| IN RE: JAMES C. FUNSTON | ) | DOCKET NO. 88 2863 |
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| CLAIM NO. J-565481 | ) | DECISION AND ORDER |
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- APPEARANCES
- Claimant, James C. "Kimo" Funston, by
- Paul J. Burns, P.S., per
- Paul J. Burns
- Employer, Funston Tire Service, Inc., by
- None
- Department of Labor and Industries, by
- Office of the Attorney General, per
- Jacquelyn Findley, Stephanie Farrell and
- Donald Verfurth, Assistants, and Toni Lorien,
- Paralegal
This is an appeal filed by the claimant, James C. Funston, on July 15, 1988 from an order of the Department of Labor and Industries dated June 30, 1988 which declared a statutory lien against claimant's third party recovery in the amount of $13,578.82, demanded reimbursement to the Department in the amount of $8,415.13 and ordered no benefits or compensation be paid on behalf of the claimant until such time as the excess recovery totalling $8,500.29 has been expended by the claimant for costs incurred as a result of the conditions covered under this claim. Affirmed.
PRELIMINARY MATTERS
Pursuant to RCW 51.52.104 and RCW 51.52.106, this matter is before the Board for review and decision on a timely Petition for Review filed by the Department to a Proposed Decision and Order issued on January 10, 1990 in which the order of the Department dated June 30, 1988 was [2] reversed and the matter remanded to the Department of Labor and Industries with direction to issue an order setting aside and holding for naught the provisions of the order dated June 30, 1988.
This appeal involves the question of whether the Department has a lien on the worker's recovery under the underinsured motorist (UIM) provisions of an insurance policy.
Initially, claimant's Notice of Appeal raised a single issue. He contended that, because a co-employee was partially at fault for his injuries, the Department's third party lien was extinguished under the provisions of RCW 51.24.060(1)(f). Based on that allegation, the Department filed a Motion to Dismiss on March 17, 1989 pursuant to CR 12(b)(6). However, by the time of the March 29, 1989 conference, the claimant had expanded the issues to include the question of whether the lien applied under the provisions of RCW 51.24.030(4) with respect to recovery under an employer's UIM policy. On May 8, 1989, the claimant filed a Motion for Summary Judgment, arguing that no lien applied because his UIM recovery was not by virtue of his employment relationship with his father, but rather was the consequence of the father/son relationship.
After the claimant filed his Motion for Summary Judgment, the Industrial Appeals Judge determined that the Department's original Motion to Dismiss should also be treated as a Motion for Summary Judgment. She was correct in that determination, since CR 12(b)(6) states:
If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to [3] present all material made pertinent to such a motion by Rule 56.
Thus, we currently have before us the claimant's and Department's opposing Motions for Summary Judgment pursuant to CR 56. In reaching our decision we have relied upon the following:
- Claimant's Notice of Appeal.
- The Department's Motion to Dismiss.
- The Department's Memorandum of Authorities in Support of Motion to Dismiss, including attachments.
- Claimant's Memorandum in Opposition to Department's Motion to Dismiss, including attachments.
- Claimant's Motion for Summary Judgment.
- Affidavit of Paul J. Burns, with attachments.
- Affidavit of Cherita Koetje, with attachment.
- Affidavit of James P. Funston.
- Claimant's Memorandum of Authorities in Support of Motion for Summary Judgment.
- Department's Response to Claimant's Motion for Summary Judgment Regarding Department's Lien.
- Department's Response to Claimant's Memorandum of Authorities in Support of Motion for Summary Judgment.
- Stipulated Facts dated October 10, 1989, including exhibits.
- Exhibit No. 1 and transcripts of all proceedings.
- Department's Petition for Review.
At the outset we note that the statutory scheme which sets forth the Department's right to a lien against a recovery in a third party action was amended in 1986, with the addition of the following underlined language to RCW 51.24.030:
(1) If a third person, not in a worker's same employ, is or may become liable to pay damages on account of a worker's injury for which benefits and compensation are provided under this title, the injured worker or beneficiary may elect to seek damages from the third person.
(3) Damages recoverable by a worker or beneficiary pursuant to the underinsured motorist coverage of an insurance policy shall be subject to this chapter only if the owner of the policy is the employer of the injured worker. [In 1987, this paragraph became subparagraph 4.] [4]
Laws of 1986, ch. 58, § 1, p. 189.
The 1984 amendment to the statute contained an applicability section, providing that:
This act applies to all causes of action against third persons in which judgment or settlement of the underlying action has not taken place before June 7, 1984.
RCW 51.24.902.
Neither the 1986 nor the 1987 amendments, contained an applicability section. Thus the question arises as to whether the 1986 amendment applies to this claim, where the industrial injury occurred on April 15, 1985 and the third party recovery occurred in June 1988.
