Special Fund v. Rey

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

ICA SPECIAL FUND DIVISION, Petitioner,

v.

THE INDUSTRIAL COMMISSION OF ARIZONA, Respondent,

NELSON REY, Respondent Employee,

NORTHERN ARIZ. HEALTHCARE, Respondent Employer,

COPPERPOINT PREMIER INSURANCE CO., Respondent Carrier.

No. 1 CA-IC 22-0040
FILED 01-23-2025

Special Action - Industrial Commission
ICA Claim No. 20153000098
Carrier Claim No. 15P00223
The Honorable Amy L. Foster, Administrative Law Judge

AWARD AFFIRMED

COUNSEL

Norton & Brozina PC, Phoenix
By Kevin E. Karges
Counsel for Petitioner

Industrial Commission of Arizona, Phoenix
By Afshan Peimani
Counsel for Respondent ICA
CopperPoint Insurance Company, Phoenix
By Chiko F. Swiney
Counsel for Respondent Employer and Insurance Carrier

Snow Carpio & Weekley, PLC, Phoenix
By Xavier A. Carpio
Counsel for Respondent Employee

MEMORANDUM DECISION

Judge Kent E. Cattani delivered the decision of the Court, in which
Presiding Judge Cynthia J. Bailey and Judge Jennifer B. Campbell joined.

C A T T A N I, Judge:

¶1 The Special Fund Division (“Special Fund”) of the Industrial
Commission of Arizona (“ICA”) challenges an award finding Nelson Rey’s
2015 workers’ compensation claim eligible for apportionment under A.R.S.
§ 23-1065(B)(2). There is no dispute that Rey is entitled to compensation for
permanent partial disability stemming from his work injuries. The only
issue here is whether respondent employer Northern Arizona Healthcare
and respondent carrier CopperPoint Premier Insurance Co. (collectively,
“CopperPoint”) are entitled to partial reimbursement from the Special
Fund for their payment of those disability benefits. See A.R.S. § 23-
1065(B)(2). For reasons that follow, we affirm the award.

FACTS AND PROCEDURAL BACKGROUND

¶2 In 2003, Rey suffered an industrial injury to his right elbow
while working for Northern Arizona Healthcare. His resulting workers’
compensation claim was accepted for benefits and closed in 2005 with a
“scheduled” 10% permanent impairment to his right upper extremity.1 See
infra ¶ 12.

¶3 In 2015, Rey injured his right foot and ankle while working
for the same employer. His workers’ compensation claim for this new
injury was accepted for benefits, and he underwent surgery. CopperPoint

1 A “scheduled” impairment is one to a body part listed in A.R.S. § 23-
1044(B).

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initially closed this claim in 2017. The injury resulted in a new scheduled
permanent impairment (this time to Rey’s lower right extremity), so Rey’s
claim for permanent partial disability benefits was to be compensated based
on loss of earning capacity in light of his now-overall-“unscheduled”
impairment. See infra ¶ 13.

¶4 Given this combination (a preexisting scheduled impairment
from the 2003 injury and an additional scheduled impairment from the 2015
injury), CopperPoint’s request for “apportionment” (that is, partial
reimbursement from the Special Fund) was accepted. See infra ¶¶ 14–15.
The ICA concurrently determined that Rey had not suffered any loss of
earning capacity, which meant Rey received a vocational rehabilitation
bonus but no ongoing disability benefits subject to reimbursement.
Compare A.R.S. § 23-1065(B)(1), with A.R.S. § 23-1065(B)(2).

¶5 Meanwhile, however, Rey requested and CopperPoint agreed
to reopen the 2015 ankle claim for active treatment. While recovering from
a second ankle surgery, Rey developed an injury to his right elbow from
using crutches. This elbow injury was later determined to be causally
related to the industrial ankle injury and thus compensable. Once Rey’s
ankle and elbow no longer needed active treatment, CopperPoint closed the
reopened claim, acknowledging that it resulted in permanent impairment.

