Esquivel v. Labor Com'n
| Decision Date | 22 January 1999 |
| Docket Number | No. 981084-CA,981084-CA |
| Citation | 973 P.2d 440 |
| Court | Utah Court of Appeals |
| Parties | 361 Utah Adv. Rep. 9 Edward ESQUIVEL, deceased; Norma Esquivel; Richard Esquivel; Angel Esquivel; Edica Esquivel; and Ofelia Herrera, Petitioners, v. LABOR COMMISSION, Redd Roofing & Construction Co., and CNA Co., Respondents. |
Robert B. Sykes and Ron J. Kramer, Salt Lake City, for Petitioners.
Theodore E. Kannell and Stephen P. Horvat, Salt Lake City, for Respondents Redd Roofing & Construction Co. and CNA Company.
Alan Hennebold, Salt Lake City, for Respondent Labor Commission.
Before Judges GREENWOOD, BENCH and GARFF. 1
¶1 The dependents of Edward Esquivel petition this court for review of an order of the Utah Labor Commission's Appeals Board (the Board), holding that respondents Redd Roofing & Construction Co. (Redd Roofing) and CNA Insurance Co. (CNA) were entitled to an offset against their future workers' compensation payment obligation to the dependents because the dependents had obtained a third-party tort judgment for the death of Esquivel. We affirm the Board's order.
¶2 On April 26, 1993, Esquivel was fatally injured when he fell through a warehouse roof at the Freeport Center in Clearfield, Utah, while working as a roofer for Redd Roofing. At the time of the accident, Esquivel was sweeping gravel from the roof with a Gravely International (Gravely) brand sweeping machine.
¶3 Redd Roofing's workers' compensation insurance carrier, CNA, began paying the statutorily required workers' compensation benefits to the dependents in 1993. In March 1994, the dependents settled a negligence lawsuit against the Freeport Center, the owner of the building where the accident occurred, and received $375,000. The dependents and CNA entered into an agreement, approved by the Utah Labor Commission (Commission), requiring CNA to pay $205 per week for as long as the dependents were entitled to benefits under the Workers' Compensation Act.
¶4 The dependents filed a product liability suit in federal court against Gravely, the manufacturer of the sweeping machine Esquivel was using at the time of the industrial accident. The dependents obtained a judgment in the amount of $203,507.25. Upon learning of this judgment, CNA discontinued its weekly payments to the dependents. CNA asserted that because the dependents had received third-party tort compensation, it was no longer required, under Utah's third-party tort compensation statute, to continue making workers' compensation payments. See Utah Code Ann. § 34A-2-106(5) (1997). 2
¶5 On July 10, 1996, the dependents filed an Application for Hearing before the Commission, contending that CNA had wrongfully discontinued workers' compensation payments. CNA countered that it was entitled to an offset against future payments because of the third-party tort recovery. CNA waived any right to reimbursement for payments already made. After a hearing before an Administrative Law Judge (ALJ), the ALJ ordered CNA to resume weekly compensation payments to the dependents.
¶6 In his Findings of Fact and Conclusions of Law and Order, the ALJ found that attorney fees in the Gravely suit were $81,402.90 and costs were $53,596.38, for a total case "expense" of $134,999.28. After deducting this expense from the $203,507.25 judgment, a net recovery of $68,507.97 remained. The ALJ found that because CNA's future obligation exceeded the net judgment, it was responsible for 100% of the attorney fees and costs. The ALJ also determined that CNA's lien amount must be reduced by those fees and costs, thus eliminating that lien. Finally, the ALJ held that the dependents could retain the entire net judgment of $68,507.97, and that no amount would be credited against future payments owed by CNA.
¶7 CNA and Redd Roofing filed a Motion for Review with the Board, claiming the ALJ had mistakenly subtracted fees and costs twice, effectively denying CNA its offset. In its Order Granting Motion for Review, the Board reversed the ALJ and determined CNA was entitled to an offset of the $68,507.97 net judgment against its future obligations.
¶8 Relying on Utah Administrative Code Rule 612-1-4, 3 the Board also ruled that CNA could "determine the extent of its offset by using an 8%discount rate to comput[e] the present value of its future liability," and determined that "[t]he present value of Redd Roofing's liability for future dependents' benefits, to be offset by the [Gravely suit] award [of $68,507.97], is $83,000."
¶9 The dependents filed a Petition for Review with this court.
