IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

SPECIAL FUND DIVISION, Petitioner,

v.

THE INDUSTRIAL COMMISSION OF ARIZONA, Respondent,

JOHNNY HANER, Respondent Employee,

VALLEY SCHOOL WORKERS COMPENSATION POOL d/b/a DEER 

VALLEY UNIFIED SCHOOL DISTRICT, Respondent Employer,

VALLEY SCHOOLS WORKERS COMPENSATION GROUP, Respondent 

Carrier.

No. 1 CA-IC 20-0052

Special Action - Industrial Commission

ICA Claim No. 20191-140023

Carrier Claim No. 33481

The Honorable Jonathan Hauer, Administrative Law Judge

AFFIRMED

COUNSEL

Industrial Commission of Arizona, Phoenix

By Stephen D. Ball

Counsel for Petitioner

FILED 11-9-2021
2

Industrial Commission of Arizona, Phoenix

By Gaetano J. Testini 

Counsel for Respondent

Arizona Injury Law Group PLLC, Phoenix

By Weston S. Montrose

Counsel for Respondent Employee

Jardine, Baker, Hickman & Houston, PLLC, Phoenix

By K. Casey Kurth 

Counsel for Respondent Employer and Carrier

OPINION

Presiding Judge Randall M. Howe delivered the opinion of the court, in 

which Judge Brian Y. Furuya and Judge Michael J. Brown joined.

H O W E, Judge:

¶1 The Special Fund Division (“Fund”) of the Industrial 

Commission of Arizona (“ICA”) challenges an award that made it

responsible for a portion of the expenses of Johnny Haner’s disability 

benefits under A.R.S. § 23–1065(C) because Deer Valley Unified School

District knew about Haner’s pre-existing medical conditions while he 

worked for Deer Valley. The Fund argues that an employee’s credible 

testimony that he informed his supervisor of his pre-existing medical 

conditions is insufficient evidence to establish knowledge for 

apportionment of expenses under the statute without evidence that the 

respondent employer acknowledged that the employee had pre-existing 

conditions. We affirm. Credible testimony that an employee told his 

employer about his pre-existing conditions is sufficient to support

apportioning expenses of disability benefits under A.R.S. § 23–1065(C).

FACTS AND HISTORY

¶2 In 2015, Haner applied for a job as a custodian with Deer 

Valley. Paul Florek hired him and became his direct supervisor. Haner was 

injured on the job in April 2019, and his worker’s compensation claim was 

accepted. After he was treated and his claim was closed with an 

unscheduled permanent partial disability in July 2019, the ICA Claims 

Division determined that Haner had suffered no loss of earning capacity.
SPECIAL FUND v. HANER/VALLEY SCHOOLS

Opinion of the Court

3

Haner disagreed and requested a hearing. He also requested 

reimbursement for expenses that he incurred in traveling for treatment.

¶3 Before the hearing on those issues, Deer Valley and its carrier,

Valley Schools Workers Compensation Group, notified the administrative 

law judge (“ALJ”) that, due to Haner’s pre-existing diabetes and 2013 heart 

surgery, they were seeking apportionment of the expenses of his disability 

benefits under A.R.S. § 23–1065(C), which generally provides that the Fund

may reimburse employers that knowingly employ persons with qualifying 

pre-existing conditions who later suffer a work injury. The Fund joined the 

proceeding as a party in interest. 

¶4 The ALJ heard testimony from Haner and others over several 

days. Haner testified that when he was hired, he told Florek that he had

diabetes and had undergone heart bypass surgery. The ALJ found that 

Haner was a credible witness and, relying solely on Haner’s testimony, 

determined that Deer Valley knew about those pre-existing conditions 

before he was injured. The resulting award, therefore, apportioned 

responsibility for payment of disability benefits between the Valley Group 

and the Fund.

