Charles W. Stenz v. City of Tucson and Pinnacle Risk Management Services , 236 Ariz. 104 ( 2014 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION TWO
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. 2 CA-IC 2013-0022
Filed October 8, 2014
Special Action—Industrial Commission
ICA Claim No. 20051100192
Insurer No. WCTUC2005478214
Gary M. Israel, Administrative Law Judge
AWARD SET ASIDE
COUNSEL
Tretschok, McNamara & Miller, P.C., Tucson
By J. Patrick Butler
Counsel for Petitioner Employee and Petitioner
STENZ v. INDUS. COMM’N OF ARIZ.
Opinion of the Court
The Industrial Commission of Arizona, Phoenix
By Andrew F. Wade
Counsel for Respondent
M. Ted Moeller, Tucson
and
Humphrey & Petersen, P.C., Tucson
By Andrew J. Petersen
Co-counsel for Respondents Employer and Insurer
OPINION
Judge Vásquez authored the opinion of this Court, in which Judge
Brammer1 concurred and Judge Howard specially concurred.
V Á S Q U E Z, Judge:
¶1 In this statutory special action, petitioner Elizabeth
Stenz, widow of Charles Stenz, the petitioner employee, challenges
the administrative law judge’s (ALJ) award denying her interest on
the death benefits she received four years after Charles’s death. She
argues Arizona law requires payment of the interest. We agree and
set aside the award.
Factual and Procedural Background
¶2 We view the facts in the light most favorable to
upholding the award. Polanco v. Indus. Comm’n, 214 Ariz. 489, ¶ 2,
154 P.3d 391, 392-93 (App. 2007). But, here, the facts are not in
dispute. Charles was employed by respondent employer City of
Tucson and suffered a compensable injury in 2005. Respondent
insurer-carrier Pinnacle Risk Management accepted the claim and
paid benefits to Charles. After Charles died on April 23, 2009,
1 The Hon. J. William Brammer, Jr., a retired judge of this
court, is called back to active duty to serve on this case pursuant to
orders of this court and the supreme court.
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STENZ v. INDUS. COMM’N OF ARIZ.
Opinion of the Court
Elizabeth filed a claim seeking death benefits under A.R.S. § 23-
1046(A). Pinnacle denied the claim, contending Charles’s death was
not work related, and the ALJ upheld the denial. This court set
aside the award upholding the denial. Stenz v. Indus. Comm’n, 2 CA-
IC 2010-0016, ¶ 14 (memorandum decision filed Aug. 25, 2011).
After a hearing on remand, the ALJ issued his decision and award
granting Elizabeth’s claim for death benefits on December 26, 2012.
On March 5, 2013, the ALJ affirmed that award. The following
month, Pinnacle paid the benefits dating back to Charles’s death but
did not pay any interest.
¶3 Elizabeth requested a hearing pursuant to A.R.S. § 23-
1061(J), contending she was entitled to interest on the unpaid death
benefits for the four-year period between Charles’s death and their
payment. Pinnacle asserted that no interest was due because the
claim was paid timely on April 23, 2013, following the ALJ’s
December 26, 2012 award. Based on the parties’ legal memoranda,
the ALJ determined that Pinnacle “did not become liable to pay
[death] benefits until [the] March 5, 2013 Decision Upon Review
became final,” that the payment of the benefits was not untimely,
and that no interest was due. Elizabeth filed this special action, and
we have jurisdiction pursuant to A.R.S. §§ 23-951 and
12-120.21(A)(2). See also Ariz. R. P. Spec. Actions 10.
Discussion
¶4 Elizabeth argues the ALJ erred by determining she was
not entitled to interest on her death benefits. Pinnacle counters that
the benefits were paid timely after the award granting them was
issued and therefore no interest was owed.
¶5 We generally defer to the ALJ’s factual findings, but
where, as is the case here, the ALJ did not conduct an evidentiary
hearing and the material facts are undisputed, the issue becomes a
question of law, which we review de novo. Finnegan v. Indus.
Comm’n, 157 Ariz. 108, 109, 755 P.2d 413, 414 (1988). We also review
questions of statutory interpretation de novo. Hahn v. Indus.
Comm’n, 227 Ariz. 72, ¶ 5, 252 P.3d 1036, 1038 (App. 2011). “When
construing workers’ compensation statutes, we favor interpretations
that make the claimant whole.” Carbajal v. Indus. Comm’n, 223 Ariz.
