Johnson v. Weyerhaeuser Co.

Johnson, J.

We are asked to determine whether evidence of collateral benefits received by an injured worker should be barred from workers’ compensation proceedings. We hold that the collateral source rule bars such evidence.

FACTS

On June 4, 1979, Dennis Johnson was injured while in the course of his employment with Weyerhaeuser, a self-insured employer. On June 21, 1979, Johnson filed an application for workers’ compensation benefits with The Department of Labor and Industries (Department). Johnson’s application was allowed and benefits were provided. On January 24, 1990, the Department closed Johnson’s claim with time loss compensation to April 27, 1987. The Department also ordered Weyerhaeuser to pay Johnson a Category 3 permanent partial disability award for low back impairment.¹ The Department denied Johnson’s claim for total permanent disability for a psychiatric condition.

Johnson appealed his award, arguing he was permanently and totally disabled due to a cognitive impairment. Weyerhaeuser argued Johnson was not permanently and totally disabled. Weyerhaeuser asserted Johnson was not motivated to work and, in support of this argument, sought to introduce evidence he was receiving more money per month in disability benefits than he earned while he was employed. Johnson moved to exclude this evidence of receipt of collateral benefits but the industrial appeals judge (IAJ) denied the motion. The IAJ also ruled Johnson could present evidence relating to the collateral benefits issue during his case in chief without waiving his objection.

At the hearing, several physicians testified that Johnson exhibited inconsistent or unexplainable symptoms. Two of those physicians diagnosed Johnson as malingering and a third physician agreed his diagnosis was consistent with a diagnosis of malingering. Testimony regarding specific amounts of money that both Mr. and Mrs. Johnson received from collateral sources was also elicited from some of the physicians and from Mrs. Johnson’s former employer.

The IAJ issued a proposed decision and order reversing the Department’s order and directing Weyerhaeuser to: (1) allow Johnson’s psychiatric condition as causally related to his industrial injury; (2) pay for treatment of that condition; (3) pay time loss compensation for the period of April 27, 1987 until July 26, 1988; and (4) pay a Category 2 permanent partial disability award for a mental condition.² Weyerhaeuser appealed the IAJ’s decision to the Board of Industrial Insurance Appeals (Board). The Board reversed the IAJ’s decision and reinstated the Department’s order. In re Dennis R. Johnson, Board of Indus. Ins. Appeals No. 90 1282 (1992).

Johnson obtained review by the Lewis County Superior Court, renewing his objection to the introduction of evidence of collateral benefits. The court overruled the objec-. tion and the jury returned a verdict affirming the Board’s findings. Johnson appealed to the Court of Appeals, Division Two, which affirmed the superior court’s decision. Johnson v. Weyerhaeuser Co., 84 Wn. App. 713, 930 P.2d 331, review granted, 132 Wn.2d 1001 (1997). Johnson then petitioned for discretionary review here. We granted his petition.

ANALYSIS

Johnson argues that evidence of payments he and his wife received from various outside sources should have been barred by the collateral source rule. The common-law collateral source rule allows an injured party to recover compensatory damages from a tort-feasor without regard to payments the injured party received from a source independent of the tort-feasor. See Stone v. City of Seattle, 64 Wn.2d 166, 172, 391 P.2d 179 (1964). In the context of personal injury actions, the collateral source rule has been the rule in Washington for 85 years. See Heath v. Seattle Taxicab Co., 73 Wash. 177, 186, 131 P. 843 (1913); Ciminski v. SCI Corp., 90 Wn.2d 802, 804-05, 585 P.2d 1182 (1978). See also Boeke v. International Paint Co., 27 Wn. App. 611, 618, 620 P.2d 103 (1980) (“We agree that the rule of strict exclusion represents the better view”); accord Sutton v. Shufelberger, 31 Wn. App. 579, 583, 643 P.2d 920 (1982).

