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IN THE SUPREME COURT OF THE STATE OF HAWAI#I

---o0o---

DENNIS T. IHARA,

Petitioner/Claimant-Appellee, Cross-Appellant,

vs.

STATE OF HAWAI#I, DEPARTMENT OF LAND AND NATURAL RESOURCES 

Respondent/Employer-Appellant, Cross-Appellee, Self-Insured.

 

SCWC-12-0000398

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS

 (CAAP-12-0000398; CASE NO. AB 2008-266 (2-07-40277))

OCTOBER 13, 2017

RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

OPINION OF THE COURT BY WILSON, J.

 I. INTRODUCTION

This case raises two questions concerning the law of

workers’ compensation in Hawai#i as it relates to permanent

partial disability (PPD) awards. First, must a PPD award for an

Electronically Filed

Supreme Court

SCWC-12-0000398

13-OCT-2017

09:47 AM
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unscheduled injury that is not comparable to a scheduled injury

be supported by some factual finding of a determinate percentage

of impairment of a physical or mental function of the whole

person? This question relates to a required component in the way

the PPD award for such an injury must be calculated under HRS §

386-32(a). Second, may a PPD determination be based on a 1

claimant’s post-injury inability (or reduced ability) to perform

the usual and customary work activities in the position the

HRS § 386-32(a) states:

1

Permanent partial disability. Where a work

injury causes permanent partial disability, the employer

shall pay the injured worker compensation in an amount

determined by multiplying the effective maximum weekly

benefit rate prescribed in section 386-31 by the number of

weeks specified for the disability as follows:

. . .

Other cases. In all other cases of permanent

partial disability resulting from the loss or loss of use of

a part of the body or from the impairment of any physical

function, weekly benefits shall be paid at the rate and

subject to the limitations specified in this subsection for

a period that bears the same relation to a period named in

the schedule as the disability sustained bears to a

comparable disability named in the schedule. In cases in

which the permanent partial disability must be rated as a

percentage of the total loss or impairment of a physical or

mental function of the whole person, the maximum

compensation shall be computed on the basis of the

corresponding percentage of the product of three hundred

twelve times the effective maximum weekly benefit rate

prescribed in section 386-31. (Emphasis added.)

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claimant occupied prior to the injury? This question relates to 2

the range of permissible methods by which the degree of partial

impairment may be assessed. With the qualifications detailed

below, we answer both questions in the affirmative. 

II. BACKGROUND

In March, 2012, the Labor and Industrial Relations

Appeals Board (the LIRAB or the Board) awarded Ihara $250 in

permanent partial disability (PPD) benefits and found the

Department of Land and Natural Resources (DLNR) liable for

vocational rehabilitation services. Both Ihara and DLNR appealed

to the Intermediate Court of Appeals (ICA). The ICA vacated the

LIRAB’s award of $250 in PPD and related vocational

rehabilitation services, and it remanded to the LIRAB for further

proceedings. On certiorari, Ihara seeks reversal of the ICA’s

decision to vacate the LIRAB’s award of permanent partial

disability benefits to Ihara. Ihara contends the ICA erred in

holding that (1) the LIRAB was required to calculate the award

based on a percentage-based finding of impairment, and (2) that

We consider only the issues raised by Ihara in his

2

application for writ of certiorari. His application presented three

questions: Did the ICA gravely err in ruling that a PPD award requires a

finding of some mental or physical impairment? Did the ICA gravely err in

ruling that PPD must equal impairment? Did the ICA gravely err in ruling that

PPD should not be based on a claimant’s ability to work? We reformulate his

first question more precisely above; we combine his second and third questions

in the discussion below.

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the LIRAB erred when it considered work activities in determining

Ihara’s PPD award. 

A. Ihara’s employment and injury

Ihara was employed as a Deputy Registrar at the Bureau

of Conveyances, a division within DLNR. Although he was a Deputy

Registrar, Ihara was in charge of operations for the Bureau of

Conveyances and effectively performed the duties of the

Registrar. Ihara described the Bureau as being in a state of

“disarray and dysfunction,” explaining that “the Land Court

section staff was pitted against the Regular System section

staff.” Job stress caused Ihara to experience trouble sleeping,

memory lapses, anxiety, and depression. 

Ihara reported to DLNR that he suffered increased

hypertension and stress resulting from the pressures of his

position, and that this injury occurred on approximately 

February 1, 2007. On March 21, 2007, DLNR filed a Form WC-1:

Employer’s Report of Industrial Injury, which documented Ihara’s

claim and the nature of his injury, and on May 17, 2007, Ihara

filed a Form WC-5: Employee’s Claim for Worker’s Compensation

Benefits. Ihara’s physician, Dr. Ronald A. Morton, submitted a

letter stating that Ihara was in reasonably good health with

controlled hypertension, but that high work stress had caused a

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recent and marked elevation in his blood pressure. 

