Heather Housley v. Second Injury Fund of Iowa

IN THE COURT OF APPEALS OF IOWA

No. 20-0016
Filed April 14, 2021

HEATHER HOUSLEY,
Plaintiff-Appellant,

vs.

SECOND INJURY FUND OF IOWA,
Defendant-Appellee.
________________________________________________________________

Appeal from the Iowa District Court for Polk County, Robert B. Hanson,

Judge.

Heather Housley appeals the denial of her claim against the Second Injury

Fund. AFFIRMED.

Peter M. Sand, Des Moines, for appellant.

Thomas J. Miller, Attorney General, and Amanda R. Rutherford, Assistant

Attorney General, for appellee.

Considered by Bower, C.J., and Doyle and Mullins, JJ.
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BOWER, Chief Judge.

Heather Housley appeals the district court’s ruling on judicial review

affirming the decision of the Iowa Workers’ Compensation Commissioner denying

her claim for benefits from the Second Injury Fund of Iowa. We affirm.

On April 23, 2015, Housley filed a petition with the Iowa Workers’

Compensation Commissioner seeking benefits from the Second Injury Fund of

Iowa (the Fund) alleging an injury to her right leg on June 25, 2005, while working

at a stock car race, and a second injury to her right arm which occurred while she

was employed with Dell Oil on November 27, 2006. Housley received benefits

from Dell Oil under Iowa Code chapter 85 (2006), but did not file a claim against

Dell Oil for workers’ compensation benefits. Housley did not name Dell Oil as a

party in the underlying action.

The Fund filed a motion to dismiss for failure to include a necessary party

or enter into an agreement for settlement with her former employer. A deputy

commissioner noted the delay between the Fund’s answer to Housley’s petition

and the motion to dismiss, determined “claimant could potentially recover on her

claim,” and denied the motion to dismiss on November 14, 2016.

At the arbitration hearing, the Fund challenged the applicability of the

Second Injury Compensation Act. It argued Housley failed to prove her entitlement

to permanent disability benefits against Dell Oil and, consequently, failed to prove

she had a compensable second injury under Iowa Code section 85.64 (2015). The

Fund also argued Housley failed to establish a disabling first injury. The deputy

commissioner determined, “[Housley] has failed to carry her burden of proof that

the Fund benefits are triggered having failed to produce a prior agreement for
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settlement or adjudication concerning [Housley] and [Dell Oil] and in the absence

thereof, having failed to include [Dell Oil] as a necessary party in this litigation.”

The deputy concluded all other issues raised were moot.

Housley filed an intra-agency appeal to the commissioner, asserting the

deputy erred in finding she failed to prove entitlement to receive benefits from the

Fund. Housley argued the employer’s liability in the November 27, 2006 claim is

established by her showing that voluntary weekly workers’ compensation

payments were made by the employer and its insurer.

The commissioner affirmed and adopted the deputy’s ruling. The

commissioner explained that an employer’s liability for permanency benefits is not

legally established by volunteering weekly benefits. Citing Iowa Code section

86.13(1),1 the commissioner noted weekly benefits were volunteered by Dell Oil

indicating the employer had notice of the injury, but was not admitting liability for

permanent impairment. The commissioner affirmed the deputy commissioner’s

ruling that Housley failed to establish the Fund benefits were triggered because

she “failed to produce a prior agreement for settlement or adjudication concerning

the claimant and the employer and, in the absence thereof, claimant also failed to

include the employer as a necessary party in this litigation.”

1Section 86.13(1) provides:
If an employer or insurance carrier pays weekly compensation
benefits to an employee . . . [t]he payments establish conclusively
that the employer and insurance carrier have notice of the injury for
which benefits are claimed but the payments do not constitute an
admission of liability under this chapter or chapter 85, 85A or 85B.
(Emphasis added.)
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Housley filed a petition for judicial review in district court, where she

asserted the employer engaged in voluntary payment of benefits, which is

equivalent to making an admission of liability. She also claimed that Dell Oil

admitted liability for her injury in an alternate care proceeding, meeting the

compensability requirement in Iowa Code section 85.64. The district court

thoughtfully considered and rejected Housley’s arguments, upheld the

commissioner’s ruling, and dismissed Housley’s petition. Housley appeals.

