Case Law Confirming
there is No Time Limit On Recovery of State Claims
David Spring, M. Ed.
Retroreform.org October 6, 2009
EXECUTIVE SUMMARY
The
Department of Labor and Industries and the Attorney General’s office have
responded to my contention that there is
no time limit for recovery of overpayments owed the State by telling stakeholders that the “the
courts have determined that L & I can only go back three years.” But neither the Attorney General nor L &
I has produced or cited a single court case to support their claims. In fact, as
the following legal review of court cases confirms, this claim is simply not
true. In fact, just the opposite is the case, with courts ruling time and again
that there is no time limitation in recovery of claims owed the State.
The
following cases provide quotations from some of the most respected figures in Washington State legal history. These include
current Supreme Court Justice Debra Stephens, former Supreme Court Justice Al
Rosellini and even former Washington State Attorney General Christine Gregoire
– who twice won cases asserting there is no time limit for recovering over
payments owed to the State. All of these famous legal experts agreed with the
assessment of Senate Judiciary Chairperson Adam Kline that there is no time limit for recovery of overpayments owed the State.
Moreover,
not a single case of the 28 cases found by the search engine legalwa.org
supported the position of the current Attorney General Rob McKenna that there
is a 3 year time limit on recovery of State claims. Thus, it is factually
incorrect to claim that the “courts have decided that there is a time limit on
State claims.” Instead, this is merely an unpublished informal opinion which
the current Attorney General has given to L & I and which L & I
accepted without critical review. This unpublished informal opinion by the
current Attorney General has no force in law and has never been supported by
any court.
The
following analysis reviews Washington State Case law regarding the three statutes
which support the conclusion that there is no time limit on recovery of claims
owed the State. In order of importance, these three statutes are:
RCW 4.16.160 Application of limitations to actions by state,
counties, municipalities.
RCW 51.48.260 states: Liability of persons unintentionally
obtaining erroneous payments.
WAC 296-17-90402
requiring the loss ratios of retro and non-retro programs to be the same after
taking into account retro subsidies.
To
examine case law regarding the three statutes, each was entered separately into
the search engine of legalwa.org. This search engine includes all citable case
law from the Court of Appeals and Supreme Court in Washington State.
RCW 4.16.160 returned 29 cases. 4
were duplicate cases leaving 25 separate cases. All 25 cases were reviewed. All
supported the contention that there is no time limit to recovery of State
claims. Four of the 25 cases applied directly to the issues in question. These four
are cited, discussed and quoted below.
RCW
51.48.260 returned only two cases. Both supported the contention that there
is no time limit. Both cases are cited, discussed and quoted below.
WAC 296-17-90402 returned 3 results.
But all three were in fact duplicates of the same case. This case also upheld
the contention that there is no time limit to recovery of claims owed the State
and is cited, discussed and quoted below.
In
conclusion, there are 28 cases cited in legalwa.org which apply to the
question. Only 7 of these cases apply directly to the question and all seven
affirm the content that there is no time limit for recovery of claims owed the
State. Indeed, many Supreme Court Opinions noted that the State, including State agencies, has a legal “mandate” or legal
requirement to collect all debts owed the State.
Case Law Confirming
No Time Limit, page 2
In
addition, none of the 28 cases supported the contention that there is a 3 year
time limitation on recovery of claims owed the State, except in narrow
exceptions which are discussed below. None of the exceptions apply to the
Department of Labor and Industries, the Workers Compensation program or to
claims against Retro agencies. Therefore not only does the State have a right
to collect claims against Retro agencies without regard to any time limit, but the State has a legal duty to collect the
entire amount of these debts plus interest.
SECTION ONE: CASE LAW REGARDING RCW
4.16.160
According
to Senator Adam Kline, who is the Chair of the Senate Judiciary Committee and
an attorney with more than 30 years of legal experience, Chapter 4.16 is the
most important or “controlling statute” because it defines the Statutes of
Limitations for all causes of action. The specific section which applies to
this case is RCW 4.16.160 which states:
RCW 4.16.160 Application of
limitations to actions by state, counties, municipalities.