At the request of DLNR, Dr. Ajit Arora performed an

Independent Medical Examination and Dr. Jon Streltzer performed

an Independent Psychiatric Examination on Ihara. Dr. Arora’s

report from May 21, 2007 diagnosed Ihara with “[e]ssential

hypertension, genetically based, with temporary aggravation.” 

Dr. Streltzer’s report from June 19, 2007 stated that Ihara

suffered from “Adjustment Disorder with Anxiety, Primary

Insomnia, Occupational Problem (not a mental disorder), and High

Blood Pressure.” Based on Dr. Arora’s and Dr. Streltzer’s

Independent Medical Examination and Independent Psychiatric

Evaluation, DLNR accepted compensability for Ihara’s claim as a

temporary aggravation. 

The Department of Human Resources Development, Employee

Claims Division, instructed the doctors to submit reports and

statements to the Department of Human Resources Development,

State Workers’ Compensation Division, documenting the medical

services rendered in relation to his increased stress and

hypertension. Various notes from Dr. Morton were submitted, as

well as from psychiatrist Dr. Dennis Lind, excusing Ihara from

work and stating that he was disabled for certain dates. Ihara

was put on unpaid medical leave with his last day at work being

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June 12, 2007.

On June 19, 2008 the claims manager of the Employee

Claims Division wrote to Drs. Lind and Morton requesting their

opinions as to whether Ihara could return to work. On June 25,

2008, Dr. Lind responded that Ihara had reached medical stability

and could work in other situations, but not at DLNR. Dr. Morton

wrote on June 27, 2008 that Ihara could return to regular duty

and had reached medical stability. 

Based on Dr. Lind’s assessment that Ihara had reached

medical stability but could only work in other situations, DLNR

discharged Ihara from his position at the Bureau of Conveyances

via a letter dated July 11, 2008. Relying on Dr. Lind’s “medical

assessment,” DLNR determined that Ihara was “medically

disqualified for continued civil service employment,” not only

for the Deputy Registrar position but also for “any DLNR

employment.” 

B. Hearings before the Department of Labor and Industrial

 Relations and the LIRAB

Ihara claimed eligibility for temporary total

disability benefits and vocational rehabilitation services. 

Ihara’s employer, DLNR, disputed his eligibility for some of

those benefits and services. Disputes concerning benefits are

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decided by the director of the Department of Labor and Industrial

Relations. HRS § 386-86(a)-(b)(1993 & Supp. 2014). The director

conducts an informal hearing on the claim and issues findings of

fact and conclusions of law. Id. After an initial hearing in

March 2008 and a decision in May 2008, the director, in a

supplemental decision in October 2009, stated that DLNR was

required to pay Ihara for “such medical care, services and

supplies as the nature of the injury may require,” as well as

weekly compensation for Ihara’s temporary total disability and

temporary partial disability for the relevant weeks of his leave. 

In addition, the director found that no permanent disability

resulted from Ihara’s injury. Both Ihara and DLNR appealed the

decision to the LIRAB.

In its March 13, 2012 decision and order, the Board

found that Ihara was entitled to certain periods of temporary

total disability as a result of his work injury and to vocational

rehabilitation benefits for certain periods. The Board concluded

that Ihara was entitled to benefits for permanent partial

disability in the amount of $250 based on its finding that the

DLNR’s statement in its July 11, 2008 letter that Ihara was

medically disqualified from his position served as an admission

that Ihara was permanently disabled.

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The Board finds that Employer’s statement that Claimant was

“medically disqualified” for his position was an admission or

acknowledgement that Claimant was permanently disabled. The Board

finds this to be especially so, because Employer sought out and

received opinions of medical stability from Drs. Morton and Lind

before it sent this letter.

The Board credits the opinions that Claimant sustained no

ratable impairment. However, Employer’s July 11, 2008 letter

admitted or acknowledged permanent disability, stated that

Claimant was “medically disqualified” for his position, and

terminated him therefrom. Therefore, the Board finds that

Claimant sustained permanent partial disability in the amount of

$250.

Both the DLNR and Ihara appealed the LIRAB’s decision to the ICA. 

C. ICA proceedings

The ICA vacated the Board’s ruling awarding Ihara $250

in PPD benefits on two grounds. First, the ICA held that the

statute governing PPD benefits requires the assignment of a

percentage of impairment for unscheduled injuries, i.e., for

injuries not listed in the statute. More precisely stated, the

statute requires the assignment of a percentage of impairment for

injuries not specifically listed in the statute or comparable to

those listed in the statute. The Board had failed to assign any

percentage of impairment to Ihara’s injury, instead awarding him

a lump sum of $250. 

