Opinion ID: 1677389
Heading Depth: 1
Heading Rank: 5

Heading: do the best interests of the employee allow consideration of the claimant's purely personal interests when considering a request for a cash advance as part of a lump sum distribution under sdcl 62-7-6?

Text: It is the public policy of this state that worker's compensation statutes be liberally construed in favor of injured employees, and to effectuate the purpose of the workers' compensation system. Wilcox v. City of Winner, 446 N.W.2d 772, 775 (S.D. 1989) (citations omitted); Mills v. Spink Elec. Coop., 442 N.W.2d 243, 246 (S.D.1989) (citations omitted); Schwan v. Premack, 70 S.D. 371, 374, 17 N.W.2d 911, 912 (1945). The overall purpose of the worker's compensation act is to compensate an employee and dependents for the loss of income-earning ability where the loss is caused by injury, disability or death due to an employment-related accident, casualty or disease. Caldwell, 489 N.W.2d at 362. When compensation is made in lieu of a pay check, such payment on an installment basis allows less chance that the funds could be lost through unwise investments or squandering of the money. See generally Wulff v. Swanson, 69 S.D. 539, 543, 12 N.W.2d 553, 554-55 (1944). We have previously considered the propriety of a lump-sum payment, noting that: It may be stated generally that the allowance of a lump-sum award is the exception and not the general rule. We believe, as a matter of public policy, that the welfare of the [claimant and any dependents] is best served by the payment of the compensation in regular fixed installments as wages are paid [.] Wulff, 69 S.D. at 543, 12 N.W.2d at 555 (emphasis added) (citations omitted). Noting that the excessive use of lump-sum payments undermines the real purposes of the compensation system, Professor Larson likewise states in his treatise that, Since compensation is a segment of a total income insurance system, it ordinarily does its share of the job only if it can be depended on to supply periodic income benefits replacing a portion of lost earnings. 3 ARTHUR LARSON, THE LAW OF WORKMEN'S COMPENSATION § 82.71, at 15-1243 (1993) [hereinafter LARSON, WORKMEN'S COMPENSATION]. SDCL 62-7-6 allows for a lump sum distribution of workers' compensation benefits under certain circumstances. The statute provides in pertinent part: An employer or employee who desires to have any unpaid compensation paid in a lump sum may petition the department of labor asking that the compensation be paid in that manner. If, upon proper notice to interested parties and proper showing before the department, it appears in the best interests of the employee that the compensation be paid in a lump sum, the secretary of labor may order the commutation of the compensation to an equivalent lump-sum amount.... If there is an admission or adjudication of permanent total disability, the secretary may order payment of all or part of the unpaid compensation in a lump sum under the following circumstances: (1) If the employee has exceptional financial need that arose as a result of reduced income due to the injury; or (2) If necessary to pay the attorney's fees, costs and expenses approved by the department under § 62-7-36. SDCL 62-7-6 (emphasis added). [6] Professor Larson notes that, The beginning point of any consideration of the justifiability of lump-summing in a particular case is the standard set by the statute. 3 LARSON, WORKMEN'S COMPENSATION, § 82.72(a), at 15-1245. Our statute authorizing a lump-sum payment clearly sets out the circumstances under which such a payment can be made. First, it must be in the best interests of the employee. Our prior decisions confirm that the primary emphasis must be placed on providing an injured worker with a reliable stream of income to replace lost wages and benefits. See Caldwell, 489 N.W.2d 353; and Wulff, 69 S.D. 539, 12 N.W.2d 553. Second, in the case of a worker who has been permanently and totally disabled (like Thomas), a lump sum may be ordered if the worker has an exceptional financial need that arose as a result of reduced income due to the injury. SDCL 62-7-6(1). Third, a lump sum may be ordered, in the case of a permanent total disability, when necessary to pay the attorney's fees, costs and expenses. SDCL 62-7-6(2); SDCL 62-7-36. In Thomas' case, a lump sum order was appropriate and necessary to pay her attorney's fees, costs, and taxes of $46,350.81. As the circuit court held, such a disbursement is in Thomas' best interest to pay her just and due debt. After such a disbursement, it is in accordance with the purposes of the workers' compensation act and Thomas' best interests to utilize the remainder of the lump sum in such a way that will maximize future wage replacement via a reliable mechanism such as the annuity proposed by the State. Consideration of Thomas' purely personal desire to visit her family is not within the statutory directives; nor may we consider her financial inability to take this trip absent a cash advance. Thomas' lack of funds to travel to Korea is not an exceptional financial need that arose because of her work-related injury. See SDCL 62-7-6(1). Few courts have set out specific factors to be utilized in the analysis of an employee's best interest. Thomas urges reliance on factors set out in a decision of the Iowa Supreme Court. Dameron v. Neumann Bros., 339 N.W.2d 160, 164 (Iowa 1983). In Dameron, the court listed four factors to be analyzed when considering whether a worker should receive lump sum compensation: 1. The worker's age, education, mental and physical condition, and actual life expectancy (as contrasted with information provided by actuarial tables). 2. The worker's family circumstances, living arrangements, and responsibilities to dependents. 3. The worker's financial condition, including all sources of income, debts and living expenses. 4. The reasonableness of the worker's plan for investing the lump sum proceeds and the worker's ability to manage invested funds or arrangement for management by others (for example, by a trustee or conservator). Id. In fact, examination of these factors supports our view that the focus of an employee's best interest must have a primarily financial perspective geared toward wage replacement. Likewise, decisions from our neighboring state of Montana, when considering lump sum payments under a statute that authorizes such payments when in the employee's best interest, allows lump sum payments to clear a claimant's past debts or to satisfy pressing needs. Daniels v. Kalispell Regional Hosp., 230 Mont. 407, 750 P.2d 455, 458 (1988) (citations omitted). We note that the Department, in allowing the cash advance to Thomas' for the Korea travel, stated that this would put Thomas' mind at ease and that the consideration of [Thomas'] emotional well-being is also of significant importance. We reject these statements as appropriate considerations when viewing lump-sum award proposals, or requests for cash advances under such proposals. Examination of a case cited by Thomas to urge consideration of peace of mind supports our conclusion. Prigosin v. Indus. Comm'n, 113 Ariz. 87, 90, 546 P.2d 823, 826 (1976). In Prigosin, the Arizona Supreme Court states that while peace of mind could be considered as a factor, it further notes that this is not the vital factor. Id. Were peace of mind the vital factor, it would dictate [lump sum awards] in almost every instance. Id. We agree, and refuse to start down that road. In summary, the purpose of the workers' compensation act directs that any awards of lump sum payments must be made in accordance with the goal of preserving future wage replacement benefits. The Department's award of a cash advance to satisfy Thomas' personal desire to visit her family in Korea subverts the intention of workers' compensation, and the circuit court properly reversed that award. The judgment is affirmed. MILLER, C.J., and SABERS and AMUNDSON, JJ., concur. HENDERSON, J., concurs specially.