IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 37623
PATRICK W. WILLIAMS, )
)
Boise, April 2011 Term
Claimant-Appellant, )
)
2011 Opinion No. 93
v. )
)
Filed: September 2, 2011
BLUE CROSS OF IDAHO, )
)
Stephen W. Kenyon, Clerk
Respondent-Respondent on Appeal. )
_______________________________________ )
Appeal from the Industrial Commission of the State of Idaho.
The decision of the Industrial Commission is affirmed, but the case is remanded.
Elsaesser Jarzabek Anderson Elliott & Macdonald, Chtd., Sandpoint, for
appellant. James S. Macdonald argued.
Chasan & Walton, LLC, Boise, for respondents. Timothy C. Walton argued.
_____________________
J. JONES, Justice.
Patrick Williams appeals the Industrial Commission’s determination that I.C. § 72-802
does not prohibit Blue Cross of Idaho from seeking to exercise its contractual right of
subrogation against Williams’ lump sum settlement proceeds. We affirm.
I.
Factual and Procedural Background
Patrick Williams suffered two injuries to his left shoulder while he was an employee of
AAA Plumbing. Williams underwent two surgeries in an effort to repair these injuries. The State
Insurance Fund (the SIF) initially provided Williams with workers’ compensation benefits to cover
a portion of his medical expenses, but later refused to provide additional coverage on the ground
that any medical treatment Williams received for his left shoulder was not for work-related injuries
1
but, rather, for a pre-existing shoulder condition. 1 As such, the SIF refused to cover the expenses
associated with the two shoulder surgeries.
After the SIF refused to provide further workers’ compensation benefits, Williams sought
payment for his remaining medical expenses in the amount of $31,195.142 from Blue Cross of
Idaho, his personal medical insurance provider. As a benefit of his employment with AAA
Plumbing, Williams was insured through a non-occupational group insurance policy with Blue
Cross for which AAA Plumbing paid a portion of the premium. Blue Cross accepted responsibility
for payment of these medical expenses, and after making contractual adjustments with the medical
providers, Blue Cross was able to satisfy Williams’ medical bills for $11,181.08.
Williams’ insurance contract with Blue Cross contains several subrogation and
reimbursement provisions. With regard to Blue Cross’ rights of subrogation and reimbursement,
the insurance policy provides:
The benefits of this Policy will be available to an Insured when he or she is
injured, suffers harm or incurs loss due to any act, omission, or defective or
unreasonably hazardous product or service of another person, firm, corporation or
entity (hereinafter referred to as “third party”). To the extent that such benefits for
Covered Services are provided or paid for by Blue Cross of Idaho under this
Policy or any other Blue Cross of Idaho plan, agreement, certificate, contract or
policy, Blue Cross of Idaho shall be subrogated and succeed to the rights of the
Insured or, in the event of the Insured’s death, to the rights of his or her heirs,
estate, and/or personal representative.
In addition to seeking payment from Blue Cross, Williams filed a complaint with the
Industrial Commission seeking workers’ compensation for the medical expenses incurred as a
result of the two shoulder surgeries, as well as benefits for temporary and permanent disability as a
result of such injuries. On February 20, 2008, Williams entered into a lump sum settlement
agreement with the SIF. Pursuant to the settlement agreement, Williams received $70,000 in
exchange for releasing the SIF from liability for any and all claims associated with the industrial
accidents. The settlement agreement provides:
There are genuine and substantial disputes and differences between the parties as
to the degree, if any, of Claimant’s impairment and disability, the need for
1
During his deposition, Williams testified he had injured his left shoulder in a motorcycle accident in 2005.
2
While counsel for Williams submitted documentation to the Commission indicating Williams’ medical expenses
were substantially higher, the Commission found that, based on invoices provided by Blue Cross, Williams had
incurred $31,195.14 in medical expenses. Williams did not object to this conclusion before the Commission nor
does he challenge it on appeal.