Second, based on its analysis of the statute’s

legislative history, the ICA held that PPD may not be based on

“ability to work,” because, unlike total disability awards, PPD

benefits are essentially indemnity payments for loss of bodily

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integrity, not compensation to replace loss of wages. The ICA

found that the Board improperly awarded Ihara permanent partial

disability benefits based on his reduced ability to work. The

ICA noted that the Board’s award of PPD benefits was based on the

ambiguous position that, though Ihara suffered no ratable

impairment, nonetheless he was “medically disqualified” to return

to his position at DLNR, and the Board accordingly awarded him

PPD benefits, based on his reduced ability to work. 

The ICA found the Board’s position on the extent of

Ihara’s impairment ambiguous. Either the Board meant by its

findings that Ihara suffered no impairment at all, or it meant

“that he had suffered some impairment, but in an amount incapable

of being measured.”3

The ICA vacated the Board’s award and remanded “for a

determination of whether Ihara had suffered a permanent

impairment, and if so, the percentage of the impairment and the

award of PPD benefits based on that percentage.”4

As noted infra, an award of permanent partial disability

3

benefits for an unscheduled injury that is not comparable to a scheduled

injury must be based on a finding of a determinate degree or percentage of

impairment.

Vocational rehabilitation services are available for

4

employees who suffer permanent disability. HRS § 386-25(b)(Supp. 2014).

Because the ICA vacated the Board’s award of PPD benefits to Ihara, it also

vacated the Board’s determination that Ihara was entitled to vocational

(continued...)

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III. STANDARDS OF REVIEW

A. Appeals from agency determinations relating to workers’

 compensation

Appellate review of a LIRAB decision is governed by the

provisions of the Hawai#i Administrative Procedure Act relating

to judicial review of agency action. HRS § 91-14(g)(1993);

Bocalbos v. Kapiolani Med. Ctr. for Women & Children, 93 Hawai#i

116, 123, 997 P.2d 42, 49 (App. 2000). Under those provisions,

the reviewing court “may affirm the decision of the agency or

remand the case with instructions for further proceedings.” Id. 

The reviewing court also “may reverse or modify the decision and

order if the substantial rights of the petitioners may have been

prejudiced because the administrative findings, conclusions,

decisions, or orders” (1) violate provisions of the constitution

or a statute, (2) are beyond the agency’s statutory authority or

jurisdiction, (3) used “unlawful procedure,” (4) were “[a]ffected

by other error of law,” (5) were clearly erroneous, or (6) were

arbitrary or capricious “or characterized by abuse of discretion

or clearly unwarranted exercise of discretion.” HRS § 91-

14(g)(1)-(6). To be reversed as clearly erroneous, the agency’s

(...continued)

4

rehabilitation services. The ICA then remanded that issue to the Board “for a

redetermination consistent with its final decision on the PPD issue.”

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findings, conclusions, decisions or orders must be clearly

erroneous “in view of the reliable, probative, and substantial

evidence on the whole record.” HRS § 91-14(g)(5); Poe v.

Hawai#i Labor Relations Bd., 87 Hawai#i 191, 195, 953 P.2d 569,

573 (1998). As to conclusions of law, the LIRAB’s conclusions

will be reviewed de novo, under the right/wrong standard. Tate

v. GTE Hawaiian Tel. Co., 77 Hawai#i 100, 103, 881 P.2d 1246,

1249 (1994). As to findings of fact, an “agency’s findings

should be ‘sufficient to allow the reviewing court to track the

steps by which the agency reached its decision.’” Kauai Springs,

Inc. v. Planning Comm’n of Cty. of Kauai, 133 Hawai#i 141, 164,

324 P.3d 951, 974 (2014)(citation omitted); Int’l Bhd. of Elec.

Workers, Local 1357 v. Hawaiian Tel. Co., 68 Haw. 316, 328, 713

P.2d 943, 953 (1986)(“A remand pursuant to HRS § 91–14(g) is

appropriate if an agency’s findings are incomplete”). “When

mixed questions of law and fact are presented, an appellate court

must give deference to the agency’s expertise and experience in

the particular field. The court should not substitute its own

judgment for that of the agency.” In re Water Use Permit

Applications, 94 Hawai#i 97, 119, 9 P.3d 409, 431

(2000)(citation, braces, and internal quotation marks omitted).

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B. Statutory interpretation

Appellate courts review statutory interpretation de

novo. Van Ness v. State, Dep’t of Educ., 131 Hawai#i 545, 558,

319 P.3d 464, 477 (2014), as corrected (Feb. 4, 2014). “When

construing a statute, our foremost obligation is to ascertain and

give effect to the intention of the legislature, which is to be

obtained primarily from the language contained in the statute

itself.” Id. (citation omitted). The “broad humanitarian

purpose of the workers’ compensation statute read as a whole

requires that all reasonable doubts be resolved in favor of the

claimant.” Id. (braces, underscoring, and citation omitted). 

