Boeing Co. v. Dep't of Labor & Indus. ( 2015 )

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SUPREME COURT, aTATe OF WASIIIGTON
This opinion was fl1ed for record
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. DATE APR 1 6 2015 j 5
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IN THE SUPREME COURT OF THE STATE OF WASHINGTON
THE BOEING COMPANY,
Respondent,
v. NO. 90304-2
PATRICIA DOSS,
Defendant, ENBANC
and
STATE OF WASHINGTON, Filed APR 1 6 2015
DEPARTMENT OF LABOR and
INDUSTRIES,
Petitioner.
STEPHENS, J.-We must decide whether a self-insured employer is entitled
to second injury fund relief under RCW 51.16.120(1) for a worker's postpension
medical costs. We hold that the plain language of the governing statutes does not allow
a charge to the second injury fund for postpension medical treatment under RCW
51.16.120(1 ). Accordingly, we reverse the Court of Appeals.
The Boeing Co. v. State, Dep 't ofLabor & Indus., 90304-2
FACTS AND PROCEDURAL HISTORY
The underlying facts of this case are undisputed. Patricia Doss filed a claim for
workers' compensation with the Department ofLabor and Industries (Department) after
suffering chemical exposure during the course of employment with The Boeing
Company. The exposure permanently aggravated her preexisting asthma, and she
requires ongoing medical treatment as a result of these combined injuries.
The Department determined that the combined effects of Doss's preexisting
asthma and the aggravation of this condition during her Boeing employment rendered
her permanently totally disabled. A right knee injury also contributed to Doss's
preexisting disability. Due to her permanent total disability, the Department awarded
Doss a pension. Pursuant to RCW 51.16.120(1), the Department granted Boeing
second injury fund relief, meaning that Boeing was not required to pay the entire cost
of Doss's pension, but only the portion attributable to the workplace exposure. The
remaining portion of Doss's pension was covered by the second injury fund, into which
all employers pay. The Department determined that Doss was also eligible for
postpension medical treatment for her asthma under RCW 51.36.010(4). It directed
Boeing to pay the cost of such treatment.
Boeing agreed to pay for the portion of the pension attributable to Doss's
workplace injury but challenged the Department's order requiring it to pay for her
postpension medical treatment. Boeing argued that the cost of this treatment should
also be covered by the second injury fund. Boeing appealed to the Board.
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The Board affirmed the Department's order, concluding that postpension
medical benefits are not payable from the second injury fund and are properly borne by
the self-insured employer. Boeing appealed to superior court, which reversed the
Board's determination and held that "Ms. Doss'[s] post pension treatment benefits are
properly payable from the Second Injury Fund, and are not the responsibility of
Boeing." Clerk's Papers (CP) at 60. The Court of Appeals affirmed. Boeing Co. v.
Doss, 180 Wn. App. 427, 321 P.3d 1270 (2014). The Department petitioned to this
court, and we granted review. Boeing Co. v. Dep 'tofLabor &Indus., 181 Wn.2d 1001,
332 P.3d 984 (2014).
ANALYSIS
This case presents an issue of first impression, which turns on our interpretation
of several statutes under the Industrial Insurance Act (IIA).
1. Overview of the Relevant Statutory Scheme under the IIA
Under the IIA, any worker injured in the course of employment is entitled to
compensation for full disability, independent of any preexisting condition. Tomlinson
v. Puget Sound Freight Lines, Inc., 166 Wn.2d 105, 117, 206 P.3d 657 (2009) ('"The
worker is to be taken as he or she is, with all his or her preexisting frailties and bodily
infirmities."' (quoting Dennis v. Dep't of Labor & Indus., 109 Wn.2d 467, 471, 745
P.2d 1295 (1987))); RCW 51.32.010 ("Each worker injured in the course of ...
employment . . . shall receive compensation."). An employer must secure such
compensation by insuring "the payment of such benefits with the state fund" or by
"[q]ualifying as a self-insurer." RCW 51.14.010(1), (2).
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The Boeing Co. v. State, Dep 't of Labor & Indus., 90304-2
If an employer insures through the state fund, the Department pays benefits
directly to workers for disability benefits through the accident fund and "[t]he medical
aid fund covers medical treatment received by injured workers." WR Enters., Inc. v.
