MARINA J. WHISENANT, 
Employee, 
Applicant
v. 
CARR-GOTTSTEIN FOODS CO.,
(Self Insured) 
Employer,
Defendant.

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INTERLOCUTORY
DECISION AND ORDER
AWCB Case Nos. 199828675, 199523578
AWCB Decision No. 00-0025
Filed with AWCB Juneau, Alaska
on February 10, 2000

We heard the employer’s petition to compel discovery at Juneau, Alaska, on January 11, 2000. Attorney Paul Hoffman represents the employee. Attorney Robert Griffin represents the employer. We closed the record at the end of the hearing.

Whether to compel discovery concerning terms of the employee’s settlement of a medical malpractice claim.

The employee suffered two injuries while working for the employer in Juneau. The first occurred on October 30, 1995 when she slipped on an icy rampway and fell, striking her head. She suffered a cervical spinal injury and sought care from Tom Gundelfinger, D.C., among others. Eventually she saw a neurologist and had a cervical fusion. There was considerable delay in getting the cervical fusion while the employee was under the care of Dr. Gundelfinger. Some medical experts considered Dr. Gundelfinger’s delay in advising care by a neurosurgeon medically inappropriate, causing increased neurological problems with her hand as the result of the delay in getting surgery.

The employee suffered another injury in 1998 after returning to work for the employer, which was either a new injury or an aggravation of the first injury. She was diagnosed with a further cervical disk herniation on June 24, 1998 and had a second surgery to her cervical spine. After that surgery, she was found not capable of returning to her same employment and entered into a Reemployment Plan for which she is in school at Clover Park Vocational Technical Institute in Tacoma, Washington.

The employee was represented by attorney Paula M. Jacobson in her medical malpractice claim against Dr. Gundelfinger. In an April 19, 1999 letter to attorney Griffen, Ms. Jacobson requested confirmation of whether the employer agreed that it had no interest in the employee’s case against Dr. Gundelfinger. In her letter, Ms. Jacobson referenced a decision by U.S. District Court Judge Sedwick, in which the court held in similar circumstances: "Employers still enjoy subrogation rights under AS 23.30.015(g), but not when the claim arises out of a medical malpractice case and the tortfeasor is a medical practitioner." Crosby v. United States, A95-395 CIV, p. 4 (Alaska US Dist. Ct., March 16, 1999)

The parties agree that claims against medical practitioners are governed by AS 09.55.530-560. Damages in medical practice claims pursuant to AS 09.55.548 do not allow a claimant in that arena to recover damages from the medical practitioner for amounts received by the claimant as compensation for injuries from collateral sources.

After further communication, on May 17, 1999 attorney Griffen wrote to Ms. Jacobson stating, in part, "The collateral source statute in AS 09.55.548(b) controls. Consequently, The employer will not be pursing its workers’ compensation lien in this matter."

In a subsequent ruling in Crosby, on July 1, 1999 Judge Sedwick clarified his earlier ruling, noting that "AS 09.55.548 applies to all payments made by covered sources regardless of whether such payments are to be made in the future;" indicating there was no subrogation for amounts paid or to be paid. Thereafter, the employee’s claim against Dr. Gundelfinger was compromised and settled.

The employer requested copies of the Gundelfinger settlement documents on September 24, 1999. The employee responded on October 5, 1999 asserting the requests were irrelevant and immaterial in the instant case. The employer replied on October 11, 1999: "Carrs cannot pursue its workers’ compensation lien pursuant to AS 09.55.548(b). However, Carrs has every intention of asserting its right to a credit of any excess recovery pursuant to AS 23.30.015(g)."

Additional correspondence from Ms. Jacobson to Mr. Griffin, dated October 26, 1999, attempted to clarify this disagreement. Mr. Griffin responded in a November 8, 1999 letter to Ms. Jacobson agreeing that the employer had no subrogation rights, but continuing to assert that there was a right to a credit under AS 23.30.015(g).

