Court Opinion

ID: 2678349
Source: CourtListenerOpinion
Date Created: 2014-06-13 17:01:09.104956+00
Date Added: 2024-06-11T13:09:27.800780
License: Public Domain

Notice: This opinion is subject to correction before publication in the P ACIFIC R EPORTER .
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      303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
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               THE SUPREME COURT OF THE STATE OF ALASKA

RICHARD LOUIE,                  )
                                )                       Supreme Court No. S-15120
             Appellant,         )
                                )                       Alaska Workers’ Compensation
      v.                        )                       Appeals Commission No. 12-022
                                )
BP EXPLORATION (ALASKA),        )                       OPINION
INC., and ACE USA,              )
                                )                       No. 6914 – June 13, 2014
             Appellees.         )
_______________________________ )

              Appeal from the Alaska Workers’ Compensation Appeals
              Commission, Laurence Keyes, Commissioner Chair.

              Appearances: Joseph A . Kalamarides, Kalamarides &
              Lambert, Anchorage, Appellant. Richard L. Wagg, Russell,
              Wagg, Gabbert & Budzinski, Anchorage, for Appellees.

              Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and
              Bolger, Justices.

              STOWERS, Justice.

I.    INTRODUCTION
              A highly paid worker suffered a debilitating stroke while traveling for his
employer. The employer initially controverted benefits because it did not think the
stroke was work related, but it later accepted the claim and paid workers’ compensation
benefits. The statutory maximum compensation rate at the time of the injury was $700
a week. A little more than five months after the employee’s stroke, an amended version
of the Alaska Workers’ Compensation Act took effect. Instead of an absolute maximum
compensation rate, the amended statute set a variable rate indexed to the statewide
average weekly wage. The employee asked for an increased rate of compensation,
arguing that the law in effect at the time he was recognized as being permanently and
totally disabled should govern his benefit amount. The Alaska Workers’ Compensation
Board, with one panel member dissenting, decided that the version of the statute in effect
at the time of the injury was the applicable statute and consequently capped the
employee’s benefits at $700 a week for life. The dissenting panel member would have
construed the statute as permitting increased benefits.           The Alaska Workers’
Compensation Appeals Commission affirmed the Board’s decision. The worker appeals,
arguing that the amount of his benefits does not fairly compensate him for lost wages
during the period of his disability so that the date of his disability, rather than the date
of his injury, should be used to determine the version of the statute governing his claim.
We affirm the Commission’s decision.
II.    FACTS AND PROCEEDINGS
              The facts in this case are largely uncontested. Richard Louie worked for
BP Exploration (Alaska), Inc. (BP) as an auditor. At the time of his injury he earned in
excess of $100,000 a year. In January 2000 he traveled to London, England, for a
meeting; en route, he developed “an air travel [deep vein thrombosis]” in his leg, and a
small clot eventually made its way to his brain, causing a debilitating stroke. He is now
paralyzed on one side of his body and suffers from aphasia and muscle spasms.
              After initially controverting Louie’s claim, BP accepted that the stroke was
work related. According to the compensation report dated September 12, 2002, BP was
paying temporary total disability (TTD) at the rate of $700 a week. The parties later
entered into a partial compromise and release (C & R) agreement related to occupational,
physical, and speech therapy; the Board approved the partial C & R in early 2004. The

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partial C & R acknowledged that Louie was unlikely to return to work, but it left open
reemployment benefits. The partial C & R also acknowledged that BP had paid Louie
TTD from September 2002 to December 2003 (approximately the time the agreement
was signed) and agreed that Louie’s “total disability rate is $700.”
             Louie filed a workers’ compensation claim in October 2011 seeking a
compensation rate adjustment and permanent total disability (PTD) benefits. In its
answer BP raised the defense that Louie had received, “from his date of injury and
continuing,” PTD benefits “at the maximum compensation rate allowable under the Act
as it existed in the year of the employee’s injury.”
             At the hearing on the claim, Louie presented testimony from Curtis Smith,
a former co-worker with approximately the same employment history as Louie. Smith
testified that, had Louie continued to work at BP, Louie’s gross salary with bonuses
would have been approximately $300,000 a year, plus benefits such as 401(k)
contributions. Louie’s wife testified that in the months following the stroke, she and
Louie thought there was still some chance he would be able to return to work because,
in spite of his initially severe condition, he made rapid progress in therapy.
             The Board panel issued a split decision in the case, with the majority
deciding that Louie was not entitled to increased benefits. The Board decided that the
version of the statute in effect at the time of injury should govern the case, citing a
number of cases from this court to support its decision. The Board determined that Louie
was already receiving the maximum benefit he was permitted under law and denied his
petition for a compensation rate adjustment. The Board chair dissented. She relied on
the policy that workers’ compensation is intended to replace workers’ wages during the
time of disability and wrote that the policy compromise under workers’ compensation
“is achieved only when an injured worker’s compensation rate fairly approximates his

