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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. American International Group v. Carriere (6/9/00) sp-5281

American International Group v. Carriere (6/9/00) sp-5281

     Notice:  This opinion is subject to correction before publication in
the Pacific Reporter.  Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.


and VECO, INC.,               )    Supreme Court No. S-8921
             Appellants,      )    Superior Court No.
                              )    3AN-97-8498 CI
     v.                       )
UALLEN CARRIERE,              )    O P I N I O N
             Appellee.        )    [No. 5281 - June 9, 2000]

          Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
                Sigurd E. Murphy, Judge pro tem. 

          Appearances:  Robert L. Griffin, Law Offices
of Robert L. Griffin, Anchorage, for Appellants.  James B.
Pentlarge, Brittain & Pentlarge, Anchorage, for Appellee.  

          Before: Eastaugh, Fabe, Bryner, and Carpeneti,
Justices.  [Matthews, Chief Justice, not participating.] 

          EASTAUGH, Justice.

          When an injured employee did not receive the insurer's
check settling the employee's workers' compensation claims, the
insurer stopped payment on the original check, but did not promptly
send the employee a new check.  The Alaska Workers' Compensation
Board denied the employee's request for a statutory penalty for
late payment.  The superior court reversed.  We affirm the superior
court's decision because we conclude that AS 23.30.155(f) is not
discretionary, and that it imposes a continuing duty to satisfy the
fourteen-day requirement with tender of a negotiable instrument. 
          Uallen Carriere, an employee of Veco, Inc., sustained a
workplace injury in 1989.  To settle Carriere's workers'
compensation claims, the parties entered into a Compromise and
Release Agreement (C&R), which the Alaska Workers' Compensation
Board approved on November 9, 1994.  Pursuant to the C&R, Veco
agreed to pay Carriere $42,000 in a lump sum.
          Veco carried workers' compensation insurance underwritten
by American International Group (AIG).  AIG's local adjuster, Bob
Jackson, mailed the lump sum settlement check to Carriere on
November 15.  But on November 30, Carriere's attorney telephoned
Jackson and told him that Carriere had not received the check, and
that Carriere suspected that somebody had been tampering with his
mail.  Jackson agreed to stop payment on the outstanding check and
to issue a new check.  Another AIG employee phoned Key Bank the
next day, December 1, and requested a stop payment on the check.
The bank issued a stop payment effective 12:50 p.m. on December 1. 
          AIG's Portland office issued the new check on December
17, but did not overnight mail it to Carriere until December 19. 
It is undisputed that Carriere received the check on December 20. 
          On December 16 Carriere filed an Application for
Adjustment of Claim with the Alaska Workers' Compensation Board,
requesting under AS 23.30.155(f) a twenty-five-percent penalty for
late payment.  At the board's hearing on that application, Carriere
argued first that Jackson could not prove that he had mailed the
first check on November 15, 1994, and, second, that the statute's
fourteen-day period restarted after the stop-payment order became
effective on December 1, 1994.  AIG argued that it had satisfied AS
23.30.155(f) when it mailed the first check on November 15.
          The board denied Carriere's request for a penalty.  The
board ruled that (1) "payment is made when the check is mailed to
the person entitled to it"; (2) AIG mailed the C&R check on
November 15, 1994; and therefore (3) "the insurer complied with the
14-day requirement of AS 23.30.155(f)."  The board also ruled that
the statutory clock did not restart on December 1, because "the
employee's request for reissuance of his check is not 'compensation
payable under the terms of an award' triggering the penalty
provisions in AS 23.30.155(f)."
          Carriere appealed to the superior court.  The superior
court found that the fourteen-day statutory clock restarted on
December 2, the day after the stop payment became effective.
Because the Portland office did not send the check by overnight
mail until December 19, payment was not timely.  The superior court
reversed the board's decision and remanded for award of a penalty. 
          AIG appeals the superior court's decision.
     A.   Standard of Review
          When reviewing the merits of an agency decision, this
court gives no deference to the decision of the superior court
acting as an intermediate court of appeal. [Fn. 1]  The court
instead directly reviews the merits of the board's decision. [Fn.
2]  We apply a "substantial evidence" test to the board's factual
findings, ensuring that there is "such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion."
[Fn. 3]
          We apply the substitution of judgment test when
considering "questions of law where no agency expertise is
involved," especially "in the context of statutory interpretation
or other analysis of legal relationships about which courts have
specialized knowledge and experience." [Fn. 4]  The main issue here
is a pure question of statutory interpretation: whether the
fourteen-day time period of AS 23.30.155(f) begins to run anew
after the insurer, at the employee's request, stops payment on a
timely-mailed check that did not reach the employee.  We therefore
apply the substitution of judgment standard to the core legal
question in this appeal.
     B.   The First Check Was Mailed in a Timely Fashion.
          Substantial evidence supports AIG's contention that its
local adjuster, Bob Jackson, mailed the initial check to Carriere
on November 15.  The board found that Jackson had indeed mailed the
check on November 15 based on:
          1) the photo copy of the November 12, 1994
check bearing the employee's correct address; 2) Mr.
Jackson's testimony and log entries; 3) a separate check
sent to the employee's attorney (we have received no
complaints regarding this check for attorney's fees);
[and] 4) the employee's testimony that he believed he was
a victim of mail tampering. 