The limitations
prescribed in this chapter (RCW 4.16) shall apply to actions brought in the
name or for the benefit of any county or other municipality or
quasi-municipality of the state, in the same manner as to actions brought by
private parties: PROVIDED, That, except as provided in RCW 4.16.310, (a statute which applies to defects in
building construction) there shall be no
limitation to actions brought in the name or for the benefit of the state, and no claim of right predicated upon the
lapse of time shall ever be asserted against the state…
The
most recent Supreme Court case deciding an issue related to RCW 4.16.160 was
Wash. State Major League Baseball
Stadium Pub. Facil. Dist. v. Huber, Hunt & Nichols-Kiewit Constr., Co, et.
al.,
Supreme Court Docket # 81029-0. The Opinion was filed on March 5, 2009.
This
case concluded that a State agency (in this case the State Public Facilities
District or PFD) was entitled to collect more than $2.46 million dollars in damages
involving SAFECO field repairs even though the normal Statute of Limitations
had expired. The Supreme Court ruled that there was no Statute of Limitations
on debts owed a State agency, except in narrow cases as discussed below which
did not apply to the PFD case.
Decided
by a 6 to 3 vote, this case was interesting for two reasons. First, two of the
three dissenting votes were cast by the two Supreme Court Justices whose
elections to the Supreme Court were paid for in large part by the BIAW
(Justices Sanders and James Johnson). They may have been aware that this issue
would set a precedent for a future case involving the BIAW.
More
import, the Supreme Court Justice who authored the majority Opinion, Justice
Debra Stephens, included a detailed legal history of RCW 4.16.160 going all the
way back to the Middle Ages. A portion of this history is discussed and quoted
below.
The
Washington State PFD had filed a lawsuit in King County Superior Court against
Huber, Hunt, Nichols and Kiewit Construction (hereafter HK) alleging damages
resulting from construction of SAFECO field.
HK filed a motion for Summary Judgment to dismiss the suit claiming that
it was barred by a 6 year Statute of Limitations on breach of contract claims
per RCW 4.16.040 (the State had filed their suit more than 7 years after the completion
of the stadium) CP at 1-8, 9, 12. King County Superior Court agreed with HK and
granted their summary judgment motion.
Washington
State PFD appealed the Summary Judgment Order to Division One of the Court of
Appeals contending that their actions were “for the benefit of the State and
thus exempt from the six year statute of limitations under RCW 4.16.160” (Br of
Appellants at 19). The appeal was transferred pursuant to RAP 4.4 from Division
One to the Washington State Supreme Court. The Supreme Court reversed King
County Superior Court, agreeing with the State PFD that there is no time limit
to recover debts owed the State.
Case Law Confirming
No Time Limit, page 3
On pages 5 to 7 of her Opinion, Justice Stephens commented on RCW 4.16.160 by noting:
“This provision reflects a facet of sovereign immunity under the old English common law doctrine, “nullum tempus occurrit regi,” meaning “no time runs against the king.” Sigmund D. Schutz, Time to Reconsider Nullum Tempus Occurrit Regi” The Applicability of Statutes of Limitations Against the State of Maine in Civil Actions, 55 Me. L. Rev. 373, 374 (2003).
This court in Washington Public Power Supply System v. General Electric
Co., 113 Wn.2d 288, 295, 778 P.2d 1047 (1989) (WPPSS) determined that when a
municipality brings an action that arises out of the exercise of powers traceable to
the State’s sovereign powers delegated to the municipality, the municipality as an
agent of the State is bringing the action “for the benefit of the state” within the
meaning of RCW 4.16.160, RCW 4.16.160 exempts a municipality from a statute of limitations in this circumstance. WPPS, 133 Wn.2d at 295. “
“The “for the benefit of the state” language in RCW 4.16.160 is properly
understood to refer to the character or nature of municipal conduct rather than its
effect. WPPSS, 133 Wn.2d at 293. The only inquiry is whether the municipal
action arises from an exercise of powers traceable to delegated sovereign state
powers or whether such action is proprietary and thus subject to the statute of
limitation. Id. at 296. Each case is determined in light of the particular facts
involved. Id.
