American Home Assurance v. Liberty Mutual Fire Insurance Company

IN THE COURT OF APPEALS OF IOWA

No. 20-0769
Filed July 21, 2021

AMERICAN HOME ASSURANCE,
Plaintiff-Appellee,

vs.

LIBERTY MUTUAL FIRE INSURANCE COMPANY,
Defendant-Appellant.
________________________________________________________________

Appeal from the Iowa District Court for Polk County, William P. Kelly, Judge.

Liberty Mutual Fire Insurance Company appeals from a ruling on judicial

review reversing the workers’ compensation commissioner’s decision and

concluding American Home Assurance was entitled to reimbursement from Liberty

Mutual for benefits paid when it was not the employer’s insurance carrier.

REVERSED AND REMANDED.

Benjamin T. Erickson and Andrew D. Hall of Grefe & Sidney, P.L.C, Des

Moines, for appellant.

Aaron T. Oliver of Hansen, McClintock & Riley, Des Moines, for appellee.

Heard by Vaitheswaran, P.J., and Greer and Schumacher. JJ.
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VAITHESWARAN, Presiding Judge.

This appeal raises a question about the procedure an insurance company

must follow to obtain reimbursement from another insurer for workers’

compensation benefits inadvertently paid a claimant.

I. Background Facts and Proceedings

An employee filed a petition for workers’ compensation benefits against his

employer and its insurer, American Home Assurance (American Home), for on-

the-job injuries sustained on November 15, 2007. He later amended the petition

to allege an injury date of June 30, 2008. Following an arbitration hearing, a deputy

workers’ compensation commissioner found the injury date to be June 16, 2008.

The deputy ordered the employer and American Home to pay the claimant 125

weeks of permanent partial disability benefits. The commissioner summarily

affirmed the award. American Home paid the benefits, with its final payment

disbursed in 2013.

In 2016, the claimant filed a review-reopening petition. At that time,

American Home discovered it was not the insurer on the claimant’s date of injury

as found by the deputy or on the amended date pled by the claimant. American

Home filed an “Application and Consent Order for Payment Benefits Under Iowa

Code Section 85.21” (2016). A deputy commissioner granted the application on

January 3, 2017. The order authorized American Home to “petition, cross-petition,

or intervene in proceedings before this agency . . . to seek determination of liability

and reimbursement from another carrier.”

American Home filed a petition for contribution pursuant to Iowa Code

section 85.21, seeking reimbursement from Liberty Mutual Insurance Company
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(Liberty Mutual) “for the benefits paid to date” as well as any future benefits “found

to be due as a result of [the claimant’s] currently pending” review-reopening

petition. Liberty Mutual filed a motion for partial summary judgment, asserting “a

petitioner can only obtain contribution or reimbursement from a third party for

benefit payments made after an 85.21 order has been issued,” and because “an

85.21 order was not issued until January 3, 2017” in this case, “[b]enefits issued

prior to January 3, 2017 are not reimbursable as a matter of law.” American Home

filed a cross-motion for summary judgment, requesting a determination that Liberty

Mutual owed contribution for benefits paid and any future benefits.

A deputy workers’ compensation commissioner concluded American Home

was entitled to “contribution for benefits paid, at any time, in connection with [the

claimant’s] June 16, 2008 work injury.” On intra-agency appeal, the commissioner

sitting by delegation disagreed. The commissioner reversed that portion of the

decision requiring reimbursement for payments made before the January 3, 2017

order authorizing a reimbursement claim. The commissioner stated, “Because

American Home failed to seek an Iowa Code section 85.21 consent order prior to

the arbitration hearing, Liberty Mutual is not liable for contribution to American

Home for benefits ordered to be paid and paid pursuant to the arbitration decision.”

American Home petitioned for judicial review. The district court reversed

the agency’s final decision. The court found no “time limitation on reimbursement

actions or a carrier’s right to recovery.” The court concluded, “[W]hen an employer

or insurance carrier mistakenly paid benefits prior to the determination of the

proper date of injury, but discovered its mistake after it had made or completed
4

payments, they are entitled to reimbursement under section 85.21.” Liberty Mutual

appealed.

