PRUDENTIAL INSURANCE COMPANY OF AMERICA, Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD, THOMAS WRIGHT et al., Respondents, 22 Cal. 3d 776

Opinion MANUEL, J. Petitioner Prudential Insurance Company of America (Prudential) seeks review of an order of the respondent Workers’ Compensation Appeals Board (WCAB) denying its claim of lien filed against an award in favor of respondent Thomas Wright (Wright), an airline employee. Prudential insured Wright under a salary continuation plan termed a group disability policy which would pay to Wright monthly payments in the event of disability.

The policy provided that such payments would be reduced by the “aggregate amounts of benefits . . . which for that month, he receives or would be entitled to recover upon timely presentation of claim therefor ... for loss of time on account of disability due to sickness or injury arising out of employment . . . under . . . any workmen’s compensation law.” Wright suffered an injury in October 1975 while employed as a freight handler for American Air Lines. Pursuant to the policy, Prudential made payments to him without offset for workers’ compensation benefits to which he may have been entitled.

In August 1976, Wright filed án application with the WCAB, alleging the October injury was industrial in nature. Prudential filed with the WCAB a notice and request for allowance of lien seeking to recover back these payments to the extent Wright received workers’ compensation benefits. Wright was thereafter awarded temporary benefits by WCAB in the sum of $119 per week and permanent disability after termination of the temporary benefits. The original findings and award of WCAB failed to dispose of Prudential’s claim, apparently because the WCAB had misplaced the claim of lien.

Prudential filed a petition for reconsideration requesting a hearing to establish its claim. The WCAB concluded that it was not entitled to a lien and denied reconsideration. Prudential contends that it is entitled to a lien because (1) it furnished benefits pursuant to a group disability policy within the meaning of Labor Code

section 4903.1, and (2) it furnished living expenses to Wright within the meaning of Labor Code

section 4903, subdivision (c). We reject these contentions and affirm the decision of the WCAB. The Legislature has addressed the matter of payment and assignment of compensation claims in

chapter 1,

part 3, division 4 of the Labor Code. We consider the sections here relevant.

Section 4900 provides that “[n]o claim for compensation, except as provided in

Section 96, is assignable before payment, but this provision does not affect the survival thereof.”

Section 4901 prohibits any claim for compensation or compensation awarded being “taken for the debts of the party entitled to such compensation except as hereinafter provided.”

Section 4903 provides for the allowance of several classes of lien claims including liens for “[t]he reasonable value of the living expenses of an injured employee or of his dependents, subsequent to the injury” (§ 4903, subd. (c)); and

section 4903.1 provides that a lien may be granted representing benefits paid or services provided to alleviate the effects of that industrial illness or injuiy either where there has been a claim for self-procured medical costs in what has been determined to be an industrial injury or illness (§ 4903.1, subds. (a), (b)) or where there has been a disposition of the case by a compromise and release agreement to which the lien claimant does not agree (§ 4903.1, subd. (c)).

There is no question that the parties herein had the right to contract that disability payments under the insurance policy should be reduced by the amount of workers’ compensation allowed by the act. (Lab. Code, § 3750 et seq.) However, the

chapter on the payment of claims was intended to remove workers’ compensation awards from the operation of the usual remedies available to creditors, to limit and regulate the kinds of debts for which liens are allowed, and to insure the award is available to the injured employee for his recovery and rehabilitation. (Ogdon v. Workmen’s Comp. Appeals Bd. (1974) 11 Cal.3d 192, 196-197 [113 Cal.Rptr. 206, 520 P.2d 1022]; cf. Department of Mental Hygiene v. Industrial Acc. Com. (1960) 183 Cal.App.2d 832, 834-835 [7 Cal.Rptr. 257]; see Pacific E, Ry. Co. v. Bonding, etc. Ins.