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Opinion of the Court
1, ¶ 10, 219 P.3d 211, 213 (2009); see also Munoz v. Indus. Comm’n, 234
Ariz. 145, ¶ 9, 318 P.3d 439, 442 (App. 2014) (Workers’
Compensation Act liberally construed to effectuate remedial
purpose).
¶6 Each party relies on Tisdel v. Industrial Commission, 156
Ariz. 211, 751 P.2d 527 (1988), and DKI Corp./Sylvan Pools v. Industrial
Commission, 173 Ariz. 535, 845 P.2d 461 (1993), to support its
position. We therefore turn to those cases, which we agree guide
our decision here.
¶7 In Tisdel, the carrier issued its notice of claim status in
1971, did not deny coverage, and suggested the claimant would
begin receiving permanent partial disability benefits. 156 Ariz. at
212, 751 P.2d at 528. Neither the claimant nor the carrier followed
up with that notice, and no benefits were paid at the time. Id.
Thirteen years later, the claimant sustained a second injury and
hired counsel to assist with that claim; counsel discovered the prior
oversight and sought payment of the past due benefits from the 1971
claim. Id. The carrier paid the full amount of benefits due on the
1971 claim but refused to pay interest. Id.
¶8 Our supreme court concluded that a workers’
compensation claimant is owed interest under the general interest
statute, A.R.S. § 44-1201, on benefits not timely paid. Tisdel, 156
Ariz. at 212-13, 751 P.2d at 528-29. That statute states, in relevant
part, that “[i]nterest on any loan, indebtedness or other obligation
shall be at the rate of ten per cent per annum.” § 44-1201(A).2 In
determining when interest began to accrue, the court noted the
carrier had not denied coverage and “[c]ounsel for both parties
stipulated that it was an error [for the carrier] not to have issued a
notice of permanent disability in December of 1971.” Tisdel, 156
2 Section 44-1201(A) previously provided that “[i]nterest on
any loan, indebtedness, judgment or other obligation shall be at the
rate of ten per cent per annum.” 2011 Ariz. Sess. Laws, ch. 99, § 15.
We cite the current version of the statute. See DKI, 173 Ariz. at 537,
845 P.2d at 463 (omitting “judgment” language from discussion of
§ 44-1201(A)).
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STENZ v. INDUS. COMM’N OF ARIZ.
Opinion of the Court
Ariz. at 212, 751 P.2d at 528. The court further noted that A.R.S.
§ 23-1047(A), the statute establishing the procedure for payment of
benefits in that case, provides that an “employer or insurance carrier
may commence payment of a permanent disability award without
waiting for a determination under subsection B of this section.”
Tisdel, 156 Ariz. at 213, 751 P.2d at 529. Because “the carrier could
have begun payments as of 23 December 1971 when it issued its
notice of claims status,” the court concluded “that the legal
obligation for interest occurred on 23 December 1971 when the
carrier had notice of its obligation to pay permanent benefits.” Id.
¶9 Unlike the carrier’s acceptance of the claim in Tisdel, the
carrier in DKI denied the claimant’s petition to reopen his claim for
benefits. 173 Ariz. at 536, 845 P.2d at 462. The claimant protested
the denial with the Industrial Commission and requested interest on
any benefits ultimately awarded. Id. The ALJ determined the
claimant had a new, additional, or previously undiscovered injury
and awarded benefits. Id. In addition, the ALJ awarded the
claimant interest beginning from the filing of the petition to reopen
to the date of the award. Id.
¶10 On review, our supreme court first addressed the
availability of interest under the Workers’ Compensation Act,
restating its holding in Tisdel that a claimant awarded workers’
compensation benefits is entitled to interest, pursuant to
§ 44-1201(A), on any past-due benefits. DKI, 173 Ariz. at 537,
845 P.2d at 463. In determining when interest begins to accrue, the
court noted that, “[a]lthough factually distinguishable, Tisdel’s legal
principle applies to this case: interest only 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.’” Id., quoting Tisdel, 156 Ariz. at 213, 751 P.2d at 529 (alterations
in DKI).
