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Wausau Insurance and Era Helicopters v. Biene (2/26/93), 847 P 2d 584
<![CDATA[
NOTICE: This opinion is subject to
formal correction before publication in the
Pacific Reporter. Readers are requested to
bring typographical or other formal errors to
the attention of the Clerk of the Appellate
Courts, 303 K Street, Anchorage, Alaska
99501, in order that corrections may be made
prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
WAUSAU INSURANCE COMPANIES )
and ERA HELICOPTERS, INC., ) Supreme Court No. S-4902
)
Appellants, )
) Superior Court No.
v. ) 3AN-90-10467 CIVIL
) AWCB No. 8515418
HOLLIS VAN BIENE, )
) O P I N I O N
Appellee. )
______________________________) [No. 3935, February 26, 1993]
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
Karen L. Hunt, Judge.
Appearances: Carol L. Giles, Anchorage
and Perkins Coie, Anchorage, for Appellants.
Chancy Croft, Anchorage, for Appellee.
Before: Moore, Chief Justice,
Rabinowitz, Burke, Matthews, and Compton,
Justices.
RABINOWITZ, Justice.
Facts and Proceedings
Michael Brian Van Biene died in a plane crash while
working as a pilot for Era Helicopters in Gulkana on August 20,
1985. It is undisputed that Van Biene died during the course and
scope of his employment. Van Biene was survived by his wife
Hollis, and son, Matthew.
Hollis Van Biene signed the Report of Occupational
Injury or Illness required by the Alaska Workers' Compensation
Act to establish entitlement to benefits for herself and her son
(collectively "Van Biene"), on August 24, 1985. Wausau Insurance
Companies is the workers' compensation insurer for ERA
Helicopters, Inc. (collectively "Wausau"). Wausau began benefit
payments five days later on August 29, 1985.1
On September 9, 1985 Van Biene, accompanied by a
friend, met with the Wausau adjuster, Douglass Gerke, to discuss
the various benefits available.2 Gerke testified that he also
advised Van Biene about the limitations that existed in regard to
her benefits, including Wausau's right to receive an offset for
any Social Security benefits she or her child might receive.
Van Biene does not remember any details of the September 9th
meeting.3 The following day, Gerke sent a letter to Van Biene
discussing possible reductions in her bi-weekly payments in the
event that she was receiving Social Security benefits. Included
was a Request for Social Security Information form which would
enable Wausau to obtain information from the Social Security
Administration.4 Wausau never received an answer to its request
for information.
During the September 9th meeting, Van Biene and Gerke
discussed the death benefit rate and how it was calculated.
Van Biene inquired whether the rate could be calculated according
to her husband's "higher"wage scale during the years 1983 and
1984.5
At Hollis Van Biene's request, Wausau reviewed Michael
Van Biene's death benefits to determine whether his current
salary adequately represented his earning capacity or potential.
An informal compromise adjustment was agreed on between Wausau
and Van Biene which raised benefits to $454.31 per week beginning
November 19, 1985. A social security offset was not deducted
because Wausau did not know at that time that Van Biene was
receiving social security benefits.
No further activity was taken on the Van Biene file
until three years later. In January of 1988 Van Biene asked
Wausau to provide a summary of her worker's compensation benefits
to a mortgage company. Wausau responded with a letter indicating
the current level of benefits and the length of time Van Biene
could be expected to receive them. The letter stated that future
payments to Hollis Van Biene would be reduced if she were to
remarry, but made no mention of either a social security offset
or to Wausau's right to reimbursement for past overpayments.6
In February of 1989, Wausau contacted Hollis Van
Biene's attorney, Robert Wagstaff, requesting information about
social security payments.7 Wagstaff did not know at that time if
Van Biene was receiving social security benefits. Gerke then
wrote a letter, dated March 3, 1989, asking that Van Biene sign a
release form to enable Wausau to obtain social security benefits
information. Wausau subsequently requested social security
information from Van Biene or her attorney on March 30, May 30,
and July 14 of that same year. Wausau finally subpoenaed the
information from the Social Security Administration on April 10,
1990.