Co. (1921) 55 Cal.App. 704 [204 P. 262]; 2 Hanna, Cal. Law of Employees Injuries and Workmen’s Compensation (1973) § 17.07 [4][a].) Accordingly, to assert a lien against Wright’s workers’ compensation award for the overpayment of disability benefits, Prudential must show that not only was its claim a valid debt, but that such debt is within one of the classes enumerated by

section 4903 for which a lien can be lawfully imposed (Ogdon v. Workmen’s Comp. Appeals Bd., supra, at p. 197; Los Angeles v. Industrial Acc. Com. (1926) 76 Cal.App. 639 [245 P. 796]; Glass Containers, Inc. v. Ind. Acc. Com. (1953) 121 Cal.App.2d 656, 660 [264 P.2d 148]), or was otherwise provided for under

section 4903.1. We have no difficulty rejecting Prudential’s contention that it is entitled to a lien pursuant to

section 4903, subdivision (

c) for payment of living expenses. It was held in Rowland v. Workers’ Comp. Appeals Bd. (1977) 66 Cal.App.3d 448, 451 [136 Cal.Rptr. 1], when a disability insurer sought a lien for excess benefits paid where the injury arose out of the insured’s employment, that “[t]he purpose of

section 4903, subdivision (

c) is to protect persons who advance credit or loan money to dependents for necessary living expenses. It is not intended for the benefit of a debtor who pays a debt legally owing under a contractual obligation.” Prudential had such an obligation to Wright under its policy. It made the monthly payments not under any requirement of the workers’ compensation laws, but in satisfaction of existing or potential liabilities. Consequently, Prudential is only in the position of a general obligor. We also conclude that Prudential has no right to a lien under the provision of

section 4903.1. That

section became law after our decisions in Kaiser Foundation Hosp. v. Workmen’s Comp. Appeals Bd. (Keifer) (1974) 13 Cal.3d 20 [117 Cal.Rptr. 678, 528 P.2d 766] and Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452 [113 Cal.Rptr. 711, 521 P.2d 1103]. In Keifer, we determined that the WCAB’s practice of compromising otherwise proper medical liens in settlement situations was beyond the board’s statutory authority, its discretion being limited to deciding whether claim was reasonable in light of the medical services rendered.

In Silberg, we held an insurance company providing nonoccupational accident and sickness coverage liable in damages where it refused its policy holder medical care when it appeared the insured might be entitled to workers’ compensation benefits. A year after these decisions, the Legislature enacted

section 4903.1: subdivision (

c) empowering the WCAB to reduce certain lien claims in settlement situations, and subdivisions (

a) and (

b) to ensure that a policy holder, plan member or contractee received medical care, by permitting a lien remedy for “medical costs” to the extent of “benefits paid or services provided” for the “effects of an industrial injury or illness,” “by a health care service plan, a group disability policy, a self-insured employee welfare benefit plan, or a hospital services contract.” Prudential argues that to interpret the statute to limit allowable hens to medical costs, is contrary to its language and does not give effect to the intent of the Legislature.

Prudential urges that as provisions making reference to “specified” liens were dropped before the bill became law, and as in the present form the statute states merely that the WCAB shall determine if benefits have been paid, the Legislature intended that reimbursement should be allowed without restriction as to the type of benefit received where there is a settlement (§ 4903.1, subd. (c)), or where an award for self-procured medical costs is made, or is denied solely because of lack of notice to the applicant’s employer of the need for medical care (§ 4903.1, subds. (

a) and (b)). Prudential’s

interpretation of the statute is not supported either by its history or its language.

Section 4903.1, subdivision (b), under which Prudential seeks to assert its claim, provides for a lien “when the referee issues an award finding that an injury or illness arises out of and in the course of employment, and makes an award for reimbursement for self-procured medical costs. . . .” Obviously, the phrase “makes an award ... for self-procured medical costs” can be used either as a qualifying phrase or as an indication of the type of lien the Legislature sought to permit; that is, whether any benefits provided by a designated policy or plan can be the subject of a lien where there is an award for self-procured medical costs, or whether any such provider of medical benefits is entitled to a lien for these payments where there has been an award for medical costs.