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probable future earning capacity lost due to injury.”1 She relied on earlier cases from this
court to construe the statute as requiring a departure from “the mechanical formula” for
calculations when the result was grossly unfair. Using reasoning similar to that found
in Peck v. Alaska Aeronautical, Inc.,2 she said that the conclusion the legislature
authorized departure from the general formula was “supported by the legislature’s
alternative computation method in AS 23.30.220.”3 The dissent provided a statutory
analysis to support the conclusion that Louie’s compensation rate should be increased.
              On appeal the Commission affirmed the Board’s decision.                  The
Commission said that the only way to reach the conclusion that Louie was entitled to
increased benefits was to construe “date of injury” in the current version of AS 23.30.175

       1
              The dissent explained:
              The court has held the “essential component of the basic
              compromise underlying the Workers’ Compensation Act[,]
              the worker’s sacrifice of common law claims against the
              employer in return for adequate compensation without the
              delay and expense inherent in civil litigation,” is achieved
              only when an injured worker’s compensation rate fairly
              approximates his probable future earning capacity lost due to
              injury. Flowline of Alaska v. Brennan, 129 P.[3]d 881, 883
              (Alaska 2006); Gilmore v. Alaska Workers’ Compensation
              Board, 882 P.2d 922, 927 (Alaska 1994).
       2
              756 P.2d 282, 287-88 (Alaska 1988).
       3
              AS 23.30.220(a)(10) permits the Board to depart from the general formula
for calculating spendable weekly wage if the result from applying the general formula
does not accurately reflect the employee’s earnings. An employee’s spendable weekly
wage is used as a base amount for calculating his workers’ compensation rate.
AS 23.30.220(a).

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to mean “date of disability,”4 and to find that Louie’s disability started after July 1, 2000.
The Commission declined to do so. The Commission noted that even under an analysis
that increased Louie’s compensation rate, the weekly amount did not “bear any
reasonable relationship to his actual or predicted income.” It decided that no matter how
Louie’s spendable weekly wage was calculated, the statutory cap of $700 in place at the
time of his injury prevented him from getting increased benefits. Louie appeals.
III.   STANDARD OF REVIEW
              This appeal presents an issue of statutory construction. Interpretation of a
statute is a question of law to which we apply our independent judgment; we interpret
the statute according to reason, practicality, and common sense, considering the meaning
of the statute’s language, its legislative history, and its purpose.5
IV.    DISCUSSION
              The Commission Did Not Err In Deciding That The Maximum
              Compensation Rate Set Out In Former AS 23.30.175(a) Applied.
              Although AS 23.30.180 provides that when an injured worker is found
permanently and totally disabled “80 percent of the injured employee’s spendable
weekly wages shall be paid to the employee during the continuance of the total
disability,” actual computation of permanent total disability (PTD) rates is governed by

       4
               Cf. Johnson v. RCA-OMS, Inc., 681 P.2d 905, 908 (Alaska 1984) (noting
that this rationale for decision made it unnecessary to decide whether “time of injury”
meant “time of disability due to injury”).
       5
              Grimm v. Wagoner, 77 P.3d 423, 427 (Alaska 2003) (citing Native Vill. of
Elim v. State, 990 P.2d 1, 5 (Alaska 1999)).