II. Standard of Review

Both sides agree the appeal turns on the commissioner’s interpretation of

Iowa Code section 85.21. Our review of an agency interpretation of law depends

on the level of deference we are obligated to afford the interpretation. See Iowa

Code § 17A.19(11). Specifically, “[t]he deference owed to an agency’s

interpretation of a statute depends on whether ‘interpretation of a provision of law’

has, or has not, ‘clearly been vested by a provision of law in the discretion of the

agency.’” Christensen v. Iowa Dep’t of Revenue, 944 N.W.2d 895, 899–900 (Iowa

2020) (quoting Iowa Code § 17A.19(10)(c), (l)).

Section 17A.19(10)(c) authorizes reversal where the agency action is

“[b]ased upon an erroneous interpretation of a provision of law whose

interpretation has not clearly been vested by a provision of law in the discretion of

the agency.” Section 17A.19(10)(l) authorizes reversal where the agency action is

“[b]ased upon an irrational, illogical, or wholly unjustifiable interpretation of a

provision of law whose interpretation has clearly been vested by a provision of law

in the discretion of the agency.” “Indications that an agency has interpretive

authority include rule-making authority, decision-making or enforcement authority

that requires the agency to interpret the statutory language, and the agency’s

expertise on the subject or on the term to be interpreted.” Christensen, 944 N.W.2d

at 900 (citation omitted).

The commissioner has exercised authority to interpret section 85.21 by

promulgating a rule fixing procedures an insurer must follow to obtain
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reimbursement from another carrier. See Iowa Admin. Code r. 876-3.1(11)

(prescribing the form an insurer must use “to pay weekly and medical benefits

without admitting liability and to be able to seek reimbursement from another

carrier or employer” pursuant to section 85.21). The commissioner also has filed

a host of adjudicative decisions over more than two decades construing and

applying section 85.21. See, e.g., Arreola v. Bodeans Baking Group Holding,

L.L.C., File Nos. 5040956, 5040974, 2018 WL 1042709, at *2–4 (Iowa Workers’

Comp. Comm’n Feb. 16, 2018); Dakota Truck Underwriters v. Cont’l W., Ins., File

Nos. 5028722, 5028738, 2011 WL 13186195, at *1–2 (Iowa Workers’ Comp.

Comm’n Sept. 28, 2011); Gardner v. Great River Med. Ctr., File Nos. 5018081,

5018082, 5018083, 2007 WL 1438516, at *11 (Iowa Workers’ Comp. Comm’n Apr.

26, 2007); Allied Ins. v. Fareway, Inc., File No. 1292163, 2003 WL 22283449, at

*2–3 (Iowa Workers’ Comp. Comm’n Aug. 15, 2003); Akers v. Woodmarc, File

Nos. 1124900, 5003252, 2002 WL 32125459, at *5 (Iowa Workers’ Comp. Comm’n

Feb. 6, 2002); Cambridge Integrated v. Farewav Stores, Inc., File No. 1292163,

2001 WL 34111282, at *3 (Iowa Workers’ Comp. Comm’n Dec. 21, 2001); Mehmen

v. Archer Daniels Midland, File No. 1059955, 1999 WL 33619593, at *4–6 (Iowa

Workers’ Comp. Comm’n Dec. 30, 1999); Hysell v. Golden Age Care Ctr., File Nos.

1075022, 1042236, 987874, 1999 WL 33619268, at *1 (Iowa Workers’ Comp.

Comm’n Oct. 19, 1999); Va. Surety Co. v. Kiowa Corp., File No. 1195075, 1999

WL 33619662, at *3–4 (Iowa Workers’ Comp. Comm’n Apr. 22, 1999); Hammers

v. Sentry Ins., File No. 1133618, 1999 WL 33619900, at *1–2 (Iowa Workers’

Comp. Comm’n Feb. 2, 1999); Emps. Mut. Cas. Cos. v. Van Wyngarden &

Abrahamson, File Nos.1059572, 1059573, 1059574, 1011165 (Iowa Workers’
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Comp. Comm’n June 30, 1998); Van Dyk v. Hope Haven, File Nos. 1021846,

1030780 (Iowa Workers’ Comp. Comm’n Feb 27, 1995); see also Zomer v. W.