The statute must be “construed . . . liberally” in order to

effect its “beneficent purposes.” Puchert v. Agsalud, 67 Haw.

25, 36, 677 P.2d 449, 457 (1984).

IV. DISCUSSION

On certiorari, Ihara raises as issues (1) whether a PPD

award for an unscheduled injury requires a finding of some mental

or physical impairment and (2) whether a PPD award may reflect a

claimant’s reduced ability to work. To address these issues, we

provide a brief overview of the relevant portions of the workers’

compensation statute. 

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A. Legislative and administrative background of permanent

 partial disability

Workers’ compensation statutes “are highly remedial in

character. Their paramount purpose is to provide compensation

for an employee for all work-connected injuries, regardless of

questions of negligence and proximate cause.” Flor v. Holguin,

94 Hawai#i 70, 79, 9 P.3d 382, 391, on reconsideration in part,

94 Hawai#i 92, 9 P.3d 404 (2000). The Hawai#i workers’

compensation statute “is social legislation that is to be

interpreted broadly.” Davenport v. City & Cty. of Honolulu,

Honolulu Fire Dep’t, 100 Hawai#i 481, 491, 60 P.3d 882, 892

(2002). The statute provides “an injured employee’s exclusive

remedy for an injury arising out of and in the course of

employment.” Iddings v. Mee-Lee, 82 Hawai#i 1, 5, 919 P.2d 263,

267 (1996). In addition, the statute embodies a presumption of

compensability, and that “presumption has been described as one

of the ‘keystone principles’ of our workers’ compensation plan.” 

Flor, 94 Hawai#i at 79, 9 P.3d at 391.

Various benefit categories exist to meet different

workers’ varied circumstances. Two types of permanent disability

are relevant to our discussion here: total disability and

permanent partial disability. Total disability benefits

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compensate a worker for his or her loss of wage-earning capacity,

while PPD benefits compensate a worker for the loss of bodily

integrity, that is, the loss of a physical or mental function. 

HRS § 386-31(a); HRS § 386-32(a). If an employee is injured on

the job and is unable to work in any capacity after the injury,

he or she is eligible for a total disability benefit. H. Stand.

Comm. Rep. No. 418-70, in 1970 House Journal, at 976. Total

permanent disability payments are wage replacement benefits meant

to compensate the worker for the permanent loss of wage-earning

capacity where the worker is unable to find work on the regular

labor market. Id. The purpose of a PPD award, on the other

hand, is to compensate a worker for the loss or impairment of a

physical or mental function. Unlike total disability, a PPD

award is not based on the amount of wages lost. H. Stand. Comm.

Rep. No. 193, in 1969 House Journal, at 702. A PPD award is

payable to the worker even if the worker returns to work, and the

amount of the award derives from the extent of a worker’s

impairment rather than his or her wage-earning capacity. See HRS

§ 386-32(a). 

The distinction between total disability and PPD

benefits is further clarified in the legislative history of the

1970 amendments to the statute. “‘[T]otal disability’ is defined

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as ‘disability of such an extent that the disabled employee has

no reasonable prospect of finding regular employment of any kind

in the normal labor market.’ . . . Permanent partial

disability compensation payments under the law, however, are

based primarily on impairment of physical or mental function and

not on ability for work.” H. Stand. Comm. Rep. No. 418-70, in

1970 House Journal, at 976. Thus, the legislature intended that

total disability benefits should compensate a worker for wages

lost when he or she is unable to find regular employment of any

kind due to a work-related injury, whereas PPD benefits should

compensate for the loss or impairment of a mental or bodily

function, irrespective of wage-earning capabilities.

PPD injuries divide into two basic classes, scheduled and

unscheduled. 2 Modern Workers Compensation § 200:10 (Thomson

Reuters 2017). Scheduled losses or injuries are those

specifically listed and provided for by statute; unscheduled

losses or injuries are those not specifically listed. Id. 

Methods for determining or calculating the amount of compensation

for permanent partial injuries differ depending on whether the

injury is scheduled or unscheduled. HRS § 386-32(a) illustrates

the method for determining the amount of compensation for

scheduled injuries. It includes a schedule of body parts whose

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loss is covered by permanent partial disability benefits, with

the amount of compensation varying based on the specific body

part. The schedule lists benefits to be paid for specific

losses, e.g., a finger or hand. HRS § 386-32(a). 

For loss or impairment of a function that is not listed

in the schedule, or is not comparable to a scheduled injury, the

permanent partial disability is rated as a percentage of the

total loss or impairment of a physical or mental function of the

whole person. HRS § 386-32(a). The percentage is used to 5

calculate the dollar amount of the PPD award according to a

formula in the statute. HRS § 386-32(a) provides that the

“maximum compensation” for an unscheduled PPD injury “shall be

computed on the basis of the corresponding percentage . . . .” 

Id. (emphasis added). 