In determining whether an action is sovereign or proprietary, we may look to
constitutional or statutory provisions indicating the sovereign nature of the power
and may also consider traditional notions of powers that are inherent in the
sovereign. Id. Relevant to this analysis are the general powers and duties under
which the municipality acted, the purpose of those powers, and whether the activity
or its purpose is normally associated with private or sovereign acts. Id. The distribution of benefits is irrelevant. Id.
The principal test for determining whether a municipal act involves a
sovereign or proprietary function is whether the act is for the common good or
whether it is for the specific benefit or profit of the corporate entity. Okeson v. City
of Seattle, 150 Wn.2d 540, 550, 78 P.3d 1279 (2003); Hagerman v. City of Seattle,
189 Wash. 694, 701, 66 P.2d 1152 (1937). McQuillin’s treatise explains the
difference between sovereign and proprietary functions:
The purposes of municipal corporations, using the term in its strict
meaning, are twofold: the one to assist in the government of the state as an
agent of the state, often referred to as an arm of the state, and to promote
the public welfare generally; the other to regulate and to administer the
local and internal affairs of the territory which is incorporated, for the
special benefit and advantage of the urban community embracing within the
corporation boundaries. These two functions are usually referred to as the
dual powers of municipal corporations. (Eugene McQuillin, The Law of Municipal Corporations § 2.09, at 158 (3d ed. 1999) (footnote omitted). “
On pages 8 and 9, Justice Stephens then explains the difference between a “sovereign act” and a “proprietary function”: “The mere fact that a government project serves a public purpose or grants an economic benefit does not elevate it to the level of a sovereign act. See WPPSS, 113 Wn.2d at 300. Public health and safety are not the basis for distinguishing between governmental and proprietary functions of a municipality.
Case Law Confirming
No Time Limit, page 4
See City of Moses Lake v. United States, 430 F. Supp. 2d 1164, 1177-78 (E.D. Wash. 2006) (holding that the operation of a municipal water system is a proprietary activity and that Moses Lake was not entitled to invoke RCW 4.16.160 to salvage otherwise untimely tort claims); cf. Okeson, 150 Wn.2d at 550-51 (holding that a municipality’s operation of street lights and traffic signals involves a sovereign function).
“We have found an action to be “for the benefit of the state” under RCW 4.16.160 where it involves a duty and power inherent in the notion of sovereignty or
embodied in the state constitution. WPPSS, 113 Wn.2d at 296. For example, in
Bellevue School District No. 405 v. Brazier Construction Co., 103 Wn.2d 111, 115-
16, 691 P.2d 178 (1984), we held that a school district could bring tort claims for
design and construction defects 20 years after completion because in building
schools the district was acting in its sovereign capacity.
Similarly, we have held that actions arising out of the sovereign power of
taxation are not subject to the bar of a statute of limitations. Gustaveson v. Dwyer,
83 Wash. 303, 309-10, 145 P. 458 (1915); Commercial Waterway Dist. No. 1 v.
King County, 10 Wn.2d 474, 479-80, 117 P.2d 189 (1941); City of Tacoma v.
Hyster Co., 93 Wn.2d 815, 821, 613 P.2d 784 (1980); Allis-Chalmers Corp. v. City
of North Bonneville, 113 Wn.2d 108, 112, 775 P.2d 953 (1989). This court in
Gustaveson stated:
It is apparent from the doctrine of these authorities that a general statute of limitations has no application, whether the tax sought to be collected is to become the property of the state and payable directly into the state treasury, or whether it is to become the property of the particular county or municipality and payable into the municipal treasury to be expended for municipal purposes. In either case the tax has been imposed and collected for the express purpose of carrying on the functions of government. . . . All of the rights of the county here involved are traceable to and rest in the sovereign power of taxation.