2
retraining benefits, the need for the surgeries of September 5, 2006 and March 20,
2007 which Defendants assert are due to preexisting conditions, and the need for
future medical benefits. The parties, however, wish to settle their differences on a
full and final basis advising the Commission that it is in the best interest of the
parties to do so. Therefore, as provided by Idaho Code section 72-404, in an effort
to settle this disputed matter, the Surety tenders to the Claimant and the Claimant
accepts the sum of $70,000.00 in full and final settlement of any and all claims he
has or may have as a result of any of the alleged injuries described herein. Further,
the parties agree to waive any underpayment of total temporary disability benefits
and temporary partial disability benefits which may exist for any reason, including
any underpayments that may exist as a result of the method used to calculate the
compensation rate(s).
The portion of the settlement agreement regarding the allocation of the settlement proceeds
contains the following provision:
ITEMIZED LIST OF OUTSTANDING MEDICALS TO BE PAID BY
CLAIMANT FROM THE LUMP SUM SETTLEMENT BALANCE: (List
provider and amounts)
None
However, the settlement agreement specifically states that the $70,000 is to be paid in settlement of
all potential claims by Williams, including claims for “[d]isputed past medical expenses and future
medical benefits.” Nothing in the agreement resolves the question of whether the medical care that
Williams received was causally related to any of the industrial accidents, nor does the agreement
establish what portion of the settlement proceeds are allocated for payment of the disputed medical
bills. After the Commission approved the settlement agreement, the SIF paid Williams $70,000,
thereby discharging its obligations under the agreement.
While Williams was negotiating the settlement with the SIF, counsel for Blue Cross
contacted counsel for Williams on several occasions to inform him that Blue Cross intended to
exercise its contractual right of subrogation in the event Williams succeeded in obtaining workers’
compensation benefits. After the agreement was finalized before the Commission, Blue Cross sent
a letter to counsel for Williams demanding that, pursuant to Blue Cross’ right of subrogation, he
withhold money from the workers’ compensation proceeds for payment to Blue Cross.
In response to these communications from Blue Cross, Williams filed a declaratory
judgment action with the Commission arguing that pursuant to I.C. § 72-802, the lump sum
proceeds paid to an injured worker are exempt from the claims of all creditors, including Blue
Cross. Williams asked the Commission to enter an order directing Blue Cross to take no further
3
action against Williams to collect any portion of the workers’ compensation proceeds.
Before the Commission considered the merits of Williams’ petition for declaratory
judgment, it requested briefing from both parties regarding whether the Commission had
jurisdiction to issue a declaratory ruling in the matter. While both parties asserted that the
Commission did not have jurisdiction to decide the matter, the Commission disagreed and
proceeded to the merits of the claim.
The Commission ultimately concluded that I.C. § 72-802 does not prohibit Blue Cross
from seeking to exercise a contractual right of subrogation because Blue Cross is a subrogee, and
not a creditor, within the meaning of the statute. However, the Commission found it did not have
jurisdiction to consider a breach of contract claim by Blue Cross against Williams and, therefore,
determined that Blue Cross must pursue its remedy in district court. Williams timely appealed the
Commission’s decision to this Court.
II.
Issues on Appeal
I. Whether the Commission had jurisdiction to consider whether Blue Cross is a
subrogee, rather than a creditor, within the meaning of I.C. § 72-802?
II. Whether I.C. § 72-802 prevents a medical insurer, like Blue Cross, from
exercising a contractual right of subrogation against the proceeds of a workers’
compensation lump sum settlement?
III.
Discussion
A. The Commission had jurisdiction to determine Blue Cross’ status as a
subrogee.
As mentioned above, the Commission requested briefing on the issue of jurisdiction and
ultimately concluded it had jurisdiction to issue a ruling on Williams’ declaratory judgment action,
even though both parties asserted the action was not appropriately before the Commission.
