Opinion Information Sheet

			

      IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON

SHARON A. DAVIS,                            )
                                            )       No. 64809-8-I
                      Appellant,            )
                                            )       DIVISION ONE
                                            )
       v.                                   )
                                            )       PUBLISHED OPINION
WASHINGTON STATE DEPARTMENT ) 
OF LABOR AND INDUSTRIES,                    )
                                            )
                                            ) 
                      Respondent.           )       FILED: February 6, 2012
________________________________)

       Spearman, J.  --  Our supreme court held in Tobin v. Dep't of Labor and 

Indus., 169 Wn.2d 396, 239 P.3d 544 (2010) that the Department of Labor and 

Industries (Department) is not entitled to recover from any general damages 

allocated in an injured worker's settlement with a third-party tortfeasor. This 

appeal presents the issue of whether an injured worker whose pre-Tobin

settlement did not allocate general damages is entitled to a recalculation of the 

Department's distribution order so that a portion of her settlement can be

recognized as general damages, in light of Tobin's clarification. We hold that  

No. 64809-8-I/2

Tobin's rule applies only to allocated settlements, and the trial court therefore 

properly declined to consider Davis's claim, as in Mills v. Dep't of Labor and 

Indus., 72 Wn. App. 575, 865 P.2d 41, and Gersema v. Allstate Ins. Co., 127 

Wn. App. 687, 112 P.3d 552 (2005). We affirm.

                                        FACTS

       On August 22, 2002, Sharon Davis was involved in an on-the-job motor 

vehicle accident caused by an uninsured motorist (UM). She sustained injuries 

and received a permanent impairment rating. The Department paid Davis 

industrial insurance benefits for time loss, medical expenses, and permanent 

partial disability. The Department closed her claim on July 29, 2005. Davis 

elected to pursue a third-party claim against her employer's UM carrier, sending 

a written settlement demand on May 7, 2008, in which she calculated her 

damages as follows:

              Medical Expenses                      $27,102.10
              Lost Compensation                      $1,360.00
              Pain and Suffering                    $25,000.00
              Disability                            $25,000.00
              Loss of Enjoyment of Life             $25,000.00

              Total Damages                         $103,452.10

Davis's claim was settled for a lump sum of $75,000 on June 2, 2008. The 

settlement agreement did not differentiate between general and specific

damages.

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No. 64809-8-I/3

       Under RCW 51.24.060, an injured worker's recovery from a third party is 
subject to distribution.1 The Department issued its third-party distribution order 

regarding Davis's settlement on June 9, 2008.2. It applied the distribution formula 

in RCW 51.24.060 to the full amount of Davis's recovery, $75,000. The 

Department asserted a statutory lien in the amount of $36,207.37 and ordered 
that $8,907.01 was subject to offset.3

       1 Recovery is defined as "all damages except loss of consortium." RCW 51.24.030(5). As 
we note, pain and suffering damages are also excluded from distribution as recovery. Tobin, 169 
Wn.2d at 404. Any recovery subject to distribution is divided and distributed in the following 
order: (1) attorney fees and costs; (2) twenty-five percent of the balance goes to the injured 
employee or beneficiary; and (3) the balance of the recovery goes to the Department, but only to 
the extent necessary to reimburse the Department for benefits paid. RCW 51.24.060(1)(a)-(c). 
Any remaining balance is paid to the employee or beneficiary. RCW 51.24.060(1)(d). Thereafter, 
the employee or beneficiary is not entitled to receive additional workers' compensation benefits 
until the additional benefits equal the remaining balance of the recovery paid to the employee or 
beneficiary. RCW 51.24.060(1)(e). The Department has a lien on its share of a worker's third-
party recovery. RCW 51.24.060(2).

       2 The order provided in pertinent part:

       WHEREAS, the claimant has recovered $75,000, and RCW 51.24.060 requires 
       distribution of the settlement proceeds as follows: 1) Net share to attorney for 
       fees and costs $25,007.02; 2) Net share to claimant $25,859.00; and 3) Net 
       share to department $24,133.98.