The general outline of this “degree of whole person

5

impairment” approach has been described as follows.

Under the impairment of the whole person method of

computing workers’ compensation for a permanent partial

disability, the calculation of the workers’ compensation payable

is the result of a multiplication. The multiplicand is the amount

which the statute assigns to the whole person. This may be a flat

dollar amount or a number of weeks or months of compensation . . .

with the per-week compensation figured as a fraction or percentage

of the employee’s pre-injury average weekly wages or earnings or

the statewide average weekly wage. The multiplier is the

proportion, fraction, percentage or degree (figured up to 100

degrees) of the employee’s impairment.

2 Modern Workers Compensation § 200:18.

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In practice, initial PPD ratings for unscheduled

injuries are typically provided by medical experts using rating

categories outlined in the various editions of the American

Medical Association’s Guides to the Evaluation of Permanent

Impairment (AMA Guides), and then the LIRAB may add additional

percentage points depending on the magnitude of the impairment

rating. See Hawai#i Administrative Rules (HAR) § 12-10-

21(a)(“Impairment rating guides issued by the American Medical

Association, American Academy of Orthopedic Surgeons, and any

other such guides which the director deems appropriate and proper

may be used as a reference or guide in measuring a disability.”). 

See also Ibarra v. Fireman’s Fund Ins. Co., Case No. AB 2009-504

(2-06-01173); Chi v. City & Cty. of Honolulu, Case No. AB 2006-

116 (2-04-01998). 

It is, however, ultimately the director of the

Department of Labor and Industrial Relations or the Board, and

not the physician, that decides the final PPD rating. Cabatbat

v. Cty of Hawai#i, Dep’t of Water Supply, 103 Hawai#i 1, 9, 78

P.3d 756, 764 (2003), as corrected (Dec. 8, 2003). The LIRAB

generally places great weight upon a physician’s initial

impairment rating, but it is not the only component of the

Board’s assessment. Id. The LIRAB’s decisions show a marked

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pattern in which the Board considers factors other than the

physician’s impairment rating, such as whether the complainant is

able to participate in the same types of hobbies and daily and

work activities as prior to the accident. See, e.g., Belanio v.

State, Case No. AB 2007-532 (1-03-10259) at 8 (claimant’s

inability to return to customary job resulted in 3% PPD); Deponte

v. City & Cty. of Honolulu, Case No. AB 97-624 (2-95-11372) at 3-

4 (claimant’s inability to perform activities of daily living

resulted in 2% PPD); Chi, AB 2006-116 at 3 (claimant awarded 3%

PPD due to inability to engage in recreational and daily living

activities). 

Disputes concerning compensation under Hawaii’s

workers’ compensation law are decided by the director. HRS §

386-86(a)-(b). The director conducts an informal hearing on the

claim and issues findings of fact and conclusions of law. Id. 

The decision of the director may be administratively appealed to

the LIRAB, which conducts a de novo, trial-like hearing on the

appeal from the director’s determination. HRS § 386-87(a)-(c). 

A LIRAB decision may be appealed directly to the ICA. HRS § 386-

73.5; HRS § 386-88.

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B. A PPD award requires a finding of some determinate impairment

 of a mental or physical function

The ICA held that a PPD award requires a finding of

some percentage of mental or physical impairment. The ICA

concluded that the Board’s findings as to the extent of Ihara’s

impairment were ambiguous. Under the Board’s findings, it is

possible to conclude either that Ihara suffered no permanent

impairment or that he suffered some impairment, but not in a

ratable amount. The ICA concluded that under either of the two

alternative interpretations, the Board erred. As to the first

alternative, “[i]f the LIRAB’s conclusion was that Ihara suffered

no impairment, then its interpretation of HRS § 386-32(a) was

erroneous because a PPD award requires a finding that there is

some mental or physical impairment.” The ICA explained that the

definition section of HRS chapter 386 defines disability as “loss

or impairment of a physical or mental function,” and it concluded

that an impairment is necessary to support a PPD award because

the definition of disability explicitly includes a loss or

impairment. As to the second alternative, that Ihara had

suffered some impairment, but not in a ratable amount, the ICA

concluded that the Board had impermissibly imported Ihara’s

reduced ability to work as a criterion in deciding Ihara’s PPD

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impairment. In the ICA’s view, the legislative intent of the

statute “makes clear that PPD is solely based on a claimant’s

physical or mental impairment and not on his ability to work.” 

We consider the ICA’s analysis of the first alternative in this

section and its analysis of the second alternative in the next

section.

In regard to the first alternative, Ihara argues that

the ICA failed to “recognize long-standing precedents which did

not require a finding of some mental or physical impairment in

order to award PPD.” Ihara argues that the Hawai#i workers’

compensation statute has an established history of awarding PPD

even in the absence of impairment, citing a number of the LIRAB’s

administrative adjudications. 

