§ 5.5 Workers' Compensation Recovery Rights
Jurisdiction | Arizona |
§ 5.5 – Workers’ Compensation Recovery Rights
Any case involving a recovery from a tortfeasor for an injury occurring to a state or nongovernmental “employee” while in the course of employment (an “industrial injury”) will generally implicate recovery rights under Arizona’s Workers’ Compensation Act, A.R.S. §§ 23-901 through 23-1104, to the extent the injured employee or their dependents apply for or receive workers’ compensation benefits in Arizona as a result of the industrial injury.13 In these cases, workers’ compensation insurance carriers, self-insured employers, or the Arizona Industrial Commission Special Fund Division (altogether, “carriers”) have rights of recovery under the Act.
The principles underlying workers’ compensation recovery rights are: (1) to require a tortfeasor to pay as though there is no workers’ compensation, (2) to reimburse a carrier for its compensation expenditures, and (3) 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). Another principle 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.”).
a. The Scope of Workers’ Compensation Recovery Rights
Carriers’ recovery rights are provided for in § 23-1023. These rights include: (1) 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”); (2) the right to intervene in a personal injury action filed by the injured worker; and (3) “a lien on the amount actually collectable from the other person to the extent of such [workers’ compensation] benefits paid.”14 A.R.S. §§ 23-1023(B) to (D).
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.”15 Talley v. Indus. Comm’n of Arizona, 137 Ariz. 343, 346, 670 P.2d 741, 744 n.2 (App. 1983).
Indeed, Arizona courts’ broad interpretation of § 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. To understand this, it is necessary to understand the key phrase providing “a lien on the amount actually collectable from the other person to the extent of such [workers’ compensation] benefits paid.” A.R.S. § 23-1023(D) (emphasis added).
i. The Amount Actually Collectable
Section 23-1023 defines the “amount actually collectable” as the “total recovery less the reasonable and necessary expenses, including attorney fees, actually expended in securing the recovery.” A.R.S. § 23-1023(D).
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).” Mannel v. Indus. Comm’n of Arizona, 142 Ariz. 153, 156, 688 P.2d 1045, 1048 (App. 1984) (emphasis added). In addition, although § 23-1023(D) states the lien is against the “amount actually collectable,” rather than an amount actually collected, the Supreme Court has held workers’ compensation “lien rights attach to funds when a claimant actually receives them.” Carter v. Indus. Comm’n of Arizona, 182 Ariz. 128, 131, 893 P.2d 1291, 1294 (1995) (emphasis added).
ii. Benefits Paid
The phrase “benefits paid” does not mean only those benefits paid at the time an injured worker recovers on a third-party claim. Rather, this phrase means the total “obligation for compensation benefits” for the industrial injury provided by a carrier to an injured worker or dependent at any time.
This broad interpretation was recognized in Mannel, which drew upon dicta from an earlier case, Triste v. Indus. Comm’n, 25 Ariz. App. 489, 544 P.2d 706 (1976), overruled in Dunn v. Indus. Comm’n of Arizona, 177 Ariz. 190, 866 P.2 858 (1994). Mannel held a widow’s death benefits arising from an industrial injury were subject to a credit in favor of the carrier to the extent of the “amount actually collectible” from the tortfeasor.
Mannel observed that in Triste the court “interpreted § 23-1023([D]) to give the compensation carrier ‘a lien in the amount actually collectible from the [tortfeasor] to the extent of the carrier’s obligation for compensation benefits.” Mannel, 142 Ariz. at 156, 688 P.2d at 1048 (emphasis in original). Mannel explained that “this interpretation is consistent with the general purpose of the lien statute to reimburse the carrier for its compensation expenditure.” Id. at 156-57, 688 P.2d at 1048-49. Mannel stated, “[t]his is so even though § 23-1023 does not specifically mention reopening benefits [in the future].” Id. at 158, 688 P.2d at 1050.
iii. Future Credit
As a result of the foregoing and despite the lack of specific statutory language, carriers are entitled to a “future credit” as an offset against prospective workers’ compensation benefits up to the amount of a third-party...
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