Elizabeth Stenz v. Ica , 237 Ariz. 481 ( 2015 )

IN THE
SUPREME COURT OF THE STATE OF ARIZONA
CHARLES W. STENZ, DECEASED,
Petitioner Employee,
ELIZABETH STENZ, WIDOW,
Petitioner,
v.
THE INDUSTRIAL COMMISSION OF ARIZONA,
Respondent,
CITY OF TUCSON,
Respondent Employer,
PINNACLE RISK MANAGEMENT SERVICES,
Respondent Insurer.
No. CV-14-0298-PR
Filed July 20, 2015
Appeal from the Industrial Commission of Arizona
The Honorable Gary M. Israel, Administrative Law Judge
No. 20051100192
AWARD SET ASIDE
Opinion of the Court of Appeals, Division Two
236 Ariz. 104, 336 P.3d 737 (App. 2014)
VACATED
COUNSEL:
M. Ted Moeller (argued), Tucson, and Andrew J. Petersen, Tucson,
Attorneys for City of Tucson and Pinnacle Risk Management Services
J. Patrick Butler (argued), Tretschok, McNamara & Miller, P.C., Tucson,
Attorneys for Elizabeth Stenz, widow of Charles W. Stenz
James B. Stabler, Phoenix, Attorney for Amicus Curiae CopperPoint Mutual
Insurance Company
STENZ V. ICA, ET AL.
Opinion of the Court
CHIEF JUSTICE BALES authored the opinion of the Court, in which VICE
CHIEF JUSTICE PELANDER and JUSTICES BERCH and TIMMER joined,
and BRUTINEL concurred.
CHIEF JUSTICE BALES, opinion of the Court:
¶1 Although Arizona’s Workers’ Compensation Act does not
mandate the payment of interest on benefits not timely paid, this Court has
held that the general interest statute, A.R.S. § 44-1201, applies to workers’
compensation awards. Today we hold that death benefits under A.R.S.
§ 23-1046 are liquidated, and interest on them accrues from the time a
carrier receives notice that a survivor has filed a claim with the Industrial
Commission pursuant to A.R.S. § 23-1061(A).
I.
¶2 In 2005, Charles Stenz suffered an on-the-job injury for which
he filed a claim with his employer’s insurance carrier, Pinnacle Risk
Management. Pinnacle accepted the claim and paid the benefits. In 2009,
Stenz died. Alleging that his death resulted partly from the 2005 injury,
Stenz’s widow filed a claim for death benefits under A.R.S. § 23-1061(A).
The claim was filed with the Industrial Commission on September 21, 2009.
Pinnacle received notice of the claim on October 21, 2009.
¶3 One week later, Pinnacle denied the claim. An
Administrative Law Judge (“ALJ”) upheld the denial, but the court of
appeals set aside that award. After a new hearing, the ALJ issued an award
granting death benefits. In 2013, nearly four years after Mrs. Stenz filed her
claim, the ALJ entered a final order affirming the award. Pinnacle paid the
benefits dating back to Stenz’s death, but did not pay interest on the unpaid
benefits.
¶4 Mrs. Stenz requested a hearing pursuant to A.R.S. § 23-
1061(J), alleging that she was owed interest on unpaid death benefits from
the time the claim was originally filed until the award was ultimately paid.
The ALJ ruled that no interest was owed on the death benefit before the
award became final in 2013. The court of appeals set this ruling aside,
concluding that the claim was liquidated as of the date Pinnacle received
notice of it. Stenz v. Indus. Comm’n, 236 Ariz. 104, 336 P.3d 737 (App. 2014).
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STENZ V. ICA, ET AL.
Opinion of the Court
II.
¶5 This Court has applied Arizona’s general interest statute,
A.R.S. § 44-1201, to claims arising under the Workers’ Compensation Act.
Tisdel v. Indus. Comm’n, 156 Ariz. 211, 212, 751 P.2d 527, 528 (1988). We later
clarified that interest begins to accrue when “(1) there is a legal
‘indebtedness . . . or other obligation’ to pay benefits and (2) when the carrier
has ‘notice of [this] obligation to pay.’” DKI Corp./Sylvan Pools v. Indus.