Dep't of Labor & Indus., 147 Wn.2d 213, 217, 53 P.3d 504 (2002). Self-insured
employers, on the other hand, pay directly to workers any disability and medical
benefits. Johnson v. Tradewell Stores, Inc., 95 Wn.2d 739, 742, 630 P.2d 441 (1981).
Self-insured employers are generally responsible for all disability and medical costs
associated with their workers' compensation claims. See RCW 51.08.173 (defining
"self-insurer"); WAC 296-15-330 (describing self-insured employers' authorization
requirements for medical care).
A worker who becomes permanently totally disabled 1 from an industrial injury
receives a monthly wage-replacement payment based on a percentage of the worker's
wages. RCW 51.32.060(1 ). These monthly payments are generally referred to as
"pensions" and are drawn from the pension reserve fund. RCW 51.44.070(1). When
the Department places the worker of a self-insured employer on a pension, the employer
must pay into the pension reserve fund a sum equal to the estimated present cash value
of the worker's monthly payments. Id. These monthly payments are calculated on the
basis of an annuity, which factors rates of mortality, disability, remarriage, and interest
as determined by the Department. Id.1
"Permanent total disability" is defined as "loss of both legs, or arms, or one leg
and one arm, total loss of eyesight, paralysis or other condition permanently incapacitating
the worker from performing any work at any gainful occupation." RCW 51.08.160.
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In most circumstances, a pensioned worker is not entitled to continued medical
benefits. RCW 51.36.010(4). However, the Department may authorize medical
treatment for previously accepted conditions, including life-sustaining treatment. Id.This medical treatment results in postpension medical costs, so called because they are
not part of the total cost of the pension reserve, which, as explained, is based on an
annuity that estimates future wage replacement benefits. See RCW 51.44.070(1 ).
When a worker's permanent total disability is caused by the combined effects of
a "previous bodily disability" and a covered workplace injury or occupational disease,
self-jnsured employers pay a reduced amount into the pension reserve fund. RCW
51.16.120(1 ). In these circumstances, self-insured employers pay into the reserve fund
"only the accident cost which would have resulted solely from the further injury or
disease, had there been no preexisting disability." Id. The difference between the
portion paid by the employer and the total cost of the pension reserve, i.e., the portion
attributed to any preexisting disability, is assessed against the second injury fund. Id.Thus, the second injury fund contributes to the pension reserve fund the balance of the
pension costs not covered by the self-insured employer.
Self-insured employers fund the second injury fund through assessments
determined by the Department. WAC 296-15-221(4)(a); see also RCW 51.44.040
(creating the second injury fund). These assessments are calculated, in part, by the
claim costs paid by the self-insured employer, which include, but are not limited to,
time loss compensation, permanent partial disability awards, medical bills, and
prescriptions. WAC 296-15-221(4)(a)(ii).
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The Boeing Co. v. State, Dep 't of Labor & Indus., 90304-2
Accident costs, as described in RCW 51.16.120(1), are equal to the permanent
partial disability that a worker would have developed had the worker not suffered from
a preexisting disability. Because the statute holds self-insured employers liable only
for the accident costs "which would have resulted . . . had there been no preexisting
disability," it follows that neither the preexisting disability nor the later disability alone
could have caused the permanent total disability. RCW 51.16.120(1). Permanent
partial disability payments are based on a worker's loss of bodily function, rather than
a worker's lost wages or lost earning power. RCW 51.32.080; Tomlinson, 166 Wn.2d
at 110. These payment awards do not include the estimated cost of a worker's future
medical costs. See RCW 51.32.080.
Permanent total disability payments, on the other hand, are "not [a] different
level[ ] on the same continuum" as permanent partial disability payments, but are
instead ''two separate concepts." Ellis v. Dep 't ofLabor &Indus., 88 Wn.2d 844, 851,
567 P.2d 224 (1977). These disability payments serve as wage replacement benefits.
RCW 51.32.060(1) (authorizing payment of a percentage of "wages" for permanently
totally disabled workers); RCW 51.44.070 (describing how monthly pension benefits
for permanently totally disabled workers are based on an annuity that factors mortality,
disability, and remarriage); see also 1984 Op. Att'y Gen. No. 15, at 3 ("[C]ompensation
for total permanent disability is paid solely for a claimant's inability to carry on a gainful
occupation.").