Information received from the Social Security
Administration verified that Van Biene was receiving social
security survivor's benefits. In accordance with the provisions
of AS 23.30.225(a), Wausau then reduced Van Biene's weekly death
benefits from $454.31 to $319.08.8 Wausau claims that it
overpaid Van Biene $135.23 per week for 245 weeks resulting in a
total overpayment of $33,131.35. Wausau subsequently petitioned
the Workers' Compensation Board ("Board") to order that the Van
Bienes' compensation be further reduced to $183.85 to reimburse
Wausau for past overpayments.9
After a hearing the Board concluded that Wausau had
waived its offset rights and that this waiver applied to both
past and future offsets.10 Wausau then unsuccessfully appealed to
the superior court. This appeal followed.
I. STANDARD OF REVIEW
Since the superior court acted as an intermediate court
of appeal, we independently review the merits of the Board's
decision. Hester v. Public Employee Retirement Board, 817 P.2d
472, 474 (Alaska 1991).
II. DOES THE WORKERS' COMPENSATION BOARD HAVE THE AUTHORITY TO
EMPLOY EQUITABLE PRINCIPLES TO PREVENT AN EMPLOYER FROM
ASSERTING STATUTORY RIGHTS?
Wausau contends that the legislature did not confer on
the Board the authority to employ equitable doctrines in order to
modify statutory rights and obligations. More particularly,
Wausau claims that in the instant case the Board, acting in its
quasi-judicial capacity, modified the legislative scheme embodied
in AS 23.30.225 and AS 23.30.155 by imposing a duty of diligent
inquiry on employers and their compensation carriers. Wausau
argues that the Board's powers are limited to fact finding.
Van Biene argues that many states, including Alaska,
have used equitable doctrines to prevent employers from asserting
statutory rights.11 Van Biene claims this case is a particularly
appropriate one for the application of equitable principles,
since Wausau sat on its rights for three years and, relying upon
the assurances provided by Wausau that her compensation benefits
were fixed, Van Biene purchased a house.
The Alaska Workers' Compensation Board is a quasi-
judicial entity. Hood v. State, Workmen's Comp. Bd., 574 P.2d
811, 813 (Alaska 1978). The Board is authorized to formulate
policy, interpret statutes, adopt and enforce regulations. AS
23.30.005(h). In promulgating its regulations the Board
determined that an answer to a compensation claim must state
whether the claim is barred "by law or equity."12
In deciding this issue on appeal the superior court
relied on our opinion in Smith by Smith v. Marchant Enterprises,
791 P.2d 354, 356-57 (Alaska 1990). In that case we discussed
the application of quasi-estoppel to a workers' compensation
appeal. We concluded that estoppel did not apply because one of
the elements of estoppel was missing under the facts in the
record. Here, the superior court on appeal found that implicit
in Marchant was this court's recognition that if all the elements
were present, quasi-estoppel and equitable doctrines would have
been applicable to that workers' compensation proceeding.
In 1988, the Colorado Supreme Court addressed a similar
issue involving insurer offsets and equitable doctrines. Johnson
v. Industrial Comm'n of Colorado, 761 P.2d 1140, 1144-1147 (Colo.
1988). The court determined that the insurer was not precluded
from exercising its statutory right of offset, four years later,
after the insurer learned of Johnson's simultaneous receipt of
social security survivor's benefits and workers' compensation
benefits. Id. The Colorado Supreme Court affirmed the
Industrial Commission's rejection of Johnson's estoppel claim,
noting that the statutes were silent concerning the point at
which the right of offset must be exercised and that the purpose
of the legislative enactments was to avoid duplicative benefits.13
Id. The Colorado court did speak directly to the equitable
principles issue. It acknowledged that the doctrines of estoppel
and waiver might preclude the exercise of a statutory right.14
Id. at 1146.
The Colorado court characterized the setoff as in the
nature of an affirmative defense to a claim for workers'
compensation benefits, and concluded that "once a prima facie
case was established on the issue of setoff,"the burden shifted
to Johnson to prove "by a preponderance of the evidence that he
was entitled to relief from the claimed offset on the basis of an
estoppel or waiver." Id.
On the basis of Marchant and the preceding discussion
we hold that the Board possesses the authority to invoke
equitable principles to prevent an employer from asserting
statutory rights.
