Case Name: Lanis TOSO, Claimant and Appellant v. WORKFORCE SAFETY AND INSURANCE, Appellee
Court: North Dakota Supreme Court
Jurisdiction: North Dakota
Decision Date: 2006-04-03
Citations: 712 N.W.2d 312
Docket Number: No. 20050143
Parties: Lanis TOSO, Claimant and Appellant v. WORKFORCE SAFETY AND INSURANCE, Appellee.
Judges: [¶ 16] JOEL D. MEDD, D.J., and CAROL RONNING KAPSNER, J., concur.
Reporter: North Western Reporter 2d
Volume: 712
Pages: 312–323

Head Matter:
2006 ND 70
Lanis TOSO, Claimant and Appellant v. WORKFORCE SAFETY AND INSURANCE, Appellee.
No. 20050143.
Supreme Court of North Dakota.
April 3, 2006.
Rehearing Denied May 17, 2006.
Reed K. Mackenzie (argued), Mackenzie Dornik, Minneapolis, MN, and Joel F. Ar-nason (appeared), Rosenquist & Arnason, Grand Forks, ND, for claimant and appellant.
Jacqueline Sue Anderson, Special Assistant Attorney General, Fargo, ND, for ap-pellee.

Opinion:
VANDE WALLE, Chief Justice.
[¶ 1] Lanis Toso appealed from a district court judgment affirming an order of Workforce Safety and Insurance ("WSI"). WSI issued an order affirming WSI's right to apply the subrogation statute and to allow WSI to collect 50% of the settlement award Toso received in a third-party action. Toso appealed WSI's order to the district court. The district court affirmed WSI's order. On appeal to this Court, Toso argues WSI had no right to apply the subrogation statute to the settlement award because the damages in the third-party action were not related to Toso's medical expenses and disability benefits paid by WSI. We affirm.
I
[¶ 2] On September 3,1999, Lanis Toso filed a claim for workers compensation benefits in connection with an injury to his left heel which occurred August 25, 1999, while employed as a semi driver. WSI accepted the claim and awarded Toso benefits. Toso received disability benefits, and WSI paid medical expenses for treatment related to his injury. Disability benefits were discontinued when Toso returned to work.
[¶ 3] In June of 2001, Toso commenced a third-party action against Orthopaedic Associates and Dr. Jeffrey Stavenger, alleging negligence in the treatment of Toso's heel injury. Correspondence contained in the record, in the form of letters exchanged between Toso's attorney and WSI, shows notice of the third-party action was given to WSI. In the third-party action, Toso contended the alleged negligent treatment did not increase his temporary disability or his medical expenses incurred because of the work-related injury. Toso contended he would have suffered the same temporary disability and medical expense damages had the negligence not occurred. Rather, Toso alleged the only damage caused by the alleged negligent treatment was that the surgery was less successful than it might have been if no negligence had occurred and that, as a result, Toso incurred a greater permanent disability because of the negligence. WSI did not pay Toso permanent disability benefits.
[¶ 4] Toso's third-party action was settled out of court with the defendants agreeing to pay Toso $82,500. Because the case settled out of court, the trial court made no determination whether the settlement damages arose out of the work injury. The record does not contain a settlement agreement setting out what damages the settling defendants were paying for.
[¶ 5] WSI applied the subrogation statute, N.D.C.C. § 65-01-09, to the entire settlement award which allowed WSI to collect 50% of the settlement award for reimbursement for money it paid for Toso's medical expenses and disability payments. After Toso requested reconsideration of this order, Toso and WSI agreed to submit the dispute to an Administrative Law Judge ("ALJ").
[¶ 6] The ALJ's recommended decision found Toso failed to prove WSI's subrogation interest under N.D.C.C. § 65-01-09 was improperly applied to his claim. The ALJ found the settlement damages arose out of the work injury and recommended WSI's order be affirmed. WSI then issued a final order adopting the ALJ's recommended decision.
II
[¶ 7] On appeal, we review the decision of WSI, not the district court, although the district court's analysis is entitled to respect. Zander v. Workforce Safety and Ins., 2003 ND 194, ¶ 6, 672 N.W.2d 668. We review WSI's decision in the same manner as the district court under N.D.C.C. § 28-32^6. Id. The district court must affirm an order of an administrative agency unless it finds any of the following are present:
1. The order is not in accordance with the law.
2. The order is in violation of the constitutional rights of the appellant.
3. The provisions of this chapter have not been complied with in the proceedings before the agency.
4. The rules or procedure of the agency have not afforded the appellant a fair hearing.
5. The findings of fact made by the agency are not supported by a preponderance of the evidence.
6. The conclusions of law and order of the agency are not supported by its findings of fact.
7. The findings of fact made by the agency do not sufficiently address the evidence presented to the agency by the appellant.