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AS 23.30.220, which deals with spendable weekly wages,6 and AS 23.30.175, which sets
compensation rates.
              On January 27, 2000, the date of Louie’s stroke, AS 23.30.175(a) provided
that the maximum weekly compensation rate was $700.7 This statutory subsection was
amended in 2000, with an effective date of July 1, 2000.8 Louie’s main argument is that
the version of section .175 in effect at the time of his permanent total disability, which
he says is the time of the 2004 partial C & R, should govern his rate of compensation
rather than the version of the statute in effect at the time of his injury. BP argues that the
version of the statute in effect at the time of injury should be applied; because former
AS 23.30.175(a) capped benefits at $700 a week at the time of Louie’s stroke, it contends
he is only entitled to $700 a week “for the lifetime of his disability related to this injury,”
which in his case is probably for life.
              The Alaska Workers’ Compensation Act has a provision for calculating a
worker’s spendable weekly wage, which is the base amount for benefit calculations,9 but
the Act also sets out statutory maximum and minimum benefits.10                        Alaska
Statute 23.30.220(a)(10) permits the Board to vary the method used to calculate the
spendable weekly wage of an employee who is permanently and totally disabled when

       6
            “An employee’s spendable weekly wage is the employee’s gross weekly
earnings minus payroll tax deductions.” AS 23.30.220(a).
       7
               Former AS 23.30.175(a) (1998) (“The weekly rate of compensation for
disability or death may not exceed $700 . . . .”).
       8
             Ch. 105, SLA 2000. AS 23.30.175(a) as amended in 2000 caps benefits at
a percentage of the statewide average weekly wage.
       9
              AS 23.30.220.
       10
              AS 23.30.175.

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calculation under other subsections “does not fairly reflect the employee’s earnings
during the period of disability.” In such cases, the statute permits the Board to consider
a number of factors, but it limits the “compensation calculated under this paragraph” to
“the employee’s gross weekly earnings at the time of injury.”11 Alaska Statute 23.30.220
has not been amended since the time of Louie’s injury. At the time of injury Louie’s
gross weekly earnings were $2,301.69.12
              When the legislature changed the maximum benefit amount in 2000, the
Director of the Division of Workers’ Compensation told the legislature that workers’
compensation benefits had not increased in about 12 years and said the bill provided
“needed increases in benefits for injured employees.”13 There is no indication that the
legislation was intended to have retroactive application in either the statutory language14
or the legislative history, and Louie does not argue that it should be construed as having
retroactive application. He argues instead that the version of the law in effect at the time
both parties acknowledged that he was permanently and totally disabled should govern.15

       11
              AS 23.30.220(a)(10).
       12
             The record does not contain a calculation of spendable weekly wage for
Louie’s claim, possibly because his income was high enough that he was simply eligible
for maximum benefits at the time.
       13
            Minutes, H. Labor & Commerce Comm. Hearing on H.B. 419, 21st Leg.,
2d Sess. No. 2275 (Mar. 8, 2000) (testimony of Paul Grossi, Director, Division of
Workers’ Comp.).
       14
             AS 01.10.090 provides, “No statute is retrospective unless expressly
declared therein.”
       15
              Louie identifies 2004, when the partial C & R was signed and approved, as
the applicable date. The parties agreed in 2002 (in pleadings) that he was permanently
and totally disabled as of the date of injury, January 27, 2000, but no compensation
                                                                          (continued...)

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              Louie bases his claim largely on Peck v. Alaska Aeronautical, Inc.16 Peck
involved the compensation rate for a pilot who was initially injured in a plane crash in
1964 but returned to work and continued working until his medical certificate was
withdrawn in 1982 because of medication he was taking for the 1964 injury.17 At the
time of his injury he earned $255 a week; at the time of his permanent disability 18 years
later, he was earning more than $1,200 a week.18 At the time of the 1964 injury
AS 23.30.175(b), the maximum compensation rate statute, provided that “in computing
compensation for permanent total disability, the average weekly wages are considered
to have been not more than $81.”19 The Board interpreted this provision as capping the
average weekly wage, on which it based the PTD award, at $81, and it awarded Peck
only $52.65 a week in benefits.20 One of Peck’s arguments on appeal was “that the law
in effect at the time of the employee’s disability, instead of that in effect at the time of
injury, should be applied to determine an employee’s benefits under the Alaska
Worker[s’] Compensation Act.”21 But we did not use that rationale for our decision,
deciding instead that the version of AS 23.30.175(b) in effect at the time of injury could

       15
               (...continued)
report in the record shows a reclassification of benefits.
       16
              756 P.2d 282 (Alaska 1988).
       17
              Id. at 284.
       18
              Id.
       19
              Id. (quoting former AS 23.30.175(b)) (internal quotation marks and
alterations omitted).
       20
              Id.
       21
              Id.

