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November, 2017
High court reaffirms that statute of limitations defense not always assertable against claims brought by Washington state
by Andrew Bergh

Statutes of limitation admittedly serve the legitimate purpose of protecting defendants from stale and fraudulent claims.

But let’s be honest. If you limit your practice to representing plaintiffs, wouldn’t it be nice to never have to worry about a statute of limitations defense? Interestingly, as shown by Carrera v. Olmstead, __ Wn.2d __ (2017), this is one of the benefits enjoyed by Washington state in third party claims brought by the Department of Labor & Industries (“L&I”).

Carrera v. Olmstead arises from events that took place over eight years ago.

In the summer of 2009, 19-year-old Basilio Carrera started working as a seasonal laborer for Brent Hartley Farms in Benton County. Initially, his job was to sort and pack harvested onions. When the season began, Carrera received a basic safety lecture from Sunheaven Farms LLC, a contractor providing centralized administrative and operational support, including workplace training safety and compliance, to Brent Hartley Farms and other local farms.

For unclear reasons, on Aug. 14, 2009, Carrera was given a new job inside his employer’s warehouse. His duties included sweeping the floor with a hand broom and dumping the contents of his dust pan onto a nearby conveyor belt. Although the conveyor belt was originally equipped with side guards, someone had later removed them for unknown reasons. Before starting his new job, Carrera never received any additional safety training from Sunheaven, or any advice on how to work safely in close proximity to the modified conveyor belt.

Carrera soon suffered a horrific injury. While sweeping in a crouched position next to the conveyor belt, the machine caught his right hand or sleeve, in the process severing his right hand and wrist from his forearm. After doctors at Harborview Medical Center unsuccessfully tried to reattach the limb, they medically amputated his right (and dominant) hand at the forearm level. Almost five years later, the Department of Labor & Industries classified Herrera as “totally and permanently disabled” and awarded him a pension.

Following the accident Carrera hired Thomas Olmstead, a Kitsap County lawyer, to represent his interests. Olmstead then made three mistakes. First, he filed an action for damages against Brent Hartley Farms, notwithstanding the employer’s statutory immunity from nonintentional tort liability. Second, he failed to inform L&I about the filing of the lawsuit as required by RCW 51.24.030(2). And third, he failed to name Sunheaven as a defendant.

The superior court later dismissed Carrera’s claim against his employer, presumably on the basis of its statutory immunity.

L&I – having only learned about Carrera’s claim after the order of dismissal – quickly took matters into its own hands. After identifying Sunheaven as a potentially liable third party, L&I first sent notice to Carrera that it would pursue a third party claim if he did not. When Carrera failed to respond within 60 days, this meant his tort claim was statutorily assigned to L&I under RCW 51.24.050 – so the department then brought a legal malpractice claim against Olmstead in Kitsap County Superior Court. Later, L&I amended its complaint to add a third party claim against Sunheaven. By this point in time, however, the three-year statute of limitations applicable to tort claims (RCW 4.16.080) had long since run.

Time for a short digression to discuss RCW 51.24.050, which sets forth how amounts recovered by L&I in a third party claim should be distributed. It’s essentially a four-part formula. First, the department is paid its reasonable litigation expenses. Second, the injured worker is paid 25 percent of the recovery. Third, the department is paid the “compensation and benefits” already paid to the injured worker. And fourth, any “remaining balance” is also paid to the injured worker.

In Carrera’s case, L&I calculated that its statutory lien for Carrera’s past and future benefit payments was just over $788,000. The department’s third party claim against Sunheaven sought to recover not only this amount, however, but also Carrera’s noneconomic damages (e.g., past and future pain and suffering). Given the severity of his injuries, this is clearly not an insubstantial sum. (Besides the partial amputation of his right arm, Carrera reportedly has ongoing pain and discomfort, and also has been diagnosed with posttraumatic stress disorder.)

Against this background, Sunheaven eventually moved for partial summary judgment with the clear goal of limiting its potential exposure.

First of all, the defendant argued that since the statute of limitations had run on Carrera’s tort claim, L&I’s attempt to recover his noneconomic damages was likewise time barred. Second, while conceding that damages were recoverable on the assigned claim, Sunheaven contended that the department’s recovery was capped by the expected amount of its lien – and therefore couldn’t exceed $788,000.

Although the trial court sided with Sunheaven, the Court of Appeals reversed in a published opinion. For particulars, please see Carrera v. Olmstead, 196 Wn. App. 240 (2016). Thereafter, our high court granted review.

In a nutshell, Sunheaven did itself no favors by seeking review. To the contrary, writing two months ago for a unanimous court, Justice Debra Stephens comprehensively explained how the trial court had erred by granting Sunheaven’s motion for partial summary judgment.

According to Justice Stephens, the high court granted review to address two questions:

Whether third party claims assigned to L&I under RCW 51.24.050 are exempt from the relevant statute of limitations.