Gustaveson, 83 Wash. at 309-10.
Justice Stephens then cite a whole series of cases from Washington State and many other States supporting the conclusion that “construction and maintenance of facilities for public recreation are sovereign functions. Packard v. Rockford Prof’l Baseball Club, 244 Ill. App. 3d 643, 613 N.E.2d 321, 325-27, 184 Ill. Dec. 294 (1993); Libertarian Party v. State, 199 Wis. 2d 790, 546 N.W.2d 424, 435-36 (1996); Kelly v. Marylanders for Sports Sanity, Inc., 310 Md. 437, 530.”
On page 14, Justice Stephens further explains the term “sovereign function”:
“It is not necessary that the Washington State Constitution explicitly mandate the construction of professional baseball stadiums in order for this to be a sovereign function. The constitution does not explicitly require the construction of merry-go-rounds at city playgrounds, public libraries, or art museums, yet this court has determined that the construction and maintenance of such facilities for public recreational purposes involve the exercise of a sovereign governmental power. Stuver, 171 Wash. at 82; Heavens v. King County Rural Library Dist., 66 Wn.2d 558, 566, 404 P.2d 453 (1965); Int’l Longshoremen’s & Warehouseman’s Union, 52 Wn.2d at 322-23.3.”
Case Law Confirming
No Time Limit, page 5
On page 17, Justice Stephens concludes: “We hold that the construction of Safeco Field by the PFD involves the exercise of sovereign powers traceable to delegated sovereign powers of the State, and claims based on its construction fall within the “for the benefit of the state” statute of limitations exemption in RCW 4.16.160.”
The second relevant case is Bellevue School District No. 405 v. Brazier Construction Co., 103 Wn.2d 111, 115-16, 691 P.2d 178 (1984). In this case, a claim brought even 20 years after the fact was held to be exempt from the Statute of Limitations. As Justice Stephens noted above:
“we held that a school district could bring tort claims for design and construction defects 20 years after completion because in building schools the district was acting in its sovereign capacity.”
A third relevant case was HERRMANN v. CISSNA et al., 82 Wn.2d 1, 507 P.2d 144 [No. 42479. En Banc) decided by the Washington State Supreme Court on March 1, 1973. This case is relevant because it involves the obligations of an insurance company (such as the Retro Insurance companies).
In this case, the State Insurance Commissioner brought an action in King County Superior Court against an insurance company. The Insurance Company filed a motion for partial summary judgment contending the State’s claim for $661,000 was time barred by the Statute of Limitations. King County Superior Court granted the insurance companies motion. In a unanimous Opinion, the Washington State Supreme Court found that there is no time limit to State claims and thus reversed the trial court.
Justice Rosellini writing for the Supreme Court noted:
“ The
respondents (Insurance company) suggest that this provision (RCW 4.16.160) is
inapplicable because the action is not brought in the name of the state itself
but rather in the name of the Insurance Commissioner. We held in Smith v.
Hopkins, 10 Wash.
77, 38 P. 854 (1894), that it was immaterial whether an insurance
commissioner's action to recover assets of the corporation was brought in his
own name or in the name of the state.
In
Gustaveson v. Dwyer, 83 Wash. 303, 308, 145 P. 458 (1915), this court said that
a county exercises a part of the sovereign power of the state when it acquires
property at a tax foreclosure sale and holds it in trust for the state, and
that the statute of limitations does not run against the county when it acts in
that governmental capacity. We quoted with approval the following from Wasteney
v. Schott, 58 Ohio St.
410, 51 N.E. 34 (1898):
"When the action, though brought in
the name of the state, is prosecuted for the enforcement of some private or
individual right, and the state has no substantial interest in the litigation,
the plea of the statute may be interposed. On the other hand, if the state is
the real party in
interest, the plea of
the statute is not available though the action be not prosecuted in its name; .
. . We think the principle stated there is sound, and is applicable here.