¶11 The court then applied this legal principle to consider
whether simply filing the petition to reopen created an indebtedness
or obligation. Id. The court determined that, unlike the carrier’s
notice of claim status in Tisdel, a petition to reopen “does not create
an obligation to pay benefits” because the claimant “must show a
‘new, additional or previously undiscovered temporary or
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STENZ v. INDUS. COMM’N OF ARIZ.
Opinion of the Court
permanent condition’” before the Commission “has authority to
even reopen the claim, let alone to determine that an employer or
carrier is obligated to pay any requested benefits.” Id., quoting
§ 23-1061(H). Accordingly, citing Tisdel, the court concluded the
claimant in DKI was not entitled to interest computed from filing the
petition to reopen. Id.
¶12 Next, the court considered “the liquidated-unliquidated
test,” which “generally applies in deciding what constitutes an
‘indebtedness . . . or other obligation’ so that interest begins to
accrue.” Id. at 538, 845 P.2d at 464. The court noted “[t]his test
allows interest on ‘liquidated claims’ but not on ‘unliquidated’
claims.” Id. Liquidated means “‘the evidence furnishes data which,
if believed, makes it possible to compute the amount with exactness,
without reliance upon opinion or discretion.’” Id., quoting La Paz
County v. Yuma County, 153 Ariz. 162, 168, 735 P.2d 772, 778 (1987).
¶13 The court further noted that, in Tisdel, the claim “was
for scheduled benefits, meaning that no loss of earning capacity
determination was required.” Id., citing A.R.S. § 23-1044(B). “If
Tisdel’s average monthly wage was susceptible to mathematical
computation and applied to the statutory payment schedule in 1971,
Tisdel’s claim would have been liquidated at that time.” Id. The
court thus concluded “the ‘obligation’ would have come into
existence when the [carrier’s] notice of claim status was issued—in
1971—and the liquidated-unliquidated test explains Tisdel.” Id.
Addressing the facts in DKI, the court observed that the initial
award “did not contain a specific amount of benefits due” and that
the record did not contain any “indication that the amount of
benefits could have been accurately determined when the initial
award was entered.” Id. Consequently, the court concluded the
benefits were unliquidated and the ALJ erred in awarding the
claimant interest from the date the petition to reopen was filed. Id.
at 538-39, 845 P.2d at 464-65.
¶14 It is against this backdrop that we consider whether
Elizabeth is entitled to interest on the death benefits she was
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STENZ v. INDUS. COMM’N OF ARIZ.
Opinion of the Court
awarded under § 23-1046. 3 We first must determine when
Pinnacle’s “legal ‘indebtedness . . . or other obligation’ to pay [death]
benefits” to Elizabeth arose. DKI, 173 Ariz. at 537, 845 P.2d at 463,
quoting Tisdel, 156 Ariz. at 213, 751 P.2d at 529. Here, unlike the
carrier in Tisdel, Pinnacle had denied Elizabeth’s claim, disputing
that Charles’s death resulted from an accident arising out of and in
the course of his employment. Similar to the petition to reopen in
DKI, a claim for death benefits “does not create an obligation to pay
benefits.” Id. at 537, 845 P.2d at 463. Either the carrier must
acknowledge, or the claimant must establish, the decedent was
“killed by accident arising out of and in the course of his
employment,” A.R.S. § 23-1021, the claimant is a dependent entitled
to death benefits, A.R.S. § 23-1064, and, in some instances, the
degree of the claimant’s dependency, § 23-1046(A)(5). If the carrier
fails to acknowledge its obligation to pay the benefits, the claimant
must establish that obligation “before the Commission has authority
. . . to determine that an employer or carrier is obligated to pay any
requested [death] benefits.” DKI, 173 Ariz. at 537, 845 P.2d at 463.
¶15 Here, the ALJ determined Elizabeth was entitled to
death benefits under § 23-1046. Pinnacle does not challenge that
determination on appeal. The question remains whether the death
benefits are liquidated or unliquidated under the test DKI
announced. The amount of death benefits owed is set by statute
based on the decedent’s average monthly wage, see § 23-1046(A)(2),
and in that way is similar to the permanent partial disability benefits
paid pursuant to § 23-1044(B)(21) in Tisdel. As such, death benefits
are “susceptible to mathematical computation” and subject to a
“statutory payment schedule.” DKI, 173 Ariz. at 538, 845 P.2d at 464.
Thus, the death benefits Elizabeth was awarded were liquidated and
constituted a legal indebtedness or other obligation to pay upon the
ALJ’s award. See id. at 538-39, 845 P.2d at 464-65.