Comm’n, 173 Ariz. 535, 537, 845 P.2d 461, 463 (1993) (quoting Tisdel, 156 Ariz.
at 213, 751 P.2d at 529). Here we consider whether a “legal indebtedness . . .
or other obligation” first arises when a carrier receives notice of a claimant’s
petition for death benefits under A.R.S. § 23-1046 or instead when an ALJ
orders that such benefits be paid.
¶6 Tisdel and DKI provide guiding principles but do not answer
the question. In Tisdel, the insurance carrier accepted a claim for benefits in
1971 but did not pay that claim for nearly fourteen years. 156 Ariz. at 212,
751 P.2d at 528. The legal indebtedness indisputably existed in 1971, and
we held that interest accrued on that indebtedness throughout the nearly
fourteen-year period of inactivity. Id. In DKI, by contrast, the claimant filed
a petition to re-open a claim under A.R.S. § 23-1061(H). 173 Ariz. at 537,
845 P.2d at 463. There we held that a petition to re-open did not trigger
indebtedness sufficient to accrue interest. Id. at 539, 845 P.2d at 536.
¶7 In DKI, we applied the “liquidated-unliquidated” test to
determine whether a “legal indebtedness . . . or other obligation” exists so
that interest begins to accrue. Id. at 538, 845 P.2d at 464. “A claim is
liquidated if the evidence furnishes data which, if believed, makes it
possible to compute the amount with exactness, without reliance upon
opinion or discretion.” La Paz County v. Yuma County, 153 Ariz. 162, 168,
735 P.2d 772, 778 (1987). If the amount of benefits to be paid is liquidated
and the carrier has notice of the liquidated obligation, then the Industrial
Commission should award interest. DKI, 173 Ariz. at 539, 845 P.2d at 465.
¶8 In DKI, this Court said that the claim in Tisdel was liquidated
because it was for “scheduled benefits . . . susceptible to mathematical
computation and applied to the statutory payment schedule.” 173 Ariz. at
538, 845 P.2d at 464. But in DKI, there was “no indication that the amount
of benefits could have been accurately determined when the initial award
was entered.” Id. Because of this uncertainty, “by definition, the ALJ did
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STENZ V. ICA, ET AL.
Opinion of the Court
not find that [the claimant] was entitled to any benefits until the date of the
initial award.” Id. at 537, 845 P.2d at 463.
¶9 A claim for death benefits, like the claim at issue in Tisdel, is
subject to a fixed payment schedule. A.R.S. § 23-1046(A)(2). Pinnacle
received notice of this claim in October 2009. The amount to be paid did
not depend on an ALJ’s later award. A legal obligation to pay may exist
before, or even in the absence of, a court order commanding such payment.
See Desert Mountain Props. Ltd. P’ship v. Liberty Mut. Fire Ins. Co., 225 Ariz.
194, 201 ¶ 17, 236 P.3d 421, 428 (App. 2010). We agree with the special
concurrence in the court of appeals that “a court may enforce a legal
obligation, [but] no court action is required to create a legal obligation.”
Stenz, 236 Ariz. at 111 ¶ 27, 336 P.3d at 744 (Howard, J., specially
concurring).
¶10 Under Arizona’s workers’ compensation scheme, the
obligation to pay is created by A.R.S. § 23-1061(G), which commands that
“the insurance carrier or self-insuring employer shall process and pay
compensation and provide medical, surgical and hospital benefits, without
the necessity for the making of an award or determination by the
commission.” Because the obligation to pay was created by statute and was
for a liquidated amount prescribed by the statute’s schedule, Pinnacle had
notice of the obligation upon its receipt of Mrs. Stenz’s claim in October
2009. Interest began to accrue on that date. (As noted in the concurring
opinion, ¶ 17, no party has urged us to depart from DKI’s holding that
interest only begins to accrue when the carrier receives notice of the claim.)
¶11 Pinnacle argues that mechanisms already exist to prevent
carriers from withholding benefits in bad faith, pointing both to statutory
provisions such as A.R.S. § 23-930 (civil penalties for unfair or bad faith
claim processing) and tort law, see, e.g., Hayes v. Cont'l Ins. Co., 178 Ariz. 264,
274, 872 P.2d 668, 678 (1994) (holding that A.R.S. § 23-930 does not displace
common-law tort actions for bad faith processing of claims). But these
arguments misconstrue the purpose of awarding interest for liquidated
claims for benefits. Although allowing interest may induce insurance
companies to act more quickly, the primary purpose is to protect a
claimant’s right to be made whole after an injury.