Although neither party challenges the Commission’s decision regarding jurisdiction on appeal, this
Court can consider the issue of subject matter jurisdiction sua sponte. Bagley v. Thomason, 149
Idaho 799, 804, 241 P.3d 972, 977 (2010). Because the issue of jurisdiction in this type of case is
an important one, we find it appropriate to address the issue.
We conclude that the Commission had jurisdiction to consider whether Blue Cross is a
subrogee, rather than a creditor, under I.C. § 72-802, and that the Commission also had jurisdiction
to determine the extent of Blue Cross’ entitlement to the settlement proceeds. According to I.C. §
4
72-707, “[a]ll questions arising under [the workers’ compensation laws of this state], if not settled
by agreement or stipulation of the interested parties with the approval of the commission, except as
otherwise herein provided, shall be determined by the commission.” I.C. § 72-707. Generally, the
Commission’s jurisdiction is limited to adjudicating “certain complaints filed by a workers’
compensation claimant against an employer or an employer’s surety.” Owsley v. Idaho Indust.
Comm’n, 141 Idaho 129, 134, 106 P.3d 455, 460 (2005) (emphasis omitted). However, the
Commission may properly exercise jurisdiction in cases, like this one, where the Commission is
asked to clarify a claimant’s rights under a lump sum settlement agreement. Pursuant to I.C. § 72-
404, the Commission has the responsibility to approve lump sum settlement agreements and, in
doing so, must determine that the settlement is in the best interest of the parties. It necessarily
follows that the Commission has jurisdiction to clarify a claimant’s rights under a lump sum
settlement agreement that is presented for Commission approval.
This is particularly the case where a third party that has provided or paid for medical
services received by the claimant asserts entitlement to a portion of the lump sum settlement
agreement proceeds. I.C. § 72-803 provides that “[c]laims of attorneys and claims for medical
services and for medicine and related benefits shall be subject to approval by the commission.”
Pursuant to the authority granted under this statute, the Commission has promulgated rules relating
to medical fee claims (IDAPA 17.02.09), including a dispute resolution process for settlement of
disputes between payors and providers. IDAPA 17.02.09.034.10. If the Commission has legislative
authority to resolve disputes between payors and medical providers, there is no ground to conclude
that it could not sort out a dispute over lump sum settlement proceeds between a workers’
compensation claimant and a payor with a subrogated claim. In fact, read together, I.C. §§ 72-707,
-803, and -404 obligate the Commission to determine whether and to what extent a third-party
medical insurance provider is entitled to be subrogated to a workers’ compensation claimant’s
rights in a settlement agreement subject to Commission approval.
This Court has previously recognized that the Commission has exclusive jurisdiction to
determine the subrogation rights of the SIF where a worker also recovers from a third party. Idaho
State Ins. Fund by and through Forney v. Turner, 130 Idaho 190, 938 P.2d 1228 (1997); Van Tine
v. Idaho State Ins. Fund, 126 Idaho 688, 889 P.2d 717 (1994). In both cases, we held that the
district court lacked jurisdiction to decide whether the SIF was entitled to subrogation under I.C. §
72-223(3), which provides, “If compensation has been claimed and awarded, the employer having
5
paid such compensation or having become liable therefor, shall be subrogated to the rights of the
employee, to recover against such third party to the extent of the employer’s compensation
liability.” Id. Although that provision does not expressly grant the Commission jurisdiction to
determine subrogation rights of the SIF, in each case we held that it was a question arising under
workers’ compensation law and, thus, within the Commission’s grant of exclusive jurisdiction in
section 72-707. Turner, 130 Idaho at 191, 938 P.2d at 1229; Van Tine, 126 Idaho at 690, 889 P.2d
at 719.
