Whitesell v. Rapid Soft Water & Spas Inc.

#26793-r-GAS
2014 S.D. 41

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
****

JEFFREY I. WHITESELL, Claimant and Appellee,

v.

RAPID SOFT WATER & SPAS INC., Employer and Appellant,

and

ACUITY, Insurer and Appellant,

and

ZURICH NORTH AMERICA, Insurer.

****

APPEAL FROM THE CIRCUIT COURT OF
THE SEVENTH JUDICIAL CIRCUIT
PENNINGTON COUNTY, SOUTH DAKOTA

****

THE HONORABLE WALLY EKLUND
Judge

****

JAMES D. LEACH
Rapid City, South Dakota Attorney for claimant
and appellee.

CHARLES A. LARSON
Boyce, Greenfield, Pashby
& Welk, LLP
Sioux Falls, South Dakota Attorneys for employer, insurer
and appellants.

****
CONSIDERED ON BRIEFS
ON APRIL 28, 2014
OPINION FILED 07/02/14
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SEVERSON, Justice

[¶1.] Rapid Soft Water & Spas, Inc., Acuity, and Zurich North America

(collectively “Employer”) appeal the Seventh Judicial Circuit Court’s reversal of a

Department of Labor’s (Department) determination that Employer fulfilled its

reimbursement obligation under SDCL 62-1-1.3. We reverse the circuit court.

Background

[¶2.] Jeffrey Whitesell suffered a cervical injury at work. Employer

accepted a workers’ compensation claim from Whitesell but later denied

compensation based on a medical opinion that Whitesell’s injury did not remain a

major contributing cause of his complained condition. Whitesell then underwent

neck surgery costing $102,546.43. Whitesell’s health insurer (Tricare) covered the

surgery’s costs at a discounted rate of $20,201.81. After a hearing, the Department

found Employer liable for Whitesell’s condition. Employer then accepted Whitesell’s

claim and reimbursed Whitesell for his out of pocket expenses ($669.67) and Tricare

for payments it made on Whitesell’s behalf ($20,201.81).

[¶3.] Whitesell moved to have Employer pay the full medical expense

without the health insurance discount. The Department found SDCL 62-1-1.3 set

forth Employer’s obligation (“reimburse the parties not liable for all payments

made, including interest”) and concluded that Employer fulfilled it. Whitesell

appealed to the circuit court.

[¶4.] The circuit court heard oral argument and received briefs on the issue.

Ultimately, it reversed the Department’s order, ordering Employer liable for the full

medical expense billed without the health insurance discount. The circuit court’s

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decision relied heavily on Wise v. Brooks Constr. Servs., 2006 S.D. 80, 721 N.W.2d

461, and on public policy concerns. In the end, the circuit court ordered that

Whitesell recover $81,674.96 from Employer payable to Whitesell’s attorney, with

interest and costs, and that Whitesell’s attorney pay the medical providers, less

attorney’s fees.

[¶5.] Employer appeals, raising three issues: (1) Whether Whitesell has

standing to bring this claim; (2) Whether the circuit court erred by not remanding

for additional evidence regarding standing; and (3) Whether Employer is liable

under SDCL 62-1-1.3 for the medical costs before or after adjustments.

Standard of Review

[¶6.] SDCL 1-26-37 governs the standard of review, stating in part that this

Court “shall give the same deference to the findings of fact, conclusions of law, and

final judgment of the circuit court as it does to other appeals from the circuit court.”

This Court reviews de novo legal questions, Schuelke v. Belle Fourche Irrigation

Dist., 2013 S.D. 82, ¶ 11, 840 N.W.2d 669, 672; including standing, Arnoldy v.

Mahoney, 2010 S.D. 89, ¶ 12, 791 N.W.2d 645, 652; and statutory interpretation,

Fair v. Nash Finch Co., 2007 S.D. 16, ¶ 7, 728 N.W.2d 623, 628.

Analysis

[¶7.] Standing

[¶8.] Employer argues that Whitesell lacked standing to bring this claim

because the medical providers, not Whitesell, are the real parties in interest.

Whitesell argues that he has standing and that Acuity waived this issue by failing

to file a notice of review.

