Bohle By and Through Majette v. Henrico County School Bd., 921256

• Decision Date: 11 June 1993
• Docket Number: No. 921256,921256
• Citation: 246 Va. 30,431 S.E.2d 36
• Parties: , 83 Ed. Law Rep. 1154 Sharon J. BOHLE, By and Through Her Guardian, R. Shawn MAJETTE v. HENRICO COUNTY SCHOOL BOARD. Record
• Court: Virginia Supreme Court

Page 36

431 S.E.2d 36

246 Va. 30, 83 Ed. Law Rep. 1154

Sharon J. BOHLE, By and Through Her Guardian, R. Shawn MAJETTE v. HENRICO COUNTY SCHOOL BOARD.

Record No. 921256.

Supreme Court of Virginia.

June 11, 1993.

George E. Allen, III, Richmond (Allen, Allen, Allen & Allen, on briefs), for appellant.

Charles F. Midkiff, Richmond (Steven H. Theisen, Midkiff & Hiner, on brief), for appellee.

Present: CARRICO, C.J., COMPTON, STEPHENSON, WHITING, and HASSELL, JJ., and POFF, Senior Justice, and COCHRAN, Retired Justice.

COMPTON, Justice.

In this workers' compensation case, we consider the method to be used for apportioning attorney's fees and expenses when payment of compensation benefits has been suspended following a settlement between the employee and the third-party tortfeasor.

On October 1, 1987, the employee, Sharon J. Bohle, age 37, was severely injured in a three-vehicle accident in Henrico County. The accident arose out of and was in the course of her employment with the Henrico County School Board, which was self-insured.

On December 17, 1987, the Industrial Commission (now the Workers' Compensation Commission) entered an award based on a Memorandum of Agreement for payment of weekly compensation, during incapacity, beginning October 8, 1987. Medical benefits were awarded "for as long as necessary."

On December 6, 1989, the Circuit Court of Henrico County, pursuant to Code § 8.01-424, approved a settlement between the guardian of the incapacitated employee and third-party tortfeasors in the amount of $1.1 million. The circuit court ordered attorney's fees of $275,000, or 25 percent of the gross settlement, plus litigation expenses of $4,911.24 paid from the settlement proceeds. In satisfaction of an existing workers' compensation lien of $514,545.34, the court also ordered payment to the employer and its reinsurer of the sum of $383,600.72; this represented the amount of the lien less a pro rata share of the attorney's fee and expenses, pursuant to former Code § 65.1-43 (now § 65.2-311). After allowing payment of $11,955.63 to the employee's husband to reimburse him for sums expended for child care during the employee's incapacity, the court ordered the net balance of the settlement of $424,532.41 paid to the employee's guardian for her ongoing care and maintenance.

On December 27, 1989, the Commission entered an order suspending payments under its December 17, 1987 award. The basis of the suspension was that the employee had received a substantial sum through a third-party settlement.

In the order, the Commission recited the amount of the compensation lien, the amount received by the employer to satisfy the lien, and the net amount of the settlement received by the employee. The order further recited, "if and when this net is used toward compensation benefit and/or medical, 25% thereof in legal fees shall be deducted therefrom." Concluding, the order stated: "THEREFORE, no further compensation or medical expenses will be due the employee subsequent to December 5, 1989, until the employee can show that further benefits exceed $318,399.31." (Emphasis added.)

The employer sought review of the suspension order before the full Commission. The parties agreed there should be a suspension of payments under the compensation award but disagreed about the interpretation of Code § 65.1-43 with respect to the apportionment of attorney's fees and costs incurred by the employee in the prosecution of her third-party claim.

As pertinent, Code § 65.1-43 provided: "In any ... action, or claim for damages, by [an] employee, ... against any person other than the employer, ... if a recovery is effected, ... the reasonable expenses and reasonable attorney's fees of such claimants shall be apportioned pro rata between the employer and the employee, ... as their respective interests may appear."

Before the full Commission, the employer contended that the apportionment of attorney's fees with respect to the third-party settlement should be based on the interest of the parties as reflected at the time of the settlement. The employer argued that the employee should receive no further credit or reimbursement for the attorney's fees and litigation expenses on the net recovery even though the net recovery relieved the employer of some future compensation obligations. Thus, the employer argued, compensation should not resume until the employee had established that her further medical treatment and entitlement to compensation for disability exceeds the net amount of $424,532.41 that she received from the third-party settlement, not merely the amount of $318,399.31, as recited in the suspension order. The employer contended that the Commission had allowed the employee a double recovery of $106,133.10, the difference between $424,532.41 and $318,399.31.