Although the case at hand concerns the subrogation of a third-party insurer rather than the
SIF, both instances require clarification of a worker’s rights arising under workers’ compensation
law. According to the statutory mandates in I.C. §§ 72-707, -803, and -404 mentioned above, the
Commission is the proper tribunal to clarify such rights, particularly in the case of a lump sum
settlement where a claim for medical services is at issue. Williams, by filing this declaratory
judgment action, was essentially asking the Commission to clarify his rights to the proceeds of the
lump sum settlement agreement that he entered into with the SIF, particularly in light of Blue
Cross’ claim for a portion of the settlement proceeds that it argued were for amounts it paid for
medical services provided to Williams. In order to determine Williams’ rights under the settlement
agreement, the Commission necessarily had to determine whether Blue Cross was a subrogee. In
determining that Blue Cross was a subrogee, the Commission implicitly determined that Williams
was not entitled to all of the lump sum proceeds because Blue Cross had paid Williams’ disputed
medical bills and, therefore, Blue Cross, as a subrogee, assumed Williams’ legal right to attempt
to collect payment for such expenses. Consequently, the Commission had jurisdiction to consider
whether Blue Cross is a subrogee because Blue Cross’ status as subrogee directly affects Williams’
entitlement under the lump sum settlement agreement.
Further, although the Commission found that it lacked jurisdiction to decide the extent of
Blue Cross’s subrogation entitlement, such a determination was also within its authority and was,
in fact, necessary to determine whether the lump sum settlement was in the parties’ best interest.
As mentioned above, the Commission must approve all lump sum settlement agreements, and in
doing so, it is the Commission’s responsibility to ensure that the settlement is in the best interest of
the parties. I.C. § 72-404. This is a responsibility that the Commission must scrupulously honor.
See Wernecke v. St. Maries Joint Sch. Dist. # 401, 147 Idaho 277, 286, 207 P.3d 1008, 1017
(2009). If an injured worker’s insurance company has provided compensation for medical
6
expenses for which the worker is now seeking to obtain workers’ compensation benefits, it is in the
best interest of the parties to ensure that the insurance company’s subrogation claim is resolved
contemporaneously with the proposed settlement. This would help ensure that the parties will not
be subjected to further litigation after the settlement agreement is finalized. Coupled with the
jurisdiction grants in I.C. §§ 72-707 and -803, section 72-404 requires the Commission to do so.
It is also worth noting that before approving the lump sum settlement agreement in this
case, the Commission could and should have requested that the parties stipulate as to how the lump
sum settlement proceeds were to be allocated, including what portion was to be allocated to Blue
Cross for payment of the disputed medical bills. Therefore, pursuant to its authority, the
Commission could have attempted to get the parties to stipulate as to how the settlement proceeds
were to be allocated and, failing such agreement, determined the entitlement of each. 3
Now that this Court has determined that the Commission had jurisdiction to consider the
question raised in Williams’ declaratory judgment action, we must next determine whether the
Commission erred in determining that Blue Cross is a subrogee, rather than a creditor, under I.C. §
72-802.
B. The Commission did not err in determining that Blue Cross is a subrogee,
rather than a creditor, within the meaning of I.C. § 72-802.
I.C. § 72-802 provides,
No claims for compensation under this law, including compensation payable to a
resident of this state under the worker’s compensation laws of any other state, shall
be assignable, and all compensation and claims therefor shall be exempt from all
claims of creditors, except the restrictions under this section shall not apply to
enforcement of an order of any court for the support of any person by execution,
garnishment or wage withholding under chapter 12, title 7, Idaho Code.
I.C. § 72-802.
Williams argues that Blue Cross is a creditor under the statute and, therefore, his lump
sum settlement proceeds are exempt from any claim by Blue Cross. Blue Cross responds by
3
Although Blue Cross paid $11,181.08, after contractual adjustments, toward Williams’ medical bills, Blue Cross
may not necessarily be entitled to that full amount as a subrogee. In his workers’ compensation complaint, Williams
not only sought compensation for the medical expenses that he incurred as a result of the two shoulder surgeries, but
he also sought benefits for temporary and permanent disability. Additionally, as consideration for the lump sum
settlement payment, Williams gave up his right to compensation for future medical expenses arising from his
injuries, and agreed to release the SIF from liability for any and all claims associated with the industrial accidents.
