§ 10.4.4 WORKERS' COMPENSATION CARRIER RECOVERY RIGHTS

• Jurisdiction: Arizona

§ 10.4.4 Workers' Compensation Carrier Recovery Rights

Any case involving a recovery from a tortfeasor for an injury occurring while in the course of employment (an "industrial injury") will implicate rights under Arizona's Workers' Compensation Act, A.R.S. §§ 23-901, et seq., to the extent the injured employee or their dependents apply for or receive workers' compensation benefits as a result of the industrial injury. In those cases, workers' compensation insurance carriers, self-insured employers, or the Arizona Industrial Commission Special Fund Division (together, "carriers") have rights of recovery under the Act.

a. The Scope of Workers' Compensation Carrier Recovery Rights

Carriers' recovery rights are provided for in A.R.S. § 23-1023. These rights include (i) direct recovery rights against the tortfeasor in the event no personal injury action is filed by the injured worker within one year after such an action accrues (i.e., "automatic assignment"), (ii) the right to intervene in a personal injury action filed by the injured worker, and (iii) "a lien on the amount actually collectable from the other person to the extent of such [workers' compensation] benefits paid."⁷ A.R.S. § 23-1023(B) to (D) (emphasis added).

Notwithstanding use of the term "lien" in the statute and case law, "Arizona courts have not distinguished between statutory lien rights and subrogation interests and have treated lien rights under § 23-1023([D]) as subrogation rights."⁸ Talley v. Indus. Comm'n of Arizona, 137 Ariz. 343, 346, 670 P.2d 741, 744 n.2 (App. 1983) (emphasis added). Indeed, Arizona courts' broad interpretation of A.R.S. § 23-1023(D) provides carriers with reimbursement rights and/or a future credit encompassing an injured worker's entire third party recovery for an industrial injury (less reasonable attorney's fees and expenses) to the extent of workers' compensation benefits provided to the injured worker or their dependents at any time.

The purpose of workers' compensation statutory "liens" are (i) to require a tortfeasor to pay as though there is no workers' compensation; (ii) to reimburse a carrier for its compensation expenditures, and (iii) to allow the injured worker to enjoy any excess of the damage recovery over carrier reimbursement. Greer v. Travelers Prop. Cas. Co., 203 Ariz. 478, 479 ¶ 11, 56 P.3d 52, 53 (App. 2002).

A guiding principle in interpreting A.R.S. § 23-1023 is to prevent "double recovery" to an injured worker and courts will interpret the statutory language to reach this end. E.g., State ex rel. Indus. Comm'n v. Pressley, 74 Ariz. 412, 420-21, 250 P.2d 992, 997-98 (1952) ("We have held innumerable times that the provisions of the Act should be liberally construed to carry out its purpose and intent.").

i. The Amount Actually Collectable

A.R.S. § 23-1023(D) defines the "amount actually collectable" as the "total recovery less the reasonable and necessary expenses, including attorney fees, actually expended in securing the recovery." The carriers' lien, therefore, "applies to the entire third party recovery (less expenses and attorney's fees), even though this recovery includes damages not compensated under workers' compensation (such as pain and suffering, loss of pleasures in life, and a spouse's loss of consortium)."⁹ Mannel v. Indus. Comm'n of Arizona, 142 Ariz. 153, 156, 688 P.2d 1045, 1048 (App. 1984) (emphasis added).

Although A.R.S. § 23-1023(D) states the lien is against the "amount actually collectable," rather than an amount actually collected, the Supreme Court has held...