Opinion
BOARD No. 104136-86
Filed: March 12, 1996
REVIEWING BOARD DECISION
(Judges Smith, Maze-Rothstein and Kirby)
APPEARANCES
Linda T. Manning, Esq., for the employee
Paul Moretti, Esq., for the insurer, Ins. Co. State of Pa.
Paul R. Ingraham, Esq., for the insurer, W.C.T.F.
This is an appeal brought by the Workers' Compensation Trust Fund (hereinafter Trust Fund). The Trust Fund seeks reversal of the decision of an administrative judge ordering it to reimburse the insurer, Insurance Company of the State of Pennsylvania (hereinafter insurer), pursuant to G.L.c. 152, § 37 and 65 for the insurer's redemption of liability under a G.L.c. 152, § 48 lump sum settlement which included future weekly payments for the employee's wife and future medical payments for the employee. We find no error in the judge's decision and affirm.
The applicable provisions of § 37 provide in paragraph one of that section:
Whenever an employee who has a known physical impairment which is due to any previous accident, disease or any congenital condition and is, or is likely to be, a hindrance or obstacle to his employment, and who, in the course of and arising out of his employment, receives a personal injury for which compensation is required by this chapter and which results in disability that is substantially greater by reason of the combined effects of such impairment and subsequent personal injury than that disability which would have resulted from the subsequent personal injury alone, the insurer or self-insurer shall pay all compensation provided by this chapter. Such insurer or self-insurer shall, however, be reimbursed by the state treasurer from the fund created by section sixty-five in an amount not to exceed fifty per cent of all compensation subsequent to that paid for the first one hundred and four weeks of disability.
St. 1973, c. 855, § 2. (emphasis added).
Section 65 provides in part as follows:
There is hereby established a trust fund in the state treasury, known as the Workers' Compensation Trust Fund, the proceeds of which shall be used to pay or reimburse the following compensation: . . . (c) reimbursement of certain apportioned benefits pursuant to section thirty-seven.
G.L.c. 152, § 65(2) (as amended by St. 1991, c. 398, § 85).
This section taken together with § 37 makes up what is known as the Second Injury Fund. See L. Locke, Workmen's Compensation § 309 (2d ed. 1981), for a detailed discussion. See also the consolidated cases ofSutcliffe v. Brayman Auto, Lanoue v. Fernandes Supermarket and Vivace v.Acme Concrete Corp., 7 MASS. WORKERS' COMP. REP. 298 (1993); consolidated on appeal with, and aff'd in Shelby Mut. Ins. Co. v. Commonwealth, 36 Mass. App. Ct. 317 (1994), but reversed by the Supreme Judicial Court inShelby Mutual, 420 Mass. 251 (1995) (discussing "Second Injury Fund" and "Trust Fund" which was enacted to fund the partial reimbursements to insurers and self-insurers for their payment of second injury claims as provided in G.L.c. 152, § 37).
We summarize the facts stipulated by the parties and specifically found by the administrative judge. (Dec. 1, 3-6.) The employee had a known preexisting impairment of his right knee due to a fall on May 17, 1983. On September 26, 1986, the employee suffered injuries to his right knee arising out of and in the course of employment with C. Bain Company: a fracture of his right patella and a septic knee. The insurer accepted liability and paid workers' compensation benefits.
On August 2, 1989, a lump sum agreement under § 48 in the amount of $40,000 was approved by an administrative law judge for the September 1986 second injury. See G.L.c. 152, § 48, as amended by St. 1977, c. 776, § 1 and St. 1953, c. 314, § 6. The following amounts were deducted from the settlement: $7,600 for the employee's attorney's fee; $20,000 to the employee's wife for "release of inchoate rights"; $10,000 to the employee for his future medical expenses; and $2,000 for § 36 benefits.
On October 23, 1991, the insurer filed a petition for reimbursement from the Workers' Compensation Trust Fund under G.L.c. 152, § 37 for 50% of the $20,000 paid out of the § 48 lump sum agreement to the employee's wife for the release of her inchoate rights and 50% of the $10,000 paid to the employee for his future medical benefits. The administrative judge denied the insurer's petition in a conference order filed on September 17, 1993.
Paragraph 2 of § 37 as applicable provides:
. . . . If said subsequent injury is caused by the pre-existing impairment or if said subsequent personal injury of such an employee shall result in the death of the employee, and it shall be determined that the death would not have occurred except for such pre-existing physical impairment, the insurer or self-insurer shall pay all compensation provided by this chapter. Such insurer or self-insurer shall, however, be reimbursed by the state treasurer from the fund created by section sixty-five in an amount not to exceed fifty per cent of all compensation paid in excess of that paid for the first one hundred and four weeks. St. 1973, c. 855, § 2. (emphasis added).