¶6 Although Rey challenged the closure, an administrative law
judge (“ALJ”) found his condition stationary with permanent impairment.
Rey’s treating physician had noted a 5% impairment to his upper right
extremity (less than the 10% impairment rating attributable to his 2003
injury). The independent medical examiner assessing Rey’s condition
agreed that Rey’s elbow had a permanent impairment, but that it did not
increase the impairment level beyond the existing 10% impairment from
Rey’s 2003 injury. The ALJ noted this testimony that Rey would have had
a 5% impairment “had this been a new condition” but that there was no
further elbow impairment “beyond what [Rey] received in the past.”
Nevertheless, based on the parties’ stipulation that Rey’s disability benefits
would be determined based on loss of earning capacity as an overall-
unscheduled impairment, the ALJ did not separately determine an
impairment rating for Rey’s elbow.

¶7 After this reclosure, the ICA issued an award for permanent
partial disability finding no loss of earning capacity resulting from the 2015
injury. Rey challenged this determination, and during the prehearing
process, CopperPoint requested apportionment under A.R.S. § 23-1065(B)
and asked that the Special Fund be joined as an interested party.

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¶8 The Special Fund was joined as a party to the proceedings in
January 2022 and immediately moved for dismissal, asserting that Rey’s
2015 claim had ultimately been reclosed as an unscheduled impairment that
did not meet the statutory requirements for apportionment. CopperPoint
opposed. By the time of the hearing in June 2022, the parties had settled the
issue of loss of earning capacity and the only point in dispute was whether
the claim was eligible for apportionment. CopperPoint and the Special
Fund submitted that issue to the ALJ on the existing record.

¶9 The ALJ ultimately ruled that Rey’s 2015 claim was eligible
for apportionment under § 23-1065(B)(2). The ALJ reasoned that Rey’s
“pre-existing industrially-related ten percent impairment to the right upper
extremity” from the 2003 claim combined with the additional impairment
to his right lower extremity from the 2015 injury to “make[] the [2015] claim
unscheduled and eligible for apportionment.” The ALJ noted that
apportionment had been granted before the 2015 claim was reopened. The
ALJ specifically reiterated the independent medical examiner’s testimony
during reclosure “that [Rey’s] elbow had a permanent impairment, but that
it did not increase the impairment beyond the ten percent impairment from
the 2003 claim,” then concluded that the reopening and reclosure of the
2015 claim “does not mean that the claim becomes unscheduled or that
apportionment no longer attaches.”

¶10 The Special Fund sought administrative review, and the ALJ
affirmed the award. This statutory special action followed. We have
jurisdiction under A.R.S. §§ 12-120.21(A)(2), 23-951(A), and RPSA 21(b).

DISCUSSION

¶11 The core issue on appeal is whether the ALJ erred by finding
that Rey’s 2015 claim was eligible for apportionment and thus awarding
CopperPoint partial reimbursement from the Special Fund for payment of
permanent partial disability benefits. See A.R.S. § 23-1065(B)(2). On review,
we defer to the ALJ’s factual findings but independently review issues of
law. Special Fund Div. v. Indus. Comm’n (Sordia), 224 Ariz. 29, 31, ¶ 7 (App.
2010).

¶12 Arizona’s workers’ compensation system provides
compensation for a claimant who suffers a permanent partial disability
resulting from an industrial injury. See generally A.R.S. §§ 23-1044, -1047.
Broadly speaking, the governing statute—A.R.S. § 23-1044—divides
compensation for permanent partial disabilities into two categories. First,
disability caused by “scheduled” injuries—those delineated in subsection

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(B)—is compensated at a fixed amount for the definite period listed in the
statute. See A.R.S. § 23-1044(B); see also Ossic v. Verde Cent. Mines, 46 Ariz.
176, 187 (1935). For example, the statute fixes compensation for permanent
partial disability caused by “loss of a thumb” at the rate of 55% of the
claimant’s average monthly wage for a period of 15 months, whereas
compensation is paid at the same rate for a period of 50 months for “loss of
a leg.” A.R.S. § 23-1044(B)(1), (15).

