Aik Selective Self Ins. Fund v. Bush, 2000-SC-0344-DG.

• Decision Date: 21 February 2002
• Docket Number: No. 2000-SC-0344-DG.,2000-SC-0344-DG.
• Citation: 74 S.W.3d 251
• Parties: AIK SELECTIVE SELF INSURANCE FUND, Appellant, v. Mark W. BUSH; and William Dixon, M.D. Appellees.
• Court: United States State Supreme Court — District of Kentucky

Page 251

74 S.W.3d 251

AIK SELECTIVE SELF INSURANCE FUND, Appellant, v. Mark W. BUSH; and William Dixon, M.D. Appellees.

No. 2000-SC-0344-DG.

Supreme Court of Kentucky.

February 21, 2002.

Rehearing Denied May 16, 2002.

W. Kenneth Nevitt, G. Phillip Williams, Williams, Wagoner & Nevitt, Louisville, for Appellant.

William F. McMurry, McMurry & Talbott, Louisville, Teresa A. Talbott, Goshen, for Mark W. Bush.

Mikell Grafton Skinner, Clark & Grafton, Louisville, for William Dixon, M.D.

COOPER, Justice.

On June 19, 1993, Appellee Mark W. Bush was overcome by carbon monoxide while driving a forklift for his employer, Advance Distribution Services. He was subsequently treated for his injury by Appellee William Dixon, M.D. Appellant AIK Selective Self-Insurance Fund provided workers' compensation coverage for Advance Distribution and, as of July 28, 1998, had paid workers' compensation benefits to or on behalf of Bush as follows:

                $ 27,809.22 — temporary total disability
                 185,000.00 — permanent partial disability
                  26,269.51 — medical expenses
                -----------
                $239,078.73
                

The temporary total and permanent partial disability benefits were paid pursuant to an approved settlement agreement between AIK and Bush. AIK remains liable for future medical expense as they are incurred. KRS 342.020(1).

Bush filed this tort action against Dixon and others claiming, inter alia, that Dixon was negligent in providing treatment for his injury and thereby exacerbated the injury and prolonged his disability. An employer or its insurance carrier is liable for workers' compensation benefits for any aggravation of the initial injury caused by necessary medical treatment of that injury. Elizabethtown Sportswear v. Stice, Ky.App., 720 S.W.2d 732, 734 (1986). Bush was precluded by KRS 342.690(1), the so-called "exclusive remedy provision" of the workers' compensation act, from suing his employer for its negligence. However, pursuant to KRS 342.700(1), the employer's insurer, AIK, filed an intervening complaint against Dixon to recoup the workers' compensation benefits it had paid and would pay to Bush because of his injury. And, pursuant to CR 14.01 and Burrell v. Electric Plant Bd., Ky., 676 S.W.2d 231 (1984), overruled on other grounds, Dix & Assocs. Pipeline Contrs. v. Key, Ky., 799 S.W.2d 24 (1990), Dixon filed a third-party complaint for contribution against Bush's employer, Advance Distribution. The effect of the third-party complaint was to permit an apportionment of liability against the employer and deny Bush the right to recover any damages attributable to the employer's percentage of fault. KRS 411.182(4); Dix & Assocs. Pipeline Contrs. v. Key, supra, at 29-31.

Pursuant to a pre-trial motion by Bush (to which AIK did not object), the jury was not informed that Bush already had been partially compensated by the receipt of workers' compensation benefits. During the trial, however, the jury was made aware through the testimony of a physician that Bush had filed a workers' compensation claim. At Bush's request, the trial judge admonished the jury that "whether or not Mr. Bush is receiving workers' compensation is not an issue in this case. If Mr. Bush were to receive workers' compensation benefits, he would have to reimburse the provider of those benefits out of any award he may receive from this action." The trial judge repeated that admonition immediately prior to reading his written instructions to the jury.

Following deliberations, the jury returned a verdict finding that Bush had been damaged as follows:

                $  134,680.00 — Lost wages
                    26,269.51 — Past medical expenses
                   700,336.00 — Future lost wages
                   139,651.17 — Future medical expenses
                 1,000,000.00 — Pain and suffering
                -------------
                $2,000,936.68
                

