KATHY ANN BROWN, Employee/Appellant, v. CITY OF MINNEAPOLIS, PUBLIC WORKS, SELF-INSURED, Employer, and PRINCIPAL LIFE INS., Cross-Appellant.
WORKERS’ COMPENSATION COURT OF APPEALS
OCTOBER 27, 2011
INTERVENORS. Where the parties failed to give notice of its right to intervene to a long-term disability carrier in time for a hearing on a claim for benefits that coincided with the term of disability insurance payments, the parties’ notice to the disability carrier in later proceedings was not timely or adequate, and the disability carrier was entitled to full reimbursement from the employer of benefits it had paid the employee under its policy, with the employer entitled to a credit against benefits payable to the employee.
Determined by: Johnson, J., Pederson, J. and Stofferahn, J.
Compensation Judge: Cheryl LeClair-Sommer
Attorneys: Mark J. Freeman, Fitch, Johnson, Larson & Held, Minneapolis, MN, for the Appellant. Thomas J. Miller, Assistant City Attorney, Minneapolis, MN, for the Respondent. Todd J. Thun, Thun Law Office, Minneapolis, MN, for the Cross-Appellant.
THOMAS L. JOHNSON, Judge
The employee appeals from the compensation judge’s finding that Principal Life Insurance [Principal] was not properly notified of its right to intervene and is entitled to full reimbursement of its claim from the employer with a credit to the employer for overpayment against benefits payable to the employee. We affirm.
The facts in this case are essentially undisputed. Kathy Brown, the employee, sustained multiple personal injuries arising out of her employment with the City of Minneapolis, the employer, which was self-insured for each of those injuries. In May 2007, the employee filed a claim petition seeking temporary total and temporary partial disability benefits. The claim petition was later amended to allege a personal injury on October 23, 2007.
In October 2007, the employee applied for long-term disability [LTD] benefits under a group policy issued by Principal Life Insurance Company [Principal] to the employer. The policy provided that LTD benefits payable to disabled persons would be subject to an offset for “Other Income Sources” received by the recipient for the same period. Under the policy, “Other Income Sources” included workers’ compensation wage loss benefits. The policy further provided that, if a recipient received an overpayment of LTD benefits, Principal had the right to recover the overpayment directly from or take any other legal action against the recipient. (Principal Ex. B.)
On June 11, 2008, the employee signed a Workers’ Compensation Reimbursement Agreement, agreeing to reimburse Principal for LTD benefits paid if the employee was later paid workers’ compensation benefits for the same period for disability related to the claimed injury of October 23, 2007. (Principal Ex. G.) By letter dated July 29, 2008, Principal advised the employee and the employer that the employee’s application for long-term disability benefits had been approved. Principal then began payment of LTD benefits to the employee, retroactive to January 22, 2008. Principal ultimately paid LTD benefits in the amount of $15,576.78 for the period January 22, 2008, through April 9, 2009.
The employee’s May 2007 claim petition came on for hearing before Judge Rolf Hagen in December 2008. In a Findings and Order served and filed February 23, 2009, the compensation judge found that the employee had sustained a personal injury on October 23, 2007, as claimed. The employee was awarded temporary total disability benefits from October 23, 2007, through October 6, 2008, and temporary partial disability benefits from October 7, 2008, through the date of the hearing and continuing. Principal was not given notice of its right to intervene in this proceeding, did not participate in the proceeding, and was not awarded any reimbursement of the LTD benefits paid to the employee.
On February 25, 2009, the employee contacted Gayle Crist, Principal’s claims representative handling the employee’s LTD claim. In that conversation, the employee informed Ms. Crist that she had been awarded workers’ compensation benefits. Ms. Crist requested a copy of the judge’s Findings and Order, which the employee faxed the next day. Ms. Crist told the employee she would get back to her as to how the award of workers’ compensation benefits would affect the employee’s eligibility for LTD benefits. On March 2, 2009, Ms. Crist informed the employee that her LTD benefits would be reduced by the amount of wage loss benefits she was receiving. Two days later, on March 4, 2009, the employee’s attorney, Mark J. Freeman, told Ms. Crist that it was not known yet whether there would be an appeal from the judge’s Findings and Order. Ultimately, no appeal was taken, and the employer issued payment to the employee for temporary total and temporary partial disability benefits in the amount of $41,517.99, representing benefits payable for the period October 23, 2007, through April 11, 2009. No amounts were withheld from these payments to reimburse Principal for the LTD benefits paid by Principal to the employee during the same period.
The employee filed another claim petition in September 2009. In November 2009, the employer sought to discontinue temporary partial disability benefits, and the employee objected. On January 27, 2010, Principal was served with a Notice of Right to Intervene, but it did not do so.
The employee’s objection to the employer’s requested discontinuance of benefits was heard before Judge Hagen. In a Findings and Order served and filed May 7, 2010, Judge Hagen denied the requested discontinuance and ordered the employer to reinstate temporary partial disability benefits. The compensation judge further found that Principal had failed to intervene and that Principal’s failure materially prejudiced the interests of the parties. Accordingly, the judge ruled that any potential claim of Principal for reimbursement of LTD benefits was barred due to Principal’s failure to intervene.