¶13 For a permanent partial disability caused by an
“unscheduled” injury—that is, any injury not listed in subsection (B)—
compensation is calculated based on the claimant’s resulting loss of earning
capacity and is paid as long as the disability exists. A.R.S. § 23-1044(C); see
also Ossic, 46 Ariz. at 187–88. This category includes disability caused by
injury or impairment to a body part that is not enumerated in subsection
(B) (e.g., a spinal injury) as well as disability stemming from a combination
of two or more otherwise-scheduled injuries, whether suffered
simultaneously or in sequence. See A.R.S. § 23-1044(C), (E); Ossic, 46 Ariz.
at 188–90; Alsbrooks v. Indus. Comm’n, 118 Ariz. 480, 482–83 (1978).

¶14 The claimant’s employer at the time of an injury is generally
responsible for the full amount of compensation for any resulting disability.
See Special Fund Div. v. Indus. Comm’n (Burrell), 191 Ariz. 149, 152, ¶ 8 (1998).
But to promote hiring and continued employment of workers with
preexisting conditions, our Legislature established the Special Fund as a
“second injury fund” to share the cost of certain disability compensation.
See id. at ¶¶ 8–9; see also A.R.S. § 23-1065. Thus, in statutorily defined
circumstances, the Special Fund is liable to reimburse the employer or
carrier for 50% of a portion of the disability compensation paid to a
permanently disabled worker. A.R.S. § 23-1065(B)(2), (C)(4), (E).

¶15 The provision implicated here makes reimbursement (also
known as “apportionment”) available when a worker experiences two
scheduled impairments in sequence:

In claims involving an employee who has a preexisting
industrially-related permanent physical impairment of the
type specified in § 23-1044, subsection B [i.e., a scheduled
injury] and who thereafter suffers an additional permanent
physical impairment of the type specified in such subsection
[i.e., a second scheduled injury], the claim involving the
subsequent impairment is eligible for reimbursement . . . .

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A.R.S. § 23-1065(B). Thus, when a worker who has already suffered one
scheduled injury (“a preexisting industrially-related permanent physical
impairment of the type specified in § 23-1044, subsection B”) subsequently
suffers a second scheduled injury causing additional permanent
impairment (“an additional permanent physical impairment of the type
specified in such subsection”), the latter claim qualifies for reimbursement.
That reimbursement is paid as outlined in § 23-1065(B)(1) and (2).

¶16 Here, the Special Fund does not dispute that, at the time of his
2015 industrial injury, Rey had a preexisting industrial impairment to his
elbow, a scheduled body part, from 2003. See A.R.S. § 23-1044(B)(13), (21).
Nor does the Special Fund dispute that Rey’s 2015 injury resulted in
permanent impairment to his ankle, an additional scheduled body part, see
A.R.S. § 23-1044(B)(14), (21), which made apportionment available under §
23-1065(B)—at least before the 2015 claim was reopened.

¶17 Instead, the Special Fund asserts that after reopening,
apportionment under § 23-1065(B) was improper because the 2015 claim
involved a new injury to Rey’s right elbow as well as his ankle, which
resulted in an unscheduled impairment—independently compensable
based on loss of earning capacity under § 23-1044(C), not (B), without
regard to Rey’s preexisting impairment. The Special Fund asserts that the
reclosure award determined as much and was entitled to preclusive effect,
and that the ALJ rendering the apportionment award improperly relied on
the initial closure rather than the reclosure as binding.

