WORKMEN'S COMPENSATION ‑- INDUSTRIAL INSURANCE ‑- LABOR AND INDUSTRIES
The department of labor and industries has the authority to certify an employer as a self-insurer under chapter 51.14 RCW of the industrial insurance act where the employer has retained an independent service organization to assist it in managing its industrial insurance matters.
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February 2, 1973
Honorable Gary Grant
State Senator, 11th District
Olympia, Washington 98504 Cite as: AGLO 1973 No. 21
By letter previously acknowledged you have requested an opinion of this office on a question which we paraphrase as follows:
Does the department of labor and industries have the authority to certify an employer as a self-insurer under chapter 51.14 RCW of the Industrial Insurance Act where the employer has retained an independent service organization to assist it in managing its industrial insurance matters?
We answer your question in the affirmative for the reasons set forth in our analysis.
In 1971 the state legislature amended the state industrial insurance act to give employers who are covered by the act the option of securing the payment of industrial insurance benefits by qualifying as self-insurers. See sections 26-35, chapter 289, Laws of 1971, Ex. Sess., now codified as chapter 51.14 RCW. Prior to this amendment, covered employers could secure the payment of benefits only by paying premiums into the state accident and medical aid funds. For prior law, see, section 1, chapter 80, Laws of 1965, Ex. Sess.
RCW 51.14.010, codifying section 26, supra, provides that:
"Every employer under this title shall secure the payment of compensation under this title by:
"(1) Insuring and keeping insured the payment of such benefits with the state fund: or
[[Orig. Op. Page 2]]
"(2) Qualifying as a self-insurer under this title."
RCW 51.14.020, codifying section 27, supra, as amended by section 16, chapter 43, Laws of 1972, Ex. Sess., is largely concerned with the financial requirements for a self-insurer and reads as follows:
"(1) An employer may qualify as a self-insurer by establishing to the director's satisfaction that he has sufficient financial ability to make certain the prompt payment of all compensation under this title all assessments which may become due from such employer.
"(2) A self-insurer may establish sufficient financial ability by depositing in an escrow account in a depository designated by the director, money and/or corporate or governmental securities approved by the director, or a surety bond written by any company admitted to transact surety business in this state filed with the department. The money, securities, or bond shall be in an amount reasonably sufficient in the director's discretion to insure payment of reasonably foreseeable compensation and assessments but not less than the employer's normal expected annual claim liabilities and in no event less than one hundred thousand dollars. In arriving at the amount of money, securities, or bond required under this subsection, the director shall take into consideration the financial ability of the employer to pay compensation and assessments and his probable continuity of operation. The money, securities, or bond so deposited shall be held by the director to secure the payment of compensation by the self-insurer and to secure payment of his assessments. The amount of security may be increased or decreased from time to time by the director. The income from any securities deposited may be distributed currently to the self-insurer.
"(3) Securities or money deposited by an employer pursuant to subsection (2) of this section shall be returned to him upon his written request provided the employer files the bond required by such subsection.
"(4) If the employer seeking to qualify as a self-insurer has previously insured with the state fund, the director shall require the employer to make up [[Orig. Op. Page 3]] his proper share of any deficit or insufficiency in the state fund as a condition to certification as a self-insurer.
"(5) A self-insurer may reinsure a portion of his liability under this title with any reinsurer authorized to transact such reinsurance in this state: PROVIDED, That the reinsurer may not participate in the administration of the responsibilities of the self-insurer under this title. Such reinsurance may not exceed eighty percent of the liabilities under this title."
RCW 51.14.030, codifying section 28, supra, provides for the certification of employers to be self-insurers by the director of the department of labor and industries as follows:
"The director may issue a certification that an employer is qualified as a self-insurer when such employer meets the following requirements:
"(1) He has fulfilled the requirements of RCW 51.14.020.
"(2) He has submitted to the department a payroll report for the preceding consecutive twelve month period.
"(3) He has submitted to the department a sworn itemized statement indicating that the employer has sufficient liquid assets to meet his estimated liabilities as a self-insurer.
"(4) He has submitted to the department a description of the safety organization maintained by himwithin his establishment that indicates a record of accident prevention.
"(5) He has submitted to the department a description of the administrative organization to be maintained by him to manage industrial insurance matters including:
"(a) The reporting of injuries;
"(b) The authorization of medical care;
"(c) The payment of compensation;
"(d) The handling of claims for compensation;
"(e) The name and location of each business location of the employer; and
"(f) The qualifications of the personnel of the employer to perform this service.
"Such certification shall remain in effect until withdrawn by the director or surrendered by the employer with the approval of the director. An employer's [[Orig. Op. Page 4]] qualification as a self-insurer shall become effective on the date of certification or any date specified in the certificate after the date of certification." (Emphasis added.)
The question you have raised is whether this last statute permits certification where the employer, otherwise qualified, proposes to utilize an independent service company or other organization to manage such industrial insurance matters as the reporting of injuries, authorization of medical care, payment of compensation, and the handling of claims for compensation. See, RCW 51.14.030 (5) set forth above.