The Insurance Commissioner is an elected
officer of the state. RCW 48.02.010. He is charged under the insurance
code with the responsibility of carrying out the public policy of the state,
which is proclaimed by the legislature in that act. In performing the duties of
his office, he acts for and in the interest of the state and for its benefit.
We have no hesitancy in saying that an action brought by the Insurance
Commissioner, in his official capacity and exercising the authority conferred
upon him by statute, is an action by the state.«2»
Case Law Confirming No Time Limit, page 6
After citing a bunch of legal cases, Justice Rosellini a page later writes:
The business of insurance is one
affected by the public interest, requiring that all persons be actuated by good
faith, abstain from deception, and practice honesty and equity in all insurance
matters. Upon the insurer, the insured, and their representatives rests the
duty of preserving inviolate the integrity of insurance.
On
page 7, Justice Rosellini further explains:
“ the public interest
required that officers be required to make good any losses to the company which
they had caused. The legislature
reasonably could have concluded that the deterrent effect of such proceedings
by the commissioner, upon other parties charged with the responsibility of
managing insurance companies, is a factor tending to benefit the public in
general. See also Gustaveson v. Dwyer,
78 Wash. 336, 139 P. 194 (1914), holding that the statute of limitations does
not run against the county where it holds property in trust, if the state is
one of the beneficiaries of the trust, even though it may not be the sole
beneficiary… There is in the statute no express provision subjecting the
commissioner to all the defenses which would be available to a defendant in a
private action. Therefore, we must assume that the legislature had in mind the
provision found in RCW 4.16.160 and intended it to be given effect where
applicable. “
The fact
that the state may be exercising a right derived by assignment or operation of
law from a private individual is not determinative, In the case of State v. Vinther, supra at 393, the state, as assignee of a claim of a
workman's widow, brought suit against a third party who caused the death of the
workman while he was in the course of extra-hazardous employment. It was
contended by the defendant that the statute of limitations barred any action
against the state upon such an assigned claim, inasmuch as the proceeds would
be used for the benefit of private individuals. After citing and quoting from
the statute this court said:
There is a qualification of the rule exempting
the state from the operation of the statute of limitations as wellfounded in
authority as the rule itself, to the effect that the statute will apply when
the state is a mere formal plaintiff in a suit, not for the purpose of
asserting any public right or protecting any public interest, but merely to
form a conduit through which one private person can conduct litigation against
another private person. United States
v. Beebe, 127 U. S. 338, 8
S. Ct. 1083;
United States v. Fletcher, 242 Fed. 818. It is upon this qualification of the
general rule that the respondent relies to sustain the Judgment of the trial
court.
We
discussed the public policy considerations which prompted the enactment of the
workmen's compensation act and said of it: The act, as a whole, is the exercise
of a governmental function in the fullest sense of the word, having its support
in the police power of the state. 176 Wash.
at 394.
The fourth relevant case was State v Vinther, just discussed by Justice Rosellini in which the Supreme Court found that the Workers Compensation Act was specifically in accordance with the “sovereign powers of the State.”
In conclusion,
recovery of claims by the Workers Comp program meets the tests of RCW 4.16.160
and thus is not time barred by the Statute of Limitations.
Case Law Confirming No Time Limit, page 7
Section Two: Case Law regarding RCW 51.48.260.
RCW 51.48.260 states: Liability of persons unintentionally
obtaining erroneous payments.
Any person, firm,
corporation, partnership, association, agency, institution, or other legal
entity, but not including an industrially injured recipient of health services,
that, without intent to violate this
chapter, obtains payments under Title 51 RCW to which such person or entity is not entitled, shall be liable for: (1) Any
excess payments received; and (2)
interest on the amount of excess payments at the rate of one
percent each month for the period from the date upon which payment was made to
the date upon which repayment is made to the state.
This
statute is different from RCW 4.16.160 in that it applies specifically to cases
involving payments received under Title 51 RCW (in other words to payments
received under the Workers Compensation Act including over payments made to Retro
agencies). RCW 51.48.260 requires repayment of “excess payments received”
including interest - even when there was no intent to violate the Chapter.