¶12 This Court has previously recognized the “economic fact”
that any money damage award is worth less the later a claimant receives it.
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STENZ V. ICA, ET AL.
Opinion of the Court
Tisdel, 156 Ariz. at 214, 751 P.2d at 530. A party who is deprived of the use
of money has suffered an economic loss and the party who retains the use
of money is unjustly enriched. La Paz, 153 Ariz. at 168, 735 P.2d at 778.
Interest is the remedy for this deprivation.
¶13 Recovery of interest in these circumstances furthers the
purpose of Arizona’s Workers’ Compensation Act, “to dispense, so far as
possible, with litigation between employer and employee and to place upon
industry the burden of compensation for injuries caused by the
employment.” Pressley v. Indus. Comm’n, 73 Ariz. 22, 28, 236 P.2d 1011, 1015
(1951). A contrary ruling would deprive a claimant of the full value of the
benefit owed while undesirably encouraging insurance carriers to protract
litigation to delay paying benefits for as long as possible.
III.
¶14 We hold that a claim for death benefits filed pursuant to
A.R.S. § 23-1046 is a liquidated claim and interest is owed on the claim from
the date on which the carrier receives notice of the claim. Accordingly, we
vacate the opinion of the court of appeals and set aside the ALJ’s award
denying Mrs. Stenz relief.
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STENZ V. ICA, ET AL.
JUSTICE BRUTINEL, CONCURRING
JUSTICE BRUTINEL, concurring:
¶15 Although I otherwise agree with the majority’s analysis, I
write separately because I think interest on the death-benefits claim
should accrue from the date of death rather than the date the carrier
receives notice of the claim. The majority correctly cites DKI Corp./Sylvan
Pools v. Industrial Commission, 173 Ariz. 535, 537, 845 P.2d 461, 463 (1993),
for the proposition that interest on a workers’ compensation claim does
not begin to accrue until the carrier receives notice of the claim. Id. DKI
relies on an earlier case, Tisdel, for the proposition that the carrier must
have notice of a claim before interest begins to accrue. See DKI, 173 Ariz.
at 537, 845 P.2d at 463 (quoting Tisdel v. Indus. Comm’n, 156 Ariz. 211, 213,
751 P.2d 527, 529 (1988)).
¶16 But neither DKI nor Tisdel explain why interest should not
begin to run until the carrier has notice of the claim. When we adopted
the liquidated/unliquidated test, we stated only that “[a] claim is
liquidated if the evidence furnishes data which, if believed, makes it
possible to compute the amount with exactness, without reliance upon
opinion or discretion.” La Paz County v. Yuma County, 153 Ariz. 162, 168,
735 P.2d 772, 778 (1987) (quoting Ariz. Title Ins. and Trust Co. v. O’Malley
Lumber Co., 14 Ariz. App. 486, 496, 484 P.2d 639, 649 (1971)). As the
majority points out, A.R.S. § 23-1061(G) creates “the obligation to pay
[death benefits],” and these benefits are immediately calculable at death.
Supra, ¶ 10. Because this legal obligation to pay a liquidated sum exists
prior to any action to enforce payment, interest should begin to accrue
from that date, just as in any other area of the law where prejudgment
interest is available. See, e.g., La Paz County, 153 Ariz. at 168, 735 P.2d at
778; Rossi v. Hammons, 34 Ariz. 95, 104, 268 P. 181, 184 (1928) (“[W]hen
allowed as damages, interest runs from the date when the right to recover
a sum certain is vested in the plaintiff.” (internal citation omitted)). This is
consistent with the purpose of awarding interest, which “protects a
claimant’s right to be made whole after an injury.” Supra, ¶ 11. To hold
otherwise wrongfully deprives claimants use and enjoyment of their
money without compensation, even if the time between death and notice
is relatively short. See La Paz County, 153 Ariz. at 168, 735 P.2d at 778.
¶17 Although I think this is the better technical approach, neither
party urged this position before this Court. Because we have not had the
benefit of briefing and argument by counsel, and recognizing that the
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STENZ V. ICA, ET AL.
JUSTICE BRUTINEL, CONCURRING
monetary difference would be relatively small in this case, I concur in the
opinion of the Court.
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