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not be construed “with certainty” as containing a maximum limitation.22 The Board was
instructed to “calculate Peck’s claim under the 1964 version of AS 23.30.220(3)” — the
statute governing calculation of spendable weekly wage — because application of the
$81 limit on the average weekly wage would lead to a grossly unfair result.23 The 1982
version of the statute was not applied to the claim.24
             According to the leading treatise on workers’ compensation law, the general
method for calculating the amount of benefits to which a worker is entitled is to use a
wage formula, and after applying the wage formula, to consider whether the result is
subject to maximum limits.25 Alaska follows this general rule.26 As we explained in
Wien Air Alaska v. Arant,27 the first step involves calculation of the weekly wage and the
percentage of that wage to which the employee is entitled; the second step “specifies a
maximum limitation on the weekly award. If the result of the step one calculation, the
dollar amount which represents the per cent of the worker’s wage, is greater than the
maximum limitation, the claimant receives only the maximum limitation.”28 Arant

      22
            Id. at 288. The statute in effect in 1964 did not have a specific maximum
dollar amount for the compensation rate. Former AS 23.30.175(a) (1962).
      23
             Id.
      24
             See id. at 286-88.
      25
             5 A RTHUR LARSON & LEX K. L ARSON , W ORKERS ’ COMPENSATION LAW
§ 93.04[1] (2013).
      26
            See, e.g., Seward Marine Servs., Inc. v. Anderson, 643 P.2d 493, 493
(Alaska 1982) (describing computation of death benefits).
      27
            592 P.2d 352 (Alaska 1979), overruled on other grounds by Fairbanks N.
Star Borough Sch. Dist. v. Crider, 736 P.2d 770, 775 (Alaska 1987).
      28
             Id. at 354 (emphasis added).

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involved death benefits from a plane crash that killed a pilot, so we did not need to
consider different versions of the governing statutes.29
              Louie       argues   that   sections   .220   and   .175   conflict   because
subsection .220(a)(10) does not permit an employee’s compensation rate to exceed his
gross weekly earnings at the time of injury. He interprets this provision as “an upper
limit which exceeds the compensation rate limitation under AS 23.30.175(a) at the time
of the injury.” But in our view, these sections do not conflict because they concern two
distinct steps in benefit calculation. Alaska Statute 23.30.220 governs the first step of
a two-step process — determining the employee’s spendable weekly wage. Variation
in calculating spendable weekly wage is needed because the formula may produce lower
benefit amounts than are warranted in certain circumstances.30 Capping the amount of
compensation under the alternative formula at the amount of actual gross earnings
removes any incentive to be found disabled rather than return to work.31 Step two of the
two-step process is to apply the maximum or minimum set out in AS 23.30.175. Unless
the statutory maximum in effect in January 2000 does not apply to Louie’s claim, his
compensation is capped at $700 a week at the second step, no matter how his wage is
calculated in the first step; this amount will never exceed his gross weekly earnings at
the time of his injury.
              Louie claims that his gross weekly earnings as calculated under
AS 23.30.220 do not accurately reflect his “earnings during the period of disability” so

       29
              Id. at 353-55.
       30
             See Dougan v. Aurora Elec. Inc., 50 P.3d 789, 797 (Alaska 2002)
(describing history of alternative methods of calculating wages in AS 23.30.220).
       31
             Cf. Alaska Pac. Assurance Co. v. Brown, 687 P.2d 264, 273 (Alaska 1984)
(agreeing that State has interest in creating incentives for workers to return to work).