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[¶9.] Before this Court addresses the standing argument, it first must

address whether the issue was properly raised. According to our precedent, a

challenge to standing can be waived. In re Midwest Motor Express, Inc., 431 N.W.2d

160, 162 (S.D. 1988) (“MME, while arguing the issue of standing to the circuit court

and in its brief to this court, failed to file a notice of review with either the circuit

court (pursuant to SDCL 1-26-36.1) or this court (pursuant to SDCL 15-26A-22).

Because of MME’s failure, the issue of Rude’s standing is waived.”).

[¶10.] Here, the standing issue arguably was not applicable until after

Whitesell’s reply brief to the Department, in which he specified that the medical

providers would receive the difference between the amount billed and the amount

paid. 1 Because Whitesell argued this theory in his reply brief, Employer contends

that it did not have the opportunity to raise standing as an issue. But that did not

prevent Employer from filing a notice of review with the circuit court regarding its

standing argument. Such failure to file a notice of review precludes appellate

review of that issue. See SDCL 1-26-36.1; Midwest Motor, 431 N.W.2d at 162

(failing to file notice of review on standing waived issue for purposes of appeal); In

re Trade Dev. Bank, 382 N.W.2d 47, 49 (S.D. 1986) (standing argument not

preserved for appeal because the record did not contain a notice of review); Schuck

1. Initially in his brief to the Department, Whitesell claimed the funds would be
paid to his attorney (“Claimant moves for an order requiring that Acuity pay
the remaining $81,674.95, and that it do so through claimant’s attorney.”).
After Employer in its brief alleged an inappropriate windfall for employee,
Whitesell explains in his reply brief that Acuity owes the medical providers
the money, but that Wise, 2006 S.D. 80, 721 N.W.2d 461, says payment is
appropriately made through counsel.
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v. John Morrell & Co., 529 N.W.2d 894, 897 (S.D. 1995) (failing to file a notice of

review on statute of limitations issue waived it for purposes of appeal).

[¶11.] Nonetheless, the circuit court allowed Employer to argue the standing

issue and Whitesell did not object to the argument based on failing to file a notice of

review. 2 The circuit court, however, did not address nor rule on the standing issue

in its ruling or its findings and conclusions. That was appropriate because

Employer’s failure to file a notice of review precluded appellate review, as it does

here. As such, we deem Employer’s standing argument waived.

[¶12.] SDCL 62-1-1.3

[¶13.] Employer argues that the circuit court improperly applied SDCL 62-1-

1.3’s plain language by finding it liable for the full amount of medical expenses

before insurance adjustment. Whitesell argues the circuit court properly applied

SDCL 62-1-1.3 because an employer should not benefit by denying a claim.

[¶14.] When reviewing SDCL 62-1-1.3’s application, this Court follows the

following rules of statutory construction:

The purpose of statutory construction is to discover the true
intention of the law which is to be ascertained primarily from
the language expressed in the statute. The intent of a statute is
determined from what the legislature said, rather than what the
courts think it should have said, and the court must confine
itself to the language used. Words and phrases in a statute
must be given their plain meaning and effect. When the
language in a statute is clear, certain and unambiguous, there is
no reason for construction, and the Court’s only function is to
declare the meaning of the statute as clearly expressed. Since

2. In turn, Employer argues Whitesell waived the argument of failing to file
notice of review. Although Whitesell specifically did not raise as an issue
failing to file a notice of review, he generally raised the issue in his reply brief
by stating that Employer waived the standing issue.

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statutes must be construed according to their intent, the intent
must be determined from the statute as a whole, as well as
enactments relating to the same subject. But, in construing
statutes together it is presumed that the legislature did not
intend an absurd or unreasonable result. When the question is
which of two enactments the legislature intended to apply to a
particular situation, terms of a statute relating to a particular
subject will prevail over the general terms of another statute.

Martinmaas v. Engelmann, 2000 S.D. 85, ¶ 49, 612 N.W.2d 600, 611 (quoting Moss

v. Guttormson, 1996 S.D. 76, ¶ 10, 551 N.W.2d 14, 17).