3Section 23-1046 defines the compensation payable in case of
an industrial injury causing death; prescribes the amount payable
and the duration of payments; and identifies the beneficiaries
entitled to receive such compensation pursuant to A.R.S. § 23-1021.
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STENZ v. INDUS. COMM’N OF ARIZ.
Opinion of the Court
¶16 Our concurring colleague concludes § 23-1046(A) alone
creates Pinnacle’s obligation to pay. See infra ¶¶ 27-28. The issue
presented here, like in Tisdel and DKI, is the claimant’s entitlement
to interest accrued before the award, or pre-judgment interest.
Although we agree generally that § 23-1046(A) entitles Elizabeth to
such interest under the liquidated-unliquidated test, a further step is
necessary before Pinnacle’s obligation to pay is established. This is
because, just as in DKI, but unlike in Tisdel, Pinnacle did not accept
Elizabeth’s claim. See DKI, 173 Ariz. at 538, 845 P.2d at 464
(discussing § 23-1044(B) as basis for liquidated claim in Tisdel, where
carrier accepted claim). Pre-judgment interest, as its name implies,
is interest ending upon the entry of judgment. See Metzler v. BCI
Coca-Cola Bottling Co., 230 Ariz. 26, ¶ 7, 279 P.3d 1188, 1190 (App.
2012) (“[T]he term ‘prejudgment’ in ‘prejudgment interest’
necessarily implies a period ending at judgment.”). Thus, a party
generally is not entitled to pre-judgment interest until that party
obtains a judgment in his or her favor. In the workers’
compensation setting, that “judgment” is either the ALJ’s benefits
award, based on a determination that the claimant established the
claim or, as in Tisdel, the carrier’s acceptance of the claim.
¶17 Accordingly, next we must determine “when [Pinnacle]
had ‘notice of its obligation to pay.’” DKI, 230 Ariz. at 537, 845 P.2d
at 463, quoting Tisdel, 156 Ariz. at 213, 751 P.2d at 529. Elizabeth’s
claim for death benefits was filed with the Commission on
September 21, 2009, sent to Pinnacle on October 21, 2009, and denied
by Pinnacle on October 29, 2009. Thus, for purposes of the
liquidated-unliquidated test, Pinnacle had notice of this obligation to
pay in October 2009. In Tisdel, the court noted that under the statute
at issue in that case, § 23-1047(A), the carrier did not have to wait for
a formal determination of the claim and, instead, could have begun
payments when it issued its notice of claim status. Tisdel, 156 Ariz.
at 213, 751 P.2d at 529. Section 23-1046(A) does not contain the same
provision as § 23-1047(A), which allows a carrier to begin payments
without waiting for a determination by the Commission. However,
§ 23-1061(G) provides, in relevant part, 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
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STENZ v. INDUS. COMM’N OF ARIZ.
Opinion of the Court
commission.” Thus, under § 23-1061(G), Pinnacle could have begun
payments to Elizabeth after receiving notice she had filed her claim
for death benefits and before the Commission made its
determination. See Keeton v. Indus. Comm’n, 27 Ariz. App. 302, 305,
554 P.2d 898, 901 (1976) (Ҥ 23-1061(G) vests carriers . . . with broad
administrative discretion in processing claims and paying
compensation.”).
¶18 In sum, § 23-1046(A) provides that, after an industrial
injury causing death, compensation known as a death benefit “shall
be payable in the amount, for the period, and to and for the benefit
of . . . the surviving spouse.” The ALJ determined Elizabeth had
established her claim under the statute, Pinnacle received notice of
the claim in October 2009, the benefits were for a liquidated sum,
and Pinnacle did not pay the benefits until April 23, 2013. We
therefore conclude Elizabeth’s death benefits constitute a legal
indebtedness or other obligation under § 44-1201(A). The benefits
were not paid timely, and interest on those benefits began to accrue
from the time Pinnacle received notice of Elizabeth’s claim. See
Tisdel, 156 Ariz. at 212-13, 751 P.2d at 528-29; DKI, 173 Ariz. at 537,
845 P.2d at 463.
¶19 At oral argument, Pinnacle argued that, except as in
Tisdel where the carrier accepts a claim, a claimant is entitled only to
post-award interest in the workers’ compensation setting. But that
position is counter to our supreme court’s analysis in DKI. In
discussing “what constitutes an ‘indebtedness . . . or other
obligation’ so that interest begins to accrue,” DKI, 173 Ariz. at 538,
845 P.2d at 464, the court cited cases dealing with pre-judgment
interest, see Schade v. Diethrich, 158 Ariz. 1, 14, 760 P.2d 1050, 1063
(1988); La Paz County, 153 Ariz. at 168, 735 P.2d at 778; Fleming v.