¶10 Two issues must be resolved on appeal: First, whether the Board erroneously held that CNA was entitled to offset the full balance of the net proceeds from the third-party tort recovery against its future compensation liability to the dependants; and second, whether the Board erroneously permitted CNA to apply Utah Administrative Code Rule 612-1-4 and discount its future obligation for workers' compensation benefits by eight percent to arrive at a present value.
¶11 We will not disturb an agency's ruling unless petitioners can establish they have been "substantially prejudiced" by the agency's erroneous interpretation or application of the law. See Utah Code Ann. § 63-46b-16(4)(d) (1997 & Supp.1998). In addition, the Legislature has granted the Commission broad discretion to determine the facts and apply the law. See Utah Code Ann. § 34A-1-301 (1997) (). We have previously held that the statute's "grant of discretion to the Commission to apply the law requires that we apply an intermediate standard of review to its determinations." Osman Home Improvement v. Industrial Comm'n, 958 P.2d 240, 243 (Utah Ct.App.1998) (citing Caporoz v. Labor Comm'n, 945 P.2d 141, 143 (Utah Ct.App.1997)). Thus, we will affirm the Board's application of the law so long as it is reasonable. See Caporoz, 945 P.2d at 143.
¶12 The dependents contend that the Board improperly determined that Redd Roofing and CNA have a "priority first right of reimbursement" in the third-party tort recovery that "takes precedence over the claimant's interest." CNA argues the Board properly applied the governing statute.
¶13 Distribution of proceeds of a third-party tort action under Utah's Workers' Compensation Act is addressed in section 34A-2-106(5), which states:
(5) If any recovery is obtained against a third person, it shall be disbursed in accordance with Subsections (5)(a) through (c).
(a) The reasonable expense of the action, including attorneys' fees, shall be paid and charged proportionately against the parties as their interests may appear. Any fee chargeable to the employer or carrier is to be a credit upon any fee payable by the injured employee or, in the case of death, by the dependents, for any recovery had against the third party.
(b) The person liable for compensation payments shall be reimbursed, less the proportionate share of costs and attorneys' fees ... for [workers' compensation] payments made as follows:
....
(c) The balance shall be paid to the injured employee, or the employee's heirs in case of death, to be applied to reduce or satisfy in full any obligation thereafter accruing against the person liable for compensation.
Utah Code Ann. § 34A-2-106(5).
¶14 In the dependents' lawsuit against Gravely, the jury returned a judgment in favor of the dependents in the amount of $814,029. However, the jury found Gravely only 25% at fault. The jury apportioned 25% of the fault to Esquivel and 50% to Redd Roofing. 4 Thus, the dependents were awarded a gross judgment of only 25% of the total damages; that is, they were awarded damages of $203,507.25.
¶15 The ALJ determined that attorney costs and fees totaled $134,999.28. After these fees and costs were deducted, the dependents' net award, or "balance" remaining, from the Gravely suit was $68,507.97. In apportioning the attorney fees between the dependents and Redd Roofing, the Board recognized that section 34A-2-106(5)(a) requires that fees and costs must be allocated between the parties "as their interests may appear." The Board stated that in determining the parties' interests, "it [was] important to note" that section 34A-2-106(5)(b) and (c) "grant the first right of reimbursement and offset to the insurance carrier." Thus, the Board reasoned, Redd Roofing's share of attorney fees and costs necessarily had to be determined first. Only thereafter could the dependents' share be determined, and, the Board held, would "then be limited to the amount of the award that remains after Redd Roofing's share has been deducted." The Board's order accordingly apportioned the parties' shares of attorney fees and costs as follows:
In this case, the amount of the third party judgment actually available for allocation is $68,507.97, which represents the amount of the third party judgment after attorney fees and costs have been deducted. The present value of Redd Roofing's liability for future dependents' benefits, to be offset by the third party award, is $83,000. Because Redd Roofing's interest in the award is more than the net amount of the award itself, Redd Roofing holds the entire interest in the award. Consequently, all attorneys fees and costs must be allocated to Redd Roofing.
¶16 The Board then concluded that because the statute required that the "balance" be "applied to reduce" the insurer's future obligation, CNA was entitled to "use the third party award to offset its obligation to make weekly payments to the dependents until such time as the award has been exhausted."
¶17 The dependents contend the Board's order failed to properly allocate costs and fees to Redd Roofing/CNA. The dependents argue that because the...
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