Opinion
W.C. Nos. 3-104-385, 4-272-176
September 17, 1996
FINAL ORDER
The Subsequent Injury Fund (SIF) seeks review of an order of Administrative Law Judge Martinez (ALJ) insofar as the order required the SIF to pay benefits for the claimant's permanent total disability. Respondents Ace Electric (Ace) and Colorado Compensation Insurance Authority (CCIA respondents) seek review of the order insofar as it denied an offset on account of the claimant's receipt of social security retirement benefits. We affirm the order insofar as it provides for an offset of liability to the SIF, and modify the order to permit an offset for social security retirement benefits.
I.
Concerning SIF liability, the ALJ found that the claimant sustained a compensable injury in July 1992 while employed by Ace. The ALJ further determined that the effects of this injury, when combined with the effects of an injury which the claimant incurred in 1981, rendered the claimant permanently and totally disabled. With respect to the 1981 injury, the ALJ found that the claimant suffered a hernia while attempting to lift a bale of hay. The injury occurred on the claimant's farm which the claimant operated as a business.
Implicitly applying § 8-46-101(1)(a), C.R.S. (1996 Cum. Supp.), the ALJ determined that the claimant's permanent total disability resulted from a combination of industrial disabilities. Consequently, the ALJ held that the SIF is liable for forty percent of the permanent total disability benefits, or that portion of the disability attributable to the 1981 injury.
On review, the SIF argues that the ALJ erred in determining that the 1981 injury resulted in "industrial disability" within the meaning of § 8-46-101(1)(a). In support of this argument, the SIF cites the claimant's testimony that he operated the farm as a business, and occasionally hired workers to help bale hay. Moreover, the SIF points out that the ALJ prevented it from inquiring whether the claimant carried workers' compensation insurance at the time of the 1981 injury.
Based on this evidence, the SIF reasons that the claimant failed to prove that the 1981 injury was "compensable" under the provisions of § 8-41-301(1)(a), C.R.S. (1996 Cum. Supp.). This is true because, according to the SIF, the claimant failed to comply with the Act by purchasing workers' compensation insurance for his farming operation. Moreover, the SIF asserts that the claimant could have acquired such insurance. We are not persuaded.
We agree with the SIF that the claimant could have purchased insurance to cover the farming operation by the time of the 1981 injury. The claimant admittedly employed workers in his farming business, and therefore, it appears that the claimant could have purchased a policy which would have covered him as an "individual employer actively engaged in the operation of the business," under the provisions of former § 8-44-102, C.R.S. (1986 Repl. Vol. 3B). See also, Stampados v. Colorado D S Enterprises, Inc., 833 P.2d 815 (Colo.App. 1992). The real issue is whether the claimant's failure to procure such insurance disqualifies the 1981 injury from creating an "industrial disability" for purposes of § 8-46-101(1)(a).
In resolving this issue, we note that the purpose of the SIF was to ameliorate the harsh effects of the "full responsibility rule." Under this rule, an employer is liable for full permanent total disability benefits if an industrial injury combines with preexisting disability so as to produce permanent total disability. The legislative objective in mitigating the effects of the full responsibility rule was to encourage Colorado employers to hire partially disabled workers. Pacheco v. Roaring Fork Aggragates, 897 P.2d 872 (Colo.App. 1995).
It is true that, under § 8-46-101(1)(a), the claimant's permanent total disability must be the result of an "industrial" injury, and not the result of a preexisting non-industrial condition. City County of Denver v. Industrial Commission, 690 P.2d 199 (Colo. 1984). However, the term "industrial disability" has not been construed to mean that a particular injury would have resulted in actual compensation had a claim for benefits been filed. For instance, in Citadel Mall v. Industrial Claim Appeals Office, 892 P.2d 419 (Colo.App. 1995), the court held that SIF liability was appropriate where the claimant sustained a compensable injury in June 1985, and sustained a subsequent injury while undergoing on-the-job training (OJT) as a result of mandatory vocational rehabilitation. The court reasoned that there were two industrial injuries because a "second and subsequent employment relation" existed between the claimant and the OJT employer. SIF liability was appropriate despite the fact that "no compensation claim [had] been asserted or adjudicated against the OJT employer." 892 P.2d at 421.