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The Boeing Co. v. State, Dep 't of Labor & Indus., 90304-2
2. The Second Injury Fund Does Not Cover Medical Costs under
RCW 51.16.120(1)
The second injury fund was established to promote the hiring and retention of
disabled workers by "providing that the employer hiring the disabled worker will not
be liable for a greater disability than what actually results from a later accident." Crown,
Cork & Seal v. Smith, 171 Wn.2d 866, 873, 259 P.3d 151 (2011). RCW 51.44.040(1)
provides that the second injury fund "shall be used only for the purpose of defraying
charges against it as provided in RCW 51.16.120 [distribution of further accident cost]
and 51.32.250 Uob modification costs]." The job modification benefits established
under RCW 51.32.250 are not at issue here. Therefore, RCW 51.16.120, entitled
"Distribution of further accident cost," is the statute, if any, that confers the second
injury relief requested by Boeing. (Boldface omitted.)
There are three types of costs authorized under RCW 51.16.120. RCW
51.16.120(1) relates to workers with preexisting disabilities, subsection (4) relates to
the "preferred worker" program, and subsection (5) relates to hiring workers with
developmental disabilities. Because only RCW 51.16.120(1) is at issue here, the other
two subsections will be discussed only briefly.
RCW 51.16.120(4) allows the Department to reduce or eliminate charges to an
employer when a worker who was previously injured and unemployed is hired and
suffers a new injury. This is known as the "preferred worker" program. WAC 296-16-
110,-150. RCW 51.16.120(5) is similar to the preferred worker program but applies to
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The Boeing Co. v. State, Dep 't ofLabor & Indus., 90304-2
the employment of developmentally disabled workers. These subsections do not apply
to this case because Doss is neither a preferred worker nor a developmentally disabled
worker.
This case concerns only RCW 51.16.120(1). The statute promotes the goals
established for the second injury fund by limiting a subsequent employer's liability for
permanent total disability benefits in the event that a worker with a preexisting disability
suffers a new workplace injury. Jussila v. Dep 't of Labor & Indus., 59 Wn.2d 772,
777-78, 370 P.2d 582 (1962). In this circumstance, a self-insured employer pays into
the pension reserve fund "only the accident cost which would have resulted solely
from the further injury or disease, had there been no preexisting disability." RCW
51.16.120(1 ). As noted, permanently totally disabled workers receive monthly pension
payments from the pension reserve fund. When a worker's permanent total disability
is caused, in part, by a preexisting injury, this statute requires self-insured employers to
pay into the pension reserve fund only the accident cost that resulted from a workplace
IllJUry.
The statute reads, in relevant part:
[A] self-insured employer shall pay directly into the reserve fund only the
accident cost which would have resulted solely from the further injury or
disease, had there been no preexisting disability, and which accident cost
shall be based upon an evaluation of the disability by medical experts. The
difference between the charge thus assessed to such employer at the time of
the further injury or disease and the total cost of the pension reserve shall be
assessed against the second injury fund.
RCW 51.16.120(1) (emphasis added). As mentioned earlier, accident costs described
in the statute are equal to permanent partial disability that a worker would have
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The Boeing Co. v. State, Dep 't ofLabor & Indus., 90304-2
developed had the worker not had a preexisting disability. Permanent partial disability
benefits serve as wage replacement benefits and do not consider or anticipate
postpension medical costs. The statute does not relieve Boeing of its duty to pay for
medical costs.
Boeing's plain language argument focuses on the terms "only'' and "solely" in
RCW 51.16.120(1). Boeing argues that self-insured employers pay "only'' accident
costs arising "solely'' from the workplace accident, to the exclusion of any other
payments. Suppl. Br. of Resp't at 8-9. This statutory provision takes precedence,
Boeing says, over the general requirement that self-insured employers cover a
claimant's ongoing treatment costs. !d. Therefore, Boeing maintains that the second
injury fund must cover any postpension medical costs.