The record supports the board's finding that the check was mailed
on November 15.  Jackson's records in particular are quite
thorough, and we have no reason to doubt their accuracy.
     C.   The Board's Date of Mailing Rule Does Not Apply Here.
          Alaska Statute 23.30.155(f) provides:
          If compensation payable under the terms of an
award is not paid within 14 days after it becomes due,
there shall be added to that unpaid compensation an
amount equal to 25 percent of it . . . .[ [Fn. 5]]

The statutory clock therefore begins when "compensation payable
under the terms of an award . . . becomes due."  The board approved
the C&R on November 9; compensation therefore became due as of that
          Since 1981 the board has interpreted AS 23.30.155(f) to
mean that an employer or insurer complies with the statute by
depositing a check in the mail before the fourteen-day period
expires. [Fn. 6]  We think this is a reasonable interpretation. 
The statute gives the board no discretion to forgive penalties, as
the board has repeatedly recognized. [Fn. 7]  Because the board
lacks that discretion, insurers and employers cannot rely upon
appeals to fairness and justice in order to excuse faultless
delays.  Instead, it is appropriate that the board follow a bright
line such as the "date of mailing" rule so that all parties can
operate with some predictability.  In the usual case in which an
employer or insurer mails the check within fourteen days, and that
check is ultimately received and cashed, we will not disturb the
board's interpretation.
          But the circumstances here are unique.  On December 1 AIG
stopped payment on the initial check.  The stop payment became
effective at 12:50 p.m. that day.  The bank's assistant vice
president testified that AIG "could have safely written a
replacement check to the recipient after 12:50 on 12/1/94."  If a
customer had presented the check after that time, it would not have
been honored. [Fn. 8]  Thus, no negotiable instrument existed that
could have been presented for payment after 12:50 p.m. December 1. 
          We hold that stopping payment on the initial check at
Carriere's request reinstated the payment obligation, imposing a
new fourteen-day deadline.  The board's "date of mailing" rule
works in practice as long as the original check remains negotiable. 
An employer or insurer's payment obligation is conditionally
satisfied when the check is mailed, but the check must be
negotiable and must ultimately be received.  If, for example, an
insurer's check were to be rejected when presented for payment, the
employer could not rely on the "date of mailing" rule to avoid a
penalty under AS 23.20.155(f).  This would be so regardless of
whether the insurer had erroneously stopped payment or the account
had insufficient funds: the insurer is not relieved of its payment
obligation on the date of mailing if the employee receives a check
which is no longer negotiable.
          Here, the parties agreed on November 30 that AIG would
stop payment of the original check, and issue a replacement.  They
thus essentially agreed to start over, and to attempt once again to
ensure that Carriere received his payment.  As of December 1 there
was no longer an instrument in existence that could have satisfied
the November 9 award.  We think the statute is best read to mean
that, the original check having become non-negotiable as of
December 1, the payment of the award again became due on that date. 
Once the original check became non-negotiable -- at 12:50 p.m. on
December 1 -- the obligations of AS 23.30.155(f) were reimposed,
and the clock restarted.  The statute requires a penalty if the
compensation is not paid within fourteen days after it becomes due.
[Fn. 9]  Because AIG did not mail the substitute payment to
Carriere until December 19, AIG failed to comply with the fourteen-
day mandate of the statute, and a penalty was required.
          AIG argues that it waited a commercially reasonable time
before issuing the second check.  But the statute does not permit
payment within a "commercially reasonable" time; it mandates
payment within fourteen days. [Fn. 10]  There is no discretion to
excuse a late payment, no matter how blameless the insurer may be.
[Fn. 11]  The legislature chose a bright-line rule, we think
wisely, to force insurers to take every possible step to ensure
that a check is mailed promptly.  Because we hold that the payment
obligation springs up again when a check becomes non-negotiable,
even if it was timely mailed, these same bright-line rules must
apply to an insurer's obligation to ensure payment within fourteen
days after the stop payment became effective.
          Given this conclusion, we see no merit in AIG's argument
that only AIG's receipt of the bank's written stop order
confirmation would have revived the payment obligation.  An injured
employee should not have to bear the burden of the insurer's
internal accounting procedures, especially here, where the insurer
could have telephoned the bank and confirmed the entry of the stop
payment order as early as the afternoon of December 1.  While we
recognize that stopping payment requires internal control
procedures, AIG does not argue that a timely payment was impossible
in this case.  And the record establishes that the insurer had
ample time to reissue the check and send it to the employee within
fourteen days.
          We therefore AFFIRM the superior court's decision.


Footnote 1:

     See Thompson v. United Parcel Serv., 975 P.2d 684, 687-88
(Alaska 1999) (applying substantial evidence test to factual
findings of Alaska Workers' Compensation Board).

Footnote 2:

     See id.

Footnote 3:

     Id. at 688 (quoting Interior Paint Co. v. Rodgers, 522 P.2d
164, 170 (Alaska 1974)).

Footnote 4:

     Id. (internal citations omitted).

Footnote 5:

     AS 23.30.155(f).

Footnote 6:

     See Bellinger v. Universal Serv., Inc., AWCB #81-0014  at 5
(Jan. 22, 1981).  The board reiterated this rule most recently in
Tilden v. State Leasing, AWCB #98-0174 at 5-6, 1998 WL 771161 (June
29, 1998).

Footnote 7:

     See Short v. John Cabot Trading Co., AWCB #98-0037 at 3, 1998
WL 770997 (Feb. 25, 1998) ("We have repeatedly concluded that we
have no authority to excuse the penalty on a late payment under an
award no matter how appealing the reason for late payment may
be."); Stockley v. Noble Mechanical, AWCB #87-0304 at 2, 1987 WL
95591 (Nov. 27, 1987) (same).

Footnote 8:

     The vice president further explained that the original check
could have been paid only if another bank customer had deposited it
earlier the same day (before 12:50 p.m.), and if the bank's
computers were not showing the check paid at the time the bank
executed the stop payment order.

Footnote 9:

     See AS 23.30.155(f).  

Footnote 10:

     See AS 23.30.155(f).

Footnote 11:

     See id.  See also Short, AWCB #98-0174 at 3; Stockley, AWCB
#87-0304 at 2.