There
are only two citable cases regarding this statute. Both specifically concluded
that claims owed the Workers
Compensation program are NOT time barred.
The
first case, decided by Division Two of the Court of Appeals on March 19, 1999
is Dept of Labor and Industries v. Kantor, (1999) 94 Wn. App. 764. The
primary issues were what the words “entitled” and “excess payments” meant in
RCW 51.48.260.
In this case, the Department of Labor
and Industries (L&I) audited a medical provider’s records and determined
that the medical provider (Kantor) had improperly received “excess payments” to
which the medical provider “was not entitled to receive.” L&I found it had paid Kantor for services
in violation of the Washington Administrative Code and ordered Kantor to pay
back $63,231 plus interest.
Kantor appealed this decision to the
Board of Industrial Insurance Appeals (BIIA). The BIIA ruled that L&I did
not have authority to order Kantor to refund the payments. L & I appealed
to the Superior Court which also held that L & I did not have the authority
to order Kantor to refund the payments. L & I then appealed this decision
to Division Two of the Court of Appeals arguing that RCW 51.48.260 gave them
the statutory authority to order Kantor to refund the over payments.
Arguing
the case for the State L & I and for enforcement of RCW 51.48.260 was none
other than Washington State Attorney General Christine O. Gregoire. So she is thus likely
to be familiar with this statute. Gregoire won the case because Division Two
reversed the trial court and held that the Department of Labor and Industries
has a statutory right under RCW 51.48.260 to recover “any excess payments.” Thus,
when a payment has been later determined to be in excess of what the payee was
“entitled to receive”, L & I (and the State’s tax payers) can recover the
tax payers money back without limitation as to the reason the excess payment
was made to the provider, even if there was no intention to violate the Workers
Compensation Act. In a unanimous Opinion, Division Two wrote:
“If a
health care provider, acting without intent to violate the Act, "obtains
payments" to which he or she is not "entitled," the provider is
liable for "any excess payments received" and any applicable interest
on such excess payments. RCW 51.48.260.”
Case Law Confirming
No Time Limit, page 8
Here is how Division Two defines the
word “entitled:”
“Neither
the Industrial Insurance Act, the medical aid rules, nor case law defines
"entitled" as that term is used in RCW 51.48.260. Nor does the legislative history provide
guidance. Thus, we resort to extrinsic aids, such as dictionaries, to find the
word's ordinary meaning. Brenner v. Leake, 46 Wn. App. 852, 854-55, 732 P.2d 1031 (1987).
A legal
definition of "entitle" is "to give a right or legal title
to" something. BLACK'S LAW DICTIONARY 477 (5th ed. 1979). A more common
meaning is to "furnish with proper grounds for seeking or claiming
something." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 758 (3d ed.
1969).
Here,
Kantor did not have a legal right to payment… And the audit authorized by RCW 51.36.100 provides the basis for L&I to take
"corrective action," including …recoupment of payments made to the
provider, together with interest.
Because
the Act authorized Kantor to bill L&I for proper and necessary treatment
only, Kantor's bill for medically unnecessary treatment did not provide
"proper grounds" for or a "right or legal title" to payment
by L&I. Because Kantor was not "entitled" to receive payment for
improper treatment, he is liable to L&I for those monies as
"excess" payments. RCW 51.48.260.
RCW 51.48.260 focuses
on the repayment of funds to which the payee was not entitled.«10» Because
Kantor is a payee of funds to which he was not entitled, the statute authorized
L&I to demand a refund.
Here
is how Division Two defines the term “excess”:
Thus excess merely
means more than what the payee was entitled to receive even if that amount in
excess was determined after the payee had received the payment.
Case Law Confirming
No Time Limit, page 9
The second case, Department
of Labor and Industries v. Allen, 100 Wn.App. 526, was decided by Division One on April 24, 2000.