Not being satisfied with the conference order, the insurer filed a timely appeal and the matter was submitted for decision pursuant to a stipulation of facts. After consideration of the stipulation and the briefs, the judge issued her decision on February 28 1994, finding that the insurer was entitled to reimbursement for benefits paid to the employee consistent with § 37, including lump sum payments entitled "inchoate rights" and future medical payments. (Dec. 8-9.)
The judge rejected the Trust Fund's argument that the history of amendments to G.L.c. 152, § 37 suggests that the legislature never intended to permit reimbursement for inchoate rights or future medical expenses because certain sections of the act were deleted from the definition of the term "compensation" making the listing of sections exhaustive rather than illustrative. (Dec. 6; Trust Fund Brief, 3-11.) Rather, she was persuaded by the insurer's position and by the fact that § 30 medical payments and § 31 spousal or dependent's death benefits are specifically enumerated in § 37. (Dec. 6-7.)
The fourth paragraph of the applicable version of § 37 provides:
The word "compensation" as used in this section for the purpose of reimbursement hereunder shall include all payments to the employee, or to his dependents in case of death, provided for by sections thirty, thirty A, thirty-one, thirty-two, thirty-three, thirty-four, thirty-four A, thirty-five, thirty-five A, thirty-six and thirty-six A. (emphasis added). St. 1973, c. 855, § 2.
The Trust Fund appeals from this decision. It contends the decision is contrary to law because § 37 as amended on October 2, 1973 does not provide for reimbursement to an employee's spouse in consideration of the release of inchoate rights or for the employee's future medical bills.
For purposes of this appeal, the parties have stipulated that G.L.c. 152, § 37, as amended by St. 1973, c. 855, applies to this case. The Trust Fund stipulates that the petition for reimbursement satisfactorily establishes that the known physical impairment combined with the distinct compensable subsequent injury to create a substantially greater disability than would have resulted from the second injury alone. See G.L.c. 152, § 37.
For the applicable text, see notes 1, 3 and 4 supra. Section 37 was rewritten by § 71 of the Acts of 1991, effective December 23, 1991. The 1991 amendment eliminated §§ 30A, 34, 35, 35A and 36 from the definition of compensation and provided that compensation is reimbursable under § 30 where benefits are due under §§ 31, 32, 33, 34A or 36A. This section was deemed substantive and applies only to injuries after its effective date. Moreover, the parties have stipulated correctly that the 1973 amendments in St. 1973, c. 855 apply to this case. It is, therefore, unnecessary to address the Trust Fund's argument that subsequent amendments to § 37 have any bearing on the analysis to be performed in this case.
ISSUES
The issue before us is whether the insurer is entitled to reimbursement from the Trust Fund for 50% of the $20,000 paid to the employee's wife for release of what was designated as "her inchoate rights" and for 50% of the $10,000 paid to the employee for "future medical expenses" under the § 48 lump sum agreement. We find the insurer is entitled to reimbursement and affirm the judge's decision.
LEGAL DISCUSSION
A. WHETHER SPOUSE'S "INCHOATE RIGHTS" AND EMPLOYEE'S FUTURE MEDICAL BENEFITS UNDER § 30 ARE REIMBURSABLE UNDER § 37.
The Trust Fund argues that § 65(2)(a-g) and § 37 instruct which benefits are reimbursable and, therefore, the Trust Fund is only obligated to reimburse the sums statutorily mandated. We agree with that premise but are not persuaded by the Trust Fund's arguments.
As the Trust Fund argues, this case arises in part under § 65(2)(c), which authorizes it to use its proceeds to reimburse "compensation" as found only in subsections 65(2)(a) through 65(2)(g). Section 65(2)(c) explicitly provides for reimbursement under § 37. Paragraph four of § 37 specifically defines the term "compensation" for purposes of that section "shall include all payments to the employee, or to his dependents in case of death, provided for by sections [30, 30A, 31, 32, 33, 34, 34A, 35, 35A, 36 and 36A]. St. 1973, c. 855, at par. 4 (emphasis added); see note 4 supra.
The pertinent sections of § 65 (2)(a-g) provide that the Trust Fund shall reimburse payments under (a) § 34B; (b) § 35C; (c) § 37; (d) § 30H; (e) certain benefits where there are uninsured employers; (f) § 26; (g) § 37A.
Section 65(2)(c) must be read in conjunction with the applicable version of § 37. The fifth paragraph of § 37 provides that a percentage of lump sum payments under § 48 are reimbursable after the first 104 weeks of disability. It reads as follows:
In the event that liability for any case arising under this section is redeemed by a lump sum payment as provided in section forty-eight, and if the attorney general has been given an opportunity to appear and be heard on behalf of the fund, and when the order of the division refers to the provisions of this section, reimbursement shall be made without the necessity of further approval of the lump sum by the state treasurer; but no reimbursement shall be made covering the first one hundred and four weekly payments, whether paid under an agreement, decision or lump sum settlement.