Because the lump sum settlement agreement does not clarify what portion of the settlement proceeds are allocated to
payment of disputed medical bills, it is not clear what portion of the lump sum settlement proceeds to which Blue
Cross is entitled.
7
arguing that (1) a subrogee, like Blue Cross, is not considered a creditor within the meaning of
I.C. § 72-802; (2) Williams will obtain double recovery for his medical expenses if Blue Cross is
not permitted to exercise its contractual right of subrogation; (3) the fact that Williams obtained
workers’ compensation proceeds through a settlement agreement rather than an adjudication
does not affect Blue Cross’ contractual right of subrogation; and (4) I.C. § 72-802 is preempted
by the Employee Retirement Income Security Act (ERISA), if interpreted in the manner
Williams proposes.
The Commission determined that:
[J]ust as the Blue Cross policy fails to create a prohibited assignment, neither is it
in derogation of the statutory exemption of compensation from the claims of
creditors. Case law draws a clear distinction between “creditors” and “subrogees.”
. . . it is clear that Blue Cross is not a “creditor” within the meaning of the statute,
but is, rather, a subrogee, against whom the prohibitions of the statute do not
specifically apply.
This Court exercises de novo review over the Commission’s legal conclusions. Allen v.
Reynolds, 145 Idaho 807, 811, 186 P.3d 663, 667 (2008). However, the Court will not disturb the
Commission’s factual findings as long as they are supported by substantial and competent
evidence. Id. The interpretation of a statute is a question of law over which this Court exercises
free review. Idaho Conservation League, Inc. v. Idaho State Dep’t of Agric., 143 Idaho 366, 368,
146 P.3d 632, 634 (2006).
We conclude that the Commission did not err in determining that the statutory
prohibitions do not apply to Blue Cross because Blue Cross is not a creditor within the meaning
of I.C. § 72-802. When interpreting a statute, the Court begins with the literal words of the
statute, and where the language of a statute is plain and unambiguous, the Court gives effect to
the statute as written, without engaging in statutory construction. Id. The plain language of I.C.
§ 72-802 prohibits (1) a workers’ compensation claimant from assigning workers’ compensation
proceeds to a third party, and (2) a creditor, other than one seeking to recover child support, from
asserting a claim against workers’ compensation proceeds paid to a claimant. Because Williams
makes no argument on appeal that the Blue Cross policy creates a prohibited assignment, 4 the
4
During the proceedings before the Commission, Williams argued that permitting Blue Cross to exercise its right of
subrogation was tantamount to permitting Williams to assign his workers’ compensation proceeds in violation of
I.C. § 72-802. However, as the Commission pointed out, this Court has specifically rejected the assertion that a
subrogation clause in a contract constitutes an assignment. See Rinehart v. Farm Bureau Mutual Ins. Co. of Idaho,
8
only issue before this Court is whether Blue Cross is a creditor within the meaning of the statute
such that it is barred from seeking to recover any portion of the settlement proceeds. This is an
issue of first impression for this Court.
While the workers’ compensation statutes do not define the terms creditor and subrogee,
Idaho case law makes a clear distinction between the two. For example, in Kenneth F. White,
Chtd. v. St. Alphonsus Regional Medical Center, the Court of Appeals discussed the distinction
between a creditor and a subrogee when determining whether the common fund doctrine was
applicable where a creditor, rather than a subrogee insurer, is asserting a claim against settlement
proceeds. 136 Idaho 238, 242–43, 31 P.3d 926, 930–31 (Ct. App. 2001). In White, Krivanec was
treated at St. Alphonsus Medical Center for injuries sustained in a motor vehicle accident. Id. at
240, 31 P.3d at 928. St. Alphonsus subsequently recorded a hospital lien for the medical
expenses Krivanec had incurred. Id. White, Krivanec’s attorney, filed a negligence action against
the driver of the other vehicle involved in the accident, and eventually settled on behalf of
Krivanec for $25,000. Id.