The Department counters that Boeing reads the statute out of context. Because
the statute pertains to accident costs, i.e., pensions, it does not relieve a self-insured
employer of its separate obligation to pay for ongoing medical costs where authorized.
Moreover, no other statute relieves Boeing of that responsibility, and the Court of
Appeals improperly concluded that RCW 51.16.120(1) provides such relief. Doss, 180
Wn. App. at 437.
We conclude the Department has the better argument. RCW 51.16.120(1)
addresses only accident costs, not medical costs. The statute authorizes "charge[ s]"
against the second injury fund for the difference between "the total cost of the pension
reserve" and the "accident cost" attributed to the workplace injury. RCW 51.16.120(1 ).
Thus, a self-insured employer is responsible for paying into the pension reserve fund
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The Boeing Co. v. State, Dep 't of Labor & Indus., 90304-2
only a portion of the accident cost. The remaining portion of the accident cost is
charged to the second injury fund and transferred into the pension reserve fund. This
amount does not include medical treatment costs because "accident costs" estimates
future wage replacements, not medical treatment. See RCW 51.44.070(1 ).
Because the second injury fund is limited to accident costs, Boeing is not entitled
to second injury fund relief for medical costs under RCW 51.16.120(1). RCW
51.44.040, which expressly limits charges to the second injury fund to two statutes,
does not discuss medical costs at all. The relevant statute, RCW 51.16.120(1), also
does not consider medical costs. There is simply no statute that supports Boeing's
position that medical treatment costs must be paid from the second injury fund, and
neither RCW 51.44.040 nor RCW 51.16.120(1) relieve Boeing of its duty as a self-
insured employer to cover all costs associated with a worker's claim.
When a self-insured employer receives relief under RCW 51.16.120(1), the
portion not paid by the employer is transferred from the second injury fund into the
pension reserve fund, which provides a monthly pension to workers. These monthly
pension payments do not consider or anticipate postpension medical treatment. Instead,
the pension is based on an annuity that factors "rates of mortality, disability, remarriage,
and interest." RCW 51.44.070(1).
When postpension medical costs are granted to state fund workers, funds are not
transferred from the second injury fund into the pension reserve fund. Postpension
medical benefits are awarded, at the discretion of the Department, after a worker
receives a pension. RCW 51.36.010(4). Thus, medical costs are not among the costs
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The Boeing Co. v. State, Dep 't of Labor & Indus., 90304-2
factored into the pension reserve fund. Instead, the medical aid fund bears the medical
costs. See WR Enters., 147 Wn.2d at 217. This distinction highlights that the pension
reserve fund is not intended to cover medical costs under RCW 51.16.120(1 ).
The Court of Appeals' and Boeing's reliance on the word "only" in RCW
51.16.120(1) is misplaced. A complete reading ofRCW 51.16.120(1) shows that the
use ofthe term "only'' is in reference to the fact that self-insured employers do not bear
the burden of paying the total cost of the pension. Instead, self-insured employers must
pay "only" the portion of the accident cost attributed to the workplace injury. RCW
51.16.120(1). The context of the entire statute contemplates the difference between the
total cost of the pension and a portion of that cost. The word "only" does not relieve
Boeing of any of its other responsibilities as a self-insured employer.
Boeing argues the second injury fund "was not established solely for paying
pension payments" and draws parallels to other programs that receive second injury
fund relief for medical costs. Suppl. Br. ofResp't at 19-20. However, this argument is
not persuasive because, unlike the other programs, RCW 51.16.120(1) is the only
subsection that expressly restricts second injury fund relief to "accident costs." Under
the '"preferred worker"' program, self-insured employers receive second injury fund
relief for "all benefits" under a new claim, which includes accident and medical costs.
WAC 296-16-150(2) (emphasis added); see also WAC 296-16-150(1)(a) (State fund
employers "[d]o not pay accident fund and medical aid fund premiums ... during the
'preferred worker' certification period."). Such broad regulatory coverage is allowed
under the "preferred worker" program because, unlike RCW 51.16.120(1 ), the statute
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The Boeing Co. v. State, Dep 't ofLabor & Indus., 90304-2
authorizing the "preferred worker" program is not limited to accident costs. See RCW
51.16.120(4). RCW 51.16.120(1), however, does not include such broad language.