III. IS THERE SUBSTANTIAL EVIDENCE IN THE RECORD TO SUPPORT THE
BOARD'S APPLICATION OF EQUITABLE ESTOPPEL, IMPLIED WAIVER,
AND LACHES IN DENYING WAUSAU ANY SETOFF (OR REIMBURSEMENT)
FOR SOCIAL SECURITY SURVIVOR'S BENEFITS RECEIVED BY
VAN BIENE?
The Board concluded that Wausau impliedly waived its
right to take a social security offset to both past and future
workers' compensation benefits. In so doing the Board relied on
the doctrine of waiver articulated in Milne v. Anderson, 576 P.2d
109, 112 (Alaska 1978) where we said:
An implied waiver arises where the
course of conduct pursued evidences an
intention to waive a right, or is
inconsistent with any other intention than a
waiver, or where neglect to insist upon the
right results in prejudice to another party.
. . . To prove an implied waiver of a legal
right, there must be direct, unequivocal
conduct indicating a purpose to abandon or
waive the legal right, or acts amounting to
an estoppel by the party whose conduct is to
be construed as a waiver.
Id. at 112 (citations omitted).
The Board found that there was no express waiver of the
right to a social security offset by Wausau. The Board
determined, however, that there had been an implied waiver. It
stated:
We find, under the facts of this case,
that Petitioners impliedly waived their right
to take a social security offset of both past
and future workers' compensation benefits.
Specifically, we find, under one of the
alternative tests in Milne, that although
Petitioners initially asserted their right to
the SSA offset, their subsequent neglect in
bringing up the offset during any ensuing
discussions with Respondent resulted in
prejudice to Respondent. Although Mr. Gerke
recalls discussing the SSA offset with
attorney Wagstaff, he was unable to recall
dates, times and content of the
conversations.
The Board concluded that although Wausau initially
asserted its right to the offset, Wausau's subsequent neglect in
pursuing the offset for three years resulted in prejudice to
Van Biene. In addition, the Board decided that Wausau should be
estopped from taking any social security survivors' benefits
offset. In making this determination the Board referred to
elements of estoppel alluded to in Jamison v. Consolidated
Utilities, 576 P.2d 97, 102 (Alaska 1978). These elements are:
assertion of a position by word or conduct, reasonable reliance
thereon by another party, and resulting prejudice. The Board
determined that Van Biene could not have relied on any express
statements regarding social security offsets because she did not
learn of the possibility of any such offsets until 1989. The
Board nevertheless found reasonable reliance on Van Biene's part
based on its conclusion that she could have relied on her
discussion with Gerke on the appropriate compensation rate, the
resulting compromise in the rate, and Wausau's long period of
inactivity before it finally was successful in obtaining
information regarding Van Biene's social security benefits.
Further the Board found that Hollis Van Biene was prejudiced
"when she relied on . . . [Wausau's] statements, on her
compensation rate and assertions to the lending company, in
making her financial commitment to buy a home."15
The type of implied waiver created by neglect to insist
upon a right is, in reality, a type of equitable estoppel. This
is implied in the language from Milne v. Anderson quoted above in
that "prejudice to another party"is required as well as "acts
amounting to an estoppel by the party whose conduct is to be
construed as a waiver." As one key element of estoppel is
communication of a position, it follows that neglect to insist
upon a right only results in an estoppel, or an implied waiver,
when the neglect is such that it would convey a message to a
reasonable person that the neglectful party would not in the
future pursue the legal right in question.
Our review persuades us that there is an absence of
substantial evidence in the record to support the Board's
holdings that application of the doctrines of implied waiver and
estoppel preclude Wausau from obtaining setoffs or reimbursements
for past or future social security benefits received, or to be
received, by Van Biene. Of particular significance to our
determination is the fact that Van Biene was apprised by Wausau,
both orally and in writing, that worker's compensation benefits
would be reduced by offsets in the event that she received social
security survivor's benefits. Also of importance is the fact
that no representations were made by Wausau to Hollis Van Biene
that it would not seek to offset social security survivor's
benefits in the event that she received such payments.
We conclude, therefore, that a finder of fact could not
reasonably find that a person in the position of Van Biene could
reasonably interpret Wausau's conduct as amounting to an implied
communication that no social security offset would be required.