White then filed a petition seeking a declaratory ruling that he had a lien against the
settlement proceeds for the amount of his attorney fees and costs, which was superior to the lien
filed by St. Alphonsus. Id. The district court held that pursuant to the common fund doctrine,
White was entitled to receive payment out of the settlement proceeds for the fees and costs
associated with obtaining the settlement on Krivanec’s behalf. Id.
On appeal, St. Alphonsus argued the common fund doctrine was not applicable because
St. Alphonsus was not asserting a subrogation interest in the settlement but, rather, was a creditor
of Krivanec “with a lien against the settlement proceeds to secure [Krivanec’s] debt to the
hospital.” Id. at 242, 31 P.3d at 930. When analyzing whether the common fund doctrine was
applicable, the Court of Appeals specifically pointed out the difference between a creditor and
subrogee, holding:
[i]n our view, the present case is not appropriate for application of the common fund
doctrine. In common fund cases, the beneficiaries of the fund are similarly situated
and have like claims to the fund. This commonality characterizes the beneficiaries of
a trust as well as the subrogee insurer who stands in the shoes of the injured party for
purposes of a claim to payment from a third-party wrongdoer. In addition, in
96 Idaho 115, 117–18, 524 P.2d 1343, 1345–46 (1974). Williams does not appeal the Commission’s conclusion in
this regard, and his only argument on appeal is that Blue Cross is a creditor within the meaning of the statute.
9
common fund cases there would be no recovery for any claimant but for the services
of the attorney who generated the recovery. These characteristics are not present
when one of the claimants to the fund is a hospital with a lien. A hospital does not
stand in the shoes of the injured party as a subrogee does; rather, it is a creditor who
possesses a lien on the tort recovery to secure payment of its charges for services
provided to the injured party. A hospital is entitled to payment from the injured
person regardless of whether compensation is ever received from a third party.
Id. at 243, 31 P.3d at 931. Therefore, the court in White made it clear that a subrogee insurer
stands in the shoes of the injured worker, and is only entitled to payment if compensation is
received from a third party, while a creditor is a third party to whom the injured worker owes
money, regardless of whether payment is obtained from a third party.
The distinction between a creditor and a subrogee, as correctly articulated in White, is
also consistent with the definitions of creditor and subrogee found in Black’s Law Dictionary. A
creditor is defined as “[o]ne to whom a debt is owed; one who gives credit for money or goods.”
BLACK’S LAW DICTIONARY 375 (7th ed. 1999). A subrogee is defined as “[o]ne who is
substituted for another in having a right, duty, or claim. An insurance company frequently
becomes a subrogee after paying a policy claim, as a result of which it is then in a position to sue
a tortfeasor who injured the insured or otherwise caused damages.” BLACK’S LAW DICTIONARY
1441 (7th ed. 1999). Therefore, although it is true, as Williams argues, that he may end up being
required to reimburse Blue Cross for the money expended, this alone does not make Blue Cross a
creditor. Rather, Blue Cross possesses a contractual right of subrogation, which potentially
allows Blue Cross to take the place of Williams and obtain, on behalf of Williams, compensation
from a third party. If Blue Cross were simply a creditor, Williams would owe Blue Cross money
regardless of whether any compensation was received from a third party. Additionally, if Blue
Cross were a creditor, it would not have the same rights Williams possesses because a creditor
does not stand in the shoes of the worker as a subrogee does. Consequently, because the plain
language of the statute only prohibits creditors from asserting a claim against workers’
compensation proceeds, Blue Cross, as a subrogee, is not barred from exercising its contractual
right of subrogation against the settlement proceeds.