The issue here is whether there exists such a significant difference between personal injury actions and workers’ compensation proceedings that the collateral source rule should not apply in workers’ compensation proceedings. In this case, Division Two of the Court of Appeals felt that such a difference exists and held the collateral source rule is inapplicable in workers’ compensation proceedings when evidence of collateral benefits is offered to show the plaintiff is malingering. The Court of Appeals reasoned that because “juries in industrial insurance appeals do not determine the amount of damages, the risk that evidence of collateral benefits will be used to improperly reduce damages is slight.” Johnson, 84 Wn. App. at 718-19.

We do not agree this distinction requires abandonment of the collateral source rule. First, workers who are injured in the course of their employment generally do not have the option to bring a personal injury lawsuit. Instead, the injured worker obtains compensation under the Industrial Insurance Act, Title 51 RCW (Act).³ The Act states:

The state of Washington . . . declares that all phases of the premises are withdrawn from private controversy, and sure and certain relief for workers, injured in their work, and their families and dependents is hereby provided regardless of questions of fault and to the exclusion of every other remedy, proceeding or compensation, except as otherwise provided in this title; and to that end all civil actions and civil causes of action for such personal injuries and all jurisdiction of the courts of the state over such causes are hereby abolished, except as in this title provided.

RCW 51.04.010 (emphasis added). We have previously recognized the change in the common law brought about by the Legislature’s enactment of the Industrial Insurance Act and that the Act is remedial in nature and “is to be liberally applied to achieve its purpose of providing compensation to all covered persons injured in their employment.” Sacred Heart Med. Ctr. v. Carrado, 92 Wn.2d 631, 635, 600 P.2d 1015 (1979).

To deny application of the collateral source rule in workers’ compensation proceedings on the basis that such proceedings are distinct from regular personal injury proceedings does a particular injustice to the injured worker who, in most instances, is restricted by the Act from bringing a standard personal injury action where the collateral source rule would apply to liar evidence of collateral source payments. Wheeler v. Catholic Archdiocese, 65 Wn. App. 552, 570-71, 829 P.2d 196 (1992) (“[workers’ compensation benefits include compensation for lost wages; they literally take the place of damages in a personal injury action against any employer, which damages would include lost wages”), rev’d on other grounds, 124 Wn.2d 634, 880 P.2d 29 (1994).

Second, simply because the fact finder in a workers’ compensation action determines the worker’s level of disability and not the specific monetary award does not remove the risk that evidence of monetary amounts the claimant has received from collateral benefits will be misused, particularly when the proceedings may eventually reach trial de novo in superior court. This risk of misuse of the evidence is one of the foundations of the collateral source rule. Furthermore, the risk is fundamentally the same in both personal injury actions and workers’ compensation proceedings. This is true because at any stage of a workers’ compensation proceeding, the trier of fact could use evidence of collateral source benefits to determine that the claimant does not need the award and, therefore, is not disabled.⁴ The only existing adequate protection to eliminate this risk is the collateral source rule.

In Franks v. Department of Labor & Indus., 35 Wn.2d 763, 215 P.2d 416 (1950), we recognized that the fact finder in workers’ compensation proceedings is highly susceptible to prejudice when evidence of monetary figures is brought before it. In Franks, the fact finder rendered a verdict in favor of a claimant in an action under the workers’ compensation act. The Department moved for a new trial arguing, among other things, that a jury instruction which divulged to the jury the actual monetary figure of the award sought by the claimant was erroneous. We stated:

We believe that the mention of past or present permanent disability awards, or claimed awards, in terms of money, is confusing to the jury, whose sole function is to determine disability in terms of physical condition. . . . Even if the jury properly understands its function, the mention of dollars injects a consideration foreign to the determination of physical condition.