The employee’s claim petition was also heard by Judge Hagen, who issued a Findings and Order on July 1, 2010, awarding temporary partial disability benefits to the employee. The judge further took administrative notice of his May 7, 2010, Findings and Order regarding Principal’s failure to intervene, finding that the prior decision was res judicata as it related to any potential claim by Principal for reimbursement.
On August 3, 2010, Principal filed an application to intervene, asserting a right to reimbursement of benefits paid to the employee between January 2008 and March 2009. By Order dated August 24, 2010, Judge Hagen denied Principal’s request to intervene. The judge further ruled that, pursuant to Minn. Stat. § 176.361, Principal was not entitled to reimbursement of benefits paid through July 1, 2010.
In September 2010, Principal filed a Motion for Reimbursement, seeking reimbursement of a claimed overpayment of LTD benefits in the amount of $15,576.78, plus statutory interest. This time, the matter was heard by Compensation Judge Cheryl LeClair-Sommer. In a Findings and Order served and filed March 28, 2011, the compensation judge found that the failure of the employee and employer to notify Principal in a timely manner of its right to intervene prior to the December 16, 2009, hearing effectively precluded Principal from obtaining a determination of its reimbursement claim. The judge further found that the May 7, 2010, and July 10, 2010, Findings and Orders and the August 24, 2010, Order were not res judicata on the issue of whether Principal’s claim for reimbursement was barred. The compensation judge ordered the employer to reimburse Principal for the full amount of its claim but allowed the employer a credit for overpayment of benefits as against the employee. The employee appeals from this decision.
Judge Hagen expressly extinguished any reimbursement claim by Principal in his Findings and Orders of May 7, 2010, and July 1, 2010, and in his August 24, 2010, Order. The employee argues that Principal’s reimbursement claim is now barred by the application of the doctrines of res judicata and collateral estoppel. As such, the employee contends, Judge LeClair-Sommer lacked jurisdiction to award reimbursement to Principal. We disagree.
The principles of res judicata are applicable in worker’s compensation proceedings. Abrahams v. University of Minn., Duluth, 61 W.C.D. 103 (W.C.C.A. 2001). The doctrine precludes litigation of issues and claims that were in fact decided in an earlier proceeding. Fischer v. Saga Corp., 498 N.W.2d 449, 450, 48 W.C.D. 368, 369 (Minn. 1993); Westendorf v. Campbell Soup, 243 N.W.2d 157, 28 W.C.D. 460 (Minn. 1976). Collateral estoppel is a limited form of res judicata, whereby a prior judgment is conclusive in a later suit between the same parties as to issues finally decided in the earlier action. Travelers Ins. Co. v. Thompson, 163 N.W.2d 289 (Minn. 1969). The Minnesota Supreme Court has held that the principles of collateral estoppel are appropriately applied in the following circumstances: (1) the issue was identical to one in a prior adjudication; (2) there was a final judgment on the merits; (3) the estopped party was a party or in privity with a party to the prior adjudication; and (4) the estopped party was given a full and fair opportunity to be heard on the adjudicated issue. Nelson v. American Family Ins. Group, 651 N.W.2d 499, 511 (Minn. 2002); Willems v. Commissioner of Pub. Safety, 333 N.W.2d 619, 621 (Minn. 1983).
Here, Principal’s claim was not asserted or litigated at any prior hearing, and there had been no judgment on the merits of its claim. Further, Principal was not a party or in privity with any party at any prior hearing, nor was Principal given a full and fair opportunity to be heard on the issue. Accordingly, none of the factors of the Nelson case have been satisfied. Moreover, as the supreme court explained, “neither collateral estoppel nor res judicata is rigidly applied,” and the focus should be on “whether its application would work an injustice on the party against whom estoppel is urged.” Johnson v. Consolidated Freightways, 420 N.W.2d 608, 613-614 (Minn. 1988). Because Principal was not given notice of its right to intervene in the first hearing in December 2008 and was not afforded the opportunity to be heard on its reimbursement claim, application of res judicata or collateral estoppel would be manifestly unfair.
There is another basis for our decision on this issue. The May 10 and July 10, 2010, Findings and Orders dealt with later claims of the employee, separate and distinct from the benefits she sought in the December 2008 hearing. Principal does not assert any right to reimbursement from the benefits at issue in either of those later proceedings. Rather, Principal claims a right to reimbursement from the benefits awarded the employee in the December 2008 hearing, the hearing from which Principal was excluded due to a lack of notice. Because there was no claim by Principal before the compensation judge in the May 2010 or July 2010 proceedings, there was no genuine conflict of tangible interests, involving Principal, that were capable of relief by judgment, in either case. Accordingly, no justiciable controversy existed, and neither the May 10 nor July 10 Findings and Order were determinative as to Principal’s rights.