Furthermore, Blue Cross correctly argues that if this Court were to interpret the statute in
the manner in which Williams proposes, it is very possible that Williams would receive double
recovery for his expenses. The purpose behind exempting workers’ compensation proceeds from
the claims of creditors is not to allow the injured worker to recover twice for his or her medical
10
expenses but, rather, to protect the worker and his or her family from the financial difficulties
associated with the worker’s injury.
Workers’ compensation awards are intended not to make the worker rich, but to
keep an injured worker and the worker’s family from becoming destitute because
the breadwinner has been injured and cannot work. In order to protect this award
and further this policy, workers’ compensation statutes typically provide that these
awards cannot be attached by creditors. Moreover, they provide that the worker
cannot voluntarily assign the proceeds, primarily in order to ensure that injured
workers who may have a valid claim but have not yet received the first payments
and are desperate for cash do not sell their rights at fire sale prices.
Validity, construction, and effect of statutory exemptions of proceeds of workers’ compensation
awards, 48 A.L.R.5th 473 (1997). As such, if this Court were to affirmatively conclude that an
insurance company, which has paid disputed medical bills, can never exercise its contractual
rights of subrogation in workers’ compensation cases, there is a strong likelihood the worker
could recover twice for his or her medical expenses, at least in cases that are factually similar to
this case. This Court, in prior decisions, has recognized the importance of interpreting workers’
compensation statutes in such a way as to prohibit the injured worker from obtaining double
recovery. For example, in Schneider v. Farmers Merchant, Inc., we held that “to allow [the
injured worker] to retain both the workmen’s compensation benefits and the full tort recovery
[from the third-party tortfeasor], would be overcompensatory, and contrary to our [prior case
law].” 106 Idaho 241, 245, 678 P.2d 33, 37 (1983). Moreover, as the Commission pointed out in
its written decision, if an insurer is aware that, even if the Commission awards workers’
compensation benefits to an injured worker, the worker has no obligation to reimburse the
insurance company for payment of the same expenses, the insurer will likely hesitate to provide
compensation to injured workers who could potentially recover workers’ compensation benefits.
Therefore, interpreting the statute in the way that Williams proposes could actually have a
negative effect on injured workers by discouraging insurance companies from paying medical
expenses while the worker is seeking workers’ compensation benefits—a potentially lengthy
process.
Williams cites to the cases of State ex. rel. Lisby v. Lisby, 126 Idaho 776, 890 P.2d 727
(1995), and In re Almgren, 384 B.R. 12 (Bankr. Dist. Idaho 2007), to support his claim that Blue
Cross is prohibited from exercising its right of subrogation against his workers’ compensation
proceeds. However, neither case provides guidance on the issue before this Court. In Lisby, this
11
Court held that only fifty-five percent of Lisby’s workers’ compensation benefits were subject to
garnishment for payment of Lisby’s past-due child support obligations. 126 Idaho at 779, 890
P.2d at 730. Williams argues that if the statutorily-favored child support creditor in Lisby was
only able to garnish fifty-five percent of the workers’ compensation benefits, then Blue Cross
cannot collect from the proceeds of his workers’ compensation settlement. Contrary to Williams’
argument, Lisby is not even applicable to the case at hand. Lisby dealt with a child support
creditor, which is the type of creditor I.C. § 72-802 specifically allows to assert a claim against
workers’ compensation proceeds. Further, the Court in Lisby determined the creditor was only
entitled to garnish fifty-five percent of the workers’ compensation proceeds because I.C. § 11-
207 specifically limits the amount of money subject to garnishment to fifty-five percent of a
person’s aggregate disposable weekly earnings, where the person is supporting a dependent child
and the garnishment is to enforce a support order that is twelve weeks past due. Id. In other
words, the Court limited the amount of workers’ compensation benefits that could be garnished
based on this statutory limitation, and not based on some policy decision that workers’
compensation benefits should be entitled to more protection, even from a statutorily-authorized
creditor. Therefore, Lisby does not support Williams’ position, nor does it provide any guidance
on the issue of whether Blue Cross is a creditor pursuant to I.C. § 72-802.