Any uncertainty as to whether the 1986 amendment applies to a third party UIM recovery resulting from an industrial injury that occurred before the effective date of the amendment was laid to rest in the recent case of O'Rourke v. Dep't of Labor & Indus., 57 Wn.App. 374 review denied 115 Wn.2d 1002 (1990). In that case, Division I of the Court of Appeals held that the "relevant date for application of the statutory scheme before us [i.e., the 1986 version of RCW 51.24.030] is the date of recovery of the UIM settlement." O'Rourke, at 379. Under the reasoning in O'Rourke, it is clear that the Department may assert a lien here, so long as the UIM recovery occurred after June 11, 1986, the effective date for the 1986 amendment. In June of 1988, Mr. Funston received $47,500.00 from the Travelers Indemnity Company of America in settlement for claims arising out of the industrial injury. Thus, under O'Rourke, the 1986 amendment to RCW 51.24.030 applies.
The stipulated facts and pleadings establish that James P. Funston was the president of Funston Tire Inc. and his son, James C. Funston, was [5] an employee. While at work on April 15, 1985 the younger Funston was injured when an uninsured automobile driven by another employee struck him while he was within the course of his employment. He filed a claim for industrial insurance benefits, which was allowed. He also made a claim under the underinsured motorist provisions of an insurance policy which was issued to Funston Tire Services Inc. and James P. Funston and Robert E. Holder individually.
James P. Funston, the claimant's father, had an endorsement attached to the corporate policy which would cover the Funston family automobiles. It was under this endorsement that the claimant was able to collect underinsured motorist benefits from Travelers Indemnity Company of America. This recovery was only forthcoming after Mr. Funston had successfully filed a declaratory judgment action against Travelers Indemnity, seeking an order holding Travelers liable for coverage to the plaintiff for the injuries suffered on April 15, 1985.
RCW 51.24.030 provides that the Department shall have a lien against the worker's UIM recovery "if the owner of the policy is the employer of the injured worker". Under the clear and unambiguous language of this statute, if we find that Funston Tire Service Inc. is the owner of the policy, then the Department has a right to assert its lien against the claimant's recovery under that policy.
The parties have agreed to all of the underlying facts and there is, therefore, no dispute regarding any material fact. What is in dispute, however, is the interpretation to be placed on the agreed facts. Our industrial appeals judge concluded that Funston Tire Service Inc. was not the owner of the policy, because Mr. Funston recovered under the UIM [6] endorsement as a resident of his father's household related by blood, and not as an employee of Funston Tire. The Proposed Decision and Order stressed that no other employee of Funston Tire Service would have been entitled to recover under the Funston family automobile endorsement. We interpret the agreed facts somewhat differently. In our view, Funston Tire Service, Inc. was indeed the owner of the policy under which James C. Funston made his third party recovery.
The insurance policy was clearly issued to Funston Tire Service Inc. and to James P. Funston individually and Robert E. Holder individually. See Exhibit No. 1 to Stipulated Facts dated October 10, 1989. The "General Declarations" on that policy indicate that it is a "risk complex" policy, issued to "a tire sales & service station business". In that policy, Travelers agreed to provide insurance under the following sections of the policy: property, inland marine, general liability, automobile liability, automobile physical damage, crime, and garage liability. James C. Funston was able to recover pursuant to an endorsement covering the Funston family automobiles under this corporate policy. This endorsement became part of the policy. See RCW 48.18.190. The addition of a family auto endorsement to the corporate policy did not change the ownership of the policy. Although the senior Funston undoubtedly used his influence over the corporate affairs to obtain coverage of family automobiles under the corporate policy, this action in no way changed the true ownership of the policy. We therefore conclude that Funston Tire Service Inc. was the owner of the policy under which claimant made his recovery.
Although we do not agree with the industrial appeals judge's [7] conclusion with respect to ownership of the insurance policy, the emphasis on the fact that claimant's recovery was premised on the father/son relationship, not the employer/employee relationship, is reasonable. By amending RCW 51.24.030 in 1986 the legislature may well have intended to restrict the lien to situations where the UIM recovery resulted from an employer/employee relationship. However, the language of RCW 51.24.030(3) (now(4)) is clear and unambiguous in stating that the Department shall have a lien "if the owner of the policy is the employer of the injured worker". (Emphasis added) In this case, the owner of the policy is Funston Tire Service Inc., which also happens to be the employer of James C. Funston. The Department, therefore, is entitled to a lien against Mr. Funston's third party UIM recovery.