8. The conclusions of law and order of the agency do not sufficiently explain the agency's rationale for not adopting any contrary recommendations by a hearing officer or an administrative law judge.
N.D.C.C. § 28-32-46.
[¶ 8] In evaluating WSI's findings of fact, we do not make independent findings or substitute our judgment for that of WSI, rather, we determine only whether WSI reasonably reached its factual conclusions from the weight of the evidence on the entire record. Hopfauf v. N.D. Workers Comp. Bur., 1998 ND 40, ¶ 8, 575 N.W.2d 436. We affirm WSI's decision unless its findings of fact are not supported by a preponderance of the evidence, its conclusions of law are not supported by its findings of fact, its decision is not supported by its conclusions of law, or its decision is not in accordance with the law. Id.
[¶ 9] In this case we are asked to decide whether the language of the subrogation statute at N.D.C.C. § 65-01-09 allows WSI to apply the subrogation statute to Toso's settlement award. WSI applied the subrogation statute to Toso's settlement award based on its determination that the settlement damages arose out of the work injury. Toso disagreed with that application arguing the settlement damages did not arise out of the work injury.
[¶ 10] WSI argues the district court should not have reached the merits of Toso's claims but should have summarily affirmed WSI's order because Toso failed to file a specifications of error as required by N.D.C.C. § 28-32-42(4). Vetter v. N.D. Workers Comp. Bur., 554 N.W.2d 451 (N.D.1996). Whether we decide this case based on the lack of a proper specifications of error or based on Toso's issue, we still reach the same decision in affirming WSI's order without deciding the merits of the issue placed before us.
[¶ 11] WSI contends this is a simple matter of statutory requirement. WSI argues the application of N.D.C.C. § 65-01-09 is not limited only to damages for medical expense, disability, vocational rehabilitation, or permanent impairment that may have been recovered in a third-party action. Rather, WSI argues N.D.C.C. § 65-01-09 provides that WSI is subrogated to the rights of the injured employee to the extent of fifty percent of the damages recovered in a third-party action regardless of the nature of the damages recovered.
[¶ 12] Even if we were to agree with Toso's position that WSI is not subro-gated to any damages that do not arise out of the work injury, we still could not grant Toso's requested relief because, for the purposes of this case, we would look no further than the issue of whether Toso's settlement damages were damages that arose out of his work injury. The record provides little or no evidence to help us make that determination. Paragraph four of Toso's complaint in the third-party action provides that as a consequence of the defendants' negligence, Toso sustained injuries to his heel which have and will cause him pain, discomfort, and disability, will cause him to incur medical expenses in the future, and will impair his future earning capacity. The issue of whether Toso's settlement damages arose out of his work injury was never litigated in court nor does the record contain a settlement agreement which speaks to that issue. Toso has known WSI's position throughout the duration of this case. Toso was aware WSI intended to apply the subrogation statute to the settlement award. Although the statute provides WSI's subrogation interest may not be reduced by settlement, Toso had the opportunity to structure the settlement to indicate exactly what the damages covered. However, the record does not contain a settlement agreement and therefore gives us no information as to the type of damages the settlement award covered. N.D.C.C. § 65-01-09. We are left to speculate as to whether Toso's settlement damages arose out of his initial work injury.
[¶ 13] The burden was on Toso to prove that the settlement damages caused by the alleged third-party negligence did not arise out of his initial work injury. N.D.C.C. § 65-01-09. Once a claimant gives notice to WSI that the claimant is going to pursue an action against a third-party, we believe the claimant has the burden of proof as to whether the damages caused by the third-party arose out of the claimant's work injury because WSI has certain legal obligations upon receiving notice of the third-party action. Id. Once WSI receives notice of a third-party action, if WSI chooses to participate in the action to recover any damages under the subro-gation statute, WSI is required to pay fifty percent of the costs of the action, including part of the attorney's fees as provided by the statute. Id. WSI is required to pay these costs even when there is no recovery of damages in the third-party action. Id.
[¶ 14] Because we find that WSI's findings of fact are supported by a preponderance of the evidence, its conclusions of law are supported by its findings of fact, its decision is supported by its conclusions of law, and its decision is in accordance with the law, we affirm WSI's order that it may apply the subrogation statute to Toso's settlement award.
[¶ 15] Affirmed.
[¶ 16] JOEL D. MEDD, D.J., and CAROL RONNING KAPSNER, J., concur.
I concur in the result. DALE V. SANDSTROM.
[¶ 17] The Honorable JOEL D. MEDD, D. J., sitting in place of CROTHERS, J., disqualified.