AS 23.30.015(g) reads as follows:

If the employee or the employee’s representative recovers damages from the third person, the employee or representative shall promptly pay to the employer the total amounts paid by the employer under (e)(1)(A) - (C) of this section insofar as the recovery is sufficient after deducting all litigation costs and expenses. Any excess recovery by the employee or representative shall be credited against any amount payable by the employer thereafter. If the employer is allocated a percentage of fault under AS 09.17.080, the amount due the employer under this subsection shall be reduced by an amount equal to the employer’s equitable share of damages assessed under AS 09.17.080(c).

The employee asserts that when read in context, AS 23.30.015(g) makes clear that a "lien" and a "credit" are the same thing looked at from different points in time, depending upon when settlement of a third-party claim occurs. Generally, AS 23.30.015(g) requires an offset for any medical expenses incurred by an employee that would have been payable by the employer. Berger v. Wien Air Alaska, ___ P.2d ___, Opinion No. 5231 (Alaska, January 21, 2000). The purpose of this section is to allow employees to seek damages from third-party tortfeasors without jeopardizing their compensation while, at the same time, allowing employers to share in damage awards up to the limit of their exposure under the workers' compensation law. Alaska National Insurance Co. v. Jones, ___ P.2d ___, Opinion No. 5215 (Alaska, December 10, 1999).

While there have been no Alaska Supreme Court cases directly on point concerning settlement of third party malpractice claims, the Alaska Supreme Court has suggested that a lien and a credit are treated in the same way. For example, the Court’s discussion of AS 23.30.015(g) in Jones makes no distinction between liens and credits. In Stone v. Fluid Air Components and Liberty Northwest, 990 P.2d 621, Opinion No. 5201 (Alaska, November 12, 1999) the court dealt with whether the employer’s prorated share of a third party recovery, against which the attorney fees would be calculated, would include future as well as past compensation payments. The Court noted that: "Construing pro rata fees under subsection (g) to also refer to future benefits thus makes it harmonious with subsection (e)." The court further noted: "Unjust enrichment occurs [to the employer] whether the benefits have already been paid or would have been paid in the future." The Court appears to treat a lien and a credit are one and the same thing. The court went on to note that:

The employer argues that Alaska’s statutory scheme, in contrast to the majority of jurisdictions, does not include the right to future reimbursement on the part of the employer. However, AS 23.30.015(g) includes future benefits in the employer’s right to reimbursement in the form of a credit. It provides that the employee’s recovery "shall be credited against any amount payable by the employer thereafter." In other words, if the employee recovers an amount in excess of the compensation paid, the employee can keep it, subject to the employer’s credit for future benefits that would otherwise be paid. It is as if the employer were to pay a doctor’s bill and be instantaneously reimbursed for it. If the "excess" is not sufficient to cover future benefits, the employer will again be liable.

Based on the foregoing, we find the Supreme Court concluded that liens and credits were part of a continuous employer obligation for which, in the usual case, they have the right of subrogation. In medical malpractice cases, however, in accord with Judge Sedwick’s determination, we find employers do not have the right of subrogation. AS 09.17.070 (e), 09.55.548(b). In sum, we find there is no right of subrogation as to medical malpractice third-party litigation and, therefore, no right to a lien or a credit.

Moreover, we find the employer in this case is estopped from asserting a claim against the third party proceeds. Despite the exchange of documents between the parties, the employer never provided any notice to the employee’s malpractice attorney that the employer considered itself to have a right to claim a credit. Instead, it freely acknowledging it was giving up its right to subrogation and any right to a claim of lien. The record clearly reflects that in reliance upon correspondence from the employer’ attorney, the employee’s malpractice attorney settled the claim, in contemplation that no part of it would go to decrease the employee’s workers’ compensation benefits. This reliance to its detriment is the very basis of equitable estoppel.

We have found the employer may not assert a claim against the employee’s third party proceeds from her medical malpractice case. We now must decide whether the terms of the malpractice case are discoverable.

Discovery in workers’ compensation case proceedings is governed by the Civil Rules. AS 23.30.135(a) provides in pertinent part: "In making an investigation or inquiry or conducting a hearing, the board is not bound by common law or statutory rules of evidence or by technical or formal rules of procedure, except as provided by this chapter."