On April 23, 1990, the full Commission affirmed the suspension order. Relying on Sheris v. Travelers Insurance Co., 491 F.2d 603 (4th Cir.1974), the Commission decided that the General Assembly in Code § 65.1-43 recognized the unfairness of having an employee "saddled with the entire attorney's fee incurred on a third-party recovery and provided for an apportionment of the fee on a pro-rata basis between the employer and the employee 'as their respective interests may appear.' " The Commission stated that the legislature "did not see fit to limit the pro rata interest on the basis of the interest of the parties at the time of the settlement." For this reason, the Commission found that the legislature intended for the employer to pay a pro rata portion of the attorney's fee based on its "entire exposure" under the compensation award. Agreeing with the employer that the employee's attorney is not entitled to an additional fee, apparently a reference to the "double recovery" argument, the Commission nevertheless refused to modify the suspension order, stating "the apportionment provided in the Order works for the benefit of the employee."

In January 1992, this Court decided Circuit City Stores, Inc. v. Bower, 243 Va. 183, 413 S.E.2d 55 (1992). In upholding a trial court's apportionment of attorney's fees and expenses under Code § 65.1-43 with respect to a death claim, the Court adopted the Sheris reasoning. The Court decided that the statute gives a trial court the discretion to determine that the apportionment of attorney's fees should be based on the employer's exoneration from its full potential liability because no rational distinction can be made between the benefit an employer enjoys from being reimbursed for compensation payments already made and the benefit of being released from the obligation to make further compensation payments. Id. at 186-87, 413 S.E.2d at 56-57.

In the present case, the employer appealed the full Commission's decision to the Court of Appeals. In July 1992, a divided three-judge panel of that court reversed. Henrico County Sch. Bd. v. Bohle, 14 Va.App. 801, 421 S.E.2d 8 (1992). Guided by Bower, the Court of Appeals stated that an employer "is entitled to be indemnified out of the third-party recovery to the extent that it has made or will make payments of compensation to or for the" employee. Id. at 806, 421 S.E.2d at 11. The court agreed with the employer and held that "the commission denied to it its full indemnity entitlement and effected a double recovery to" the employee. Id. at 804, 421 S.E.2d at 10.

Additionally, noting that its "method of indemnity" is different from that approved in Bower and relying on Hunter v. Midwest Coast Transport, Inc., 400 Mass. 779, 511 N.E.2d 615 (1987), the Court of Appeals held: "The correct disposition of this case is for the employer to pay to the claimant twenty-five percent of each increment of further compensation entitlement as it accrues until such time as accrued post settlement benefits equal $585,454.66." 14 Va.App . at 810, 421 S.E.2d at 14. (Emphasis added.) That sum is the difference between the gross settlement of $1.1 million and the compensation lien of $514,545.34.

Accordingly, the Court of Appeals reversed the Commission's "judgment in the calculation and structure of the order suspending benefits" and remanded the case to the Commission for entry of an appropriate order. Id. at 811, 421 S.E.2d at 14. We awarded the employee an appeal, determining that the decision of the Court of Appeals involves matters of significant precedential value. Code § 17-116.07(B).

In this appeal, the employee contends that the "Court of Appeals erred in holding that Employee's third party tort recovery required the suspension of her compensation award until such time as further compensation entitlement in the amount of $585,454.66 accrued, and thus failed to properly apportion the legal fees and expenses of the third party recovery."

Assigning cross-error, the employer contends that the Court of Appeals erred "in adopting a new method of offset for apportioning attorney's fees and expenses where the future liability of the employer is indeterminate and speculative."

While we do not entirely agree with either party, we do conclude that the Court of Appeals erred. We are of opinion that the Commission's suspension order of December 27, 1989 should be reinstated.

When interpreting Code § 65.1-43, or any other statute, we follow the settled rule that the construction accorded a statute by public officials charged with its administration is entitled to be given weight by the courts. Peyton v. Williams, 206 Va. 595, 600, 145 S.E.2d 147, 151 (1965). Indeed, the Court of Appeals has said that the Commission's construction of the Workers' Compensation Act should be given "great" weight. Graham v. Peoples Life Ins. Co., 7 Va.App. 61, 68, 372 S.E.2d 161, 165 (1988).

As we understand the Commission's approach, once the employee's net third-party recovery is determined, the employee will be entitled to payment of no further compensation or medical expenses subsequent to the date fixed in the suspension...