At best, such conduct subsequent to Gerke's conversation and
letter indicates only neglect or an internal mistake. We
therefore conclude that the Board lacked substantial evidence to
support its invocation of implied waiver and estoppel against
Wausau's attempts to assert its statutory rights to social
security survivors' benefit offsets as well as reimbursement for
overpayments of compensation made to Van Biene.
REVERSED and REMANDED to the superior court with
directions to REMAND to the Board for further proceedings
consistent with this opinion.
_______________________________
1. In accordance with AS 23.30.215, Wausau initially
calculated Van Biene's weekly death benefits to be $404.55. This
determination was based on the decedent's average weekly wage
during the two-year period preceding his death.
2. In 1985, Doug Gerke was the senior field claims adjustor
for Wausau in the Anchorage office. His principal duty was
claims investigations. At the time of his meeting with Hollis
Van Biene, Gerke had handled workers' compensation cases for
almost ten years, had appeared before the Workers' Compensation
Board on numerous occasions and had been in the insurance
adjusting field for fifteen years.
3. Hollis met with Gerke two and one-half weeks after her
husband's death. "I remember very little about that original
meeting with him, because I was literally taken into the room
hand-in-hand with our friend Tom Mockler, and I remember Tom
being in most of the conversation with Mr. Gerke. I remember him
saying something to me, you mind if we tape the conversation, and
-- and that -- like I said, I remember very little about it."
4. The text of Gerke's letter of September 10, 1985 to
Van Biene reads in full as follows:
This letter follows our meeting of
September 9, 1985. At that time we discussed
a possible reduction in your bi-weekly
benefits as a result of receiving Social
Security Survivors benefits.
So that we may determine whether or not
the social security administration is taking
an off-set which should more properly be
taken by Wausau Insurance Companies, I am
attaching a Request for Social Security
Information form for your completion. Please
sign and date this form and return it to me
in the enclosed self addressed envelope.
When returning the form, I would
appreciate your including specific
information which would help us direct our
correspondence to the social security
administration: address of the office you
are dealing with, name of the individual,
claim number or any other information which
would easily direct our request for
information.
If you have any questions regarding the
information we will be requesting or the form
itself, please feel free to contact me.
5. Two years previously, Michael Van Biene had been working
as a helicopter pilot and had earned approximately $10,000.00
more per year than his wage at the time of his death. He had
opted to change to Era's fixed wing air craft and was completing
a two-year program which would have upgraded his rating and
raised his salary to its previous level in the immediate future.
6. The full text of this 1988 letter reads as follows:
We are the Workers' Compensation
Insurance carrier handling the above
captioned claim.
Mrs. VanBiene [sic] received $454.31 per
week in death benefits for herself ($227.16)
and for Matthew ($227.16), dependent child.
Mrs. VanBiene will receive these death
benefits for ten (10) years unless she
remarries. In the case Mrs. VanBiene
remarries, she will receive a lump sum which
will equal to two (2) years of her benefits.
The childs [sic] benefits will continue till
he is 19 years of age. The death benefits
Mrs. VanBiene receives will be reduced at
five (5) years to 66 2/3 percent of the
benefits being paid and at eight (8) years
the benefits being paid will be reduced to
fifty (50) percent. Matthew's will remain
the same with no reduction.
If you have any questions regarding
this, please do not hesitate to contact me
either by phone or letter referring to claim
number and ERA Helicopters.
7. Hollis Van Biene filed a wrongful death action against
Wausau and Era and was represented by Robert Wagstaff, attorney.
8. Van Biene's initial social security entitlements were
for $1,172.00 per month or $270.46 per week. Wausau reduced Van
Biene's weekly death benefits from $454.31 to $319.08 ($454.31 -
$135.23) in June 1990 per AS 23.30.225(a), which allows an
employer to reduce weekly compensation to an amount equal to one-
half of the federal periodic weekly benefits.
Alaska Statute 23.30.225(a) provides:
When periodic retirement or
survivors' benefits are payable under 42
U.S.C. 401 - 433 (Title II, Social Security
Act), the weekly compensation provided for in
this chapter shall be reduced by an amount
equal as nearly as practicable to one-half of
the federal periodic benefits for a given
week.
