United States Fidelity & Guaranty Co. v. Plovidba

• Decision Date: 02 March 1981
• Docket Number: Civ. A. No. 78-C-257.
• Citation: 508 F. Supp. 866
• Parties: UNITED STATES FIDELITY & GUARANTY COMPANY, Plaintiff, v. Jadranska Slobodna PLOVIDBA, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

508 F. Supp. 866

UNITED STATES FIDELITY & GUARANTY COMPANY, Plaintiff, v. Jadranska Slobodna PLOVIDBA, Defendant.

Civ. A. No. 78-C-257.

United States District Court, E. D. Wisconsin.

February 20, 1981.

As Amended March 2, 1981.

David W. Neeb, Ross F. Plaetzer, Milwaukee, Wis., for plaintiff.

Joseph V. McGovern, Chicago, Ill., and Ellis R. Herbon, Milwaukee, Wis., for defendant.

DECISION AND ORDER

REYNOLDS, Chief Judge.

This is a maritime personal injury action arising under the Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C. § 901. Patrick J. Huck, a longshoreman-employee of the stevedore Hansen Seaway Service, Ltd., was killed on November 16, 1976, while working aboard the M/V Makarska, a vessel owned by the defendant Jadranska Slobodna Plovidba. His widow Sheila M. Huck and his son Matthew P. Huck receive compensation benefits payable by Hansen's insurer, United States Fidelity and Guaranty Corporation, pursuant to an award made in a compensation order. See 33 U.S.C. § 933(b).

In the course of the trial the question has arisen whether testimony may be received and, in the event the defendant is held liable, damages assessed against it for injuries sustained by Patrick J. Huck's widow and son as a result of his death. The plaintiffs have agreed that Sheila M. Huck and Matthew P. Huck should be dropped from the lawsuit as named parties in accordance with 33 U.S.C. § 933(b), but they maintain that any damages sustained by Sheila M. Huck and Matthew P. Huck can be compensated in a lawsuit brought solely in the name of the insurer. Plaintiffs have also agreed that Hansen Seaway Service, Ltd. should be dropped from the suit as a named plaintiff for reasons not relevant to this memorandum. The defendant maintains the only damages which may be awarded in this action are for expenses incurred by the insurer and past and future workers' compensation payable by it to Sheila and Matthew Huck.

Section 933 of Title 33 U.S.C. provides in part:

"(a) If on account of a disability or death for which compensation is payable under this chapter the person entitled to such compensation determines that some person other than the employer or a person or persons in his employ is liable in damages, he need not elect whether to receive such compensation or to recover damages against such third person.

"(b) Acceptance of such compensation under an award in a compensation order filed by the deputy commissioner or Board shall operate as an assignment to the employer of all right of the person entitled to compensation to recover damages against such third person unless such person shall commence an action against such third person within six months after such award.

"(c) The payment of such compensation into the fund established in section 944 of this title shall operate as an assignment to the employer of all right of the legal representative of the deceased (hereinafter referred to as `representative') to recover damages against such third person.

"(d) Such employer on account of such assignment may either institute proceedings for the recovery of such damages or may compromise with such third person either without or after instituting such proceeding."

It is not disputed that Sheila and Matthew Huck did not commence suit within six months after they received compensation under an award in accordance with 33 U.S.C. § 933(b). It is also not disputed that had they commenced suit within that time they could have recovered damages if liability were established for such items as loss of Patrick Huck's past and future wages and loss of his society and companionship. American Export Lines, Inc. v. Alvez, 446 U.S. 274, 100 S.Ct. 1673, 64 L.Ed.2d 284 (1980); Doca v. Marina Mercante Nicaraguense, S.A., 634 F.2d 30, 1980 AMC 2401 (2d Cir. 1980). What is disputed is whether, once their right to sue a third party is assigned to the employer or its insurer, their damages can be compensated in an action brought by the employer or insurer against a third party.

Prior to 1959, an injured employee or the legal representative of a deceased employee was required to elect between a workers' compensation award and a suit against a third party. In 1959, 33 U.S.C. § 933 was amended to remove the need for election. The Senate Report on the amendment noted that prior law had imposed a hardship on an injured employee in two ways, first, by forcing him frequently to accept compensation in lieu of filing suit due to the need to meet expenses prior to the time a suit could be heard and, second, by allowing unscrupulous persons to "stake" an injured employee in pursuing a suit and in effect to purchase the claim. The Senate Amendment contains the following comment on the purpose of the amendment:

"The bill as amended by the committee would revise section 33 of the act so as to permit an employee to bring a third-party liability suit without forfeiting his right to compensation under the act. The principle underlying the modification of the law made by this bill, is embodied in most modern State workmen's compensation laws. The committee believes that in theory and practice this is sound approach to what has been a difficult problem. As embodied in the committee amendment, the principle would be applied with due recognition of the equities and rights of all who are involved.

Although an employee could receive compensation under the act and for the same injury recover damages in a third-party suit, he would not be entitled to double compensation. The bill, as amended, provides that an employer must be reimbursed for any compensation paid to the employee out of the net proceeds of the recovery. In the event that an employee does not elect to sue for damages within 6 months of the compensation award the employer is assigned the cause of action. In the event that the employer institutes proceedings and makes a recovery, the employee receives four-fifths of the amount after necessary expenses, approved by the Deputy Commissioner, and all benefits and compensation have been deducted. Thus by giving the employer a reasonable (one-fifth) share in the net recovery an incentive is provided not to compromise a suit only for the amount of compensation but to protect the interests of the employee as much as possible."

(Emphasis added.) Senate Report No. 428, 1959 U.S. Code Congressional and

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