Chavez v. SED LABORATORIES

• Decision Date: 19 January 2000
• Docket Number: No. 19,700.,19,700.
• Citation: 128 N.M. 768,999 P.2d 412
• Parties: Phil CHAVEZ, Worker-Appellant, v. S.E.D. LABORATORIES and United States Fidelity & Guaranty Company, Employer/Insurer-Appellees.
• Court: Court of Appeals of New Mexico

999 P.2d 412

128 N.M. 768

Phil CHAVEZ, Worker-Appellant, v. S.E.D. LABORATORIES and United States Fidelity & Guaranty Company, Employer/Insurer-Appellees.

No. 19,700.

Court of Appeals of New Mexico.

January 19, 2000.

Certiorari Granted April 6, 2000.

Robert L. Pidcock, Albuquerque, for Worker-Appellant.

Paul Maestas, Wayne R. Suggett, Silva, Rieder & Maestas, P.C., Albuquerque, for Employer/Insurer-Appellees.

Certiorari Granted, No. 26,227, April 6, 2000.

OPINION

ARMIJO, Judge.

{1} Phil Chavez (Chavez) appeals the decision of the Workers' Compensation Administration (WCA) that required him to reimburse his employer, S.E.D. Laboratories, and its workers' compensation insurer, United States Fidelity & Guaranty Company (collectively, S.E.D./USF & G), certain benefits paid to him. Chavez sustained injuries as a result of an automobile accident. It is undisputed that Chavez' injuries were work related. In addition to seeking benefits to which he was entitled under the Workers' Compensation Act, Chavez also made a claim against the uninsured/under insured motorist policy maintained by S.E.D. Laboratories. The central question in this appeal is the extent to which S.E.D./USF & G are entitled to reimbursement and credits against future benefits. Chavez raises additional issues: whether substantial evidence supports the WCA's finding that Chavez returned to work at a wage equal to or greater than that which he earned before his injury; and whether Chavez is entitled to attorney's fees. For the reasons discussed below, we reverse the decision of the WCA as it relates to the reimbursement award and imposition of attorney's fees, and remand the matter for further proceedings. We affirm the WCA's determination regarding Chavez' wage upon returning to work.

FACTUAL AND PROCEDURAL BACKGROUND

{2} On October 15, 1993, Chavez was involved in an automobile accident with an uninsured, third-party motorist. At that time, he worked as a courier for S.E.D. Laboratories. The parties agree that the accident arose from and occurred during Chavez' employment. Chavez pursued a workers' compensation claim. The WCA concluded that the evidence established to a reasonable medical probability that the accident caused Chavez' two lumbar disk herniations and his resulting disability.

{3} At the time of the accident, Chavez was covered by two uninsured motorist policies—one provided by his mother and the other by S.E.D. Laboratories. (Both policies were provided by insurers that are not parties to this action.) As a result of the claims made against these policies, Chavez received a gross benefits pay-out of $110,000 dollars— $50,000 from his mother's policy and $60,000 from S.E.D. Laboratories. These amounts were reduced, after paying out attorney's fees and related costs, to $32,364.58 and $38,837.50, respectively.

{4} Chavez also received benefits under S.E.D. Laboratories' workers' compensation insurance policy with USF & G. The record indicates that as of the WCA's entry of judgment, he had received $19,886.21 in such benefits. By its action below, S.E.D./USF & G sought termination of future benefits and, due to Chavez' recovery, under S.E.D. Laboratories' uninsured motorist policy, a pro tanto reimbursement of benefits already paid. See Montoya v. AKAL Sec., Inc., 114 N.M. 354, 355, 838 P.2d 971, 972 (1992) (recognizing an employer's right to reimbursement). Chavez' recovery upon his mother's policy is not at issue in this appeal. S.E.D./USF & G only seeks reimbursement based upon Chavez' recovery under S.E.D. Laboratories' uninsured motorist policy.

{5} As at trial, Chavez contends that he made only a partial financial recovery. The WCA, however, declined to consider the extent of Chavez' damages or whether he had been made whole. Chavez nonetheless adduced evidence at trial supporting the following claims of damages: a 70% loss of access to the labor market, a 50% loss in earning capacity, a 76% loss in his ability to perform "household services" (valued at $93,665), and lost wages (valued between $94,073 and $242,065, depending on whether calculation is based upon actual, pre-injury earnings or pre-injury earning capacity, respectively). If accurate, this evidence indicates that Chavez has suffered between $187,738 and $335,730 in damages, of which he has actually recovered only $58,723.71 through his employer-provided benefits; that is, a net of $38,837.50 in uninsured motorist coverage and $19,886.21 in workers' compensation benefits.

{6} S.E.D./USF & G made a pretrial offer of judgment. The offer included: $11,490.90 in cash reimbursement; (2) an $8,201.70 credit against future workers' compensation benefits; (3) a provision that upon satisfaction of credit, Chavez would be entitled to future medicals with a mutually agreed-upon provider; and (4) a provision that S.E.D./ USF & G would pay one-half of attorney's fees. Chavez rejected the offer.