Franks, 35 Wn.2d at 771-72 (emphasis added); accord Diesso v. Department of Labor & Indus., 36 Wn.2d 58, 62, 216 P.2d 752 (1950) (“[t]he industrial insurance act is not one designed to award full compensation to each individual for all such damages as such individual would be entitled to in his peculiar circumstances”) (quoting Foster v. Industrial Ins. Comm’n, 107 Wash. 400, 402, 181 P. 912 (1919)).

In arguing the Court of Appeals erroneously affirmed the trial court’s decision, Johnson relies on the United States Supreme Court’s decision in Eichel v. New York Cent. R.R., 375 U.S. 253, 84 S. Ct. 316, 11 L. Ed. 2d 307 (1963). In that case, the plaintiff sued his former employer, the New York Central Railroad, under the Federal Employers’ Liability Act (FELA) for damages for a permanently disabling injury. During the trial, the Railroad attempted to introduce evidence that the plaintiff was receiving $190 per month in disability pension payments under the Railroad Retirement Act of 1937. The Supreme Court held that evidence of the disability payments is inadmissible as to the extent and duration of the plaintiff’s disability or on the issue of malingering. In so holding, the Supreme Court stated:

Insofar as the evidence bears on the issue of malingering, there will generally be other evidence having more probative value and involving less likelihood of prejudice than the receipt of a disability pension. ... It has long been recognized that evidence showing that the defendant is insured creates a substantial likelihood of misuse. Similarly, we must recognize that the petitioner’s receipt of collateral social insurance benefits involves a substantial likelihood of prejudicial impact.

Eichel, 375 U.S. at 255 (emphasis added) (footnotes omitted). We find the reasoning of Eichel persuasive.

Weyerhaeuser, however, relies on Ladley v. Saint Paul Fire & Marine Ins. Co., 73 Wn.2d 928, 442 P.2d 983 (1968), a case we decided after Eichel where we held that plaintiff’s introduction of evidence that he was receiving collateral benefits was relevant to the plaintiffs argument that he was not malingering. Ladley, 73 Wn.2d at 934. Weyerhaeuser asserts that under Ladley, if evidence of collateral benefits is admissible to show the plaintiff was not malingering, then the same evidence is admissible to show the plaintiff was malingering. Weyerhaeuser argues that “by deciding the case of Ladley, after Eichel [this court] was clearly declining to expand a limited rule in a specific federal statutory act addressing damages in railroad actions to litigation outside of the limited parameters of FELA.” Answer to Pet. for Review at 16.

Ladley, however, is not instructive. In Ladley we did not discuss the prejudicial nature of collateral source benefits evidence where it is the defendant attempting to introduce such evidence against the claimant. The fact that a claimant may offer evidence of collateral benefits and thus open the door for the defendant’s use of such evidence is significantly distinct from a defendant’s introducing such evidence to attack the claimant’s motivation to work. That a claimant chooses not to invoke the protections of the rule does not require the conclusion that the defendant is entitled to eliminate the rule for his or her purposes. Ciminski, 90 Wn.2d at 806-07 (“[T]he real question is not whether there is a windfall, but rather who is to get it. As between an injured plaintiff and a defendant, we have no hesitation in saying that the former is entitled to prevail.”).

Additionally, Weyerhaeuser argues it was entitled to introduce evidence demonstrating that the total amount of Johnson’s social security disability, Weyerhaeuser retirement, and time loss compensation benefits was higher than the wages he earned while he was employed in order to “attack his [Johnson’s] credibility concerning his statement that he had ‘just barely . . . enough money to five on or get by’ and his statements concerning his wife’s income . . . .” Answer to Pet. for Review at 4 (quoting Trial Tr. at 64 (Sept. 7, 1990)).

As the United States Supreme Court stated in Eichel, however, there is often evidence less inflammatory than collateral benefits available to the defendant on the issue of malingering. See Eichel, 375 U.S. at 255. Malingering can be established through expert and nonexpert opinion including doctor’s records, as well as videotape of the plaintiffs capacity for activity. In this case, Weyerhaeuser called numerous witnesses to testify to Johnson’s disability. The record shows Weyerhaeuser offered the testimony of three doctors who concluded Johnson was malingering. A great deal of this testimony was given without regard to Johnson’s finances. The need for the evidence of Johnson’s finances was marginal at best.