8 AAC 45.054 provides in pertinent part:

(a) The testimony of a material witness, including a party, may be taken by written or oral deposition in accordance with the Alaska Rules of Civil Procedure.

(b) Upon the petition of a party, the board will, in its discretion, order other means of discovery. . . .

(d) A party who refuses to release information after having been properly served with a request for discovery may not introduce at a hearing the evidence which is the subject of the discovery request.

In Clark v. Timber Fallers, Inc., AWCB No. 88-0318 (November 29, 1988) aff'd, 1JU-88-2038 CI (Alaska Super. Ct., September 25, 1989), we noted that, with a few exceptions such as privilege, everything relevant is discoverable under the Alaska Workers' Compensation Act and that the work product doctrine is not a form of privilege. Relevant evidence is defined in Evidence Rule 401 as follows:

Relevant evidence means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.

In this case, we find the information about the settlement with Dr. Gundelfinger can make no fact that is of consequence to any determination before the Board more or less probable. Therefore, we find it is not relevant evidence and, consequently, not discoverable. Civil Rule 26(b)(1). Stated differently, we find the employer can put forward no legitimate reason why it needs to have any information about the settlement with Dr. Gundelfinger because it has no right to subrogation, neither for a lien nor a credit. Accordingly, we conclude the employer’s petition to compel must be denied.

The employee petitioned for an award of attorney fees for time spent in defending the petition to compel. AS 23.30.145 provides, in part:

(b) If an employer fails to file timely notice of controversy or fails to pay compensation or medical and related benefits within 15 days after it becomes due or otherwise resists the payment of compensation or medical and related benefits and if the claimant has employed an attorney in the successful prosecution of the claim, the board shall make an award to reimburse the claimant for the costs in the proceedings, including a reasonable attorney fee. The award is in addition to the compensation or medical and related benefits ordered.

8 AAC 45.180 provides, in part:

(f) The board will award an applicant the necessary and reasonable costs relating to the preparation and presentation of the issues upon which the applicant prevailed at the hearing on the claim. The applicant must file a statement listing each cost claimed, and must file an affidavit stating that the costs are correct and that the costs were incurred in connection with the claim.

The employee submitted an affidavit of itemized attorney fees. He claimed a total of $7,607.25 in actual attorney fees, including sales tax. He claimed an hourly fee of $300.00.

In determining a workers’ compensation case attorney fee award, we consider, in part, the nature, length, complexity and benefits received. Wise Mechanical Contractors v. Bignell, 718 P.2d 971, 974-975 (Alaska 1986). In the instant case, at present, no benefits have been awarded and we are unaware of the value of the undisclosed benefits preserved by our determination that the employer has no right of subrogation against the medical malpractice proceeds. Therefore, we find it is premature to award attorney fees at this time.

ORDER

The employer’s petition to compel discovery is denied and dismissed. We also deny the employee’s petition for attorney fees at this time.

Dated at Fairbanks, Alaska this 10^th day of February, 2000.

ALASKA WORKERS' COMPENSATION BOARD

/s/ Fred G. Brown
Fred Brown, Designated Chairman

/s/ Nancy J.Ridgley
Nancy J. Ridgley, Member

/s/ James G. Williams
James G. Williams, Member

A party may ask the Board to reconsider this decision by filing a petition for reconsideration under AS 44.62.540 and in accordance with 8 AAC 45.050. The petition requesting reconsideration must be filed with the Board within 15 days after delivery or mailing of this decision.

Within one year after the rejection of a claim or within one year after the last payment of benefits under AS 23.30.180, 23.30.185, 23.30.190, 23.30.200 or 23.30.215 a party may ask the Board to modify this decision under AS 23.30.130 by filing a petition in accordance with 8 AAC 45.150 and 8 AAC 45.050.

I hereby certify that the foregoing is a full, true and correct copy of the Interlocutory Decision and Order in the matter of MARINA J. WHISENANT employee / applicant; v. CARR-GOTTSTEIN FOODS CO., employer (Self Insured) / defendant; Case Nos. 199828675, 199523578; dated and filed in the office of the Alaska Workers' Compensation Board in Fairbanks, Alaska, this 10^th day of February, 2000.

Lora Eddy, Clerk

SNO