Opinion ID: 2591026
Heading Depth: 2
Heading Rank: 1

Heading: in balancing the equities presented, we limit the retroactive operation of our ruling

Text: ¶ 5 The general rule from time immemorial is that the ruling of a court is deemed to state the true nature of the law both retrospectively and prospectively. Malan v. Lewis, 693 P.2d 661, 676 (Utah 1984). In civil cases, however, the court may, in its equitable discretion, prohibit or limit retroactive operation of its ruling where the overruled law has been justifiably relied upon or where retroactive operation creates a burden. Id. (internal quotation marks omitted). While these interests weigh heavily, this court does not ignore the underlying considerations that led to the correction of law. See Rio Algom Corp. v. San Juan County, 681 P.2d 184, 196 (Utah 1984). Nor does the court cast aside the efforts of successful litigants and deprive them of the fruits of their victory, as doing so would discourage challenges to statutes of questionable validity. Id. Therefore, [i]n fashioning an equitable remedy, . . . the court should seek a blend of what is necessary, what is fair, and what is workable. Id. ¶ 6 A few of our cases have merited purely prospective application. For example, in Loyal Order of Moose v. County Board of Equalization, the court gave pure prospective effect to its decision. 657 P.2d 257 (Utah 1982). Specifically, the court harbor[ed] concern for the harsh effect that its interpretation of a tax exemption would have on nonprofit entities that had relied upon the court's previous interpretation for so many years, and because retroactivity might result in an unreasonable burden of back taxes. Id. at 264-65. In Rio Algom Corp., the court limited its ruling to prospective application, with the exception of the prevailing litigants. 681 P.2d at 196. In doing so, the court cited to local governments' reliance on the validity of a tax in light of strained budgets and the risk to their solvency. Id. at 195. We cited to the great financial and administrative hardship that would be imposed by retroactive effect where numerous past payments had been made under protest and would need to be reopened. Id. at 195-96. ¶ 7 Respondent compares the effect of our ruling in Merrill to that of Loyal Order and Rio Algom. Specifically, Respondent argues that it, as well as the workers' compensation insurance industry, justifiably relied on the presumptive constitutionality of the offset in section 34A-2-413(5) in establishing premiums and an insurance structure. It had done so since 1988, when the Utah Legislature enacted the statute. Moreover, Respondent argues that because the offset could only be, and in fact was, challenged on rational basis review, this generally deferential standard of review did not signal a likelihood of constitutional infirmity. Respondent emphasizes that although we ruled the offset to be unconstitutional, we did note in Merrill that other states have upheld such an offset. 2009 UT 26, ¶ 35. ¶ 8 Further, Respondent points out that retroactive application would impose significant financial, administrative, and competitive burdens. While prospective application of the court's ruling can be resolved by an adjustment in workers compensation rates, premiums, and a premium tax, no such solution will be possible for retroactive application. Instead, the cost of retroactive payments would be shifted from past employers to current employers. Also, an insurance company or a self-insured employer would be forced to make payments from its equity, which could lead to a ratings downgrade, insolvency, regulatory oversight, or potential liquidation. Administratively, retroactive application would open up many workers compensation claims that have been settled and resolved. Respondent asserts that these adverse consequences would make Utah an undesirable market for insurance companies. ¶ 9 Mr. Merrill agrees that the issue before the court is one of equity. He asserts that while a negative financial impact will occur, its scope is not as far reaching as Respondent suggests. He calculates that retroactive application applied to past payments will total less than $15 million industrywide. While this is a significant amount, it appears manageable when compared to the more than $320 million in dividends distributed since 1990 to the policyholders of Utah's largest workers' compensation insurance carrier, the Workers Compensation Fund. ¶ 10 Moreover, unlike Loyal Order and Rio Algom, the underlying scheme at issue in Merrill relates not to taxes, but to workers compensation. The Workers Compensation Act is designed to help injured workers. The system of compromises that comprises workers compensation as a whole mandates exclusivity; both workers and employers give up the right to litigate. At the heart of this scheme lies a balance of interests predicated on fairness. Despite this goal, our decision means that the statutory offset has for nearly two decades unconstitutionally deprived workers of monies rightfully owed to them. ¶ 11 Nonetheless, the question of retroactivity is tied to fundamental fairness and equity across the board. In balancing the equities before us, we recognize that a justified reliance on the constitutionality of the statute existed and that full retroactive application of our ruling would create significant burdens. Yet we remain mindful of the underlying workers compensation scheme and the constitutional violation. Therefore, although we decline to give purely prospective application, we limit, to an extent, the retroactive operation of our ruling in Merrill.