Regardless, there is an inherent problem with admitting collateral benefits evidence to show malingering. By seeking admission of collateral benefits evidence to show the defendant is malingering, the defendant is attempting to show the claimant is receiving enough money from sources outside workers’ compensation benefits to satisfy the claimant’s financial needs. The very essence of the collateral source rule requires exclusion of evidence of other money received by the claimant so the fact finder will not infer the claimant is receiving a windfall and nullify the defendant’s responsibility. If evidence of collateral benefits is admitted, the message received by the fact finder is that the claimant already has enough money and, therefore, is not disabled. Johnson argues, persuasively, that use of collateral benefits evidence to show the plaintiff is malingering is “disturbing.”

It basically infers that any injured out-of-work worker that receives money from outside sources lacks motivation to return to work. The worker’s independent financial foresight has nothing to do with the degree of their [sic] disability. . . . Admission of this kind of evidence will turn workers’ compensation trials into tests of wealth and worthiness and will not promote “sure and certain relief” to injured workers.

Pet’r’s Answer to Amicus Br. at 5 (quoting RCW 51.04.010). We agree. Evidence of Mr. Johnson’s collateral benefits should have been excluded here.

Johnson also argues that evidence of collateral benefits received by his wife should not have been admitted. The Court of Appeals concluded the evidence was properly admitted because Mr. Johnson opened the door by testifying that due to Mrs. Johnson’s injury, the family did not “have as much money as [it] used to . . . .” Johnson, 84 Wn. App. at 721. Because we remand this case for a new trial, this evidence will be admissible only if Mr. Johnson opens the door to such evidence. As noted above, the collateral source rule is designed to protect injured parties. The potential prejudice of collateral benefits evidence might lead to a conclusion by the fact finder that because an injured worker’s spouse is also receiving collateral source payments, both spouses are feigning injury. Injured parties may, however, waive the protections of the collateral source rule by opening the door to evidence of collateral benefits. The trier of fact is free to make this determination upon remand.

CONCLUSION

In typical civil cases, the collateral source rule affords protection to injured parties. We hold the collateral source rule also bars evidence of collateral benefits from workers’ compensation proceedings. The same rationale we have relied upon for 85 years to bar evidence of collateral source payments in personal injury cases applies with equal force in workers’ compensation proceedings. Namely, application of the collateral source rule eliminates the possibility that evidence of collateral benefits will prejudice the fact finder in determining the claimant’s level of disability or in any other manner.

The decision of the Court of Appeals is reversed and the case remanded for further proceedings.

Dolliver, Smith, Guy, Madsen, Alexander, and Talmadge, JJ., concur.

1 A Category 3 low back impairment is defined in WAC 296-20-280.

2 A Category 2 permanent impairment for mental health is defined in WAC 296-20-340.

3 Chapter 51.24 RCW provides that an injured worker continues to have a cause of action against his or her employer or a third person not in the worker’s same employ for intentional torts as though the Industrial Insurance Act had not been enacted. See RCW 51.24.020; RCW 51.24.030. In such actions, however, the collateral source rule continues to have application.

4 Although the trial court’s review is under the de novo standard, the “trial court is not permitted to receive evidence or testimony other than, or in addition to, that offered before the Board or included in the record filed by the Board.” Sepich v. Department of Labor & Indus., 75 Wn.2d 312, 316, 450 P.2d 940 (1969); see RCW 51.52.115. “[E]ven though the trial court may rule independently on evidentiary questions, as an appellate tribunal, it can only pass upon those matters that have first been presented to the Board and preserved in the Board’s record for review.” Sepich, 75 Wn.2d at 316.