We begin our analysis with recognition of a basic rule of statutory construction,i.e., that a statute is to be construed so as to give effect to the intent of the legislature, which is found, if possible, from the language utilized by the legislature. In re Renton, 79 Wn.2d 374, 376, 485 P.2d 613 (1971). However, the amendatory act here in question does not appear to contain specific language either expressly authorizing or prohibiting a self-insured employer's hiring of an outside service organization to administer claims arising under the act,1/ and, furthermore, a review of the legislative history surrounding enactment of the self-insurer provisions in 1971 has not revealed any documentation of legislative intent in this regard.
If RCW 51.14.030 (5),supra, is read alone, it would initially appear that the legislature at least anticipated that a self-insurer would maintain its own internal organization to handle any matters relating to claims (although, again, we find no words directly prohibiting an outside service organization from assisting the self-insurer). Under this statute, the employer is required to submit a description to the department of "the administrative organization to be maintained by him to manage industrial insurance matters" and, further, the self-insurer is to submit the "qualifications of the personnel of the employer to perform this service."
[[Orig. Op. Page 5]]
However, another fundamental rule of statutory construction is that a statute is to be construedas a whole and no single provision of a statute is to be read or construed in isolation. We must, therefore, look to the entire act to finally determine the meaning of its parts. See, 2 Sutherland,Statutory Construction (3d ed.), § 4703; Tacoma v. Cavanaugh, 45 Wn.2d 500, 503, 275 P.2d 933 (1954);Guinness v. State, 40 Wn.2d 677, 679, 246 P.2d 433 (1952).
In view of other terms of the statute, it appears far less clear that a self-insurer in fact is necessarily required by RCW 51.14.030 (5) to maintain only an intracompany claims administration organization. For example, in the immediately preceding language of RCW 51.14.030 (4),supra, the legislature provided that in order to be certified as a self-insurer an employer must submit "a description of the safety organization maintained by himwithin his establishment that indicates a record of accident prevention." The words "within his establishment" were, on the other hand, omitted from subsection (5)‑-although it would seem to have been a simple matter for the legislature to have included them if the restriction were intended. In view of the absence of such words from this latter subsection, it seems to us logical to read it as merely requiring the description of an organization,either within or without an employer's establishment, which is "maintained" by the employer to manage industrial insurance matters.
We do not believe that we are at liberty to "read in" the missing language‑-or to assume that the legislature intended the same meaning although the words were not repeated. InVannoy v. Pacific Power & Light Co., 59 Wn.2d 623, 369 P.2d 848 (1962) our court had before it the same type of variation in language between two adjacent sentences (page 628):
"'All wires or appliances carrying a current of less than seventy-five hundred volts,inside of any building or vault, . . . shall be sufficiently insulated, [[Orig. Op. Page 6]] or so guarded, located, or arranged as to protect any person from injury. All wires or appliances carrying a current of over seventy-five hundred volts, shall be insulated, or so located or arranged, as to protect any person from injury; . . ." (Emphasis added.)
The court ruled that the underscored phrase could not properly be read into the second sentence, stating (at page 629):
". . . But thesecond sentence of the rule applies to different wiring‑-wiring 'carrying a current of over seventy-five hundred volts,' and the words 'inside of any building or vault' are omitted. Appellant seeks to have us read in the missing words. The words may have been omitted inadvertently, as appellant contends, but it is beyond the power and function of this court to read them in. SeeIn re Baker's Estate, 49 Wn.2d 609, 304 P.2d 1051 (1956), and McKay v. Department of Labor & Industries, 180 Wash. 191, 39 P.2d 997, 97 A.L.R. 1439 (1934). The rule is neither vague nor ambiguous, nor irrational on its face. Had the legislature intended the second sentence of rule 14 to apply to inside wiring only, we presume that the rule would so state." (Court's italics.)
Further, self-insuring employers are permitted (by RCW 51.14.020 (5), above quoted) to reinsure up to eighty percent of their liability under the act with any reinsurer authorized to transact such reinsurance in this state. This statute specifically provides, however, that "the reinsurer may not participate in the administration of the responsibilities of the self-insurer under this title." Had the legislature intended by the provisions of RCW 51.14.030 (5),supra, to prohibit self-insurers from engaging outside organizations to manage industrial insurance matters, it would have been unnecessary for it to have specifically provided, in RCW 51.14.020 (5), thatreinsurers are so prohibited. Such language would be superfluous. A statute should, if possible, be so construed that no clause, sentence or word is superfluous. Danley v. Cooper, 62 Wn.2d 179, 182, 381 P.2d 747 (1963); State v. Lundquist, 60 Wn.2d 397, 403, 374 P.2d 246 (1962);Group Health Cooperative of Puget Sound [[Orig. Op. Page 7]] et al. v. King Co. Medical Society, 39 Wn.2d 586, 636, 237 P.2d 737 (1951). And, again, the specific prohibition as to reinsurers is to be contrasted to the language of RCW 51.14.030 (5).