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that he is entitled to a compensation rate adjustment under AS 23.30.220. This argument
is based on evidence — which BP does not dispute — that, had he continued to work for
BP, his income and other benefits would have continued to increase. The uncontested
evidence showed that his income would have been approximately $300,000 a year, and
BP would have had to put additional funds in his 401(k). But adjusting Louie’s wage
rate is irrelevant if the $700 statutory maximum in former AS 23.30.175(a) applies to
him.
              The $700 cap on benefits was enacted in 1988.32 According to the
legislative history, the 1988 legislation lowered the maximum benefit from
approximately $1,100 a week and increased the minimum benefit.33 An analysis of this
section of the bill and public comments related to it noted that the “[m]ajority of workers
are on the low end of the scale with less than 5% qualifying for weekly benefits in excess
of $700/week.”34      According to a sectional analysis, the 1988 amendment to
AS 23.30.175(a) created “an absolute maximum of $700 per week” and was intended to
“provid[e] for a fixed maximum compensation rate which can be predicted.”35 This
legislative history underlines the statutory language and shows that the legislature knew
highly paid workers would receive lower benefits after disability.

       32
              Ch. 79, § 30, SLA 1988.
       33
              H. Labor & Commerce Comm., Workers’ Comp. Legislation Comparative
Analysis House & Senate Bills at 10, 15th Leg., 2d Session (Feb. 23, 1988) in Pat
Wilson, Alaska Legislative History: Workers’ Comp. SB 322 (1988) (compiled 1993).
Prior to its amendment the statute provided for a cap that was a percent of the average
weekly wage, rather than a fixed amount. Former AS 23.30.175(a) (1982).
       34
              Comparative Analysis, supra note 33, at 10.
       35
             H. Judiciary Comm., House CS for CS for Senate Bill No. 322 (L&C)
Sectional Analysis at 12, 15th Leg., 2d Session (Apr. 6, 1988) in Pat Wilson, Alaska
Legislative History: Workers’ Comp. SB 322 (1988) (compiled 1993).

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              In general the statute in effect on the date of injury applies to a workers’
compensation claim.36 Louie points to no statutory language that suggests otherwise, nor
does he cite cases that do not apply this rule. Even Peck applied the version of the statute
in effect on the date of injury.37 Near the time of Louie’s injury there appears to have
been a consensus that the compensation rates set out in the statute were too low.38 Louie
had the extreme misfortune both to suffer a devastating injury and to suffer it shortly
before an amendment to the statute would have increased the benefit amount available
to him. We do not discount the devastating effect of Louie’s injury on his family and his
income: $700 a week is a cheeseparing amount that inadequately compensates him for
his lost income. Under the $700 statutory cap, Louie can receive an amount that is equal
to a little more than 30% of what his income was in 2000 and approximately 12% of
what Smith testified Louie would be earning now if he had not been disabled. But Louie
points to no authority that would support using a later version of the statute, and we find

       36
               See Thompson v. United Parcel Serv., 975 P.2d 684, 688 (Alaska 1999)
(applying 1988 version of statute to claim even though statute amended one month after
injury). See also 5 ARTHUR LARSON & LEX K. LARSON , W ORKERS ’ COMPENSATION LAW
§ 93.05[1] (2013) (noting general rule that benefit increases are not retroactive and
benefit level at time of injury controls). The treatise says that Alaska “applies the benefit
level prevailing at the time the disability was rated.” Id. § 93.05[2]. The cases it cites
in support are permanent partial impairment (PPI) cases that were decided under a
version of the statute providing that permanent disability benefits were to be calculated
“according to currently existing benefit rates regardless of the benefit rate in existence
at the time of injury.” Hood v. State, Workmen’s Comp. Bd., 574 P.2d 811, 813 (Alaska
1978). That statute was repealed in 1977. Id. n.4.
       37
              Peck v. Alaska Aeronautical, Inc., 756 P.2d 282, 288 (Alaska 1988).
       38
            See Minutes, H. Judiciary Comm. Hearing on H.B. 419, 21st Leg., 2d Sess.
No. 271 (Apr. 3, 2000) (testimony of Paul Grossi, Director, Division of Workers’
Comp.) (noting that bill increased benefit amounts but also had provisions to benefit
employers).

                                            -12-                                       6914

none. Consequently, the Commission correctly affirmed the Board’s decision that Louie
is receiving the maximum amount to which he is entitled.
V.    CONCLUSION
             For the foregoing reasons, we AFFIRM the Commission’s decision.

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