River Farms, Inc., 666 N.W.2d 130, 132–33 (Iowa 2003) (noting that section 85.21

“give[s] the commissioner authority to resolve claims for workers’ compensation

benefits,” and “[t]he scope of this authority is comprehensive”); Second Inj. Fund

of Iowa v. Bergeson, 526 N.W.2d 543, 549 (Iowa 1995) (“Section 85.21 gives the

commissioner authority to order reimbursement where one party makes voluntary

payment that ultimately the commissioner determines should have been paid by

another party.”). Finally, the commissioner has used its expertise to establish

dates of claimants’ injuries, which control which insurer should be liable to pay

benefits. See Mike Brooks, Inc. v. House, 843 N.W.2d 885, 889 (Iowa 2014)

(stating “[t]he legislature has by a provision of law vested the commissioner with

the discretion to make factual determinations,” and concluding “the district court

correctly affirmed the agency’s factual finding that [the claimant] sustained a work-

related injury and resulting disability on” a specified date); Ruiz v. Revstone

Casting Indus., L.L.C., No. 16-1728, 2017 WL 6034128, at *4 (Iowa Ct. App. Dec.

6, 2017) (“The establishment of a date of injury is a fact-finding decision made by

the commissioner.”). The commissioner’s actions relative to section 85.21 lead us

to conclude that the commissioner is clearly vested with authority to interpret

section 85.21. Accordingly, our review is under the “irrational, illogical, or wholly

unjustifiable” standard set forth in Iowa Code section 17A.19(10)(l). But, assuming

we are wrong about the clear vesting of authority to interpret section 85.21, we will

also review the agency action under the “erroneous” standard. See Iowa Code

§ 17A.19(10)(c).
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III. Iowa Code section 85.21

Iowa Code section 85.21 states in part:

1. The workers’ compensation commissioner may order any
number or combination of alleged workers’ compensation insurance
carriers and alleged employers, which are parties to a contested
case or to a dispute which could culminate in a contested case, to
pay all or part of the benefits due to an employee or an employee’s
dependent or legal representative if any of the carriers or employers
agree, or the commissioner determines after an evidentiary hearing,
that one or more of the carriers or employers is liable to the employee
or to the employee’s dependent or legal representative for benefits
under this chapter or under chapter 85A or 85B, but the carriers or
employers cannot agree, or the commissioner has not determined
which carriers or employers are liable.
....
3. When liability is finally determined by the workers’
compensation commissioner, the commissioner shall order the
carriers or employers liable to the employee or to the employee’s
dependent or legal representative to reimburse the carriers or
employers which are not liable but were required to pay benefits.
Benefits paid or reimbursed pursuant to an order authorized by this
section do not require the filing of a memorandum of agreement.
However, a contested case for benefits under this chapter or under
chapter 85A or 85B shall not be maintained against a party to a case
or dispute resulting in an order authorized by this section unless the
contested case is commenced within three years from the date of the
last benefit payment under the order. The commissioner may
determine liability for the payment of workers’ compensation benefits
under this section.

In interpreting section 85.21, the commissioner began by noting “the

scenario created by American Home [was] not the circumstance for which Iowa

Code section 85.21 was intended.” In the commissioner’s view, the purpose of the

provision was “to encourage the voluntary payment of benefits to a claimant when

insurers dispute who is responsible.” The commissioner stated that “[i]n this case,

American Home initially accepted responsibility despite being put on alert via

claimant’s amended petition in the spring of 2011 that [the claimant’s] actual injury

date may be June 30, 2008, which was outside of [American Home’s] coverage
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period,” and it “continued to admit it was the correct insurer for the next five and a

half years, including at the arbitration hearing.” The commissioner explained that

“20 years of agency precedent” required insurers to follow a procedure under

section 85.21 of seeking orders before the arbitration hearing in order to pursue

reimbursement claims from another insurer. After canvassing that precedent,

including a decision that came to be known as the Van Wyngarden rule, the

commissioner concluded:

While not explicitly stated, it appears the Van Wyngarden rule
draws a line in the sand at evidentiary hearing in an attempt to
establish the fairest result for insurers. By the time the evidentiary
hearing is held, the insurer pled by the claimant will have had a full
opportunity to conduct discovery, depose the necessary individuals,
and investigate. By that point, the pled insurer in most cases should
reasonably know whether there is a possibility that the correct injury
date may fall outside its coverage period. Thus, allowing retroactive
reimbursement only if an 85.21 consent order is sought prior to the
evidentiary hearing protects the public policy of encouraging insurers
to render payment even if it is subsequently determined that the injury
is outside their coverage period while discouraging drawn out or
piecemeal litigation. In other words, it balances the public policy
interests and judicial efficiency.

As noted, the district court reached a contrary conclusion. The court stated,

“Section 85.21 is not constricted to only allow reimbursement proactively after

arbitration, and only for those parties who were a part of the underlying arbitration.”

The court “recognize[d]” its “interpretation [was] contrary to the cases that have

followed the Commission’s restricted interpretation of [s]ection 85.21” but stated

the “plain language” of the statute together with its purpose permitted American

Home’s reimbursement claim.

Liberty Mutual contends “the district court err[ed] in reversing over 20 years

of agency rulings by finding Iowa Code section 85.21 allows American Home to
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retroactively seek and receive contribution from [it] for workers’ compensation

mistakenly paid several years after the applicable evidentiary hearing.” American

Home counters that “Iowa Code section 85.21 grants broad powers to the

workers’ compensation agency to resolve payment disputes between insurance

carriers.” It further contends “the statute is not ambiguous, and it does not contain

the limiting language suggested by Liberty Mutual.”

Section 85.21(1) indisputably affords the workers’ compensation

commissioner authority to order “any number or combination of alleged workers’

compensation carriers” to pay benefits. These carriers must be “parties to a

contested case or to a dispute which could culminate in a contested case.” Iowa

Code § 85.21(1).1 If the carriers do not agree on liability or the commissioner “has

not determined which carriers . . . are liable,” the commissioner may “determine[]

after an evidentiary hearing, that one or more of the carriers . . . is liable to the

employee.” Id.

The commissioner’s authority under this provision is broad. Opinions cited

by American Home confirm as much. See Zomer, 666 N.W.2d at 133; United

Techs. Corp. v. Bahmler, No. 01-1512, 2003 WL 553855, at *5 (Iowa Ct. App. Feb.

28, 2003). However, the opinions do not stand for the proposition that the

commissioner is authorized to approve an insurer’s reimbursement claim without

considering when it was filed.

1 “Contested case proceedings before the workers’ compensation commissioner”
include “[d]etermination of liability, reimbursement for benefits paid and recovery
of interest.” Iowa Admin. Code r. 876–4.1(16) (citing Iowa Code section 85.21);
see also Iowa Admin. Code r. 876–4.1(1)–(2) (defining “Arbitration” and “Review-
reopening” separately under “contested case proceedings”).
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In Zomer, the issue before the court was whether the commissioner had

authority to reform a workers’ compensation policy to provide for coverage where

“a determination of insurance coverage was an essential prerequisite to a

determination of the compensability of the claimant’s injury.” 666 N.W.2d at 131.

The court concluded, “[T]he commissioner has the power to decide any issue

necessary to a determination of whether a claimant is entitled to workers’

compensation benefits.” Id. at 133. The court did not speak to the timing of

reimbursement claims.

In Bahmler, the court made the undisputed statement that section 85.21

“empowers the workers’ compensation commissioner to apportion liability between

insurance carriers and to order reimbursement to any carrier that was not liable

but was required to pay.” 2003 WL 553855, at *5. Unlike this case, both potentially

liable carriers participated in the arbitration hearing. See id. The opinion is

inapposite. Other opinions cited by American Home also are inapposite.