{7} Upon completion of the formal hearing, the WCA awarded S.E.D./USF & G $12,214.22 in direct reimbursement, a $12,267.02 credit against Chavez' future permanent partial disability claims, a $4,366.31 credit against future medicals, and a $483.27 credit for previously overpaid permanent partial disability benefits. The WCA calculated these figures upon its conclusion that S.E.D./USF & G were entitled to a full, dollar-for-dollar reimbursement, subject only to the parties' agreement to reduce S.E.D./ USF & G's "reimbursement by one-third for attorney's fees and tax and by one-half the cost of [Chavez'] action" to collect upon S.E.D. Laboratories' uninsured motorist policy.

{8} The WCA further determined that Chavez had returned to work at a wage equal to or greater than his pre-injury wage. Finally, the WCA concluded that S.E.D./USF & G's pretrial offer of judgment was more favorable to Chavez than the results at trial, requiring Chavez to pay his own attorney's fees. Chavez appeals the WCA's judgment.

DISCUSSION

{9} Chavez makes three challenges to the WCA's rulings below: (1) is S.E.D./USF & G entitled to a pro tanto reimbursement for workers' compensation benefits paid and an offset against future benefits due?; (2) upon reaching maximum medical improvement, did Chavez return to work at a wage equal to or greater than his pre-injury wage?; and (3) is Chavez entitled to attorney's fees? We address each issue in turn.

1. Is S.E.D./USF & G entitled to a pro tanto reimbursement for workers' compensation benefits paid?

{10} On the one hand, S.E.D./USF & G contends that it is entitled to a full, dollar-for-dollar reimbursement. On the other hand, Chavez argues that such reimbursement is contrary to New Mexico law; he argues instead that S.E.D./USF & G is only entitled to be reimbursed to the extent that the uninsured motorist policy coverage it provided duplicates the workers' compensation benefits it has already paid. This issue, in the context of uninsured motorist coverage, has not previously been raised in New Mexico's appellate courts. However, we hold that our Supreme Court's recent decision in Gutierrez v. City of Albuquerque, 1998-NMSC-027, 125 N.M. 643, 964 P.2d 807, decided less than one month prior to the filing of Chavez' docketing statement is controlling.

{11} In Gutierrez, an injured worker suffered in excess of $367,000 in damages, including amounts for medical expenses, pain and suffering, and lost wages. She had received from her employer (the City) workers' compensation benefits covering her medical expenses and partially covering her lost wages. She subsequently settled a third-party tort claim, based upon the same injuries, for $140,000, or 38% of her actual damages. After paying attorney's fees, related costs, and medical expenses not covered by workers' compensation, she was left with approximately $77,000 of the settlement. See id. ¶ 6.

{12} Upon entry of the third-party settlement, the City sought a dollar-for-dollar reimbursement for all workers' compensation benefits it had provided, an amount, it was estimated, that would leave her with "nothing at all or a marginal sum at best." Id. ¶ 6 (quoting Gutierrez v. City of Albuquerque, 121 N.M. 172, 175, 909 P.2d 732, 735 (Ct.App. 1995), cert. granted, 120 N.M. 828, 907 P.2d 1009 (1995)). The WCA denied the employer's claim, concluding instead that since the worker's $140,000 settlement covered only 38% of her actual damages, the City's reimbursement award should likewise be reduced to 38% of the cash benefits it provided. In addressing the issue presented in Gutierrez, our Supreme Court provided an in-depth analysis of how to calculate an employer's reimbursement from a worker's fair, but partial, third-party tort recovery. Upon consideration of NMSA 1978, § 52-5-17 (1990), the Court prescribed the following method of calculation:

[T]he employer's extent of reimbursement for compensation paid is determined by identifying the nature and purpose of the payments made by the employer, and comparing the elements of the tort recovery with those which are duplicative of the employer's compensation payments.

Gutierrez, 1998-NMSC-027, ¶ 8, 125 N.M. 643, 964 P.2d 807. In effect, the Court delimited, for the first time, the nature and extent of an employer's legal interest in an injured worker's third-party tort recovery:

An employer has an interest in those elements of the worker's tort recovery which are also covered by worker's compensation, but no interest in those elements of a worker's tort recovery that were calculated in good faith to remedy losses not covered.

Id. ¶ 14. The focus of the Gutierrez analysis is, therefore, upon the elements of the worker's recoveries. Upon reimbursement requests, workers' compensation judges are now required to conduct an element-by-element comparison of the benefits paid under workers' compensation and the damages awarded in tort. See id. ¶ 8. "The total of the duplicative payments is the amount which must be reimbursed." Id.

{13} S.E.D./USF & G argues that Gutierr...