An appeal of a workers’ compensation decision is reviewed
under standards described in chapter 17A. “The agency decision
itself is reviewed under the standards set forth in section
17A.19(10).” The agency’s decision in this case was based on an
interpretation of Iowa Code section 85.64. Interpretation of the
workers’ compensation statute is an enterprise that has not been
clearly vested by a provision of law in the discretion of the
commissioner. Thus, we will reverse the agency’s decision if it is
based on “an erroneous interpretation” of the law.

Gregory v. Second Injury Fund, 777 N.W.2d 395, 397 (Iowa 2010) (internal

citations omitted).

The Fund is statutorily created. See generally Iowa Code §§ 85.63–.69.

Iowa Code section 85.64 provides in part:

If an employee who has previously lost, or lost the use of, one hand,
one arm, one foot, one leg, or one eye, becomes permanently
disabled by a compensable injury which has resulted in the loss of or
loss of use of another such member or organ, the employer shall be
liable only for the degree of disability which would have resulted from
the latter injury if there had been no pre-existing disability. In addition
to such compensation, and after the expiration of the full period
provided by law for the payments thereof by the employer, the
employee shall be paid out of the “Second Injury Fund” . . . the
remainder of such compensation as would be payable for the degree
of permanent disability involved after first deducting from such
remainder the compensable value of the previously lost member or
organ.

To trigger the application of section 85.64, the employee must establish
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“(1) the employee has either lost, or lost the use of a hand, arm, foot,
leg, or eye; (2) the employee sustained the loss, or loss of use of
another such member or organ through a work related—that is,
compensable—injury; and (3) there must be some permanent
disability from the injuries.”

Second Injury Fund v. Nelson, 544 N.W.2d 258, 269 (Iowa 1995) (quoting Second

Injury Fund v. Shank, 516 N.W.2d 808, 812 (Iowa 1994)). The prior loss or loss of

use need not be work related. See Shank, 516 N.W.2d at 812. And the prior loss

or loss of use does not have to be a total loss or loss of use. Second Injury Fund

v. Braden, 459 N.W.2d 467, 469 (Iowa 1990). The Fund is responsible for the

industrial disability present after the second injury that exceeds the disability

attributable to the first and second injuries. See Iowa Code § 85.64.

“Unlike ordinary workers’ compensation benefits, however, the [Fund’s]

obligation cannot be assessed until the employer’s liability is fixed.” Braden, 459

at 473. By statute, the voluntary payment of workers’ compensation benefits does

not establish the employer’s liability. Iowa Code § 86.13(1).

Housley argues that where, as here, the employer volunteers payment of

benefits, once the time passes within which the worker or the employer is allowed

to seek agency adjustment of the proper compensation, the employer’s “liability is

fixed.” There is some superficial appeal to the argument. But, while the employer

and the employee may no longer challenge the amount of the payments, there

remains the absence of a settlement or determination by the agency that the

employee suffered a work-related injury for which the employer is responsible.

See Iowa Code § 85.3(1) (“Every employer . . . shall provide, secure, and pay

compensation . . . for any and all personal injuries sustained by an employee

arising out of and in the course of the employment, and in such cases, the
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employer shall be relieved from other liability for recovery of damages or other

compensation for such personal injury.”).