In view of Citadel Mall, it appears that the critical issue in determining whether the claimant sustained an "industrial disability" for purposes of § 8-46-101(1)(a) is whether the injury arose out of employment related activities which were cognizable under the provisions of the Workers' Compensation Act, not whether actual adjudication of a claim would have resulted in an award of compensation. Here, the SIF does not dispute that the claimant's 1981 injury arose out of the farming operation, and that it could have been compensated under the Act but for the claimant's failure to purchase compensation insurance. Thus, the claimant's injury was cognizable under the Act, and the resulting disability was "industrial" for purposes of SIF liability.
Moreover, it cannot seriously be argued that, if one of the claimant's former employees had been injured, the claimant's failure to procure insurance would have precluded the employee or his employer from seeking SIF liability in case of a subsequent industrial injury. To the contrary, § 8-43-408(1), C.R.S. (1996 Cum. Supp.), would permit the injured employee to seek workers' compensation from the claimant together with a fifty percent increase in compensation on account of the failure to procure insurance. Thus, the mere fact that insurance is lacking does not remove the case from the purview of the Workers' Compensation Act, and does not render the injury "non-industrial" for purposes of SIF liability.
Finally, we conclude that this result is consistent with the purposes of SIF liability. In order to effectuate the purposes of § 8-46-101(1)(a), and reap the benefit of SIF liability, an employer should not be required to conduct an exacting legal inquiry into whether a potential employee's prior injury would have been compensable under the detailed insurance provisions of the Act. In fact, such a requirement would tend to discourage employers from hiring disabled employees, and therefore, defeat the benefit of SIF liability to the employer and society at large. Cf. Kelly v. Mile Hi Single Ply, Inc., 890 P.2d 1161 (Colo. 1995) (fact that corporate office rejected workers' compensation coverage did not mean that his decision nullified co-employee immunity enjoyed by a co-worker who came within the Act). For these reasons, we uphold the ALJ's order apportioning liability to the SIF.
II.
The CCIA respondents seek review of that portion of the order which determined that the permanent total disability benefits should not be reduced on account of the claimant's receipt of social security retirement benefits. In this regard, the ALJ found that the claimant was receiving social security retirement benefits at the time of the 1992 injury, and continued to receive those benefits at the time of the hearing. However, the ALJ also found that the claimant did not receive "any social security disability insurance benefits."
Under these circumstances, the ALJ concluded that the claimant is not entitled to an offset for social security retirement benefits under the provisions of § 8-42-103(1)(c)(I), C.R.S. (1996 Cum. Supp.). Moreover, the ALJ stated that because the respondents did not request the claimant to apply for periodic disability benefits, there could be no suspension of benefits under the provisions of § 8-42-103(d)(II), C.R.S. (1996 Cum. Supp.).
In its initial brief, the CCIA argued that the ALJ's denial of an offset denied it due process because the claimant did not "list offset as an issue" or argue "why the offset statute should not apply." Alternatively, the CCIA argued that, regardless of the applicability of subsection (1)(c)(I), the ALJ's order was inadequate because it failed to address the applicability of the retirement offset created by § 8-42-103(1)(c)(II)(A), C.R.S. (1996 Cum. Supp.). The claimant responded that an offset for social security retirement benefits is improper because § 8-42-103(1)(c)(II)(A) provides that the retirement offset cannot "exceed the reduction specified . . . for periodic disability benefits payable" to the claimant. The claimant reasoned that any offset for retirement would "exceed" benefits payable for social security disability because the claimant never received such benefits. The CCIA then filed a response arguing that the question is not whether social security disability benefits were "paid" to the claimant, but whether they were "payable." We agree with the CCIA's latter argument.