St. 1973, c. 855, at par. 5 (emphasis added).
The plain words of the statute, thus, provide that G.L.c. 152, § 48 and 30 through 33 are included as reimbursable sections under the Act. SeeHashimi v. Kalil, 388 Mass. 607, 609 (1983). We are bound to interpret the statute as written. Id.
The Trust Fund suggests that were it the intention of the legislature "to include inchoate rights as reimbursable compensation they would have listed the same in . . ." G.L.c. 152, § 37. (Trust Fund Brief, at 10); seesupra note 4. We find the Trust Fund's construction of the term "inchoate rights" inapposite.
Inchoate rights are future rights that are pending or disputed, and not yet payable although potentially so. Prior to the time of the employee's September 26, 1986 second injury and the August 2, 1989 lump sum settlement, a spouse had two potential types of inchoate rights. Under theFerriter rule, despite the exclusivity provisions of the Workers' Compensation Act, a spouse could recover for loss of consortium and society. Ferriter v. Daniel O'Connell's Sons, Inc., 381 Mass. 507-529-530 (1980). Additionally, the spouse of an employee who died as a result of work related injuries generally was entitled to statutory death benefits under G.L.c. 152, § 31-33.
The Legislature abolished all "Ferriter" or similar claims by amending § 24 of the Act through St. 1985, c. 572, § 35, which deemed the new provisions in § 24 substantive, and thus applicable only to injuries arising on or after December 10, 1985. Because of this statutory change, after December 10, 1985, the only "inchoate" or future rights of a spouse are those provided by §§ 31-33.
The 1985 amendment to c. 152, § 24 provided in pertinent part:
. . . If an employee has not given notice to his employer that he preserves his right of action at common law as provided by this section, the employee's spouse, children, parents and any other member of the employee's family or next of kin who is wholly or partly dependent upon the earnings of such employee at the time of injury or death, shall also be held to have waived any right of action at common law against such employer due to loss of consortium, parental guidance, companionship or the like, when such loss is a result of any injury to the employee that is compensable under this chapter.
St. 1985, c. 572, § 35.
An insurer's potential liability under G.L.c. 152 for rights that have not yet arisen may be redeemed by means of a § 48 lump sum settlement.Carrier's Case, 3 Mass. App. Ct. 502, 508 (1975), aff'd, 370 Mass. 674 (1976); L. Locke, Workmen's Compensation § 551 (2d ed. 1981); seeHenderson's Case, 349 Mass. 683, 685 (1965) (narrow view of § 37 would discourage lump sum settlements); see also G.L.c. 152, § 48. The judge's approval of the terms of a § 48 agreement constitutes a release of the employee's rights as well as those of his spouse. L. Locke, supra § 551, at 677.
In conclusion, §§ 37 and 65 explicitly provide that §§ 30 through 33 compensation benefits are reimbursable. Section 37 further provides that future potential or "inchoate" rights under those sections may be redeemed by a § 48 lump sum settlement where it is properly executed and approved as it was in this case. Accordingly, we find that the insurer is entitled to reimbursement from the Trust Fund for 50% of the §§ 30 through 33 compensation paid under § 48. We affirm the decision and orders of the administrative judge.
B. WHETHER ALLOCATION TO EMPLOYEE'S SPOUSE UNDER LUMP SUM AGREEMENT WAS PROPER.
The Trust Fund also contends that the insurer's allocation of "inchoate rights" under the § 48 settlement was a subterfuge to avoid a social security offset. The Trust Fund was properly notified and failed to exercise its right to object to the allocation. It is, therefore, bound by the lump sum agreement. Although we agree with the Trust Fund that the spousal allocation must be reasonable, we do not decide the propriety of the allocation as it was not properly preserved for appellate review. The time to raise the issue was at the lump sum hearing. It cannot be raised for the first time on appeal.
See MacQuarrie v. Secretary of Health Human Serv., 639 F. Supp. 1357, 1362 (D. Mass. 1986) (discussing reasonableness requirement); see also Davidson v. Sullivan, 942 F.2d 90, 95 (1st Cir. 1991); Lemire v.Secretary of Health Human Serv., 682 F. Supp. (D.N.H. 1988) (discussing release of potential spousal rights under New Hampshire Compensation Act).
The decision of the administrative judge is affirmed.
So Ordered.
_______________________ Suzanne E.K. Smith Administrative Law Judge
________________________ Edward P. Kirby Administrative Law Judge
_______________________ Susan Maze-Rothstein Administrative Law Judge
Filed: March 12, 1996