While these programs may effectuate similar policies as expressed by the legislature,
the statute in question before us, RCW 51.16.120(1 ), is the only of such statutes that is
restricted to "accident costs."
Regulations implementing the statute also support the interpretation that the
second injury fund covers only pension costs and not medical costs under RCW
51.16.120(1 ). WAC 296-15-225 describes the assessments self-insured employers pay
into fund the second injury fund. The regulation says, "The [second injury] fund is used
to relieve employers' costs related to pensions that result from the combined effects of
the industrial injury and another prior injury [authorized under RCW 51.16.120(1)],
preferred worker claims [authorized under RCW 51.16.120(4)], and job modifications
[authorized under RCW 51.32.250]." (Emphasis added.) The regulation supports the
plain language of RCW 51.16.120(1) that the second injury fund relieves only
employers' "costs related to pensions" that arise from RCW 51.16.120(1), and nothing
more. WAC 296-15-225(1).
3. We Reject Boeing's Broad Appeal to "Fairness" in Light of the Clear Statutory
Language
Boeing argues, and the Court of Appeals agreed, that charging Boeing for
postpension medical costs is unfair for two reasons. First, Boing argues that medical
costs are, in part, a factor in determining its second injury fund assessments. So, Boeing
says, denying it second injury fund relief for medical costs constitutes a double
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The Boeing Co. v. State, Dep 't of Labor & Indus., 90304-2
assessment. Second, Boeing argues that the Department's interpretation places a
greater financial burden on self-insured employers than on state fund employers
because the experience rating of state fund employers is not charged for postpension
medical costs.
a. Double Assessment
Employers pay into the second injury fund assessments in "proportion" to claims
paid from the second injury fund on behalf of the self-insured employer and "the total
sum of payments from the fund." RCW 51.44.040(3)(a)(i). The Court of Appeals
found that requiring Boeing to pay for postpension medical costs constitutes a "double
assessment" on Boeing and a "windfall" for the Department. Doss, 180 Wn. App. at
435. The court reasoned that Boeing's assessments to the second injury fund are based
on its total claim costs, which includes payments for medical treatment. !d. While the
court is correct that the assessments may be based, in part, on medical costs, requiring
self-insured employers to pay for postpension medical costs does not constitute an
unfair double assessment.
WAC 296-15-221(4), provides:
Each self-insurer must submit:
(a) Complete and accurate quarterly reports summarizing worker
hours and claim costs paid the previous quarter.... This report is the basis
for determining the administrative, second injury fund, supplemental
pension, asbestosis and insolvency trust assessments . ...
(ii) Claim costs include, but are not limited to:
(A) Time loss compensation. Include the amount of time loss the
worker would have been entitled to if kept on full salary.
(B) Permanent partial disability (PPD) awards.
(C) Medical bills.
(D) Prescriptions.
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(E) Medical appliances.
(F) Independent medical examinations and/or consultations.
(G) Loss of earning power.
(H) Travel expenses for treatment or rehabilitation.
(I) Vocational rehabilitation expenses.
(J) Penalties paid to injured workers.
(K) Interest on board orders.
(Emphasis added.) As the Department notes, this regulation is not helpful to determine
the scope of coverage under RCW 51.16.120(1) since the assessments are based on
several types of claim costs that are not covered by the second injury fund. Suppl. Br.
ofDep't of Labor & Indus. at 16. As discussed earlier, RCW 51.44.040 expressly limits
charges to the second injury fund for job modification costs and distribution of further
accident costs. Second injury fund relief under RCW 51.16.120(1) is granted only after
a worker's claim has been closed and the worker has been placed on a pension.
Two of the costs that are included in the calculation are temporary total disability
payments and vocational payments, and although they are included in the calculation
for assessments, these costs occur while the claim is open. See RCW 51.32.095(1) (The
purpose of vocational rehabilitation is "to make the worker employable."), .099
(describing temporary disability compensation for workers participating in vocational
rehabilitation). This is further evidenced by the temporary and vocational nature of
these services, which aim to reintegrate injured workers into the workforce. Second
injury relief under RCW 51.16.120(1), however, relieves self-insured employers of a
portion of the accident cost for permanently totally disabled workers who receive
pensions for future wage replacements. We cannot reasonably infer that costs that may
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The Boeing Co. v. State, Dep 't of Labor & Indus., 90304-2
be used to calculate second injury fund assessments are necessarily covered costs under
the second injury fund.