Finally, the argument has been made that even if the Department has a lien under RCW 51.24.030(4), that lien is extinguished pursuant to RCW 51.24.060(1)(f) which provides:
If the employer or a co-employee are determined under RCW 4.22.070 to be at fault, (c) and (e) of this subsection do not apply and benefits shall be paid by the department and/or self- insurer to or on behalf of the worker or beneficiary as though no recovery had been made from a third person.
RCW 4.22.070 requires that the determination of fault be made by a trier-of-fact. In the present case, the recovery was made as a result of a settlement with Travelers Insurance Company; a determination of co-employee fault was never made by a trier-of-fact. Without such a determination, RCW 51.24.060(1)(f) does not extinguish the Department's lien.
After careful consideration of the Proposed Decision and Order, the Department's Petition for Review, and the entire record before us we are [8] persuaded that the Department order under appeal is correct and should be affirmed. We enter the following findings and conclusions.
FINDINGS OF FACT
1. On April 17, 1985 the Department of Labor and Industries received from the claimant, James C. "Kimo" Funston, a claim for benefits alleging an industrial injury on April 15, 1985 while in the course of his employment with Funston Tire Service, Inc. On May 7, 1985 the Department issued an order allowing the claim, and beginning monthly time-loss compensation and other benefits. On July 25, 1987 the Department issued an order awarding the claimant a permanent partial disability award equal to 10% as compared to totally bodily impairment for dorso-lumbar and lumbosacral impairments, paid at 75% of the monetary value thereof pursuant to RCW 51.32.080, 5% of the amputation value of the left leg above the knee joint with short thigh stump (3 inches or less below the tuberosity of ischium), time-loss compensation as paid, with deduction of overpayment, and closed the claim.
On August 18, 1987 the Department received from the claimant a letter of protest and request for reconsideration of its order dated July 25, 1987.
On September 23, 1987 the Department issued an order holding in abeyance its order dated July 25, 1987. On February 19, 1988 the Department issued an order adhering to the provisions of its order dated July 25, 1987, the claim to remain closed. No appeal was taken from that order by the claimant.
On June 30, 1988 the Department issued an order which declared a statutory lien against claimant's third party recovery in the amount of $13,578.82, demanded reimbursement to the Department in the amount of $8,415.13 and ordered no benefits or compensation be paid on behalf of the claimant until such time as the excess recovery totalling $8,500.29 has been expended by the claimant for costs incurred as a result of the conditions covered under this claim.
On July 15, 1988 the Board of Industrial Appeals received from the claimant a notice of appeal of the Department order dated June 30, 1988, and [9] assigned the appeal Docket No. 88 2863. On August 4, 1988 the Board issued an order granting the appeal and directed that proceedings be held on the issue raised in the claimant's notice of appeal.
2. The claimant, James C. Funston, was injured on April 15, 1985 during the course of his employment with Funston Tire Service, Inc.
3. As a result of his injuries received on April 15, 1985, Mr. Funston applied for and received industrial insurance benefits under Claim No. J-565481.
4. On July 20, 1987 Mr. Funston filed a Declaratory Judgment Action against Travelers Indemnity Company of America, Inc., seeking an order holding Travelers liable for coverage to the plaintiff for injuries sustained in the April 15, 1985 accident. In June of 1988, Mr. Funston settled with Travelers Indemnity Company of America in the amount of $47,500 and advised the Department accordingly. On June 30, 1988 the Department asserted a third party lien as stated in Finding of Fact No. 1.
5. Neither the employer nor any co-employee was determined by a trier-of-fact to be at fault in the April 15, 1985 accident.
6. Claimant's employer, Funston Tire Service, Inc., was the owner of the insurance policy under which the claimant made his UIM recovery.
CONCLUSIONS OF LAW
- The Board of Industrial Insurance Appeals has jurisdiction over the parties and the subject matter of this appeal.
- Under the provisions of RCW 51.24.030 as amended in 1986, the Department of Labor and Industries is entitled to a lien against Mr. Funston's recovery under the UIM provisions of the insurance policy issued to Funston Tire Service Inc.
- Because neither the employer nor any co-employee was determined by a trier-of-fact to be at fault in the April 15, 1985 accident within the meaning of RCW 4.22.070, the Department's lien against [10] claimant's UIM recovery was not extinguished under the provisions of RCW 51.24.060(1)(f).
- The Department order of June 30, 1988 which asserted a lien against claimant's third party recovery for the sum of $13,578.82 and demanded reimbursement of the amount of $8,415.13, and which provided that no benefits or compensation will be paid until such time as the excess recovery totalling $8,500.29 has been expended by the claimant for costs incurred as a result of the conditions covered under this claim, is correct and is affirmed.
It is so ORDERED.
Dated this 16th day of August, 1990.
BOARD OF INDUSTRIAL INSURANCE APPEALS
/s/
SARA T. HARMON Chairperson
/s/
PHILLIP T. BORK Member