In Wilson Food Corp. v. Cherry, 315 N.W.2d 756, 757 (Iowa 1982), the court

stated, “Employers may generally recover payments made by mistake in workers’

compensation matters.” And the court stated, “[T]he public interest will be better

served by encouraging employers to freely pay injured employees without

adversary strictness. It is not so unfair to compel the claimant to face at an earlier

date the termination he would face later in any event so as not to penalize the

employer.” Cherry, 315 N.W.2d at 758. Both propositions were made in the

context of an employer’s attempt to obtain a credit for extra weekly benefits paid

to the claimant. Id. at 757. The opinion had nothing to do with section 85.21, which

had yet to take effect. See 1982 Iowa Acts ch. 1161, § 22 (enacting Iowa Code
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section 85.21). More to the point, neither proposition cited by the court answers

the question here—whether mistaken payments may be recouped whenever the

insurer discovers the mistake, no matter how long after the arbitration award or the

expiration of benefit payments.

In Bergeson, 526 N.W.2d at 549, the court broadly stated, “Section 85.21

gives the commissioner authority to order reimbursement where one party makes

voluntary payment that ultimately the commissioner determines should have been

paid by another party.” True. But, again, that proposition does not answer the

question facing us. There, two entities were ordered to compensate the claimant

for a second injury. Id. Both participated in the contested case proceeding. Id. at

546. The court specifically noted, “The proportion between the obligation of the

employer and the [Second Injury] Fund could not be determined until a hearing

was held and a decision rendered.” Id. at 549. That language undermines

American Home’s assertion that the commissioner “is not time bound nor limited

only to arbitration.”

There is no question that statute and case law afford the commissioner

comprehensive authority to decide reimbursement claims. The real question is

whether statute or case law affords an insurer an indefinite period of time within

which to seek reimbursement.

Section 85.21(3) states that an order “to reimburse the carriers . . . which

are not liable but were required to pay benefits” will be entered only “[w]hen liability

is finally determined.” The provision also states:

[A] contested case for benefits under this chapter or under chapter
85A or 85B shall not be maintained against a party to a case or
dispute resulting in an order authorized by this section unless the
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contested case is commenced within three years from the date of the
last benefit payment under the order.

Iowa Code § 85.21(3). The provision expressly limits the time for seeking

reimbursement.

The commissioner found that American Home made its last payment to the

claimant in May 2013. American Home did not seek a section 85.21 order until

December 2016. If we were to apply the three-year limitation period, American

Home’s application for such an order would have been untimely, but for the

claimant’s filing of a review-reopening petition within three years of the last benefit

payment. Liberty Mutual conceded the claimant’s petition opened the door for

American Home’s late filing. In short, American Home’s belated reimbursement

claim was saved by the claimant. The interpretation advanced by American

Home—an ability to seek reimbursement from another carrier five years and nine

months after receiving notice of an injury date outside its coverage period or, as

suggested at oral argument, at any time—runs afoul of the express language of

section 85.21(3).

The commissioner’s procedure for addressing reimbursement claims is

essentially a method of enforcing the statutory time limit. Per agency rule, the

employer’s insurance carrier is generally a party to the arbitration proceeding

against the claimant. See Iowa Admin. Code r. 876–4.10 (titled, “Insurance carrier

as a party,” and stating, “Whenever any insurance carrier shall issue a policy with

a clause in substance providing that jurisdiction of the employer is jurisdiction of

the insurance carrier, the insurance carrier shall be deemed a party in any action

against the insured”). The commissioner’s order implementing section 85.21
13

authorizes the insurance carrier to bring in another party “to seek determination of

liability and reimbursement from another carrier or employer for benefits paid

pursuant to this order.” (Emphasis added.) The prescribed form states2:

An agency decision filed more than two decades ago confirms that the

procedure set forth in rule 3.1(11) implements the time limit set forth in section

85.21(3). In Van Wyngarden, the commissioner stated, “Subsection 85.21(3)

allows the named insurance carrier to bring a contested case against another

insurance carrier or employer but only if the case is commenced within three years

2 Form 14–0037 was updated in November 2020, but the relevant content remains
the same.
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from the date of the last benefit payment under this order.” The commissioner

summarized the statute as follows:

Section 85.21 contemplates that sometime prior to an
evidentiary hearing the industrial commissioner may order an
insurance carrier to pay benefits due to an employee until liability is
finally determined. In the event of a later determination that the
named insurance carrier is not liable to a claimant the named
insurance carrier is entitled to an order for reimbursement from the
insurance carrier that is liable.