       WHEREAS, the Department of Labor and Industries has paid benefits of 
       $36,991.21, and asserts $36,207.37 against this recovery;

       NOW THEREFORE, demand is hereby made upon the claimant to reimburse 
       the department in the amount of $24,133.98.

       IT IS FURTHER ORDERED no benefits or compensation will be paid to or on 
       behalf of the claimant or beneficiary as defined in RCW 51.08.020 until such 
       time as the excess recovery totaling $8,907.01 has been expended by the 
       claimant or beneficiary for costs incurred as a result of the condition(s), injuries, 
       or death covered under this claim.

       3 The amount subject to offset is what an injured worker must spend before the 
Department will pay any additional benefits.

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No. 64809-8-I/4

       On July 1, 2008 we issued our opinion in Tobin v. Dep't of Labor and 

Indus., 145 Wn. App. 607, 187 P.3d 780 (2008), holding the Department was not 

entitled to reimbursement from the portion of an injured worker's third-party 

recovery compensating the worker for pain and suffering. Because the 

Department did not pay pain and suffering damages, those damages were not a 

"recovery" as defined in RCW 51.24.030(5).

       On August 1, 2008, Davis appealed the Department's distribution order to 

the Board of Industrial Appeals (Board). Her appeal was based on Tobin. The 

Industrial Appeals Judge (IAJ) affirmed, ruling that Tobin did not apply because 

Davis's settlement did not allocate special damages. The Board granted Davis's 

petition for review and affirmed the IAJ's ruling.

       Davis appealed the Board's decision and order in King County Superior 

Court. She sought a stay pending the Washington Supreme Court's 

determination of Tobin. The superior court denied the stay, and trial was held on 

October 5, 2009. The court upheld the Board and entered findings of fact, 

conclusions of law, and judgment in the Department's favor. The court's ruling

was based on the following conclusion of law: 

       Because the Appellant did not allocate any portion of her recovery 
       to damages for loss of consortium or pain and suffering, this matter 
       is controlled by Mills v. Dep't of Labor and Indus., 72 Wn. App. 
       575, 865 P.2d 41, review denied, 124 Wn.2d 1008 (1994) and 
       Gersema v. Allstate Insurance Company, 127 Wn. App. 687, 112 
       P.3d 552 (2005). 

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No. 64809-8-I/5

Davis appealed to this court, again arguing that her distribution order should be 

recalculated following our decision in Tobin. We stayed her appeal pending the

Supreme Court's decision in that case. The Court affirmed, holding that chapter 

51.24 RCW did not authorize the Department to include the portion of a worker's 

settlement allocated to pain and suffering damages in its distribution calculation. 

Tobin, 169 Wn.2d at 404.

                                    DISCUSSION

       The only issue before us is whether a worker who entered a non-allocated 

third-party settlement before Tobin is entitled to a recalculation of the 

Department's distribution order so that some portion is recognized as general 

damages, to which the Department is not entitled under Tobin. The facts are 

undisputed and this appeal presents only issues of law. This court reviews the 

trial court's decision to grant the Department's motion for summary judgment de 

novo. This court reviews issues of law de novo. Stuckey v. Dep't of Labor & 

Indus., 129 Wn.2d 289, 295, 916 P.2d 399 (1996).

       Davis contends that her failure to allocate did not make her entire 
settlement subject to distribution.4 She argues that she was not obligated to 

       4 Davis suggests that any of three different methods could be used by the Department 
upon remand: (1) her demand to the UM carrier, which apportioned her damages, could be 
prorated with the gross amount of the settlement; (2) the difference between (a) her medical bills 
and lost compensation, as reflected in the Department's ledger (itemizing each dollar paid in 
connection with Davis's claim) and (b) the $75,000 settlement should be allocated to her general 
damages; or (3) the Department could conduct a reasonableness hearing. 

