Court Opinion

ID: 9793097
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:42:25.303284+00
Date Added: 2024-06-11T08:03:25.390238
License: Public Domain

FIDEL, Presiding Judge,
dissenting.
¶ 35 When Claimant settled his third party claim, nineteen months had passed since the date of injury. During those months the Special Fund had denied compensability, asserting a forfeiture, though a different forfeiture than it now asserts. Specifically, the Fund contended that, before Claimant fell from the roof where he was working, he had become so intoxicated that he had abandoned the course of his employment.
¶ 36 This contention, as it turned out, was a red herring, yet a time-consuming and costly one. The matter went to hearing, the Industrial Commission affirmed, and eventually this court set the Commission’s decision aside. We held that the evidence established neither impairment nor abandonment and that the allegation of intoxication lacked any causal relevance to an injury that occurred when a roof collapsed under Claimant’s feet. We remanded for a new hearing on compensability.
¶ 37 Two months before our decision, however, Claimant gave the Fund a new ground for asserting forfeiture. Faced with extensive medical expenses and wage loss, his workers’ compensation claim reduced to an appeal of uncertain outcome and duration, Claimant found a different source of compensation a third party personal injury settlement with the owners of the structure from which he fell. Before entering this settlement, Claimant received the approval of his employer,8 but neither sought nor received the approval of the Special Fund.
¶ 38 The Fund now asserts, and the majority agrees, that by entering this settlement without the Fund’s approval, Claimant for*486feited workers’ compensation. The majority deems it irrelevant that, as of the time of settlement, the Fund had denied compensability for nineteen months, that the matter had been adjudicated before the Industrial Commission, and that the Commission had upheld the Fund’s denial. Even under such circumstances, according to my colleagues, the necessary consequence of an unapproved settlement is forfeiture. I would hold the contrary. Under such circumstances, a lesser consequence than forfeiture should apply.
¶ 39 The majority repeatedly stresses that a settling claimant is statutorily obliged to obtain the compensation provider’s approval. I do not disagree. But the majority conflates the statutory requirement of approval with the penalty of forfeiture. They are not the same, nor do they derive from the same source.
¶ 40 Analysis begins with the statute: “Compromise of any claim by the employee or his dependents at an amount less than the compensation and medical, surgical and hospital benefits provided for shall be made only with written approval of ... the person liable to pay the [workers’ compensation] claim.” A.R.S. § 23-1023(C).
¶ 41 The statute does not specify a penalty of forfeiture for a failure to secure the workers’ compensation provider’s approval for a third party settlement. Id. Nor does the corresponding Industrial Commission regulation. See Ariz. Admin. Code (“A.A.C.”) R20-5-119. In notable contrast, the workers’ compensation statute and its supporting regulation expressly impose a forfeiture of benefits during a worker’s unapproved absence from the state for a period greater than two weeks. See A.R.S. § 23-1071(A); A.A.C. R20-5-115(B). A comparison of these provisions suggests that the Legislature and Commission did not regard a forfeiture as essential to the enforcement of A.R.S. § 23-1023(C). Had they done so, they could have written it directly into law, just as they did when adopting section 23-1071(A) and its supporting regulation.
¶ 42 Thus, the majority is mistaken when it states that, by restricting the use of forfeiture as a tool for the enforcement of section 23-1023(0, we would “upset the balance of interests between claimant and carrier that the Legislature has fixed.” (Emphasis added.) The penalty of forfeiture is not a statutory or regulatory device; it is a judicial device. Fashioned in Homback, it need not be read as a universal penalty for all section 23-1023 violations, for it was adopted there to fit circumstances quite different than these.
¶ 43 Specifically, in Homback, the claimant was attempting to reopen a workers’ compensation claim that had previously been accepted, paid, and closed. Before filing the petition to reopen, without informing the compensation provider, the claimant settled his third party claim for an amount exceeded by the compensation benefits that he intended to seek upon reopening. 106 Ariz. at 220-21, 474 P.2d at 811-12. Homback differs from this case because there, by the time of the settlement, the workers’ compensation provider had accepted the claim, paid benefits, and acquired a lien. In adopting a rule to fit such circumstances, the Homback court neither addressed nor contemplated whether to impose a forfeiture when, as here, the provider has engaged in a lengthy, and administratively successful, contest over the compensability of the claim. And because the Homback court neither addressed nor contemplated the present circumstances, I disagree with the majority’s conclusion that Homback confines our remedial options to the single device of forfeiture in this case.
¶ 44 The majority also relies on Macaluso, a case indeed more comparable to ours, but one in which the court of appeals gave only summary consideration to the question that divides us here. There, before attending a Commission hearing on the Special Fund’s denial of his compensation claim, the claimant entered a third party settlement without the Fund’s approval. In rejecting the claimant’s later assertion that he was not obliged to seek the Fund’s approval, the Macaluso court offered only the following explanation:
This argument overlooks the fact that once Macaluso filed a claim for workers’ compensation benefits, that claim came under the jurisdiction of the Industrial Commission and he was bound by the provisions of the Workers Compensation Act as well as *487the Rules of Procedure for Hearings Before the Industrial Commission.