Pima County, 141 Ariz. 149, 155-56, 685 P.2d 1301, 1307-08 (1984).
And, courts specifically use the liquidated-unliquidated test to
determine whether parties are entitled to pre-judgment—or, as is the
case here, pre-award—interest. See John C. Lincoln Hosp. & Health
Corp. v. Maricopa County, 208 Ariz. 532, ¶¶ 39-40, 96 P.3d 530, 542
(App. 2004); Alta Vista Plaza Ltd. v. Insulation Specialists Co., 186 Ariz.
81, 82-83, 919 P.2d 176, 177-78 (App. 1995).
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STENZ v. INDUS. COMM’N OF ARIZ.
Opinion of the Court
¶20 Our conclusion is supported by the public policy
considerations underlying the Workers’ Compensation Act and
§ 44-1201. The purpose of the Act is “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); see also Ariz. Const. art. XVIII, § 8. And, an award
of interest under § 44-1201 serves to compensate the injured party,
which in the workers’ compensation setting is the employee or his
dependents. Cf. Dawson v. Withycombe, 216 Ariz. 84, ¶ 99, 163 P.3d
1034, 1063 (App. 2007) (“An award of prejudgment interest serves
the dual purpose of recompensing the victim and deterring
defendants from dilatory litigation tactics.”). As our supreme court
has explained:
Where money belonging to a party is not
timely paid, interest is generally awarded.
This is because the party entitled to use of
the money has been deprived of that use,
and the party retaining it has been unjustly
enriched.
La Paz County, 153 Ariz. at 168, 735 P.2d at 778 (citation omitted).
Awarding pre-award interest to a workers’ compensation claimant
when the carrier fails to pay benefits timely comports with these
policy concerns.
¶21 Moreover, a good-faith dispute over liability does not
prevent the award of interest on a liquidated claim. Precision Heavy
Haul, Inc. v. Trail King Indus., Inc., 224 Ariz. 159, ¶ 11, 228 P.3d 895,
898 (App. 2010); John C. Lincoln Hosp., 208 Ariz. 532, ¶ 40, 96 P.3d at
544; see also Tisdel, 156 Ariz. at 214, 751 P.2d at 530 (“Interest is not
based on diligence or lack of diligence. Interest accrues and
becomes payable when the debt is due.”). Thus, that Pinnacle
initially challenged Elizabeth’s entitlement to the benefits does not
affect our analysis. And, permitting carriers to avoid paying interest
on liquidated benefits from the time they are notified of a claim
provides carriers a significant disincentive to honor legitimate
claims, as there would be no penalty associated with contesting
payment until a final award is issued. This runs counter to
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STENZ v. INDUS. COMM’N OF ARIZ.
Opinion of the Court
Arizona’s public policy of speedy resolution of these claims, a right
our Constitution guarantees injured workers in exchange for
requiring them to forego their rights to maintain a tort action to
recover damages for those injuries. Ariz. Const. art. XVIII, § 8; see
also Grammatico v. Indus. Comm’n, 208 Ariz. 10, ¶ 7, 90 P.3d 211, 213
(App. 2004).
¶22 Pinnacle had the use of the death benefit money, and
Elizabeth did not. “We do not feel it unjust to require the carrier to
pay interest on [benefits] it should have paid” before the ALJ’s 2012
award. Tisdel, 156 Ariz. at 214, 751 P.2d at 530. Elizabeth “not only
lost the use of the money when the carrier failed to pay the award,
but also the ‘time-value’ of the money.” Id. Under § 44-1201(A),
Elizabeth is due interest on her death-benefits award pursuant to
§ 23-1046(A) from the date Pinnacle received notice of her claim. See
Tisdel, 156 Ariz. at 213, 751 P.2d at 529; see also DKI, 173 Ariz. at 539,
845 P.2d at 465.
Disposition
¶23 For the foregoing reasons, the ALJ’s award denying
Elizabeth relief is set aside.