The commissioner wrote:

Claimant argues that nowhere in the statutory language is
there a stated requirement that there be a final adjudication either by
an agreement for settlement or by agency decision of the employer’s
liability. Claimant argues that the credit to be given the Fund for the
employer’s portion of scheduled member liability can be determined
without the employer’s presence in this proceeding. Further,
claimant argues that the same can be shown from the documents
submitted confirming voluntary payment of weekly benefits to
claimant. Claimant further argues that the Fund admits claimant was
paid five weeks of permanent partial disability benefits prior to the
arbitration hearing. However, I affirm the deputy commissioner’s
finding that the Fund merely admitted claimant was paid five weeks
of permanency benefits, which is not the same thing as stipulating to
the employer’s extent of liability.

We agree. Cf. Winnebago Indus., Inc. v. Haverly, 727 N.W.2d 567, 571–75 (Iowa

2006) (discussing employer liability for purposes of issue preclusion, law of the

case, and judicial estoppel and concluding the employer’s admission of liability in

an earlier alternate-medical-care proceeding was not binding in later contested

workers’ compensation proceeding).

This court considered whether an employer was a necessary party to a

claimant’s action against the Fund in Eaton v. Second Injury Fund, No. 05-0381,

2006 WL 2560854, at *4 (Iowa Ct. App. Sept. 7, 2006). There, Eaton voluntarily

dismissed the action against the employer and proceeded against the Fund only.

Id. at *1. At the agency hearing, the Fund argued the claimant needed to include

the employer as a necessary party and needed to supply proof of either an

adjudication of the employer’s liability or settlement for the second injury date. Id.

The commissioner and district court agreed. Id. at *2.
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On appeal, Eaton claimed the employer is not a necessary party and he

could proceed solely against the Fund, arguing there is no specific statutory

requirement that he must recover workers’ compensation benefits directly from the

employer for the second loss in order to recover benefits from the Fund under

section 85.64. Id. The Fund argued section 85.64 “requires the establishment of

employer liability, either by an adjudication or an admission, as a prerequisite to

determining the liability of the Fund.” Id. This court concluded “it was the

legislature’s manifest intent in passing this statute to require the establishment of

the employer’s liability before allowing recovery from the Fund.” Id. at *4.2 We

wrote:

[W]here, as here, there has been no prior adjudication or settlement
establishing the employer’s liability the employer is a necessary party
to the employee’s action against the Fund.
....
As stated in the arbitration decision, the employer’s liability
must be established directly against the employer and not collaterally
in an action against the Fund only, because the employer is an actual
party in interest and the employer is in a better position than the Fund
to make an early and full investigation of the employee’s claimed
work injury.
We note that because we have concluded it was the manifest
intent of the legislature to require the determination of the liability of
the second employer before allowing recovery from the Fund, we
need not determine whether the express language of the statute
requires the establishment of such liability as argued by the Fund.
. . . [A]ssuming without deciding that no express language in the
statute imposes the requirement argued by the fund, just as the
manifest intent of the legislature prevails over the literal import of the
words used, here the manifest intent of the legislature must prevail
over the absence of an express requirement.

Id. (internal citations omitted).

2 “Clearly, the manifest intent of our legislature prevails over the literal import of
the words used.” State v. Anderson, 636 N.W.2d 26, 35 (Iowa 2001).
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Housley claims Eaton was overruled or made obsolete by the agency’s later

decisions. Housley argues the new commissioner has allowed claims against the

Fund without the employer being named in as a party. She cites Second Injury

Fund v. George, 737 N.W.2d 141 (Iowa 2007), and an agency ruling, Grahovic v.

Second Injury Fund, File 5021995, 2009 WL 3382042 (Iowa Workers’ Comp.

Comm’n Oct. 9, 2009). We note that both cited claims involve a prior agreement

for settlement with the employer, which is not the case here.

We agree with the Fund that Eaton simply states the minimum evidence a

claimant must present to establish employer liability for the second alleged date of

injury is a “prior adjudication or settlement.” 2006 WL 2560854, at *4. We find no

error of law. Because Housley failed to establish employer liability for the second

asserted injury, her claim against the Fund failed. Discerning no error of law, we

affirm.

AFFIRMED.