Ahlers v. EMCASCO Ins. Co., 95-504
| Decision Date | 22 May 1996 |
| Docket Number | No. 95-504,95-504 |
| Citation | 548 N.W.2d 892 |
| Parties | Thereasa AHLERS, Appellee, v. EMCASCO INSURANCE COMPANY, Appellant, and Stephen Fosdick, Defendant. |
| Court | Iowa Supreme Court |
Jill M. Augustine, Des Moines, and Steve E. Ort, New London, for appellant.
Patricia Zamora of Zamora, Taylor & Walters, Davenport, for appellee.
Considered by McGIVERIN, C.J., and CARTER, LAVORATO, NEUMAN, and ANDREASEN, JJ.
This dispute concerns whether a workers' compensation insurance carrier that is entitled to be indemnified from a third-party recovery by an injured employee must pay a one-third contingent fee claim of the employee's attorney for the latter's efforts in obtaining a settlement for a sum less than the workers' compensation lien. The plaintiff, Thereasa Ahlers, received approximately $35,000 in workers' compensation benefits after being injured while driving a school bus in the course of her employment. She subsequently brought a suit against the driver of the vehicle that struck the school bus. EMCASCO Insurance Company (EMCASCO), the workers' compensation carrier for her employer, intervened in the action in order to protect its right of indemnification and lien for workers' compensation benefits paid.
The record reflects that EMCASCO had carried on substantial correspondence concerning its lien rights with the liability insurance carrier for the defendant in advance of any contact with that carrier by plaintiff's attorneys. EMCASCO claims that these efforts were the catalyst that produced the settlement involving the payment of the policy limits by defendant's insurance carrier. At the hearing on apportionment of attorney fees a representative of defendant's insurance company indicated that it had decided to tender the policy limits before suit was filed but had not communicated that decision to Thereasa or her attorney. This witness also indicated that neither Thereasa nor her attorney had been informed of the policy limits.
In asserting that EMCASCO's recovery of indemnification from the tendered policy limits should be reduced by attorney fees measured by Thereasa Ahlers' contract with her attorneys, the appellee stresses that the claim is one of indemnification and not subrogation. She argues that EMCASCO had no right in its own behalf to pursue any claim against defendant's insurance carrier unless Thereasa failed to commence an action after being notified to do so under Iowa Code section 85.22(2) (1993). Because, appellee asserts, EMCASCO is an indemnitee rather than a subrogee, it has no claim except as to the residuum of the recovery after payment of attorney fees incurred by Thereasa. Without expressly adopting appellee's legal theory, the district court found that the one-third contingent fee contract was reasonable, and fixed the amount of EMCASCO's indemnification as the tendered policy limits diminished by the amount of that fee.
EMCASCO argues that, in determining the extent to which a workers' compensation payor's indemnification rights are to be reduced by the employee's attorney fee, the court must take account of the compensation payor's own efforts to obtain reimbursement. As support for this argument, EMCASCO relies on this court's decision in Kirkpatrick v. Patterson, 172 N.W.2d 259 (Iowa 1969).
In Kirkpatrick, as in the present case, a workers' compensation insurance carrier had made payment to an injured employee of sums exceeding the policy limits of the third-party tortfeasor's liability insurance. The tortfeasor's insurance carrier offered to settle for a sum within $250 of its policy limits. The employee refused the settlement and brought suit. The workers' compensation insurance carrier intervened in the action. Later, the employee accepted settlement for a sum equaling the policy limits. The entire amount of that settlement was subject to the workers' compensation carrier's indemnity rights.
The district court in Kirkpatrick approved payment of a one-third contingent fee to the employee's attorney from the proceeds recovered. The workers' compensation insurance carrier objected. We stated the arguments as follows:
Employer's insurance carrier argues no fee should be allowed as it intervened and...
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