[¶15.] SDCL 62-1-1.3 states: 3

If an employer denies coverage of a claim for any reason under
this Title or any reason permissible under Title 58, such injury
is presumed to be nonwork related for other insurance purposes,
and any other insurer covering bodily injury or disease of the
injured employee shall pay according to the policy provisions. If
coverage is denied by an insurer without a full explanation of
the basis in the insurance policy in relation to the facts or
applicable law for denial, the director of the Division of
Insurance may determine such denial to be an unfair practice
under chapter 58-33. If it is later determined that the injury is
compensable under this Title, the employer shall immediately
reimburse the parties not liable for all payments made,
including interest at the category B rate specified in § 54-3-16.

[¶16.] “The text of this statute contemplates the situation where an employer

has denied coverage of an injury, which is later found to be compensable.” Wise,

2006 S.D. 80, ¶ 37, 721 N.W.2d at 473. As in Wise, that contemplated situation

occurred here. Employer initially denied coverage. The injury was deemed

nonwork related for health insurance purposes. Tricare then paid the health

3. At the time of Whitesell’s injury in 2009, SDCL 62-1-1.3’s first clause read: “If
an employer denies coverage of a claim on the basis that the injury is not
compensable under this title due to the provisions of subsection 62-1-1(7)(a),
(b), or (c), . . . .” Appellee concedes the differing language does not change 62-
1-1.3’s analysis in this case.

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providers at their discounted rate per its agreement with the providers. The

Department then found the injury was compensable. According to SDCL 62-1-1.3’s

plain language, Employer was then required to “immediately reimburse the parties

not liable for all payments made, including interest . . . .” SDCL 62-1-1.3 (emphasis

added).

[¶17.] In this case, Employer reimbursed Tricare and Whitesell for all

payments made. Accordingly, the Department found Employer satisfied its

obligations under SDCL 62-1-1.3. We agree.

[¶18.] But the circuit court reversed the Department, exhaustively citing

Wise, 2006 S.D. 80, 721 N.W.2d 461. In Wise, the employer initially denied coverage

of employee’s injury. Employee incurred medical fees. The Department then found

the employee’s injury to be compensable. The employer sought to reimburse the

employee based on ARSD 47:03:05:05’s fee schedule. We held the employer was

“liable for the full amount of medical expenses incurred by [the employee].” Id. ¶

38. We further stated that fee payment can be made through the employee’s

attorney. Id. ¶ 39 (citing Lagge v. Corsica Co-op, 2004 S.D. 32, ¶ 38, 677 N.W.2d

569, 578).

[¶19.] Based on Wise, Whitesell argues that Employer should pay for the full

amount of medical services provided to Whitesell. But that is not what Wise stands

for, and that is not what SDCL 62-1-1.3 requires. Wise merely stated that ARSD

47:03:05:05 does not provide SDCL 62-1-1.3’s reimbursement amount. Id. ¶ 38.

Instead, SDCL 62-1-1.3 requires that the employer “reimburse the parties not liable

for all payments made, including interest[,]” which is what Employer did here.

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[¶20.] The circuit court, in its reversal, makes several policy arguments,

including improperly encouraging employers and their insurers to deny claims

when employees have insurance and making it difficult for injured employees to

obtain counsel. But workers’ compensation is a creature of statute. Caldwell v.

John Morrell & Co., 489 N.W.2d 353, 364 (S.D. 1992). “When the language in a

statute is clear, certain and unambiguous, there is no reason for construction, and

the Court’s only function is to declare the meaning of the statute as clearly

expressed.” Holscher v. Valley Queen Cheese Factory, 2006 S.D. 35, ¶ 33, 713

N.W.2d 555, 565 (quoting Martinmaas, 2000 S.D. 85, ¶ 49, 612 N.W.2d at 611).

Here, SDCL 62-1-1.3’s language is clear and the Department appropriately applied

it.

Conclusion

[¶21.] The circuit court erred by reversing the Department’s order. The

Department correctly applied the law when it determined that Employer satisfied

its reimbursement obligation under SDCL 62-1-1.3. We reverse the circuit court

and reinstate the Department’s order.

[¶22.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER, and

WILBUR, Justices, concur.

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