Further, the other claim costs that form the basis for fund assessments are not
used exclusively for second injury fund assessments. WAC 296-15-221 (4)(a) indicates
that the Department uses the different claim costs to determine assessments for
"administrative, second injury fund, supplemental pension, asbestosis and
insolvency trust assessments." Administrative and asbestosis assessments, for
example, may factor claim costs and may cover costs not relevant to or covered by
the second injury fund.
We conclude that self-insured employers are not entitled to second injury
relief for medical costs under RCW 51.16.120(1) just because medical costs may be
considered, in part, for second injury fund assessments.
b. Comparing Self-Insured and State Fund Employers
The Court of Appeals found that denying self-insured employers second injury
fund relief for postpension medical costs imposes "a greater financial burden on self-
insured employers" than on state fund employers. Doss, 180 Wn. App. at 437. The
court reasoned that when state fund employers receive second injury fund relief, they
are "entitled to have the pension paid from the second injury fund without any charges
to the employer's account and without any effect on the employer's experience rating."
!d. The court concluded that state fund employers receive second injury fund relief for
postpension medical costs, which '"spread[s the cost] to all state fund employers and
employees,'" while self-insured employers bear the medical costs themselves. !d.
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The Boeing Co. v. State, Dep 't of Labor & Indus., 90304-2
However, the court's interpretation is incorrect. As the Department notes, postpension
medical costs may indeed affect the experience rating of a state fund employer.
It is important to first highlight that self-insured employers, by choosing to self-
insure, do not necessarily experience the same treatment and procedures as state fund
employers. So, we question the premise that state fund and self-insured employers must
be treated equally. Employers that choose to self-insure handle their own claims,
reducing costs and expediting claims. In so choosing, however, self-insured employers
opt to stand in the shoes of the Department, unlike state fund employers, who pay
premiums to the Department and rely on the Department to process and pay claims.
Just as for self-insured employers, the second injury fund shields state fund
employers-by way of their experience rating-from accident costs that are attributed
to workplace injuries. See RCW 51.16.120(1). And just as with self-insured
employers, state fund employers are not entitled to second injury relief for postpension
medical costs under RCW 51.16.120(1).
Contrary to Boeing's contention, postpension medical costs may affect a state
fund employer's experience rating. A state fund employer's experience rating is
adjusted by an experience factor, which considers recent claims and losses, including
medical costs. WAC 296-17-855, -850. A worker's claim will affect an employer's
rating when it occurs during the "experience period," which may vary between three to
four years after the date of injury or occupational disease. See WAC 296-17 -850(2), -
855, -870. Medical costs incurred during this period will affect the experience factor
of a state fund employer. Thus, postpension medical costs authorized during this period
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affect the employer's experience rating. But, any medical costs incurred after a final
valuation of a claim do not affect the employer's experience rating. So, these are instead
charged to the medical aid fund, where the cost is spread to all state fund employers and
workers. WAC 296-17 -850(2), -855, -870.
Considering this framework, there does not appear to be an unfair greater burden
on self-insured employers. Postpension medical costs may be charged to the experience
rating of state fund employers if the pension is granted before the three- to four-year
valuation period. Even if the pension is granted after the final valuation period, the
postpension medical cost is still charged to the medical aid fund, where the cost is
spread among all state fund participants. This is not an option for Boeing. In deciding
to forgo participation in the state fund, Boeing opted out of certain procedures but
received the potential cost savings of administering its own claims. Self-insured
employers are more aptly compared to the Department, in that they stand in the
Department's shoes in administering their own claims and paying workers'
compensation benefits directly.
CONCLUSION
We reverse the Court of Appeals. The plain language ofRCW 51.44.040 and
RCW 51.16.120 indicates that the second injury fund is not intended to relieve Boeing
from paying Doss's postpension medical costs under RCW 51.16.120(1).
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WE CONCUR:
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