Erie Ins. Co. v. Curtis

• Decision Date: 01 September 1992
• Docket Number: No. 123,123
• Parties: ERIE INSURANCE COMPANY, et al. v. Zesco F. CURTIS. ,
• Court: Maryland Court of Appeals

Page 160

330 Md. 160

623 A.2d 184

ERIE INSURANCE COMPANY, et al. v. Zesco F. CURTIS.

No. 123, Sept. Term, 1992.

Court of Appeals of Maryland.

April 22, 1993.

Morris Kletzkin (Amy L. Epstein of Friedlander, Misler, Friedlander, Sloan & Herz, Washington, DC, all on brief), for appellants.

John J. Yannone (Eugene M. Zoglio, P.A., and Thomas McKeon, all on brief), Bowie, Benjamin S. Vaughan (David M. Simmons, of Armstrong, Donahue & Ceppos, Chtd., all on brief), Rockville, for appellee.

Argued before MURPHY, C.J., and ELDRIDGE, RODOWSKY, McAULIFFE, CHASANOW, KARWACKI, and ROBERT M. BELL, JJ.

KARWACKI, Judge.

We issued a writ of certiorari in this case to determine whether a workers' compensation insurer may assert its statutory lien for compensation paid to an injured worker against a recovery made by that worker under the uninsured motorist coverage of his employer's automobile liability insurance policy.

I.

Appellee, Zesco F. Curtis, was injured in an automobile accident while in the course of his employment with Entec Technicom, Inc. ("Entec") on October 30, 1987. The accident occurred when a motorist who was operating a stolen vehicle collided head-on with Curtis's vehicle. The driver of the stolen vehicle was never apprehended.

At the time of the accident, Curtis was operating a vehicle owned by Entec which it had insured through Nationwide Mutual Insurance Company ("Nationwide"). The insurance policy covering Entec's vehicle provided uninsured motorist coverage with limits for bodily injury of $50,000.00 per person, per accident. The parties concede that the unidentified motorist whose vehicle collided with Curtis's vehicle was operating an uninsured motor vehicle within the meaning of both Nationwide's policy and Maryland Code (1957, 1986 Repl.Vol., 1990 Cum.Supp.), Article 48A, § 541, mandating that every policy of motor vehicle liability insurance provide uninsured motorist coverage.

As a result of his work-related injuries, Curtis applied for workers' compensation benefits with the Workers' Compensation Commission. Entec maintained workers' compensation coverage through Erie Insurance Company ("Erie"). As a result, Erie paid $14,259.10 in workers' compensation to Curtis.

On August 15, 1990, Curtis brought a breach of contract action in the Circuit Court for Prince George's County against Nationwide to recover the uninsured motorist benefits due him under his employer's policy. After Nationwide filed its answer, Erie was permitted to intervene as a plaintiff. In its Intervenor's Complaint, Erie stated in relevant part:

12. Pursuant to Maryland Annotated Code, Article 101, Section 58, the plaintiff intervenor has a lien on any judgment or settlement on this case for benefits paid to or on behalf of the plaintiff, pursuant to the Workers' Compensation Act above-referenced.

13. The plaintiff intervenor, Erie Insurance Company, has a subrogated interest in the amount recovered, if any, by the plaintiff against the defendant in this proceeding.

Erie and Curtis each filed motions for summary judgment. In his motion for summary judgment and at the motions hearing, Curtis asserted that Erie was not entitled to a lien against the amount payable to him under the uninsured motorist coverage provided by Nationwide. Erie contended that it had a right to assert a lien against the uninsured motorist benefits provided by Nationwide, notwithstanding that Nationwide was entitled by statute to reduce the uninsured motorist benefits payable to Curtis by any amount awarded him as workers' compensation. Nationwide simply took the position that by statute it was entitled to offset the uninsured motorist benefits to the extent that Curtis was awarded compensation under any workers' compensation laws.

In a well reasoned opinion, Judge James P. Salmon concluded that Erie, the workers' compensation carrier, was not entitled to assert its statutory lien for workers' compensation benefits paid to Curtis against money due him under an uninsured motorist policy. Judge Salmon reasoned "that the legislature did not intend that [workers'] compensation carriers should have a lien against third parties, such as uninsured motorist carriers, who are liable in contract but not in tort." Consequently, having determined that Erie had no right to assert a lien against the uninsured motorist benefits, the court denied Erie's motion for summary judgment, granted Curtis's motion for summary judgment, and dismissed Erie as a party to the suit. Erie noted an appeal to the Court of Special Appeals. We issued our writ of certiorari prior to consideration of the case by the intermediate appellate court, and we shall affirm.

