Worker’s Revealing Preexisting Conditions Supports ALJ’s Apportionment Decision

Frank Ferreri

Phoenix, AZ ( – An Arizona case recently illustrated how the Special Fund division may be responsible for a portion of an injured worker’s compensation when an employer knows about the worker’s preexisting conditions before the injury.

In Special Fund Division v. Industrial Commission of Arizona, No. 1 CA-IC 20-0052 (Ariz. Ct. App. 11/09/21), the court determined that an administrative law judge correctly determined that a worker’s letting his supervisor know about his preexisting conditions was enough to demonstrate the requisite knowledge on the employer’s part to warrant apportionment.


A school custodian was injured on the job, and his workers’ compensation claim was accepted. After he was treated and his claim was closed with an unscheduled permanent partial disability, the Industrial Commission of Arizona Division determined that the custodian had suffered no loss of earning capacity.

The custodian disagreed and requested a hearing as well as reimbursement for expenses he incurred in traveling for treatment.

Before the hearing, the school district and its carrier notified the administrative law judge that, due to the custodian’s pre-existing diabetes and earlier heart surgery, they were seeking apportionment of the expenses of the custodian’s disability benefits under state law.

At the hearing, the custodian testified that when he was hired, he told his supervisor that he had diabetes and had undergone heart bypass surgery. Based on this testimony, the ALJ determined that the school district knew about the custodian’s preexisting conditions before he experienced his injury. The resulting award, therefore, apportioned responsibility for payment of disability benefits between the carrier and the state’s Special Fund Division.

The Fund requested administrative review of the award, arguing that without direct evidence that the supervisor or another district representative acknowledged the custodian’s preexisting conditions, the record was insufficient to show that the district knew about them.

The ALJ denied the review request, prompting the Fund to appeal to court.


Under Arizona law, the expense of disability benefits may be apportioned between the Fund and the employer or its carrier when the employer knowingly hires an employee with a significant non-work-related physical impairment that “is of such seriousness as to constitute a hindrance or obstacle to employment,” and the employee later experiences a work-related impairment.

The court explained that it was sufficient for the custodian to tell his supervisor about his preexisting conditions for apportionment to attach to his case.

The court rejected the Fund’s argument that the information the custodian provided was inadequate without direct evidence of what the supervisor did with the information or other information that the district acknowledged that it knew of the custodian’s preexisting conditions.

“This argument ignores that a valid inference from [the custodian’s] testimony that he told [the supervisor] of his pre-existing conditions is that [the supervisor], and consequently [the district], knew of those conditions,” the court wrote. “Evidence that [the supervisor] acknowledged that he understood the meaning of [the custodian’s] statement to him would certainly make the case stronger, but its absence does not detract from the sufficiency of [the custodian’s] testimony.”

As a result, the court affirmed the ALJ’s ruling to apportion the award.