It went beyond the prior case in expanding what the State was entitled to
recover.
Based on the audit, DLI made certain
factual findings. These findings were the bases for DLI concluding that Dr.
Alien violated certain medical aid rules. Based on the findings and applying
the governing provisions of the WAC to those findings, DLI ordered Dr. Alien to
refund excess payments in the amount of $48,367.83 plus statutory interest. Dr.
Allen appealed DLI's order to the Board of Industrial. Here the Board of
Industrial Insurance Appeals (BIIA) found that a medical provider must
reimburse L & I for excess payments. The provider appealed to King County
Superior Court, which held that the medical provider was not required to
reimburse the State because “the payments were for medically proper and
necessary treatment” and thus, L & I “did not have the authority to recover
over payments. L & I then appealed this order to Division One.
Arguing the case for
the State L & I again was Christine Gregoire. Once again, she prevailed.
In a unanimous Opinion,
Division One reversed the trial court stating:
“RCW 51.48.260 authorizes the Department of
Labor and Industries to recover excess payments made to health care providers
over the amounts they are entitled to receive under the Industrial Insurance
Act (Title 51 RCW) for services rendered, the term "excess payments"
includes payments received by a health care provider in violation of the
medical aid rules, even if the payments were for medically proper and necessary
treatment.”
“Holding that the Department had statutory
authority to recover excess payments received by the physician in violation of
the medical aid rules and that the physician was contractually obligated to
refund any excess payments he received, the court reverses the trial court's
order and grants summary judgment in favor of the Department.”
“DLI's audit of Dr. Allen's records showed
that he violated certain
"medical aid rules," which are codified in the WASHINGTON ADMINISTRATIVE CODE.
We hold that the plain meaning of the governing
statutes mandates recovery from Dr. Alien of the "excess" payments to
which he was not entitled plus statutory interest. (RCW 51.48.260; Department
of Labor & Indus, v. Kantor, 94 Wn. App. 764, 973 P.2d 30, review denied, 139 Wn.2d 1002 (1999).
Finding that there was “no debatable
issue,” Division One took the unusual step of granting the State a summary
judgment motion in their favor.
In
Kantor, Division Two of this court essentially held that DLI's payment of the
bills the doctor submitted was irrelevant to the question of whether Dr. Kantor
was entitled to the payments. Rather, it focused on legal and common
definitions of the statutory word "entitled":
A legal
definition of "entitle" is "to give a right or legal title
to" something. BLACK'S LAW DICTIONARY 477 (5th ed. 1979). A more common
meaning is to "furnish with proper grounds for seeking or claiming
something." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 758 (3d ed.
1969).«18»
Case Law Confirming
No Time Limit, page 10
The court
concluded that because Dr. Kantor's treatment was medically unnecessary, he had
no legal right to payment for that treatment. Accordingly, he was not "entitled"
to the payments he received and was liable for the "excess payments"
plus interest. In so holding, the court held that "excess" payments
were payments to which a recipient is "not entitled."
The same
underlying rationale applies here… The statutory framework makes no distinction
between these types of violations of the medical aid rules in terms of the
remedy. Both types of violations require that DLI recover the excess payments.
And the fact that Dr. Allen provided treatment that was "proper and necessary"
is irrelevant. That fact does not preclude the remedy of repayment.
There is
no controlling authority that dictates a different result.«19» We are not bound
by erroneous interpretations of the law, notwithstanding the fact that the
interpretation comes from the administrative agency with Jurisdiction.«20»
In short,
Dr. Allen received excess payments to which he was not entitled. He must
reimburse DLI for those payments plus statutory interest.
Section 3: Case Law
regarding WAC 296-17-90402
This statute requires L
& I to set retro refunds at an amount such that the loss ratios (developed
claims paid out divided by premiums paid in) are the same between retro and
non-retro groups. In other words, if L & I later discovers that retro
groups received $525 million in retro refunds to which they were not entitled,
then the excess payments MUST be refunded to the State in order to make the
loss ratios equal.