¶5 The Fund requested administrative review of the award, 

arguing that the Valley Group did not meet its burden of proving that Deer 

Valley knew about Haner’s pre-existing conditions because it failed “to 

provide any testimony or writing from the employer evidencing 

knowledge of applicant’s heart condition and diabetes.” The Fund argued 

that without direct evidence that Florek or another Deer Valley

representative acknowledged Haner’s pre-existing conditions, the record

was insufficient to find that Deer Valley knew about them. The ALJ 

summarily denied the review request, and this special action review 

followed.

DISCUSSION

¶6 When this court reviews the ICA’s findings and conclusions, 

we defer to the ALJ’s factual findings but review questions of law de novo. 

Young v. Indus. Comm’n, 204 Ariz. 267, 270 ¶ 14 (App. 2003). We consider 

the evidence in the light most favorable to upholding the award. Lovitch v. 

Indus. Comm’n, 202 Ariz. 102, 105 ¶ 16 (App. 2002). Here, the Fund does not 

dispute Haner’s testimony, but argues that his testimony, which the ALJ 

found credible, is insufficient by itself to support the ALJ’s finding that Deer 

Valley knew about his pre-existing conditions.
SPECIAL FUND v. HANER/VALLEY SCHOOLS

Opinion of the Court

4

¶7 The expense of disability benefits may be apportioned 

between the Fund and the employer or its carrier when the employer 

knowingly hires an employee with a significant non-work-related physical 

impairment that “is of such seriousness as to constitute a hindrance or 

obstacle to employment,” and the employee later suffers a work-related 

impairment. A.R.S. § 23–1065(C). If the statutory prerequisites are satisfied, 

the Fund must reimburse the employer or carrier a portion of the disability 

benefits to which the worker is entitled. A.R.S. § 23–1065(C)(4). This 

provision promotes hiring workers who have pre-existing conditions.

Burrell, 191 Ariz. at 153 ¶ 10; Special Fund Div. v. Indus. Comm’n (Lane), 240 

Ariz. 104, 105 ¶ 6 (App. 2016).

¶8 The statutory prerequisites to apportionment include proof of 

the employer’s knowledge of the worker’s pre-existing condition. This 

means that the employer must know about the pre-existing condition when 

it hires the employee or must continue employing the worker after it 

becomes aware of the condition. A.R.S. § 23–1065(C)(2). Here, the only 

prerequisite to apportionment that the Fund challenges is whether Deer 

Valley knew of Haner’s pre-existing conditions. Direct evidence before the 

ALJ that Haner told Florek of his pre-existing conditions allowed the judge

to draw the inference that Florek, and by extension Deer Valley, knew about 

them. This is sufficient evidence of the employer’s knowledge. See Burrell, 

191 Ariz. at 155 ¶ 17 (stating ALJs “are more than capable of weighing the 

credibility of testimony and evaluating whether the employer has met its 

burden of demonstrating that it possessed the requisite knowledge at the 

requisite time”).

¶9 The Fund asserts that this is inadequate without direct 

evidence of what Florek did with the information, or other information that 

Deer Valley acknowledged it knew of Haner’s pre-existing conditions. But

this argument ignores that a valid inference from Haner’s testimony that he 

told Florek of his pre-existing conditions is that Florek, and consequently 

Deer Valley, knew of those conditions. Evidence that Florek acknowledged 

that he understood the meaning of Haner’s statement to him would 

certainly make the case stronger, but its absence does not detract from the

sufficiency of Haner’s testimony. 

¶10 The ALJ has the “duty to resolve all conflicts in the evidence 

and to draw all warranted inferences,” Aguayo v. Indus. Comm’n, 235 Ariz. 

413, 416 ¶ 11 (App. 2014), and he did so. Therefore, we reject the Fund’s 

argument.
SPECIAL FUND v. HANER/VALLEY SCHOOLS

Opinion of the Court

5

CONCLUSION

¶11 The evidence supports the apportionment portion of the 

award. We affirm.