Id. The commissioner highlighted the purpose of requiring advance notice of

reimbursement claims as follows:

The statutory scheme of section 85.21 is set up to allow an
employer or insurance carrier to seek an order prior to payment of
benefits, and only when liability is finally determined, to seek
reimbursement for benefits the employer or insurance carrier was
“required to pay” under the order. . . . Litigation can be expected to
proceed much more expeditiously where, as the statute
contemplates, relief under section 85.21 is sought in advance, and
all parties are subsequently well aware that potential contribution is
an issue.

Id.

The commissioner articulated other purposes for early notice of

reimbursement claims in Arreola. There, an insurer sought reimbursement from

another insurer three-and-one-half years after a claimant filed arbitration petitions

and two years and nine months after the evidentiary hearing. See Arreola, 2018

WL 1042709, at *1–2. The commissioner stated:

By raising the issue of reimbursement at the time of evidentiary
hearing, the deputy is able to avoid the potential for double-recovery
by a claimant or double-payment by a party. . . .
In this case, Farmington [(the insurer seeking
reimbursement)] failed to raise the issue of reimbursement at any
time prior to evidentiary hearing. . . . A procedure was available to
Farmington whereby Farmington could maintain a right to seek
reimbursement; Farmington did not utilize the procedure.
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Id. at *4.

These purposes were elucidated in Gardner. There, one insurer sought

reimbursement from another for benefits paid. See Gardner, 2007 WL 1438516,

at *11. The issue was litigated at the arbitration hearing, along with the claimant’s

assertion that he sustained two separate injuries for which different insurers were

responsible. Id. at *8–9. The deputy commissioner found a cumulative injury date

that fell within the coverage of a single insurer and ordered that insurer to

reimburse the other. Id. The entire matter was resolved with all players having

notice and a chance to weigh in. See id. The manner of resolution had the added

benefit of affording the claimant prompt payment of benefits without double

recovery or double-payments.

The agency rule implementing section 85.21 together with agency

adjudicative decisions make sense. An insurer should have to afford the

commissioner early notice of the disputed nature of its claim so that the

commissioner can address the issue at the arbitration hearing. Cf. Iowa Code

§ 86.13(1) (requiring an employer or insurance carrier that pays an employee

weekly compensation benefits to file with the commissioner “a notice of the

commencement of the payments”). Once the commissioner authorizes impleader

of another insurer, the first insurer can seek to absolve itself of liability while at the

same time allowing the second insurer to present its own defense to the claimant’s

case before liability is established. The interpretation adopted by the

commissioner gives everyone with a stake in the case a chance to participate at

the earliest opportunity. The supreme court endorsed these purposes in
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Bergeson, where the reimbursement issue was litigated and resolved at the

arbitration hearing:

By recognizing the commissioner’s authority to order
reimbursement we further the beneficial purpose of encouraging the
voluntary payment of benefits to the employee while the case is
pending. Such an interpretation also supports the intent to reimburse
employers and insurers and to avoid double recovery expressed in
section 85.22 [(providing for “liability of others–subrogation”)].

526 N.W.2d at 549.

We conclude the commissioner’s decision limiting American Home’s

reimbursement claim to benefits paid after it sought and obtained a section 85.21

order was consistent with its precedents. See Iowa Code § 17A.19(10)(h)

(reviewing agency action to determine whether it “is inconsistent with the agency’s

prior practice or precedents, unless the agency has justified that inconsistency by

stating credible reasons sufficient to indicate a fair and rational basis for the

inconsistency”). We further conclude the commissioner’s interpretation of Iowa

Code section 85.21 was neither “irrational, illogical, or wholly unjustifiable” nor

“erroneous.” See id. § 17A.19(10)(c), (l). The district court judgment reversing the

portion of the commissioner’s decision that declined to order reimbursement for

benefits American Home paid prior to January 3, 2017, is reversed. The case is

remanded for entry of a judgment consistent with this opinion.

REVERSED AND REMANDED.