Whether Washington’s Industrial Insurance Act (chapter 51.24 RCW) authorizes L&I to seek damages beyond the amount necessary to reimburse the Fund (i.e., the pool of employers’ contributions collected and used by L&I to pay benefits to injured workers).

At the outset, the opinion in Carrera provides a concise but thorough overview as to how the Act removes most workplace injury claims from Washington’s “common law tort regime,” while preserving third party liability. Though beyond the scope of this column, this section of the opinion is must reading for those who want a quick primer in this area of the law.

With regard to the first issue, Justice Stephens observed how statutes of limitation historically haven’t been applied to states without their explicit consent. This reflects the view, she continued, “that when government executes its duties to protect the public, the concerns associated with stale claims are outweighed by public policy considerations.”

In Washington, the relevant statute is RCW 4.16.160. On the one hand, this law states that the limitation periods prescribed in chapter 4.16 RCW apply to actions brought by most governmental entities in the same manner they apply to actions brought by private parties. In the case of Washington state, however, the statute contains a huge proviso that “there shall be no limitation to actions brought in the name or for the benefit of the [S]tate.”

So when is an action brought for the “benefit” of the State? Good question. Under well-established precedent, observed the Carrera court, an action is for the benefit of the State when the State acts in its “sovereign” – as opposed to “proprietary” – capacity. There is an exception to this general rule, however, when the State is a “mere formal plaintiff” – e.g., where the State is a plaintiff “merely to form a conduit [between private litigants].” In that situation, a statute of limitations defense may be asserted because the State instead acts in a proprietary capacity.

Predictably, this was the tack taken by the defense. Under Sunheaven’s view of the world, the third party action brought by L&I fell into the “proprietary” category because Carrera stood to benefit from the suit.

But our high court respectfully disagreed.

To determine whether an action is sovereign versus proprietary, said the justices, one “must look to the ‘character or nature’ of the action” (emphasis original). As long as the lawsuit’s purpose, at least in part, is to benefit the State or protect the public, the State is necessarily acting in its sovereign capacity. On this basis, the Carrera court concluded as follows:

In sum, L&I’s RCW 51.24.050 claim against Sunheaven is for the shared benefit of Carrera and the State. The State benefits from reimbursing the Fund, enforcing workplace safety laws, and deterring future negligence. Because the public stands to gain some benefit from L&I’s third party action, the action is “for the benefit. . . .of the state” under RCW 4.16.160, regardless of personal benefit to Carrera. We hold that Sunheaven may not assert the statute of limitations as an affirmative defense to L&I’s third party action.

Having determined that a statute of limitations defense was unavailable as a matter of law, Justice Stephens next focused on the issue relating to damages. Sunheaven’s argument was essentially twofold. First, that L&I could only recover economic damages in a third party action brought under RCW 51.24.050. And second, that L&I’s recovery should be capped at an amount equivalent to L&I’s total lien, which in Carrera’s case was $788,000.

Sunheaven lost on both counts.

First of all, the Carrera court said Sunheaven had incorrectly interpreted RCW 51.24.050. Under RCW 51.24.030, which authorizes an injured worker to bring a third party action, “recovery” is broadly defined to “include[] all damages except loss of consortium.” Although RCW 51.24.050, which only relates to third party actions assigned to L&I, contains no like definition, this distinction was inconsequential:

There is no alternative definition of “recovery” in RCW 51.24.050, nor is there any indication in the text that the act of assignment constrains the single cause of action. The statutory language is unambiguous: L&I may recover all damages except loss of consortium.

As for the argument that L&I’s recovery should be capped by the amount of L&I’s total lien, Justice Stephens concluded that this would “illogical.” She elaborated as follows:

Simply put, RCW 51.24.050(4) divides L&I’s recovery into two categories of recovery it can keep (legal fees and benefits paid) and two categories it cannot keep (25 percent of the initial award and any “remaining balance”). If L&I were not authorized to recover funds it cannot keep, there would be no reason for the legislature to instruct L&I how to dispose of that recovery. Furthermore, the legislature explicitly authorized L&I to reimburse the Fund when either the worker or the State recovers damages from a third party. [Citation omitted.] By capping L&I’s recovery at the lien amount (i.e., the exact amount required to fully replenish the Fund) before costs and the worker’s 25 percent are deducted, Sunheaven’s interpretation would guarantee that the Fund would never be fully reimbursed. This interpretation is unsupported by the statue and contrary to legislative intent – we decline to adopt it.

While the legal disputes in Carrera v. Olmstead primarily concern L&I and Sunheaven, let’s not forget that Basilio Carrera – now 27 years old – remains the named plaintiff. Should L&I ultimately prevail on its assigned third party claim and recover all (or even most) of his economic and noneconomic damages, Carrera – at minimum – will receive his 25 percent share of the award as mandated by RCW 51.24.050. All in all, not a bad outcome for an injured worker whose tort claim would be time barred if pursued solely by him.

Andrew Bergh, WSTLA EAGLE member, former prosecutor and insurance defense attorney, now limits his practice to plaintiff's personal injury cases, including professional liability and insurance bad faith.