Colorado Compensation Ins. Auth. v. Jones, 03CA0487.

• Decision Date: 19 May 2005
• Docket Number: No. 03CA1740.,No. 03CA0487.,03CA0487.,03CA1740.
• Parties: COLORADO COMPENSATION INSURANCE AUTHORITY, d/b/a Pinnacol Assurance Company, Intervenor-Appellant, and Kenneth W. SATTERFIELD, Plaintiff-Appellee and Cross-Appellant, v. Dr. Ron JONES, Defendant-Appellee.
• Court: Colorado Court of Appeals

Page 1074

131 P.3d 1074

COLORADO COMPENSATION INSURANCE AUTHORITY, d/b/a Pinnacol Assurance Company, Intervenor-Appellant, and Kenneth W. SATTERFIELD, Plaintiff-Appellee and Cross-Appellant, v. Dr. Ron JONES, Defendant-Appellee.

No. 03CA0487.

No. 03CA1740.

Colorado Court of Appeals, Div. V.

May 19, 2005.

Rehearing Denied June 23, 2005.

Certiorari Denied April 3, 2006.^*

COPYRIGHT MATERIAL OMITTED

Ruegsegger Simons Smith & Stern, LLC, Charles M. Pratt, Mark J. Gauthier, Denver, Colorado, for Intervenor-Appellant.

Lindquist & Vennum, P.L.L.P., Charles F. Brega, Scott T. Rodgers, Denver, Colorado, for Plaintiff-Appellee and Cross-Appellant.

Nathan, Bremer, Dumm & Myers, P.C., Mark H. Dumm, Benjamin E. Tracy, and Allison R. Ailer, for Defendant-Appellee.

NIETO, J.

Intervenor, Colorado Compensation Insurance Authority, d/b/a Pinnacol Assurance Company (Pinnacol), appeals the judgment rejecting its subrogation claim and determining that plaintiff, Kenneth W. Satterfield was entitled to all the proceeds received when Pinnacol and Satterfield settled a personal injury claim against Harley and Sylvia Hagan. Satterfield and Pinnacol also appeal the summary judgment dismissing a similar personal injury claim against Ron Jones. We affirm in part, reverse in part, and remand with directions.

Kenneth Satterfield was driving a truck with an attached semitrailer for his employer when he approached a herd of cattle. The cattle were being herded on the road by Jones, the owner, and the Hagans, who were assisting Jones. Satterfield slowed but did not stop, and he proceeded to pass the herd. This angered Jones and Harley Hagan.

As Satterfield drove away, Harley Hagan pursued him for some distance. Hagan then went to his nearby home where he obtained a gun. Hagan returned to the herd, spoke with Sylvia Hagan, and then left again in pursuit of Satterfield. Hagan did not tell Jones where he was going or what he intended to do. Sylvia Hagan called the police and reported that Hagan had a gun and was pursuing Satterfield. Hagan found Satterfield unloading the semitrailer several miles from the initial incident. Hagan then shot Satterfield, and as a result of the wound, Satterfield was paralyzed from the waist down.

Because the injury was sustained in the course of his employment, Satterfield received workers' compensation benefits paid by Pinnacol.

Satterfield brought a personal injury action against the Hagans and Jones. Pinnacol was permitted to intervene in the actions to assert subrogation rights under § 8-41-203, C.R.S.2004, to the extent of the workers' compensation benefits it was obligated to provide to Satterfield.

Satterfield and Pinnacol agreed to settle the personal injury action against the Hagans for $500,000, the coverage limit under their insurance policy. Pinnacol also received an additional $30,000 from Harley Hagan for a waiver of Pinnacol's right to seek restitution in the criminal action brought against him.

Satterfield and Pinnacol did not agree on an allocation of the settlement proceeds, and Pinnacol moved for an evidentiary hearing in accordance with Colorado Compensation Insurance Authority v. Jorgensen, 992 P.2d 1156 (Colo.2000), to determine the portion of the proceeds it would be entitled to receive. Following a hearing, the trial court found Satterfield's noneconomic damages caused by Harley Hagan were $732,500 and his damages for physical impairment and disfigurement were $2 million. Pinnacol does not appeal these findings. The court also found that Sylvia Hagan was responsible for noneconomic damages of $366,250 and that Pinnacol, pursuant to its workers' compensation obligations, had paid $129,000 in medical benefits and $17,670 for temporary total disability benefits. It further found that Pinnacol had no subrogation rights in $116,000 of the amount it had paid because that amount was equivalent to benefits under the motor vehicle insurance policy covering the truck Satterfield was driving (PIP benefits), and Pinnacol does not appeal this ruling.

The court also found that Pinnacol would continue to pay workers' compensation benefits to Satterfield, but it made no findings as to the amount of future payments. The court then ruled that Pinnacol had no subrogation rights to any part of the settlement because the $500,000 settlement would not fully compensate Satterfield for all his noneconomic damages.