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No. 64809-8-I/6

allocate because the third-party recovery statute was ambiguous and the 

Department was not required to -- and did not -- respect allocations for general 

damages. She points out that she settled her claim before Tobin clarified that the 

Department may not recover from an injured worker's general damages.

       The Department argues that because Davis did not allocate, Tobin does 

not apply and the trial court correctly applied Mills and Gersema. It contends that 

because Tobin addresses an allocated settlement, Tobin does not overrule or 

affect Mills or Gersema. The Department contends that here, as in Mills and 

Gersema, it is impossible to determine from the record what amount, if any, was 

intended by the settling parties as general damages.

       We agree with the Department. The cases discussed by the parties are 

dispositive. In Mills, Mills contracted lung disease and received worker's 

compensation benefits. He and his wife filed a civil action against several 

defendants. In addition to Mills' own damages, the complaint sought damages 

for his wife's loss of consortium claim. Mills, 72 Wn. App. at 576. The Mills

settled the third-party action for a lump sum and did not allocate to the wife's 

loss of consortium claim. The Department asserted a lien against the entire 

settlement, but the Mills argued that the wife's loss of consortium claim was not 

subject to the Department's right of reimbursement. The Board determined that 

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No. 64809-8-I/7

the Department's lien could not be asserted against any portion of a third-party 

recovery awarded to a worker's spouse for loss of consortium until the spouse 

began receiving benefits under the Industrial Insurance Act. However, the Board

concluded that the entire settlement was subject to the lien because the Mills' 

settlement did not allocate a portion to the loss of consortium claim. We agreed.

Id. at 577.

       Next, in Gersema, Gersema was injured at Titus-Will while working for 

Allstate, a self-insured employer. Allstate paid him $35,731.61 in industrial 

insurance benefits. Gersema, 127 Wn. App. at 689-90. Gersema sued third party 

Titus-Will for the same injury and they settled for a lump sum of $160,000. The 

settlement did not make an allocation for general damages. Allstate asserted a 

lien, and the Department's order subjected the entire $160,000 to distribution. Id.

at 690-91. Gersema appealed to the Board, which affirmed. On appeal to this 

court, Gersema argued that the Department's application of RCW 

51.24.060(1)(e) violated his right to substantive due process because it resulted 

in an unconstitutional taking of general damages from his third-party settlement. 

Specifically, he argued that because Allstate recovered all benefits it had paid 

him, the Department unconstitutionally took his property when it allowed Allstate 

to offset his potential future industrial insurance benefits against his statutorily 

defined excess recovery. Id. at 692. Gersema relied on Flanigan v. Dep't of 

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No. 64809-8-I/8

Labor & Indus., 123 Wn.2d 418, 423, 869 P.2d 14 (1994), in which our supreme 

court held that the Department's statutory right to reimbursement does not 

extend to a spouse's recovery for loss of consortium because RCW 

51.24.060 provides that the Department can be reimbursed only for benefits 

paid, and the Department does not pay the injured worker for loss of consortium. 

But we held that Gersema's failure to allocate was determinative:

       If Gersema's settlement with Titus Will had clearly allocated some 
       or all of the damages to his pain and suffering, we might agree with 
       his contention that these general damages are not "excess" and, 
       therefore, should receive the same treatment as loss of consortium 
       damages in Flanigan.  But such is not the case here. Unlike 
       Flanigan's differentiated award, Gersema received an 
       undifferentiated settlement award for which it is impossible to 
       determine from the record what portion was attributable to general 
       damages, such as pain and suffering, and what portion was 
       attributable to special damages, for which Allstate had already paid 
       Gersema industrial insurance benefits or may pay as future 
       benefits arising from the same neck injury. Thus, Flanigan, with its 
       differentiated award, does not apply.

Gersema, 127 Wn. App. at 695-96. We applied Mills and held that under RCW 

51.24.060(1)(e) and RCW 51.24.060(2), Allstate's lien applied to the entire 

remainder of Gersema's excess recovery from the third-party settlement 

because the settlement failed to differentiate general damages from special 

damages. Id.