The employee concedes that Principal was not provided notice of its right to intervene in the 2008 hearing as required by Minn. R. 1415.1100. The employee contends, however, that Principal had knowledge that the employee had a pending claim for workers’ compensation benefits, and it received from the employee a copy of the February 23, 2009, Findings and Order. In addition, Principal was given notice of its intervention rights on January 27, 2010. At that point, the employee asserts, Principal had sufficient information from which it knew or should have known that its reimbursement claim was not considered in the February 2009 Findings and Order. Despite having this information, Principal did not file a motion requesting a hearing within thirty days of knowledge of its exclusion, as provided by Minn. R. 1420.1850, subp. 4. Accordingly, the employee asserts, the reimbursement claim of Principal is now barred. For the following reasons, we disagree.
Minn. R. 1420.1850, subp. 4, allows a potential intervenor to request a hearing on the issue of whether the parties failed to provide it with the notice of intervention rights required by Minn. R. 1415.1100. In this case, it is undisputed that neither the employee nor the employer gave Principal notice of its right to intervene in the proceeding leading to the February 23, 2009, Findings and Order. In other words, there was no reason to conduct the hearing provided by the rule, and Principal’s reimbursement claim should not be barred for failure to request an unnecessary hearing.
Pursuant to Minn. Stat. § 176.191, subd. 3, if a dispute exists as to whether an employee’s injury is compensable under the workers’ compensation act and the employee is covered by a policy of disability insurance, the disability carrier
shall make any disability payments otherwise payable by that insurer or entity in the absence of or in addition to workers’ compensation liability. If the injury is subsequently determined to be compensable pursuant to this chapter, the workers’ compensation insurer shall be ordered to reimburse the insurer or entity that made the payments for all payments made under this subdivision by the insurer or entity, including interest at rate of 12% a year.
(Emphasis added.) The purpose behind the statute is two-fold: first, to insure the employee does not suffer unnecessarily during a dispute over primary liability; and second, to insure that the burden of economic loss for work injuries is placed on the workers’ compensation employer and insurer, not on the disability carrier. In return for undertaking this responsibility, and to minimize the administrative costs of doing so, the disability carrier is permitted to take a relatively passive role in the workers’ compensation litigation. See Brooks v. A.M.F., Inc., 278 N.W.2d 310, 31 W.C.D. 521 (Minn. 1979); Johnson v. BlueCross & BlueShield, 329 N.W.2d 49 (Minn. 1983); Lee v. Kurt Mfg. Co., 557 N.W.2d 202, 55 W.C.D. 650 (Minn. 1996).
Minn. Stat. § 176.191 provides clear evidence of legislative intent to protect the interests of disability insurers who are obligated to make disability payments whenever there is a dispute about the compensability of an injury. While Principal has a statutory right of reimbursement, it cannot institute a claim on its own; it can only intervene in an existing proceeding. But once commenced, those proceedings must be conducted in a manner so as to protect Principal’s interests. In this case, the employer was informed in July 2008 that Principal had begun payment of LTD benefits to the employee, and the employee had already signed a Reimbursement Agreement with Principal. That neither party saw fit to provide the required notice to Principal prior to the December 2008 hearing, or even to advise the compensation judge of Principal’s claim, is simply inexplicable.
An intervenor or potential intervenor that is excluded from negotiations or a hearing resulting in a final resolution of the employee’s claim is entitled to full reimbursement. Brooks, 278 N.W.2d 310, 31 W.C.D. 521; Lee, 557 N.W.2d 202, 55 W.C.D. 650; Newstrand v. Anderson Fabrics, 59 W.C.D. 243 (W.C.C.A. 1999). Considering the principles and purposes of Minn. Stat. § 176.191 together with the case law, we affirm the conclusion of Judge LeClair-Sommer that Principal’s reimbursement claim is not barred by Minn. R. 1420.1850, subp. 4. Principal is entitled to full reimbursement of its claim, plus statutory interest from the employer. The employer is entitled to a credit for overpayment of benefits against the employee.
 Principal cross-appeals from the compensation judge’s finding that receipt of a Findings and Order was sufficient notice to Principal that its intervention claim might be extinguished. Based upon our affirmance of the judge’s decision we need not address this issue.
 “The existence of a justiciable controversy is a prerequisite to adjudication. The judicial function does not comprehend the giving of advisory opinions. No controversy is presented, absent a genuine conflict in the tangible interests of opposing litigants.” Izaak Walton League of Am. Endowment, Inc., v. State, Dep’t of Natural Resources, 312 Minn. 587, 589, 252 N.W.2d 852, 854 (1977).
 Minn. R. 1420.1850, subp. 4, provides:
If a potential intervenor claims the potential intervenor was not served with a notice of the right to intervene and a settlement or decision is now final, the potential intervenor may request a hearing on the issue of whether the parties failed to provide proper notice under part 1415.1100. The potential intervenor must, within 30 days of knowledge of the exclusion, file a motion under part 1420.2250 for a hearing under subpart 8.
 And, contrary to the employee’s contention, the fact that the employee provided notice to Principal in January 2010 did not obviate the parties’ obligation to provide notice to Principal prior to the December 2008 hearing.