Allen v. Texaco, Inc.

Decision Date07 April 1975
Docket NumberNo. 74--1902,74--1902
Citation510 F.2d 977
PartiesJimmy ALLEN, Plaintiff, v. TEXACO, INC., Defendant-Appellee, North-West Insurance Company, Intervenor-Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

Abraham Gerber, Gen. Counsel, New Orleans, La., for intervenor-appellant.

Robert M. Contois, Jr., Robert B. Acomb, Jr., New Orleans, La., for Texaco, Inc.

Richard C. Baldwin, New Orleans, La., for American Casing Crews.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before BELL, AINSWORTH and RONEY, Circuit Judges.

RONEY, Circuit Judge:

This is a case of first impression. An employee was injured on the job and received compensation benefits under the Longshoremen's and Harbor Workers' Compensation Act. The compensation carrier had waived rights of subrogation as to any claim the employee might have against a third party who caused the injury. The employee sued the third party and a settlement was reached. Does the waiver of subrogation rights by the compensation carrier bar a lien against and participation in the proceeds of the settlement between the employee and the third party, to which the carrier would otherwise be legally entitled? The district court held there to be a bar and dismissed the carrier's claim. The compensation carrier argues that the waiver only bars it from filing a suit against the third party as subrogee of the employee's claim, but does not bar its lien against the suit proceeds or settlement proceeds where the employee pursues the claim against the third party and receives a settlement or judgment. We decide the workmen's compensation carrier waived any claim to the settlement between the third party and the employee. We affirm the district court.

In 1972, Texaco, Inc. and American Casing Crews, Inc. entered into a miscellaneous work agreement whereby American, as an independent contractor, was to furnish labor and equipment to Texaco at the latter's request. American was also required by the specific terms of the agreement to procure from its insurer, North-West Insurance Company, a waiver of subrogation rights against Texaco, or to have Texaco named in its insurance policy as an additional co-assured. American chose the former alternative and, in consideration of an additional premium, obtained from North-West the required waiver of subrogation rights against Texaco.

Jimmy Allen, the original plaintiff in this matter, was employed by American and sustained an accidental injury on August 16, 1972, while working aboard Texaco's movable drilling barge. North-West, as the compensation insurer of American, paid Allen $2,660 in compensation benefits and $230 for medical bills on American's behalf in fulfillment of the employer's responsibility under the Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C.A. § 901 et seq. The payments by North-West were made voluntarily, without a formal award of compensation benefits being entered by the Department of Labor.

Allen then brought this action against Texaco for damages. North-West sought and obtained permission from the district court to intervene as plaintiff 'in order to assert a claim of subrogation.' It asserted a lien on any recovery Allen might obtain for the amount of compensation payments it had advanced and for the medical expenses it had incurred. Texaco, in turn, impleaded American as a third-party defendant seeking indemnity under the provisions of the contract between Texaco and American.

Before trial, Texaco reached a settlement agreement with Allen and with American. Pursuant to that agreement, Texaco paid Allen $15,000, and further agreed to pay him any additional amount which might be owed on the subrogation claim asserted by North-West. American agreed to reimburse Texaco for a portion of the amount which was to be paid to Allen. Thus, the only issue before the district court was whether or not North-West's waiver of subrogation rights against Texaco affected its compensation lien claim. The district court, after reviewing the depositions, stipulations, documents and memoranda submitted, rendered an opinion in which it held that North-West was barred by the specific waiver of subrogation in favor of Texaco in the insurance policy.

In the main policy issued by North-West, under the heading 'Conditions', it is stated:

12. Subrogation: In the event of any payment under this policy, the company shall be subrogated to all rights of recovery therefor of the insured and any person entitled to the benefits of this policy against any person or organization, and the insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. The insured shall do nothing after loss to prejudice such rights.

This provision was modified by Endorsement No. 13 of the policy which provides:

In consideration of an additional premium as shown above ($103.00), based on 10% of the premium developed in operations performed by the assured for TEXACO, INC. and subject to a minimum premium of $100.00, it is agreed that the Company hereby waives its rights of subrogation of claims coming under this policy against: TEXACO, INC.

Throughout the course of this litigation, North-West has asserted that the language in Endorsement No. 13, along with the testimony of the underwriter, demonstrates that no waiver of North-West's right to join a lawsuit to protect its compensation lien was requested, nor was such a waiver given. What was given, North-West argues, was a waiver of its right to sue Texaco under 33 U.S.C.A. §§ 933(b) and (h). These sections provide, in effect, that if a compensation carrier makes payments under a formal order and if the claimant does not institute an action against a third party tortfeasor within six months, then the carrier shall have the right to sue the third party. The parties agree on the validity of the waiver but do not agree on whether the rights waived include the right to proceed against a claimant's recovery fund in a suit against Texaco as a third party tortfeasor.

Section 33(h) of the Longshoremen's and Harbor Workers' Act, 33 U.S.C.A. § 933(h), provides that the compensation insurance carrier shall be subrogated to all the rights of the employer under § 933 if it has assumed the payments of compensation to the injured employee:

(h) Where the employer is insured and the insurance carrier has assumed the payment of the compensation, the insurance carrier shall be subrogated to all the rights of the employer under this section.

Among the rights of the employer to which the carrier is subrogated is the right provided in section 33(b) of the Act, 33 U.S.C.A. § 933(b), for an assignment of an employee's claim against a third party to his employer in those instances where payments are received pursuant to a compensation award:

(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.

See 33 U.S.C.A. §§ 919, 921. Section 33(e) of the Act, 33 U.S.C.A. § 933(e), governs the distribution of the recovery when an employer or a subrogated insurer institutes a § 933(b) action, and specifically provides for reimbursement for all compensation and medical payments advanced.

There is no statutory counterpart of § 933(e) where payments are made to an employee without a formal award of compensation being entered. The subrogation right where there is no award is a judicial creature with the statute as a rationale. In cases such as this one, where the employee himself sues the third party tortfeasor, the courts have long recognized a right of subrogation to the extent of payments made, and have permitted the employer or its insurer to intervene in the employee's suit to protect its right, even where compensation was paid without the entry of a formal compensation award. The Etna, 138 F.2d 37 (3d Cir. 1943); Hugev v. Dampskisaktieselskabet International, 170 F.Supp. 601 (S.D.Cal.1959), aff'd sub nom. Metropolitan Stevedore Co. v. Dampskisaktieselskabet International, 274 F.2d 875 (9th Cir.), cert. denied, 363 U.S. 803, 80 S.Ct. 1237, 4 L.Ed.2d 1147 (1960); Fontana v. Pennsylvania R.R., 106 F.Supp. 461 (S.D.N.Y.1952), aff'd sub nom. Fontana v. Grace Line, Inc., 205 F.2d 151 (2d Cir.), cert. denied, 346 U.S. 886, 74 S.Ct. 137, 98 L.Ed. 390 (1953). Thus, in The Etna, the leading case involving compensation without an award, the court stated:

We find no intent indicated by the Act to take away from the employer who pays compensation without an award his right to reimbursement out of his employee's recovery from third persons. On the contrary, we think that the intent and scheme of the Act requires that the employer's right to subrogation for compensation payments made in the circumstances here shown be recognized wholly apart from and without regard for the assignment provided for in Sec. 33(b) of the Act. It is only the right of control of the employee's right of action against third persons which an employer foregoes by paying compensation without an award. His right to reimbursement out of the recovery for the employee's injury remains unaffected.

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