The jury apportioned 25% of the fault against Dixon and 75% against Advance Distribution, thus reducing the total judgment to $500,234.17, the amount proportionate to Dixon's percentage of fault. Contrary to his admonition to the jury, however, the trial judge did not permit AIK to recoup from the judgment any amount of workers' compensation benefits it had paid to Bush. The Court of Appeals affirmed. On discretionary review, AIK asserts that it is entitled to reimbursement from the judgment of its full claim of $239,078.73, plus the entire amount of the judgment awarded for future medical expenses for which AIK remains legally liable per KRS 342.020(1). Bush asserts that the "made whole" rule applied in Wine v. Globe American Casualty Co., Ky., 917 S.W.2d 558 (1996), and Great American Insurance Cos. v. Witt, Ky. App., 964 S.W.2d 428 (1998), supports the holdings of the trial court and the Court of Appeals and precludes AIK from obtaining any part of the judgment. We conclude that AIK is entitled to recoup 25% of its payments of temporary total and permanent partial disability benefits from the judgments for lost wages and future lost wages; 25% of its payments of medical benefits from the judgment for past medical expenses (which, of course, will exhaust that portion of the judgment since all of Bush's past medical expenses have been paid by AIK); and 25% of any medical expenses which it has paid since the judgment of July 28, 1998, from the judgment for future medical expenses; from all of which must be deducted Bush's fees and expenses incurred in the prosecution of this action, to the extent such have not already been paid by Dixon; and that AIK is entitled to a 25% credit against all future medical expenses which it may pay for or on behalf of Bush for these injuries, up to a maximum of the balance, if any, of the judgment for future medical expenses.

KRS 342.700(1) provides:

Whenever an injury for which compensation is payable under this chapter has been sustained under circumstances creating in some other person than the employer a legal liability to pay damages, the injured employee may either claim compensation or proceed at law by civil action against the other person to recover damages, or proceed both against the employer for compensation and the other person to recover damages, but he shall not collect from both. If the injured employee elects to proceed at law by civil action against the other person to recover damages, he shall give due and timely notice to the employer and the special fund of the filing of the action. If compensation is awarded under this chapter, the employer, his insurance carrier, the special fund, and the uninsured employer's fund, or any of them, having paid the compensation or having become liable therefor, may recover in his or its own name or that of the injured employee from the other person in whom legal liability for damages exists, not to exceed the indemnity paid and payable to the injured employee, less the employee's legal fees and expenses.

(Emphasis added.)

I. SUBROGATION AND COMPARATIVE NEGLIGENCE.

AIK argues that KRS 342.700(1) does not limit the employer's or insurer's subrogation claim in the event of apportionment on the basis of comparative fault. There is ample authority from other jurisdictions to support that proposition. Tolar v. Caterpillar Tractor Co., 793 F.2d 654 (5th Cir. 1986) (construing Texas law); Langley v J.L. Simmons Contr. Co., 152 Ill.App.3d 899, 105 Ill.Dec. 810, 504 N.E.2d 1328 (1987); Walker v. Mlakar, 489 N.W.2d 401 (Iowa 1992); Land v. George Schmidt Co., 122 Mich.App. 167, 333 N.W.2d 30 (1982); Kelsh v. North Dakota Workmen's Comp. Bureau, 388 N.W.2d 870 (N.D.1986); Goldberg v. Workmen's Comp.App. Bd., 152 Pa.Cmwlth. 559, 620 A.2d 550 (1993); Courtright v. Sahlberg Equip. Inc., 88 Wash.2d 541, 563 P.2d 1257 (1977). There is also authority to the contrary, but premised primarily upon specific statutory provisions requiring a proportionate reduction of the subrogation claim if the injured workers' claim is reduced because of comparative fault. Herrington v. Mayo, 550 So.2d 745 (La.Ct.App.1989); Liberty Mut. Ins. Co. v. Garffie, 939 S.W.2d 484 (Mo.Ct. App.1997). In fact, the 1993 amendment of the Missouri statute, Mo.Rev.Stat. § 287.150.3, appears to have been prompted by Rogers v. Home Indem. Co., 851 S.W.2d 672 (Mo.Ct.App.1993), which interpreted the previous version of the statute as permitting full payment of the subrogation claim despite a substantial reduction of the injured worker's tort claim because of comparative fault.

What is now KRS 342.700(1) has been a part of our Workers' Compensation Act since its initial enactment in 1916. 1916 Ky. Acts, ch. 33, § 9, p. 354. The statute was originally compiled as KS 4890, then as KRS 342.055, and now as KRS 342.700(1). As originally enacted, the statute gave the right of subrogation only to the employer. A 1922 amendment extended the right to the employer's insurer. 1922 Ky. Acts, ch. 50. In Book v. City of Henderson, 176 Ky. 785, 197 S.W. 449 (1917), our predecessor Court held that under KS 4890, the employee could assert claims against both the employer and the third-party tortfeasor, albeit in different forums, but "to the extent he collects from one he may not collect from the other." Id., 197 S.W. at 451. Furthermore, "[t]he Legislature was careful to preserve to the employer the right to recover from the negligent third party anything paid to the employee under the provisions of the act...." Id, at 450.

We agree with AIK that the 1916 General Assembly did not intend that the employer's subrogation claim would be reduced because of the application of comparative negligence, for the concept of comparative negligence did not enter our common law until Hilen v. Hays, Ky., 673 S.W.2d 713 (1984). However, it was held long before Hilen that the employer's or insurer's subrogation rights were derivative of the employee's tort rights against the third-party tortfeasor, National Biscuit Co. v. Employers Mut. Liability Ins. Co., 313 Ky. 305, 231 S.W.2d 52 (1950), and that "[t]he third party may interpose all defenses against the employer or his insurance carrier that he could invoke...