Similarly, In re Almgren does not provide any assistance to this Court in answering the
issue presented on appeal. In that case, the bankruptcy court for the District of Idaho concluded
that I.C. § 72-802 protects only those workers’ compensation benefits awarded under Idaho law,
and not those recovered under a different state’s workers’ compensation scheme. 5 384 B.R. at 16.
Therefore, the court found that the workers’ compensation benefits awarded to the debtor in
Tennessee were not exempt from the claim of the Idaho Chapter 7 bankruptcy trustee. Id. at 18.
Although Williams is correct that Almgren stands for the proposition that workers’ compensation
benefits are exempt from claims by a Chapter 7 bankruptcy trustee, this provides no insight
regarding whether an insurance company, like Blue Cross, which possesses a contractual right of
subrogation, is a creditor under the statute.
5
This holding has been overruled by the 2009 amendment to I.C. § 72-802, which specifically exempts
“compensation payable to a resident of this state under the worker’s compensation laws of any other state” from the
claims of creditors. I.C. § 72-802 (2009).
12
Williams also cites to various statutes that reiterate the point that workers’ compensation
benefits are exempt from the claims of creditors. However, again, none of these statutes are
relevant to the actual question of whether Blue Cross is a creditor. For example, Williams cites to
I.C. § 11-607, which provides a list of creditor claims that are enforceable against exempt
property. Williams argues that because the statute does not mention claims by medical insurance
companies, Blue Cross cannot enforce a claim against Williams’ workers’ compensation
proceeds. Williams fails to recognize that the key term in the statute is “creditor.” The statute is
only applicable if Blue Cross is a creditor, which is the precise issue in this case.
The only statutes Williams cites that could conceivably lend some support to his
argument are I.C. § 45-701 and I.C. § 45-705. According to I.C. § 45-701,
Every individual, partnership, firm, association, corporation, institution or any
governmental unit or combination or parts thereof maintaining and operating a
hospital in this state shall be entitled to a lien for the reasonable charges for hospital
care, treatment and maintenance of an injured person upon any and all causes of
action, suits, claims, counterclaims, or demands accruing to the person to whom such
care, treatment, or maintenance was furnished, or to the legal representatives of such
person, on account of injuries giving rise to such causes of action and which
necessitated such hospital care, treatment and maintenance.
I.C § 45-701. I.C. § 45-705 then goes on to state,
The provisions of this act shall not be applicable to accidents or injuries within the
purview of the Workmen’s Compensation Law of this state.
I.C. § 45-705. Williams argues that if a hospital that has provided medical treatment to an injured
worker cannot assert a claim against workers’ compensation proceeds, even though the hospital
possesses statutory lien rights, then a medical insurer, like Blue Cross, is similarly not entitled to
exercise a claim against workers’ compensation proceeds. Although Williams is correct that
these statutes address a question closely related to the question in this case—whether I.C. § 72-
802 exempts workers’ compensation proceeds from the claims of medical providers that have
contracted with the worker for the provision of medical services—Williams again fails to grasp
the important distinction between a creditor and a subrogee. As the court made clear in White, a
medical provider that has provided services to an injured worker is a creditor. However, as the
Commission correctly determined, Blue Cross is a subrogee, not a creditor.
Because we conclude that the Commission did not err in determining that Blue Cross is a
subrogee, it is unnecessary for us to address Blue Cross’ remaining arguments.
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IV.
Conclusion
We affirm the Commission’s determination that Blue Cross is a subrogee, rather than a
creditor, under I.C. § 72-802. Although the Commission’s ruling is affirmed, we remand the case
for the Commission’s further consideration. Costs on appeal are awarded to Blue Cross.
Chief Justice BURDICK, and Justices EISMANN, W. JONES and HORTON CONCUR.
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