The legislative history of

section 4903.1 resolves this apparent ambiguity. In drafting Senate Bill No. 573 (later § 4903.1), it is clear the Legislature intended to provide prompt medical treatment for those suffering an injuiy or illness in Silberg situations, i.e., where there is questionable liability because it is uncertain whether such injuiy or illness was compensable under workers’ compensation. The bill was originally written to compel medical benefit providers to render such benefits or services in circumstances where liability was unclear.

Before it was amended, the Legislative Counsel comment read: “This bill would require such policies and plans [health care service plans, disability insurance policies, self-insured employee welfare benefit plans, and nonprofit hospital service plans] which contain provisions excluding or reducing benefits [for injuries or illnesses arising out of or in the course of employment or which are compensable under the workers’ compensation laws] to pay for, regardless of the terms of such provisions, specified services rendered the insured or plan member until such time as the Workmen’s Compensation Appeals Board determines the injuiy or illness to be compensable under the workers’ compensation law.” The “specified” services whose payment was to have been made mandatory by the sections governing health care service plans (proposed Gov.

Code, § 12532.25), group disability policies and self-insured employee welfare benefit plans (proposed Ins. Code, § 10720.96), and hospital service contracts (proposed Ins. Code, § 11512.9), were medical services. Since the bill dealt with health care services whether provided directly through plans or by indemnity payments, group disability policies and self-insured employee welfare benefit plans were included with the other health care plans to the extent they provided medical benefits. Rather than adopting such detailed provisions, the Legislature enacted only

section 4903.1 of the initial bill. This

section did not require mandatory payment, but relied on Silberg to insure compliance, rewarding cooperating medical benefit providers with a lien recovery for any excess benefits in addition to their other remedies. (In re Marriage of Bouquet (1976) 16 Cal.3d 583, 588 [128 Cal.Rptr. 427, 546 P.2d 1371]; Estate of McDill (1975) 14 Cal.3d 831, 839 [122 Cal.Rptr. 754, 537 P.2d 874]; Buckley v. Chadwick (1955) 45 Cal.2d 183, 200 [288 P.2d 12, 289 P.2d 242].) Accordingly, subdivisions (

a) and (

b) limit such lien remedy to those situations where there are self-procured medical costs, i.e., where the worker, rather than his employer, is otherwise bearing his own medical expenses. Thus, the

section 4903.1 exception to the

section 4902 prohibition against hens promotes the policy of the workers’ compensation laws by insuring medical aid to the injured or ill employee where that employee is without statutorily required medical assistance. This linkage of the allowance of liens for benefits and services to the disposition of claims for reimbursement for self-procured medical costs is a- clear indication of the Legislature’s purpose of restricting such liens to claims for medical costs incurred by the applicant under whatever plan gave him the benefits.

The statute grants a lien for benefits rendered under a group disability policy only if the employee incurred such expenses. Yet, in the instant case, Prudential’s claim and the award for self-procured medical treatment are wholly separate and unrelated matters. If the employer or his carrier had promptly provided medical care, unquestionably, Prudential would not have been entitled to such lien under

section 4903.1, subdivision (b). It would be unreasonable, therefore, to treat the fortuity of a self-procured medical claim as a trigger to claim for a lien for disability indemnity. If the intent were to make the lien allowable, the Legislature would not have imposed such a precondition. Clearly, the Legislature did not mean the award with respect to self-procured medical costs to be the triggering event for a claim on a salary continuation plan unconnected to the furnishing of such medical care. Were Prudential’s view to prevail, it would significantly expand the liens enforcible against compensation awards in contravention of the protection afforded by

section 4901 and would conflict with the requirement of

section 3202 that the code be liberally construed to extend workers’ compensation benefits for the protection of persons injured in their employment. The order denying Prudential’s claim of lien is affirmed. Bird, C. J., Tobriner, J., and Newman, J., concurred.