       Finally, in Tobin, our supreme court held that chapter 51.24 RCW does 

not authorize the Department to seek reimbursement from damages awarded for 

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No. 64809-8-I/9

pain and suffering in a third-party settlement. Tobin, 169 Wn.2d at 398. The 

court relied on Flanigan's principle that where the Department has not paid 

benefits for a type of damages, it cannot seek reimbursement from those 

damages. Id. at 401 (citing Flanigan, 123 Wn.2d at 426).

       These cases do not support Davis's position. Mills and Gersema

unambiguously indicated to workers that in order to make the claim that any part 

of their third-party recovery should be excluded from the Department's lien, they 

must allocate. Tobin involved an allocated settlement, and nothing in the court's 

opinion supports remanding and recalculating Davis's distribution order.

       Davis's arguments as to why Mills and Gersema do not control are 

unpersuasive. She points out that Mills involved a loss of consortium claim, but 

this distinction is immaterial. The basis for the Mills' contention that a portion of 

their recovery should be excluded was that the Department does not pay loss of 

consortium benefits and should therefore not be allowed to seek recovery for 

that benefit. This is the same basis for Davis's argument regarding pain and 

suffering damages. Next, she contends Mills involved claims belonging to 

different claimants. This point is also immaterial. Although the wife had a claim 

separate from her husband's, both of them entered into a single settlement 

agreement resolving all of their claims. Mills, 72 Wn. App. at 576. The critical 

fact is that the Mills failed to allocate. Finally, Davis contends that the Mills court 

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No. 64809-8-I/10

did not have the benefit of the clear rule of law provided by Tobin. But the Mills

court was aware when it issued its decision that the supreme court had accepted 

review of Flanigan and Downey v. Dep't of Labor & Indus. 119 Wn.2d 1018, 838 

P.2d 690 (1992), which would decide whether loss of consortium is subject to the 

Department's lien. The Mills court explained that its decision was made on 

independent grounds: 

       If both Downey and Flanigan were reversed, the Department would 
       have an immediate right to reimbursement against the Mills' entire 
       recovery. However, because we decide this case on other grounds, 
       i.e., the parties' failure to segregate the Mills' recovery at 
       settlement, neither Downey nor Flanigan impacts the outcome of 
       this case.

 Mills, 72 Wn. App. at 577 n.1. A clear rule of law on the substantive issue would 

not have changed the outcome given the failure to allocate.

       Davis contends Gersema did not reach the substantive issue decided by 

Tobin and that after Gersema, the Department's lien attached to the entirety of a 

worker's third-party recovery, allocated or not. Therefore, she had no reason to 

allocate. But again, Gersema clearly indicated that a settlement must be 

allocated before a worker could argue that part of a settlement was not subject to 

the Department's lien. The court declined to reach the substantive issue for the 

simple reason that the settlement did not allocate.

       Davis contends that if allocation is not ordered, the Department will 

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No. 64809-8-I/11

recover funds to which it is not entitled. She also suggests that here, unlike in 

Mills and Gersema, the record does indicate an allocation to general damages. 

But the only evidence to which Davis points is her settlement demand to the third 

party, a unilateral document written before the settlement that reveals nothing 

about the third party's intent -- or even Davis's -- at the time of settlement. There 

is no way for an allocation to be made without speculating about the parties' 

intent at settlement. Stated differently, it is impossible to verify from the record 

that any part of Davis's settlement in fact constitutes funds to which the 

Department is not entitled under Tobin.

       To hold as Davis urges would require courts to assume that the parties to 

any unallocated, pre-Tobin settlement intended to allocate a portion to general 

damages, and require the Department to recalculate its distribution orders in any 

and all of these cases. Tobin does not require this. Furthermore, we note that 

Davis had the same opportunity as Tobin to allocate. Davis's request for 

attorney fees under RAP 18.1 and RCW 51.52.130(1) is denied.

       Affirmed.

WE CONCUR:

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No. 64809-8-I/12

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