Section 8-42-103(1)(C)(II) was enacted in 1989 to permit a reduction of permanent total disability benefits on account of a claimant's entitlement to social security and employer-paid retirement benefits. See Nye v. Industrial Claim Appeals Office, 883 P.2d 607 (Colo.App. 1994). The apparent purpose of this statute is to prevent a "double recovery" where the claimant is entitled to receive lifetime permanent total disability benefits, but has also "retired" from the work force and is entitled to public or private retirement benefits. See L.E.L. Construction v. Goode, 867 P.2d 875, (Colo. 1994); Arellano v. Division of Labor, 42 Colo. App. 149, 590 P.2d 987 (1979).
We reject the claimant's argument that § 8-42-103(1)(c)(II)(A) contemplates that the social security retirement offset is dependent upon the finding that the claimant actually received social security disability payments. The term "payable," as used in subsection (1)(c)(I), has never contemplated that the claimant actually obtain social security disability benefits in order for the respondents to claim an offset. Rather, the question is whether the claimant is entitled to the benefits, not whether he actually applied for and received them. Hurtado v. CFI Steel Corporation, 168 Colo. 37, 449 P.2d 819 (1969); Arellano v. Division of Labor, supra.
In our view, the meaning of the term "payable" as it is in subsection(1)(c)(II)(A) should be the same as the meaning used in subsection (1)(c)(I). Therefore, the question is not whether the claimant actually received any social security disability benefits, but whether such benefits were "payable" to him. See Henderson v. RSI, Inc., 824 P.2d 91 (Colo.App. 1991) (statute should be read to give consistent, harmonious and sensible effect to all its parts). Here, the claimant himself testified that he was entitled to social security disability benefits, but elected not to apply because the increase in social security benefits would be small and he would "have to give it back to state comp." (Tr. p. 32).
We also reject the claimant's assertion that there would be no double recovery in this case because he was receiving retirement benefits prior to the 1992 injury, and "intended to continue working until he could no longer work." The retirement offset is limited to "one-half" of the social security retirement benefits. Section 8-42-103(1)(c)(II)(A). Thus, the Act itself recognizes that persons receiving social security retirement benefits may have only partially withdrawn from the labor market, and may be earning some wages despite retiring.
Under these circumstances, the ALJ's order must be modified to reflect that the respondents are entitled to an offset on account of the claimant's receipt of social security retirement benefits. Should there be any dispute concerning the amount of such benefits, the parties may submit the matter for hearing before the ALJ.
IT IS THEREFORE ORDERED that the ALJ's order dated March 5, 1996, is modified to reflect that the CCIA respondents and SIF are entitled to an offset on account of the claimant's receipt of social security retirement benefits.
IT IS FURTHER ORDERED that the ALJ's order is otherwise affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
___________________________________ David Cain
___________________________________ Dona HalseyNOTICE
This Order is final unless an action to modify or vacate the Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, Colorado 80203, by filing a petition to review with the court, with service of a copy of the petition upon the Industrial Claim Appeals Office and all other parties, within twenty (20) days after the date the Order was mailed, pursuant to §§ 8-43-301(10) and 307, C. R. S. (1995 Cum. Supp.).
Copies of this decision were mailed September 17, 1996 to the following parties:
Leonard O. Culver, 15260 C.R. 32, Mancos, CO 81328
Gerald L. Hinton d/b/a Ace Electric, 11991 C.R. 29, Cortez, CO 81321-9391
Colorado Compensation Insurance Authority, Attn: Michael Steiner, Esq. (Interagency Mail) Subsequent Injury Fund (Interagency Mail)
Scot Houska, Esq., 744 Horizon Ct., Ste. 360, Grand Junction, CO 81506 (For the Respondents)
Gail Harriss, Esq., 572 E. Third Ave., Durango, CO 81301 (For the Claimant)
Roxane O. Baca, Esq., Office of the Attorney General, 1525 Sherman St., 5th Flr., Denver, CO 80203 (For SIF)
By: ______________________