The trial court granted summary judgment and dismissed the claims against Jones.

I.

Pinnacol first contends the trial court erred in allocating all of the settlement to noneconomic damages and distributing the full amount to Satterfield. We agree.

The payment of workers' compensations benefits to an injured employee operates as an assignment to the workers' compensation insurer of the employee's cause of action against a third-party tortfeasor responsible for the employee's injuries to the extent of the benefits for which the insurer is liable, including past and future benefits. Section 8-41-203(1)(b) C.R.S.2004; Colo. Comp. Ins. Auth. v. Jorgensen, supra. However, the subrogation right, as it existed at the time of Satterfield's injury, extends only to the employee's right to recover economic damages from the tortfeasor. It does not include every right of recovery that the employee has against the tortfeasor and does not extend to the employee's right to recover noneconomic damages. Colo. Comp. Ins. Auth. v. Jorgensen, supra.

Where a settlement is reached with the third-party tortfeasor, the insurer's subrogation interest extends to the settlement proceeds. If the parties to the settlement agreement do not allocate the proceeds, they may request the trial court to do so. In that event, the court must determine the amount of each category of damages actually suffered by the employee, and based on these findings, allocate the settlement among the categories. "While a number of factors may be considered in attributing the settlement proceeds to the economic and non-economic damage categories respectively, once the allocation has been determined, the distribution of settlement proceeds should be based on that allocation." Reliance Ins. Co. v. Blackford, 100 P.3d 578, 580 (Colo.App.2004).

Colorado law does not require that an employee be fully compensated for his or her noneconomic damages before the insurer's subrogation rights may be exercised. Colo. Comp. Ins. Auth. v. Jorgensen, supra; Reliance Ins. Co. v. Blackford, supra.

The Reliance case is instructive here because the facts are very similar. There, the employee and the insurer settled with the tortfeasor but did not agree on the allocation of the settlement proceeds. The trial court, without determining the actual amount of damages, determined that economic and noneconomic damages each exceeded the settlement amount, and it ordered that the employee was entitled to all the proceeds. A division of this court held that the trial court erred in not apportioning the settlement proceeds between economic and noneconomic damages. The division directed the trial court to determine the actual amount of the employee's economic and noneconomic damages and to apportion the settlement proceeds accordingly. We agree with the reasoning and conclusion in the Reliance opinion, and we follow it here.

Here, the trial court determined the amount of Satterfield's damages for physical impairment and disfigurement and his noneconomic damage, but it did not determine his actual past and future economic damage. It then allocated all of the settlement proceeds to noneconomic damages.

Accordingly, we conclude the trial court erred in not determining Satterfield's actual past and future economic damages and in allocating all of the settlement proceeds to noneconomic damages. On remand, the trial court must determine Satterfield's past and future economic damages and reallocate the settlement proceeds among economic, noneconomic, and physical impairment and disfigurement damages.

II.

Pinnacol next contends the trial court erred in finding its subrogation rights did not extend to physical impairment and disfigurement damages. We agree in part.

In July 2003, the General Assembly added § 8-41-203(1)(d)(I)(B), C.R.S.2004, to provide explicitly that for injuries occurring on or after that date, a workers' compensation insurer's subrogation rights extend to an employee's physical impairment and disfigurement damages. Colo. Sess. Laws 2003, ch. 406 at 2614. However here, the court issued its findings in December 2002 and Satterfield's injury occurred long before that.

The retroactive application of statutes is generally disfavored. Absent legislative intent to the contrary, a statute is presumed to operate prospectively, meaning it operates on transactions occurring after its effective date. In re Estate of DeWitt, 54 P.3d 849, 854 (Colo.2002).

In workers' compensation cases, the substantive rights and liabilities of the parties are determined by the statute in effect at the time of a claimant's injury, while procedural changes in the statute become effective during the pendency of a claim. Am. Comp. Ins. Co. v. McBride, 107 P.3d 973 (Colo.App. 2004).

Here, because the amended statute would affect the substantive rights and liabilities of the parties, the amendment is not retroactive. Therefore, we must apply the statute that was in effect at the time of the injury. At that time, the subrogation rights provided by the statute were interpreted to limit a workers' compensation insurer's subrogation rights to economic damages received by the employee. Colo. Comp. Ins. Auth. v. Jorgensen, supra; Reliance Ins. Co. v. Blackford, supra.

Damages for physical impairment or disfigurement can be in the nature of economic or noneconomic damage. Dupont v. Preston, 9 P.3d 1193 (Colo.App.2000), aff'd, 35 P.3d 433 (Colo.2001). However, under Colorado common law, physical impairment and disfigurement have historically been considered an element of damage separate from...