There is only one
citable case referencing this statute. It is Tri-State Construction Council
v. Westfall, 127 Wn. App. 669, decided by Division Three on May 24, 2005. The
case began when L & I charged a Retro agency (Tri-State Construction
Council) an additional assessment as part of their Retro agreement to pay
additional assessments if the loss ratio of the retro group was higher than the
loss ratio of comparable non-retro groups. Tri-state paid L & I for the
additional assessment per their Retro agreement.
Tri-state then tried to
collect $12,476 from Westfall, a member of Tri-state, who had agreed to pay his
fair share of any additional Retro assessments. When Westfall went bankrupt,
Tri-State tried to collect from Westfall’s security bond by filing a motion in
Benton County Superior Court. The bonding company filed for summary judgment to
dismiss the action. The Superior Court granted the motion for summary judgment.
Tri-state then appealed
this order to Division Three of the Court of Appeals. Division Three reversed
the trial court finding “the principle of equitable subrogation” required the
bonding company to pay for Westfall’s share of the assessment charged per WAC
296-17-90402.
Case Law Confirming No Time Limit, page 11
In a unanimous Opinion,
Division Three wrote:
This case centered on
the “equitable” principles which required a “liberal application” wherein each
case must be decided on the “circumstances
of each case and the demands of justice for an equitable result.”
“Courts liberally apply the doctrine of equitable subrogation in the interests of justice and
equity. The doctrine as now applied is broad enough to include every instance
in which one person, not acting voluntarily, pays a debt for which another is
primarily liable and which in equity and good conscience should have been
discharged by the latter. “
(Under Washington’s
Retrospective Rating Plan), The Council may be assessed an additional
retrospective premium if the members were not able to reduce their workers'
compensation costs. Former WAC
296-17-90463(1); former WAC 296-17-90469 (2000). And the Department
"hold[s] the [sponsoring] organization responsible for any additional
assessment." Former WAC 296-17-90469 . To maintain the account in good
standing, the "group must have . . . paid all industrial insurance premium
payments, assessments , penalties and interest when due and
on time." Former WAC 296-17-90402 (2000)
Equitable Subrogation
We
address, first, the question of equitable subrogation since we find that
dispositive here.
Principles
of natural justice give rise to the doctrine of equitable subrogation. Tilly v. Doe , 49 Wn. App. 727 , 734, 746 P.2d 323 (1987). This
means that we will require the party who should pay a debt to ultimately pay
it. Mahler v. Szucs , 135 Wn.2d 398 , 411, 957 P.2d 632, 966 P.2d 305
(1998); In re Liquidation of Farmers
& Merchants State Bank of Nooksack , 175 Wash. 78 , 85, 26 P.2d 631 (1933). But there
is no absolute right of equitable subrogation. Farmers & Merchants State Bank , 175 Wash. at 86. It is, instead, based upon the
circumstances of each case and the demands of justice for an equitable result. Id.
at 85-86; Tilly
, 49 Wn. App. at 734 . And we will apply the
doctrine liberally "in the interests of justice and equity." J.D. O'Malley & Co. v. Lewis , 176 Wash. 194 , 201, 28 P.2d 283 (1934). "
'[T]he doctrine as now applied is broad enough to include every instance in
which one person, not acting voluntarily, pays a debt for which another is
primarily liable, and which in equity and good conscience should have been
discharged by the latter.' " Farmers
& Merchants State Bank , 175 Wash.
at 85-86 (quoting 25 R.C.L. 1322 et seq.).
Retrospective
rating plans, like the one represented by the Council here, are administered
according to rules adopted by the Department. RCW 51.18.010 (1), (2). Under the plan, Westfall was
obligated to pay the Council. And the Council was obligated to pay the
Department.
Thus, this case
supports the contention that WAC 296-17-90402 requires an equitable
distribution of insurance assessments. Combined with the other six court cases
cited above, it is clear that there is no time limit barring recovery of excess
payments made contrary to WAC 296-17-90402.