Ihara is mistaken. His analysis of the LIRAB decisions

confuses the LIRAB’s impairment rating with a physician’s

impairment rating. The LIRAB decisions Ihara cites do, in fact,

serve as instances where a physician gave a 0% impairment rating,

or found no impairment, and yet the LIRAB awarded a small

percentage of PPD. However, these decisions merely show that it

is not necessary for a physician to find a percentage of

impairment under the AMA Guides in order for the LIRAB to award

PPD. The LIRAB decisions he cites do not negate the fact that

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the LIRAB must ultimately find impairment before making a PPD

award. In the decisions Ihara cites, the LIRAB found that the

physician’s 0% or low impairment rating based on the AMA Guides

did not fully reflect the claimant’s total loss or impairment,

and so it further evaluated the record to reach an accurate

impairment rating. We approved this practice in Cabatbat when 6

we quoted the Arizona Supreme Court’s holding that where the AMA

Guides and the physician’s assessment do not give an accurate

portrayal of the total loss of impairment, the director or Board

should take other factors into account to reach an accurate

disability determination. 103 Hawai#i at 9, 78 P.3d at 764

(“when the AMA Guides do not truly reflect a claimant’s loss, the

[administrative law judge] must use his discretion to hear

additional evidence and, from the whole record, establish a

rating independent of the AMA recommendations.” (quoting Slover

Masonry, Inc. v. Indus. Comm’n, 761 P.2d 1035, 1040 (Ariz.

1988))). We later reaffirmed this view when we stated that other

factors affecting a PPD assessment include “skills, education,

job history, adaptability, age, and environment . . . .” Duque

See, e.g., Ibarra, AB 2009-504 at 7-8 (awarding claimant 2%

6

PPD despite crediting physician’s 0% impairment rating under the AMA Guides

because lower back injury affected ability to work); Chi, AB 2006-116 at 3-4

(awarding claimant 3% PPD for residual eye problems despite AMA Guides rating

his vision impairment at 0%).

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v. Hilton Hawaiian Vill., 105 Hawai#i 433, 439, 98 P.3d 640, 646

(2004)(quoting the AMA Guides).

Furthermore, none of the LIRAB decisions Ihara marshals

demonstrate circumstances where the LIRAB found the claimant

suffered no impairment whatever; on the contrary, in each of

these cases, the LIRAB found that the complainant’s daily

activities at home or at work were permanently affected due to

the injury. For example, in Chi, a police officer who was struck

in the eye rated at 0% impairment according to the vision test

outlined in the AMA Guides, but based on testimony that he

suffered from double vision and was no longer able to engage in

certain activities of daily living as a result, the LIRAB awarded

him 3% PPD. AB 2006-116 at 3-4. 

It follows that even where a physician finds there is

no impairment under the standards in the AMA Guides, or fails to

give an impairment rating, the LIRAB has the discretion to

consider the entire record, even beyond the physician’s

impairment rating, to determine the most accurate impairment

rating possible. The AMA Guides itself does not require an award

of permanent partial disability to be conditioned upon a finding

of impairment by a physician. Instead, the AMA Guides emphasizes

that it “is not intended to be used for direct estimates of work

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disability. Impairment percentages derived according to the

Guides criteria do not measure work disability. Therefore, it is

inappropriate to use the Guides’ criteria or ratings to make

direct estimates of work disability.” AMA Guides (Fifth Edition,

2000), at 9; id. at 13 (“Impairment percentages estimate the

extent of the impairment of the whole person functioning and

account for basic activities of daily living, not including work. 

The complexity of work activities requires individual analysis. 

Impairment assessment is a necessary first step for determining

disability.”)(emphasis in original)).

The cases Ihara cites represent instances where the

physician found no percentage of impairment, but after reviewing

the record, the LIRAB found impairment based on additional or

other evidence. None of the cases Ihara highlights include a

scenario where the LIRAB found that there was no impairment

whatever, yet still awarded PPD. Thus, the ICA accurately held

that a PPD award requires a finding of some physical or mental

impairment. 

Following Ihara’s hearing, the Board did not determine

Ihara’s PPD using the percentage of impairment, and instead

directly awarded him a monetary lump sum of $250 with no

explanation as to how it calculated the amount of the award. 

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The statutory formula uses the impairment percentage to calculate

the monetary amount of the PPD award, stating that “[i]n cases in

which the permanent partial disability must be rated as a

percentage of the total loss or impairment . . . the maximum

compensation shall be computed on the basis of the corresponding

percentage of the product of three hundred twelve times the

effective maximum weekly benefit rate . . . .” HRS § 386-32(a).7

Given this statutory provision, the LIRAB cannot calculate

Ihara’s monetary PPD award in accordance with the statute without

first establishing his percentage of impairment. 