181 Ariz. at 449, 891 P.2d at 916. This explanation was inadequate to the issue, for it was circular, begging the question what the Act and Rules require. The conclusory discussion in Macaluso should not preclude a pointed inquiry into matters unexamined there.
¶45 To ask what the Act and Rules require returns us to the point that the penalty of forfeiture is specified in neither. Compare A.R.S. § 23-1023(C) and A.A.C. R20-5-119 with A.R.S. § 23-107(A) and A.A.C. R20-5115(B). It is a judicial penalty, and the true question before us is whether to extend it from the circumstances attendant in Horn-hack to the different circumstances presented in this case. The appropriate statutory question to be answered is whether it serves the statutory purpose to do so. I would hold that it does not.
¶ 46 The statutory purpose was defined in Homhack: “to prevent an employee from accepting too small a settlement and prejudicing the subrogation rights of the ... carrier.” Id. at 219, 474 P.2d at 810. To advance that purpose, it is neither necessary nor fitting to impose a forfeiture upon a claimant in the circumstances attendant here.
¶47 To impose a forfeiture is not fitting because it grants compensation providers excessive settlement leverage in circumstances where injured workers may be desperate for compensation from any source. Since 1975, compensability settlements have become common in Industrial Commission cases. See Gray v. Industrial Comm’n, 24 Ariz.App. 499, 539 P.2d 973 (1975), approved per curiam, 113 Ariz. 296, 552 P.2d 766 (1976). We judges should be cognizant of the impact of our case law in the market that has developed for the settlement of such claims. A compensation provider that contests compensability can withhold workers’ compensation from an injured claimant until the contest is settled or resolved. To permit such a provider simultaneously to withhold third party settlement approval upon pain of forfeiture, and thereby to frustrate the claimant’s achievement of compensation from an independent source, is to grant the provider powerful extra leverage to impose a compensability settlement on its own terms.
¶ 48 The majority discounts such leverage because a claimant sufficiently aggrieved by a carrier’s course of dealing can initiate proceedings for bad faith. Such proceedings may indeed provide recourse after the fact in occasional cases of clearly demonstrable abuse. From the standpoint of an injured worker who lacks both livelihood and compensation, however, it is unrealistic to suppose that so remote and uncertain a bird in the bush will relieve the pressure to accept a settlement that would place an immediate bird in the hand.
¶ 49 Turning to necessity, it is wholly unnecessary for the courts to extend such leverage to the providers or to impose so drastic a penalty upon the workers; the statutory goal can be achieved by far more moderate means than outright forfeiture. Instead, when a claimant, while engaged in a compensability contest, enters an unapproved third party settlement, the compensation provider may be given the opportunity, if compensability is later established, to prove to the Commission that the claimant settled the third party claim for an unreasonably low amount. To whatever extent the compensation provider can persuade the Commission that the settlement should have been greater, to that extent its credit should be enlarged. Absent such proof, the provider should be limited to the credit that would ordinarily arise from the settlement that the claimant made.9
¶ 50 The majority misapprehends my proposal when it argues that it would bind the carrier to an insufficient third party settlement or to a reimbursement or credit less substantial than it could otherwise reasonably achieve. To the contrary, the remedy that I propose would permit the compensation provider to protect its subrogation rights against any third party settlement that is too small. Thus, it would fully satisfy the statu*488tory purpose set forth in Hornback. See Hornback, 106 Ariz. at 219, 474 P.2d at 810.
¶ 51 Further, by devising a judicial remedy that wholly serves the statutory purpose by means less punitive than forfeiture, we would advance three fundamental principles of our law. The first is that the Workers’ Compensation Act is a remedial act that must be liberally construed to achieve its underlying purpose. See Special Fund Div. v. Industrial Comm’n, 191 Ariz. 149, 152, 953 P.2d 541, 544 (1998). The second is to “ ‘prevent [claimants] and [their] dependents from becoming public charges during the period of disability,’ ” see Safeway Stores v. Industrial Comm’n, 152 Ariz. 42, 47, 730 P.2d 219, 224 (1986) (quoting Prigosin v. Industrial Comm’n, 113 Ariz. 87, 89, 546 P.2d 823, 825 (1976)), an objective served by eliminating unnecessary impediments to the settlement of claims. Id. The third principle “so elementary that no citations are necessary to sustain [it]”is that our “law abhors a forfeiture.” De Almada v. Sovereign Camp W.O.W., 49 Ariz. 433, 436, 67 P.2d 474, 475 (1937); see also Foundation Dev. Corp. v. Loehmann’s, 163 Ariz. 438, 442-44, 788 P.2d 1189, 1193-95 (1990).
¶ 52 Given our traditional reluctance to judicially impose a forfeiture, given the absence of any legislative provision for a forfeiture in section 23-1023(0), and given that the legislative purpose can be achieved by a less drastic and more measured remedy, one might question whether it was necessary for the supreme court to have applied the penalty of forfeiture even in the circumstances of Homback. That question is not ours to decide, however; this court may decide only whether to extend the penalty of forfeiture to the different circumstances of this case. The majority chooses to enlarge the sweep of forfeiture. I respectfully dissent.

. The parties stipulated before the Industrial Commission that Claimant had obtained the employer’s approval but neither stipulated nor contested whether the approval was in writing.

. Comparable proceedings in another context demonstrate that our legal process is competent to resolve contests over the reasonableness of settlements. See A.R.S. § 12-2501(D); City of Tucson v. Superior Court, 165 Ariz. 236, 798 P.2d 374 (1990).