Supreme Court Guts Discovery Rule in Traumatic Event Cases; Finds that Settlement with Second Injury Fund Does Not Bar Action Against Employer

Tweeten dba Tweeten Farms v. Tweeten, 999 N.W.2d 270 (Iowa Dec. 22, 2023)

In this action reviewing the district court decision, three issues were presented:

• Does the statutory bar under section 85.39(9) of the Code preclude further benefits following a compromise settlement between claimant and the Second Injury Fund?
  
• Does the discovery rule toll the statute of limitations following amendments to section 85.26(1) of the Iowa Code?
  
• How do amendments to section 85.39(2) of the Code affect reimbursement for independent medical exams?          

The Supreme Court concluded that a compromise settlement with the Fund does not bar an action against the employer.  The Court further finds that, in actions based on a traumatic event, the legislative changes to 85.26(1) made in 2017 effectively eliminates the discovery rule.  Because of the decision on this third issue, the final issue concerning independent medical evaluations was not reached.

Claimant suffered an injury to his right arm on July 25, 2017.  Claimant continued to have intermittent pain and had physical therapy for the injury.  On April 13, 2018, claimant complained for the first time about pain in his shoulder and received a trigger point injection in the distal deltoid.  An MRI on May 22 showed a deltoid insertional tear, which was treated by surgery.  On October 16, 2018, the treating doctor related both the original injury and the deltoid injury to the original injury.  A surgeon hired by defendants concluded that the tear could not have been caused by cumulative stress, but was traumatic in nature. He concluded that the tear was not work related.  

Claimant filed a petition on January 21, 2020, asserting an injury date of February 1, 2018.  Claimant also filed an action against the Fund at this time, alleging an earlier leg injury.  Claimant later settled the injury against the Fund on a closed file basis.  The deputy found that the right elbow epicondylitis and deltoid tear arose out of the July 2017 grain bin incident.  The deputy concluded that claimant did not learn of the seriousness of his injury until April of 2018, which meant that the January 21, 2020 petition did not run afoul of the two year statute of limitations period in 85.26.  The deputy also concluded that the settlement with the Fund did not bar an action against the employer, noting that the preprinted language on the settlement agreement saying all future claims were barred was interlineated by the parties.  The commissioner held that the employer had waived this issue and otherwise affirmed the decision of the deputy.

The district court concluded that claimant's epicondylitis claim was time-barred under the revisions to 85.26(1) that occurred in 2017.  Because the deltoid insertional tear was a cumulative injury according to the court, and there was no knowledge of this injury until after January 21, 2018, this injury was not time-barred.  The Court also found that the settlement with the Fund did not bar an action against the employer and awarded claimant's independent medical evaluation.

The Supreme Court first addressed the issue of the settlement with the Second Injury Fund and its effect on a future action against an employer.  In 2005, the legislature had added language to 85.35(9) indicating that a settlement was preclusive of further actions "regarding the subject matter of the compromise."  The employer argued that once claimant entered into a settlement, the commissioner lost further jurisdiction of the action, including an action against the employer.  The Court, however, concluded that the addition of the language "regarding the matter of the compromise" meant that only the settlement that was a part of the compromise was precluded.  In the context of a Fund claim, the liability of the employer was completely separate from the liability of the Fund.  Since the Fund claim (the "subject matter of the compromise") did not involve the employer in this case, the action against the employer was not barred.  The Court did note that there could be compromise settlements between the Fund and claimant that might bar an employee from seeking benefits from the employer, without specifying what those claims might be.  Where the subject matter of the dispute concerns whether preexisting injury triggers the Second Injury Compensation Act, "a compromise settlement of that dispute does not bar the separate and distinct claim against the employer for the current injury."

The Court notes that the 2017 legislature had defined the "date of injury" for the first time in 2017 in 85.26(1).  That provision notes that the "'date of occurrence of the injury' means the date that the employee knew or should have known that the injury was work-related."  The employer argues that this change eliminated the discovery rule.  Claimant argued that the legislature merely codified the manifestation rule for cumulative injuries but left alone the discovery rule, which required the claimant to appreciate the nature, seriousness and probable compensable consequences of the injury.  The Court ruled that the general assembly had tied "commencement of the statute of limitations to a specific event, an event it has now expressly defined."  The Court concludes that the legislature "has chosen to limit the discovery rule to knowledge that an injury is work-related, not to knowledge of the compensable nature of the injury as we had previously recognized." Despite the fact that the legislative changes did not specifically address the discovery rule, the Court concluded that the effect of the language was to eliminate the discovery rule.  The Court concluded that although this was a significant change, because the arena was entirely statutory, it was bound to apply the statutes as enacted by legislative action.  No reference is made in the decision to the liberal construction of workers' compensation statutes that has long been a part of the workers' compensation arena.

The Court concludes that the district court had erred in splitting the injuries.  Claimant knew that he had a right arm injury and this injury was not presented as a cumulative injury but as an acute injury.  The Court concludes "we do not address how the revisions to section 85.26 might apply to a cumulative-type injury."  Therefore, the decision of the Court applies only to acute injuries.