II.

Erie's argument that it is entitled to assert a lien for the compensation awarded to Curtis is based on its construction of Md.Code (1957, 1985 Repl.Vol., 1990 Cum.Supp.), Article 101, § 58. ¹ This section of our workers' compensation law gives the employer or its workers' compensation carrier the right to recover from a third party who causes an injury to its employee any workers' compensation which the employer or its insurance carrier has been required to pay to its employee because of that injury. Anne Arundel County v. McCormick, 323 Md. 688, 692, 594 A.2d 1138, 1140 (1991). For two months after compensation is awarded or paid, the employer or insurance carrier has the exclusive right to sue the third party. Id. Thereafter, the employee may do so. Id.

It is well settled that Article 101, § 58 "does not create a cause of action in the employer but rather subrogates it to the claim of its injured employee against the responsible third party." McCormick, 323 Md. at 693, 594 A.2d at 1140; Smith v. Bethlehem Steel Corp., 303 Md. 213, 222, 492 A.2d 1286, 1290 (1985); Johnson v. Miles, 188 Md. 455, 460, 53 A.2d 30, 32 (1947); Baltimore Transit Co. v. State, 183 Md. 674, 678, 39 A.2d 858, 860 (1944); Western Md. Ry. Co. v. Employer's Liab. Assurance Corp., 163 Md. 97, 102, 161 A. 5, 7 (1932). In Smith v. Bethlehem Steel Corp., we stated that Article 101, § 58 " 'is for the benefit of the employer or insurer and the injured employee or his dependents; it is not for the benefit of the negligent third party. The statute does not create the right of action, but merely creates or preserves the right of subrogation for the benefit of the employer and employee as their interests may appear. The procedural priorities established are for the protection of those interests alone.' "

303 Md. at 222, 492 A.2d at 1290 (quoting Johnson v. Miles, 188 Md. at 460, 53 A.2d at 32).

Although Article 101, § 58 has been amended numerous times since its original enactment by Ch. 800 of the Acts of 1914, the pertinent language for purposes of this decision has remained unchanged since its original enactment. As originally enacted, Article 101, § 58 provided in its entirety:

"Where the injury or death for which compensation is payable under this article was caused under circumstances creating a legal liability in some person, other than the employer, to pay damages in respect thereof, the employe or, in case of death, his personal representative or dependents as hereinbefore defined, may proceed either by law against that other person to recover damages or against the employer for compensation under this article, or in case of joint tort feasors against both; and if compensation is claimed and awarded or paid under this article any employer may enforce for the benefit of the insurance company or association carrying the risk or the State Accident Fund, or himself, as the case may be, the liability of such other person; provided, however, if damages are recovered in excess of the compensation already paid or awarded to be paid under this article, then any such excess shall be paid to the injured employe or, in case of death, to his dependents, less the employer's expenses and costs of action." ²

There is no legislative history of the original enactment, but, with regard to the relevant language of Article 101, § 58 at issue in this case, our predecessors stated:

"It will be seen that where injury or death for which compensation is payable under this act was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect therefor, the section gives to the parties specifically designated therein, under the conditions therein set forth, a right of action against a third party, the tort-feasor. The clear meaning of the language, 'under circumstances creating a legal liability in some person other than the employer,' is that the circumstances under which the injury was received created a liability resting upon the tort-feasor outside of the provisions of section 58, which means that if the injury did not result in death the injured party would have had a right of action at common law against the wrongdoer for such injuries, or in case injury resulted in death, that the dependents would have had a right of action by reason of the liability then existing under Lord Campbell's Act. In other words, section 58 of article 101 does not create any new liability, but simply designates in what manner the liability theretofore existing, under the common law and Lord Campbell's Act, should be enforced, and changes the parties who might be benefited by such enforcement. Section 58 provides, in cases where there was an existing liability on the part of a third person, other than the employer, that in case of death the dependents, as defined in article 101, may proceed either by law against the tort-feasor or against the employer for compensation under the act, and that if they elect to proceed under the act and compensation is awarded against an employer, where he is self-insured, or against the insurer, the employer in such case, or the insurer, may bring an action to enforce for their benefit the liability of the tort-feasor, and that if the employer who is self-insured, or the insurer,...