness, by a health care service plan, a group disability policy, a self-insured employee welfare benefit plan, or a hospital service contract.” (Italics added.)

Legislative Counsel determined Labor Code section 4903.1

“would require the Workmen's Compensation Appeals Board to determine, prior to making an award of any workers' compensation benefits, whether any benefits have been provided by an insurer or plan, and to provide in its award for the reimbursement, in a specified manner, for benefits paid or services provided by an insurer or plan.” (Stats. 1975, c. 1109, No. 8 West's Cal. Legis. Service, p. 2937; italics added.)

It is reasonable to presume the Legislature adopted section 4903.1 with the intent and meaning expressed in Legislative Counsel's digest of the bill (Maben v. Superior Court, 255 Cal.App.2d 708, 713, 63 Cal.Rptr. 439).

Hanna, in 2 California Law of Employee Injuries and Workmen's Compensation at section 17.07(1), states a lien against workers' compensation benefits is allowable for the “(a)mount of benefits paid or the value of services provided for the effects of an industrial injury or illness by a health care service plan, group disability policy, self-insured employee welfare benefit plan, or a hospital service contract.”

The Board's interpretation of the statute is apparently based upon the preconditions which must be met before the Board is required to recognize lien claims under the statute. The legislation has no apparent effect unless (1) “the referee . . . makes an award for reimbursement for self-procured medical costs” (Lab. Code s 4903.1, subd. (b)); or (2) “the referee . . . denies the applicant reimbursement for self-procured medical costs solely because of lack of notice to the applicant's employer of his need for . . . care” (Lab. Code s 4903.1, subd. (a)); or (3) the parties propose a settlement, but the lien claimant does not agree to the amount allocated to it (Lab. Code s 4903.1, subd. (c)). Thus, as to claims which are not settled, a lien is allowed only if the employee incurred self-procured medical costs. (See Lab. Code s 4600.) One might reasonably ask why self-procured medical costs should trigger a lien for group disability insurance payments, which are not directly related to medical costs. The Board apparently concluded, not unreasonably, the statute only permits liens for providers of medical benefits and services. (See Witkin, Summary of Cal. Law (8th ed. 1976 supp. to vol. 2) Workmen's Compensation, s 218A, pp. 44-45.)

However, such a narrow interpretation imposes hidden meaning upon otherwise broad and unambiguous provisions in the statute. For example, the section's first paragraph provides:

“The appeals board, before issuing its award or approval of any compromise of claim, shall determine, on the basis of liens filed with it, whether any benefits have been paid or services provided by a . . . group disability policy . . ., and its award or approval shall provide for reimbursement for benefits paid or services provided under such plans as follows . . . .” (Emphasis added.)

The Board is to determine whether “any” benefits have been paid, not “medical” benefits or “any medical” benefits. The statute requires reimbursement for “benefits paid or services provided” without limitation. Similarly, subdivisions (a) and (b) permit liens “to the extent of benefits paid or services provided, for the effects of the industrial injury or illness” without limitation to medical benefits or services.

Furthermore, the statute expressly permits liens for benefits or services provided by a group disability policy or a self-insured employee welfare benefit plan as well as by a health care service plan or a hospital service contract. If the legislative intent were to limit the statute's application to medical lien claims, one might reasonably ask why disability policies and self-insured employee benefit plans, the benefits of which are not restricted to medical costs, are included in the statutory scheme. Plainly, the Board's interpretation would significantly restrict the literal scope of the statute.

Finally, the Board's interpretation would render superfluous subdivision (b) of section 4903.1, since medical lien claims under the circumstances of that subdivision are already permitted by section 4903, subdivision (b).

Though we recognize the statute may operate enigmatically, its terms literally apply to the facts before us. If the statute requires grafts or amputations, the surgery should be performed by the Legislature. We are guided to this conclusion by People v. Knowles, 35 Cal.2d 175, 217 P.2d 1, in which the Supreme Court stated:

“ ‘While courts are no longer confined to the language (of the statute), they are still confined by it. Violence must not be done to the words chosen by the legislature.’ Frankfurter, Some Reflections on the Reading of Statutes, 47 Columb.Law Rev. 527, 543. A standard of conduct prescribed by a statute would hardly command acceptance if the statute were given an interpretation contrary to the interpretation ordinary men subject to the statute would give it. ‘After all, legislation when not expressed in technical terms is addressed to the common run of men and is therefore to be understood according to the sense of the thing, as the ordinary man has a right to rely on ordinary words addressed to him.’ (Citations.) If the words of the statute are clear, the court should not add to or alter them to accomplish a purpose that does not appear on the face of the statute or from its legislative history. (Citations.) Certainly the court is not at liberty to seek hidden meanings not suggested by the statute or by the available extrinsic aids. In re Miller, 31 Cal.2d 191, 198-199, 187 P.2d 722 . . ., and cases cited therein. (Id. at pp. 182-183, 217 P.2d at p. 5.)”

Rowland v. Workers' Comp. Appeals Bd., supra, 66 Cal.App.3d 448, 136 Cal.Rptr. 1, relied on by the Board, concerned Labor Code section 4903, subdivision (c) only; Labor Code section 4903.1 was not discussed.

Subdivision (b) of Labor Code section 4903.1 is applicable to this case. The referee (1) determined Wright sustained an injury arising out of and occurring in the course of employment, and (2) made an award for self-procured medical treatment. We conclude, therefore, “the appeals board shall allow a lien, to the extent of benefits paid (by Prudential) . . . , for the effects of the industrial injury . . . .” (Lab. Code s 4903.1, subd. (b).)

The order is reversed and remanded for further proceedings consistent with this opinion.

FOOTNOTES

1.  Prudential also contends disability insurance payments should be classified as amounts paid for reasonable living expenses of an injured employee. Such characterization would allow Prudential to assert a lien under Labor Code section 4903, subdivision (c) (but see Rowland v. Workers' Comp. Appeals Bd., 66 Cal.App.3d 448, 136 Cal.Rptr. 1). Additionally, Prudential contends it was denied due process. We do not reach either issue because Labor Code section 4903.1 is dispositive.

GERALD BROWN, Presiding Justice.

COLOGNE and RAUL ROSADO (San Diego County Superior Court Judge sitting under assignment by the Chairperson of the Judicial Council), JJ., concur.