¶18 Apportionment is proper under § 23-1065(B) when a claimant
with a preexisting scheduled impairment suffers an “additional”
impairment of the type specified in § 23-1044(B). And here, the only
“additional” impairment resulting from Rey’s 2015 injury—even after
reopening—was to his ankle. Citing medical evidence from the reclosure
proceedings, the Special Fund asserts that, if Rey had “not had any pre-
existing impairments,” his new elbow injury “would have” resulted in a 5%
impairment. But Rey did have a preexisting 10% impairment to his right
elbow from the 2003 injury, meaning the 2015 claim left him with no
additional impairment to his upper right extremity beyond that preexisting
impairment.

¶19 The Special Fund asserts that the reclosure award determined
otherwise, and that the ALJ here wrongly relied on circumstances existing
at the initial closure rather than reclosure of the 2015 claim. But while the
reclosure proceedings addressed whether the 2015 injury resulted in
permanent physical impairment, whether any such impairment was

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“additional” to Rey’s preexisting condition was neither litigated nor
decided.2 To the extent the reclosure award touched on the issue at all, the
ALJ’s factual findings recited the independent medical examiner’s
testimony that Rey’s elbow “does not meet criteria for impairment beyond
what he was previously assessed”—i.e., that Rey had suffered no additional
elbow impairment. And although the decision cited § 23-1044(C) when
referring the matter for calculation of disability benefits, that provision
governs the relevant calculation (loss of earning capacity) regardless
whether apportionment applies. See A.R.S. § 23-1065(B)(2) (describing
procedure for reimbursement when the ICA “determines that the employee
is entitled to compensation for loss of earning capacity under § 23-1044,
subsection C”).

¶20 Moreover, the ALJ noted and considered the circumstances at
reclosing, expressly citing the independent medical examiner’s testimony
during the reclosure hearing that Rey’s new elbow injury “did not increase
the impairment beyond the ten percent impairment from the 2003 claim.”
Because the reopening did not result in any additional impairment,
however, the ALJ correctly reasoned that the reopening and reclosure did
not affect eligibility for apportionment. Accordingly, because the only
additional permanent physical impairment from the 2015 injury was to
Rey’s ankle, a scheduled body part, the 2015 claim qualifies for
reimbursement under A.R.S. § 23-1065(B). See Universal Roofers v. Indus.
Comm’n, 187 Ariz. 620, 622 (App. 1996) (noting that eligibility for
apportionment hinges on “the nature of the impairment, not [] the nature
of the disability compensation”).

2 For the first time on appeal, the Special Fund argues that
CopperPoint failed to timely provide notice of its claim for apportionment,
which excluded the Special Fund from the reclosure proceedings.
Although CopperPoint did not provide notice when reclosing the 2015
claim, see A.R.S. § 23-1065(D), it did so when Rey challenged the ICA’s
calculation of permanent partial disability benefits. Even assuming this
was untimely, that does not necessarily bar a request for apportionment.
See Special Fund Div. v. Indus. Comm’n (Morin), 182 Ariz. 341, 344–45 (App.
1994). And after receiving notice, the Special Fund did not seek (even in the
alternative) to unwind and participate in reclosure proceedings, but rather
opted to oppose apportionment on the existing record. Because we do not
consider issues that were not raised before the ICA, see Stephens v. Indus.
Comm’n, 114 Ariz. 92, 94 (App. 1977), we decline to further address this
argument.

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¶21 Finally, the Special Fund argues in the alternative that the
apportionment award should be vacated for want of adequate findings or
reasoning. See Post v. Indus. Comm’n, 160 Ariz. 4, 7–9 (1989) (requiring the
ALJ to make necessary factual findings, resolve conflicts in the evidence,
and provide a basis for a reviewing court to evaluate its legal analysis).
Here, there was no new evidence presented necessitating credibility
determinations or new factual findings, and the award adequately
explained the ALJ’s legal reasoning. We thus decline to vacate the award
on this basis.

CONCLUSION

¶22 We affirm the award.

AMY M. WOOD • Clerk of the Court
FILED: JR

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