Accordingly, the ICA correctly vacated Ihara’s PPD

award. A PPD award for an unscheduled injury that is not

comparable to a scheduled injury must be based on a finding of

some determinate percentage of “the total loss or impairment of a

physical or mental function of the whole person.” HRS § 386-

32(a). The percentage may correspond to the percentage of

impairment found by a physician using the AMA Guides. The

percentage may also correspond to a physician’s rating of

Ihara also contends that HRS § 386-32(a) only requires that

7

a PPD percentage be used to calculate the maximum PPD for which a claimant is

eligible, and that no percentage is required to calculate the PPD a claimant

is actually awarded. Even were Ihara’s interpretation of the statutory

language correct, the statute mandates that the LIRAB still must find a PPD

percentage to set the ceiling of a claimant’s PPD award eligibility. Because

the LIRAB failed to establish a percentage, it was unable to calculate the

maximum PPD award for which Ihara was eligible.

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impairment based on “any other such guides which the director

deems appropriate and proper,” and therefore “may be used as a

reference or guide in measuring a disability.” HAR § 12-10-

21(a). Where a physician’s estimate of the permanent impairment

under the AMA Guides is zero, the Board nonetheless has the

discretion to find a determinate degree of impairment using

standards not encompassed by the AMA Guides.

C. A claimant’s loss of wage-earning capacity cannot be

 considered in determining permanent partial disability;

 however, reduced ability to perform one’s usual and customary

 work post-injury can be considered in determining PPD

The ICA concluded: “The legislative intent of HRS §

386-32(a) makes clear that PPD is solely based on a claimant’s

physical or mental impairment and not on his ability to work.” 

As the ICA stated, the legislative history of the statute

“strengthens the conclusion that awards for PPD are meant to be

based on the extent of a claimant’s impairment and not on his

wage-earning capacity or ability to work.” Accordingly, the ICA

held that inability (or reduced ability) to perform work-related

activities may never be a factor in determining PPD awards. 

This analysis fails to distinguish with sufficient

precision between a post-injury reduced ability to perform the

work activities of one’s former position (which may be relevant

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to PPD), on the one hand, and loss of future wage-earning

capacity (which is relevant only to total disability

determinations), on the other. While total disability awards

compensate a worker who has lost his or her wage-earning

capacity, permanent partial disability awards serve a different

purpose: to compensate the worker for a loss of bodily integrity. 

Cuarisma v. Urban Painters, Ltd., 59 Haw. 409, 421, 583 P.2d 321,

327 (1978). 

Stated differently, loss of wages or earning capacity

is relevant to total disability (whether temporary total

disability or permanent total disability), but it is not a

relevant criterion in determining permanent partial disability. 

Id. (“Permanent partial disability compensation is an indemnity

payment for the loss or impairment of a physical function and,

unlike temporary total disability benefits, is not compensation

to replace current loss of wages.”). See also H. Stand. Comm. 8

Rep. No. 418-470, in 1970 House Journal, at 76 (indicating that

while loss of wage-earning capacity affects total disability

Cuarisma’s holding was limited to disfigurement benefits,

8

which are a separate category of PPD under the statute. Cuarisma, 59 Haw. at

413, 583 P.2d at 323-24.

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awards, it should not be considered in PPD awards) . In short, 9

the ICA correctly held that PPD awards may not be based on wage

loss or earnings loss, because PPD awards rest on a different

rationale than awards for total disability, whether permanent or

temporary total disability. 

However, the ICA mistakenly concluded that eligibility

for a PPD award may never be based, even in part, on an inability

or reduced ability, post-injury, to perform one’s usual and

customary work. In so concluding, the ICA incorrectly supposed

that considering the claimant’s post-injury inability to perform

his or her usual and customary work is the equivalent of

considering the loss-of-wages rationale appropriate only to total

disability awards. 

A total disability award provides the injured worker

with a replacement income stream because he or she can no longer

work and therefore cannot earn a living. For that reason, loss

of income is a necessary component of a total disability award. 

The relevant text reads:

9

[T]otal disability is defined as disability of

such an extent that the disabled employee has no reasonable

prospect of finding regular employment of any kind in the

normal labor market . . . Permanent partial disability

compensation payments under the law, however, are based

primarily on impairment of physical or mental function and

not on ability for work.

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Determination of a PPD award, in contrast, compensates the worker

not for total loss of income but for partial loss of function,

either physical function or mental function. Phrased another

way, a total disability award is ultimately income-based; a

partial disability award is ultimately function-based. 

A reduced ability to perform one’s pre-injury work

activities may indicate a permanent partial loss of function,

that is, an impairment, and a permanent partial loss of function

is precisely the kind of loss for which PPD awards compensate the

injured worker. The fact that the loss of function may be

manifested in a reduced ability to perform one’s pre-injury work

activities does not make a PPD award income-based rather than

function-based. 