H O W A R D, Judge, specially concurring:
¶24 The majority correctly concludes that Elizabeth was
entitled to interest from the date Pinnacle received her notice for
death benefits. I write separately because I disagree with part of the
majority’s analysis. The majority states this case is similar to DKI in
that a claim for death benefits “does not create an obligation to pay
benefits” unless the carrier acknowledges the obligation or the
claimant establishes to the Commission that the death was related to
the decedent’s employment. DKI, 173 Ariz. at 537, 845 P.2d at 463;
supra ¶ 14. It then states it was the ALJ, and not § 23-1046(A), that
determined Elizabeth was entitled to death benefits. Supra ¶¶ 14-15.
The majority goes on to determine “the death benefits Elizabeth was
awarded [by the ALJ] were liquidated and constituted a legal
indebtedness or other obligation to pay.” Id. But it then determines
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Opinion of the Court
interest begins to run from the date Pinnacle received Elizabeth’s
notice of the claim, and not the date of the ALJ’s award. Supra ¶ 18.
The majority thus seems to conclude that although Pinnacle had no
obligation to pay Elizabeth until the ALJ issued its award, the fact
that the amount of the award was liquidated controls the date from
which interest began to accrue.
¶25 DKI sets for the test for when interest accrues under
§ 44-1201: “interest only 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.’” 173 Ariz. at 537,
845 P.2d at 463, quoting Tisdel, 156 Ariz. at 213, 751 P.2d at 529
(alterations in DKI). The court in DKI further noted that a legal
indebtedness or other obligation, which allows for the recovery of
interest, arises only if the claim is “liquidated,” i.e., “set forth in an
award, notice of claim status, or . . . otherwise.” Id. at 538-39,
845 P.2d at 464-65. Put another way, if the claim “‘makes it possible
to compute the amount with exactness, without reliance upon
opinion or discretion,’” then a legal obligation exists which triggers
the accrual of interest. Id. at 538, 845 P.2d at 464, quoting La Paz
County, 153 Ariz. at 168, 735 P.2d at 778.
¶26 Elizabeth’s entitlement to interest, consequently,
depends on, first, whether § 23-1046(A) creates a liquidated legal
indebtedness or other obligation and, second, when a carrier has
notice of that obligation. See id. at 537, 845 P.2d at 463. As for the
first requirement, the amount of death benefits Elizabeth was owed
is set by statute based on Charles’s average monthly wage which is
“susceptible to mathematical computation and applied to the
statutory payment schedule.” See DKI, 173 Ariz. at 538, 845 P.2d at
464; § 23-1046(A)(2). This schedule is similar to the permanent
partial disability benefits paid pursuant to A.R.S. § 23-1047(A).
§ 23-1046(A)(2); see also A.R.S. § 23-1044(B). Thus, Elizabeth’s claim
was liquidated at the time it was filed and therefore constituted a
legal indebtedness or other obligation to pay. See DKI, 173 Ariz. at
539, 845 P.2d at 465.
¶27 The majority determines that enforcement through an
award was necessary to trigger Pinnacle’s legal obligation. Supra
¶ 14. But in a similar context, we have stated that a statute can
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Opinion of the Court
create a legal obligation which exists notwithstanding any action to
enforce it. In Desert Mountain Properties Ltd. Partnership v. Liberty
Mutual Fire Insurance Co., this court was asked to interpret the
phrase “legal obligation to pay,” which was found in an insurance
contract but was not defined in that contract. 225 Ariz. 194,
¶¶ 13, 17, 236 P.3d 421, 427-28 (App. 2010). The court determined
that:
The language in the [insurance]
policies may be interpreted according to its
plain and ordinary meaning, as one
untrained in law or business would
understand it. Reading the policies in that
manner, a “legal obligation to pay” means
any obligation enforceable by law,
including, for example, an obligation
created by statute, contract or the common
law. Once created, the obligation exists
prior to and even in the absence of a suit to
enforce it or a court order compelling
performance.
In short, although a court may enforce
a legal obligation, in the usual case, no
court action is required to create a legal
obligation. For that reason, we conclude
the better-reasoned rule is that coverage for
sums an insured becomes “legally
obligated to pay as damages” may be
triggered even in the absence of a civil
lawsuit against the insured or a court order
requiring the insured to make payment.