Section 4903, subdivision (

c) provides: “The appeals board may determine, and allow as liens against any sum to be paid as compensation, any amount determined as hereinafter set forth in subdivisions (

a) through (

g) of this section. If more than one such lien be allowed the appeals board may determine the priorities, if any between the liens allowed. The liens which may be allowed hereunder are as follows: “(

c) The reasonable value of the living expenses of an injured employee or of his dependents, subsequent to the injury.”

Section 4903.1 provides: “The appeals board, before issuing its award or approval of any compromise of claim, shall determine, on the basis of liens filed with it, whether any benefits have been paid or services provided by a health care service plan, a group disability policy, a self-insured employee welfare benefit plan, or a hospital service contract, and its award or approval shall provide for reimbursement for benefits paid or services provided under such plans as follows: (

a) When the referee issues an award finding that an injury or illness arises out of and in the course of employment, but denies the applicant reimbursement for self-procured medical costs solely because of lack of notice to the applicant’s employer of his need for hospital, surgical, or medical care, the appeals board shall nevertheless award a lien against the employee’s recovery, to the extent of benefits paid or services provided, for the effects of the industrial injury or illness, by a health care service plan, a group disability policy, a self-insured employee welfare benefit plan, or a hospital service contract. [¶] (

b) When the referee issues an award finding that an injury or illness arises out of and in the course of employment, and makes an award for reimbursement for self-procured medical costs, the appeals board shall allow a lien, to the extent of benefits paid or services provided, for the effects of the industrial injury or illness, by a health care service plan, a group disability policy, a self-insured employee welfare benefit plan, or a hospital service contract. [¶] (

c) When the parties propose that the case be disposed of by way of a compromise and release agreement, in the event the lien claimant does not agree to the amount allocated to it, then the referee shall determine the potential recovery and reduce the amount of the lien in the ratio of the applicant’s recovery to the potential recovery in full satisfaction of its lien claim.” Some group disability policies and self-insured employee welfare benefit plans which are approved as “voluntary plans” under Unemployment Insurance Code sections 3251-3272, are required to provide some hospital benefits as part of the plan. (See Unemp.

Ins. Code, §§ 2801 and 3254, subd. (a).) Moreover, other group disability policies and self-insured employee welfare benefit plans voluntarily elect to provide some medical assistance in addition to disability indemnity. Accordingly, proposed Insurance Code

section 10270.96 stated: “[w]hen a group disability policy or self-insured employee welfare benefit plan providing for the payment of hospital, surgical, or medical services contains [a]n exclusion or reduction in payment of benefits for [an]. . . injury . . . arising out of or in the course of one’s occupation ... or [an] . . . injury for which the insured is entitled to any . . . compensation under the workers’ compensation laws . . . [then] . . . upon the filing of an application . . . with the Workmen’s Compensation Appeals Board, . . . benefits shall be paid under such policy or plan for disability, hospital, surgical or medical services. . . .” (Italics added.) Witkin, in volume 2 of the

Summary of California Law, (8th ed.) 1978 supplement, also suggests that the Legislature’s sole purpose in

section 4903.1 was to provide for the disposition of medical lien claims. The supplement states in

section 218A on page 72: “Lab.C. 4903.1, added in 1975, requires the Appeals Board to award a lien for medical benefits paid and services provided by health care service plans, group disability policies, self-insured employee welfare benefit plans, or hospital services contracts, even when the employer is not required to pay for such benefits or services because the employee fails to give the required notice. (See Supp., supra, § 165.) (Lab.C. 4903.1(

a) and (b).)” (Italics added.) (See also 2 Witkin,

Summary of Cal. Law (8th ed. 1976 supp.) § 218A, pp. 44-45.)