9. Alaska Statute 23.30.155(j) provides:
Payment of compensation. If an employer
has made advance payments or overpayments of
compensation, the employer is entitled to be
reimbursed by withholding up to 20 percent
out of each unpaid installment or
installments of compensation due. More than
20 percent of unpaid installments of
compensation due may be withheld from an
employee only on approval of the board.
10. The Board held, in part, that Wausau's neglect in
pursuing its statutory right to a social security survivor's
benefit offset resulted in financial prejudice to Van Biene.
This holding was based on the fact that in 1988 Van Biene relied
on Wausau's statement of compensation benefits and its three year
silence at the time she executed a mortgage in connection with
her purchase of a new home.
One Board member concurred that Wausau had waived its
right to an offset of past social security benefits, but
dissented from the Board's conclusion that Wausau had also waived
its right to an offset of future social security benefits. He
said:
Although Petitioners delayed in
following through with their request for the
amount of SSA benefits, they should not be
permanently denied a right to an offset. I
believe Respondent must have or at least
should have known of the possibility of the
offset. Petitioners asked for the SSA
information initially, and neither Respondent
nor her attorney (a few years later)
cooperated in providing this information. I
believe someone was playing a delaying game
here. Further, I question the degree of
prejudice which occurred to Respondent when
she made her financial commitment on her home
in Washington. . . . A report to a mortgage
company, in my opinion, does not constitute a
contract guaranty. . . . My fellow board
members are placing too much value and
reliance on the report.
11. McKaskle v. Industrial Comm'n of Arizona, 659 P.2d 1313
(Ariz. App. 1982) (equitable estoppel used to reverse administra
tive law judge's decision dismissing claim as untimely); Davis v.
Jones, 661 P.2d 859, 861 (Montana 1983) (Montana Workers'
Compensation Board applied equitable estoppel to case untimely
filed); Ex Parte Jack Youngblood, 413 So.2d 1146 (Ala. 1981)
(running of statute of limitations estopped even where misleading
statements of employer were made in good faith).
12. 8 AAC 45.050. PLEADINGS. (c)(3)(C) provides:
(c) Answers
(3) All answers must be simple in form
and language. Answers must state, when
applicable
. . .
(C) whether the claim is barred under AS
23.30.100, AS 23.30.105, or otherwise barred
by law or equity. . . .
13. The Colorado Supreme Court stated:
The purpose of workers'
compensation disability benefits is to
compensate an injured worker for any loss of
earning capacity resulting from a disabling
industrial injury or occupational
disease. . . . The disability provisions of
the federal Social Security Act serve a
similar purpose. . . . If an injured worker
were to receive both workers' compensation
and social security disability benefits for
the same disabling injury, the worker would
be receiving benefits from two different
sources while experiencing in fact only one
wage loss. It was to prevent this
duplication of benefits, as well as to
coordinate the disability provisions of
Colorado's workers' compensation statute with
the disability provisions of the Social
Security Act that section 8-51-101(1)(c) was
enacted.
Johnson v. Industrial Comm'n of Colorado, 761 P.2d 1140, 1144
(Colo. 1988) (citations omitted).
14. The Colorado court said:
[a] statute cannot stand in the way of
waiver or equitable estoppel when the facts
demand their application in the interest of
justice and right.
761 P.2d 1140 at 1146.
15. Relying on our analysis of the doctrine of laches found
in Pavlik v. State, 637 P.2d 1045, 1047 (Alaska 1981) the Board
held that application of laches bars Wausau from obtaining the
benefit of any social security benefits offset. As indicated
earlier in this opinion Wausau's claim to social security benefit
offsets is based on the provisions of AS 23.30.225(a) and its
claim to reimbursement for overpayments of compensation is
predicated on AS 23.30.155(j).
Given that Wausau is attempting to assert its statutory
(legal) based rights to offsets and reimbursements we conclude
that laches is inapplicable. Laches is an equitable defense
inapplicable to actions at law. Gudenau v. Bang, 781 P.2d 1357,
1363 (Alaska 1989); Kodiak Elec. Ass'n v. Delaval Turbine, Inc.,
694 P.2d 150, 157 (Alaska 1985).
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