Our conclusion is buttressed by the Board’s expertise

and experience in this complex field. The LIRAB’s administrative

adjudications consistently follow the distinction between wagebased total disability awards and function-based partial

disability awards. In Belanio, the LIRAB awarded permanent

partial disability based on claimant Belanio’s inability to

perform his usual and customary work. Belanio suffered injuries

to his lower back that prevented him from returning to his usual

and customary job as an equipment operator. LIRAB Case No. AB

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2007-532, at 6. The LIRAB stated that “[b]ased on Claimant’s

testimony and medical evidence restricting Claimant from

returning to his usual and customary job, the Board finds that

Claimant sustained some loss or impairment of physical function.” 

Id. In Ibarra, the LIRAB again awarded PPD where an employee

hurt his shoulder at work although -- according to the AMA Guides

-- he was rated at 0% impairment of his whole person. LIRAB Case

No. AB 2009-504, at 6. The LIRAB awarded a 2% PPD award based on

its conclusion that “Claimant’s ability to work, even while [the

doctor] released Claimant to ‘full capacity’ work, was affected

by Claimant’s injury” where the claimant changed jobs following

his injury due to his inability to undertake heavy-lifting

activities. Id. at 7. 

The LIRAB’s decisions stand for the proposition that a

claimant’s inability to perform his or her usual and customary

work activities legitimately may be considered in determining PPD

awards, especially where the AMA Guides do not present an

accurate rating of the full extent of the claimant’s impairment

or loss of a physical or mental function. Additionally, as

discussed supra, Cabatbat and Duque support the LIRAB’s

consideration of work activities, in that each holds that other

factors outside of a physician’s impairment evaluation may

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permissibly affect the determination of a claimant’s PPD award. 

Cabatbat, 103 Hawai#i at 9, 78 P.3d at 764; Duque, 105 Hawai#i at

439, 98 P.3d at 646.

In Ihara’s case, the LIRAB appropriately considered his

inability to return to his regular course of work when

determining his PPD award: 

The Board credits the opinions that Claimant sustained no

ratable impairment. However, Employer’s July 11, 2008 letter

admitted or acknowledged permanent disability, stated that

Claimant was “medically disqualified” for his position, and

terminated him therefrom. Therefore, the Board finds that

Claimant sustained permanent partial disability in the amount of

$250.

However, the LIRAB awarded Ihara a lump sum of $250

without explaining its basis for doing so, when it should have

first determined his percentage of impairment and then calculated

the correct dollar amount of the PPD award according to the

formula in the statute. HRS § 386-32(a). Thus, although the ICA

incorrectly interpreted the law in holding that work activities

cannot play a role in determining PPD awards, it properly vacated

and remanded the LIRAB’s decision awarding Ihara $250 in PPD.

We defer to the LIRAB’s expertise in determining that

Ihara suffered from a permanent partial disability, and do not

substitute our judgment for its judgment concerning that

determination. In re Water Use Permit Applications, 94 Hawai#i

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97, 119, 9 P.3d 409, 431 (2000)(“When mixed questions of law and

fact are presented, an appellate court must give deference to the

agency’s expertise and experience in the particular field. The

court should not substitute its own judgment for that of the

agency.” (citation, braces, and internal quotation marks

omitted)). On the other hand, we find the factual basis for the

Board’s awarding Ihara a lump sum of $250 for his PPD

insufficient to allow us to discern the steps by which the LIRAB

reached that decision. Kauai Springs, 133 Hawai#i at 164, 324

P.3d at 974 (noting that an “agency’s findings should be

‘sufficient to allow the reviewing court to track the steps by

which the agency reached its decision.’” (citation omitted));

Int’l Bhd. of Elec. Workers, 68 Haw. at, 328, 713 P.2d at 953 (“A

remand pursuant to HRS § 91–14(g) is appropriate if an agency’s

findings are incomplete”). 

We therefore remand this matter to the LIRAB to

determine the relevant percentage of Ihara’s impairment, as well

as to determine an award of PPD benefits based on that

percentage. 

V. CONCLUSION

For the foregoing reasons, we affirm in part the ICA’s

vacating of the LIRAB’s March 13, 2012 decision awarding $250 in

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PPD to Ihara. While we affirm in part, we also correct the ICA’s

rationale for vacating and remanding. We leave intact the

LIRAB’s determination that Ihara suffered some permanent partial

disability. We vacate only the Board’s $250 lump sum award to

Ihara, and we remand to the LIRAB for it to determine the

relevant percentage of Ihara’s impairment, as well as an award of

PPD benefits based on that percentage.

Wayne H. Mukaida

for petitioner

Scott G. Leong and 

Shawn L.M. Benton

for respondent

/s/ Mark E. Recktenwald

/s/ Paula A. Nakayama

/s/ Sabrina S. McKenna 

/s/ Richard W. Pollack

/s/ Michael D. Wilson

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