Id. ¶¶ 17-18. This analysis of “legal obligation” applies to our case
with equal force.
¶28 Section 23-1046(A), by setting forth a mathematical
formula for determining the exact amount of benefits due, created
Pinnacle’s obligation to pay Elizabeth “prior to and even in absence
of” Pinnacle’s decision to contest the cause of Charles’s death.
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Id. ¶ 17. The fact that an ALJ’s award was required to enforce
Pinnacle’s obligation does not change the fact that § 23-1046(A)
created the obligation once it received Elizabeth’s claim. See Desert
Mountain Props., 225 Ariz. 194, ¶ 18, 236 P.3d at 428; see also La Paz
County, 153 Ariz. at 168, 735 P.2d at 778. The ALJ’s “determination
did not change the nature of the [death] from nonindustrial to
industrial. Instead, the [ALJ] corrected an error made by [Pinnacle]
. . . in characterizing” the cause of Charles’s death. Boehm &
Associates v. Workers’ Comp. Appeals Bd., 90 Cal. Rptr. 2d 486, 488 (Ct.
App. 1999).
¶29 As for whether the carrier had notice, § 23-1046(A) does
not contain the same provision as § 23-1047(A), on which Tisdel was
based, allowing the carrier to begin payments without waiting for a
determination by the Commission. It does, however, provide that,
after an injury causing death, compensation known as a death
benefit “shall be payable in the amount, for the period, and to and
for the benefit of . . . the surviving spouse.” § 23-1046(A).
Additionally, a carrier may always begin paying a claimant’s
compensation without a determination from the Commission under
§ 23-1061(G). Thus, under § 23-1046(A), Elizabeth became entitled to
the death benefits from the time of Charles’s death once she timely
filed her notice of claim with the Commission. A.R.S. § 23-1061(A);
§ 23-1046(A). Unlike a petition to reopen under § 23-1061(H),
§ 23-1046(A) does not require any further action from the
Commission for the payment of the death benefits to begin; it simply
states the benefits “shall be payable.” And death benefits under
§ 23-1046(A) are not one of the enumerated benefits requiring
additional action by the Commission under § 23-1047(A).4 A carrier
4 Although death benefits pursuant to § 23-1046(A) do not
require further action by the Commission, the same is not true for
death benefits pursuant to § 23-1046(B). Section 23-1046(B) applies
when the decedent “leaves dependents only partially dependent
upon his earnings for support.” For death benefits falling under that
subsection, the “insurance carrier within thirty days shall notify the
commission and request that the claim be examined and further
compensation, if any, be determined.” § 23-1047(A). This provision
was not applicable to Elizabeth’s claim because she is Charles’s
14
STENZ v. INDUS. COMM’N OF ARIZ.
Opinion of the Court
is therefore put on notice that benefits are due once it receives a
claim filed pursuant to § 23-1046(A). See Tisdel, 156 Ariz. at 213, 751
P.2d at 529; DKI, 173 Ariz. at 537, 845 P.2d at 463.
¶30 Under DKI’s two-step test for determining whether
interest is due, death benefits pursuant to § 23-1046(A) satisfy both
requirements. See DKI, 173 Ariz. at 537, 845 P.2d at 463. First,
§ 23-1046(A)(2) provides an exact formula for computation of the
amount of the death benefits Elizabeth was entitled to receive, so the
claim was liquidated at the time of Charles’s death and therefore
created a legal obligation. See DKI, 173 Ariz. at 539, 845 P.2d at 465;
see also La Paz County, 153 Ariz. at 168, 735 P.2d at 778; Desert
Mountain Props., 225 Ariz. ¶¶ 17-18, 236 P.3d at 428. And, second,
because § 23-1046(A) does not require any action by the Commission
for the death benefits to become due and payable, Pinnacle had
notice of this obligation. Accordingly, Elizabeth was owed a
liquidated legal indebtedness or other obligation upon Charles’s
death and Pinnacle had notice of its obligation upon receipt of
Elizabeth’s claim. The benefits therefore were not timely paid and
interest on Elizabeth’s death benefits began to accrue once Pinnacle
received her claim. Tisdel, 156 Ariz. at 212-13, 751 P.2d at 528-29;
DKI, 173 Ariz. at 537, 845 P.2d at 463.
surviving spouse, and neither party has argued that it would apply
to this situation. See § 23-1046(A).
15