No particular policy reasons readily appear from the terms of the statute which would demand a construction prohibiting self-insurers from hiring external claims management organizations. Employers under the act who do not self-insure are not statutorily prohibited from engaging such service organizations, and we understand that in practice many have, for years, utilized the services of outside organizations to assist in managing their industrial insurance matters. We note that there are many protections written into the act to guard against any unfair treatment of workmen or beneficiaries by self-insurers or their agents. For example, a self-insurer must report all injuries to the department (RCW 51.28.025); all determinations of permanent disability are made by the department (RCW 51.32.055 (2)); the director may at any time make inquiry into and resolve disputes where benefits are controverted or payment of compensation is opposed, stopped or changed (see RCW 51.32.190 (5) and RCW 51.32.055 (6)); the director may enact rules and regulations providing for procedures to ensure fair and prompt handling of claims by self-insurers (RCW 51.32.190 (6)); and the certification of a self-insurer can be withdrawn on a variety of grounds, including requiring employees unreasonably to resort to proceedings to obtain benefits, failure to comply with the department rules, etc. (See RCW 51.14.080.) Penalties are provided for by RCW 51.48.017 for unreasonable delay or refusal to pay benefits.
We must also give consideration to the department's administrative interpretation of the language in question. We are advised by the department that it has, since the applicable language became effective on July 1, 1971, certified some 49 self-insurers who have designated organizations independent of their own establishments to assist in managing the industrial insurance matters specified in RCW 51.14.030 (5). Where a statute is ambiguous, the contemporaneous construction placed upon it by the agency charged with its administration is entitled to considerable weight2/ in determining the legislative [[Orig. Op. Page 8]] intention. Cramer v. Van Parys, 7 Wn. App. 584 (1972); Bradley v. Department of Labor & Industries, 52 Wn.2d 780, 329 P.2d 196 (1958);State ex rel. Pirak v. Schoettler, 45 Wn.2d 367, 274 P.2d 852 (1954). Such interpretation is strengthened where (as here) the legislature has met and otherwise amended the statute without repudiating the administrative interpretation. Bradley v. Department of Labor & Industries, supra. (Chapter 51.14 RCW was amended by section 16, chapter 43, Laws of 1972, Ex. Sess.)
Finally, our research has disclosed that the language in question in RCW 51.14.030 (5),supra, is to be found, almost verbatim, in the "Rules Governing Self-Insurers of the Division of Workmen's Compensation, Department of Labor and Industrial Relations" of the state of Missouri. Rule X (1) provides:
"Every employer desiring to become a self-insurer shall make application for such privilege on a form provided by the Division of Workmen's Compensation. Each corporation or legal entity desiring to self-insure shall submit a separate application. This application shall contain: (a) A payroll report for the preceding twelve months; (b) a sworn itemized statement of the assets and liabilities of the employer; (c) a description of the safety organization maintained by the employer within his establishment for the prevention of accidents; and (d) a description of the administrative organization to be maintained by the employer to handle workmen's compensation matters, including the reporting of injuries, authorization of medical care, providing payment of compensation, and the handling of claims for compensation, together with the name and location of each such office and the qualifications of the personnel in such office to perform this service. . . ." (Emphasis added.)
We have been advised by the Missouri Division of Workmen's Compensation that that state does not prohibit service organizations, independent of the employer, from performing the described functions relating to the handling of workmen's compensation matters. Thus, it appears that the jurisdiction from which the language of our statute [[Orig. Op. Page 9]] apparently was taken interprets it in the same manner as does our state department of labor and industries.
In summary, for all of the reasons above stated, we do not view the language of RCW 51.14.030 (5) as presently precluding the department of labor and industries from certifying an employer as a self-insurer because the employer utilizes an outside service organization, other than a reinsurer, to assist in managing its industrial insurance matters.3/ Accordingly, we answer your question, as paraphrased, in the affirmative.
We trust that the foregoing will be of assistance to you.
Very truly yours,
JOHN C. MARTIN
Deputy Attorney General
*** FOOTNOTES ***
1/Compare the clearly expressed language of the Massachusetts industrial insurance law:
"No self-insurer or attorney acting in its behalf shall engage a service company or like organization to investigate, adjust, or settle claims under this chapter or to represent it in any matter before the division. Any violation of this section shall constitute reasonable cause for revocation of the license of a self-insurer under section twenty-five A of this chapter." Ch. 152, sec. 25 D, Anno. Laws of Mass. (Parenthetically, considerable research has failed to disclose other states which, by statute, forbid such activities.)
2/We recognize that the department's interpretation would be entitled to greater weight if it had existed over a longer period of time. See, 2 Sutherland,Statutory Construction (3d ed.), §§ 5104, 5107, 5108.
3/This constitutes our best judgment of how a court would rule on this question at this time. As you have indicated in your letter, if the legislature now in session desires to change this result by an appropriate amendment to the subject statute, it is free to do so.