Ewing v. Allied Const. Services, 97-2086

• Citation: 592 N.W.2d 689
• Decision Date: 28 April 1999
• Docket Number: No. 97-2086,97-2086
• Parties: Craig EWING, Appellee, v. ALLIED CONSTRUCTION SERVICES, and Allied Group, Appellants.
• Court: Iowa Supreme Court

Page 689

592 N.W.2d 689

Craig EWING, Appellee, v. ALLIED CONSTRUCTION SERVICES, and Allied Group, Appellants.

No. 97-2086.

Supreme Court of Iowa.

April 28, 1999.

Thomas J. Logan and Anne L. Clark of Hopkins & Huebner, P.C., Des Moines, for appellants.

David D. Drake of Lawyer, Lawyer, Dutton & Drake, West Des Moines, for appellee.

Considered by HARRIS, P.J., and CARTER, LAVORATO, NEUMAN, and CADY, JJ.

HARRIS, Justice.

A severely injured employee received workers' compensation benefits. He also brought an action against a third party for his injuries and received a favorable settlement. The injured worker's dispute here is with his employer's workers' compensation insurer. It concerns the manner of allowing for the employee's attorney fees, those earned in the third-party suit, when calculating future workers' compensation benefits. The insurer holds a statutory lien on the proceeds of the third-party recovery, subject to the obligation to pay its share of the attorney fees required for that recovery. The district court, reversing a contrary determination by the industrial commissioner, determined the attorney fees should be accommodated periodically, as the future benefits come due and are paid. We affirm.

The facts are stipulated. In 1989 Craig Ewing sustained severe and permanent injuries as a part of his employment by defendant Allied Construction Services. ¹ After receiving substantial workers' compensation and medical benefits, Ewing brought a third-party action against the parties whose negligence caused his injuries. The third parties paid $750,000 in settlement.

Prior to the third-party settlement, Allied had paid Ewing healing period and permanency benefits and necessary medical care totaling $195,435.47. Under Iowa Code section 85.22(1) (1993) Allied was entitled to be reimbursed out of the third-party recovery. See Shirley v. Pothast, 508 N.W.2d 712, 718 (Iowa 1993); Christensen v. Pocket Lounge, Inc., 519 N.W.2d 401, 403 (Iowa 1994). Entitlement is subject to Allied's obligation to pay its proportionate share of the $250,000 contingent attorney fees Ewing had paid his attorneys and its proportionate share of the $17,945.25 in administrative expenses that had been expended pursuing the third-party suit. Ahlers v. EMCASCO Ins. Co., 548 N.W.2d 892, 894 (Iowa 1996). A net of $126,392.60 was accordingly paid to Allied.

The foregoing background is only prologue; the present dispute concerns only future benefits. After the foregoing settlement, Allied continued making weekly workers' compensation payments which totaled $8756.13 and medical payments totaling $561.91. The weekly payments and medical payments continued until we filed our opinion in Shirley, at which time Allied stopped making payments, claiming its lien against Ewing's third-party recovery under the Shirley decision and Iowa Code section 85.22(1). The parties agree on the validity of the lien and also agree that, if it were not for the lien derived from the third-party settlement, Ewing would be entitled to and would be receiving weekly compensation benefits up to and through the time of trial. The industrial commissioner allowed Allied to offset every dollar of its future obligations to Ewing in view of his third-party recovery, without requiring an adjustment to reflect his payment of the contingent attorney fees. The disputed question is whether such an adjustment should have been required. The district court stated the issue as follows:

The only dispute between the parties that this court is asked to resolve is the method by which the distribution of the respondents' lien should proceed in light of respondent's obligation to pay its share of the petitioner's attorney fees in the third-party action. The parties seem to be in agreement that the following three methods are ways by which the distribution of the lien could proceed: an immediate lump-sum payment of attorney fees, periodic payment of attorneys fees and deferred payment of attorneys fees. The parties also seem to agree that Iowa Code section 85.22 does not specifically address this issue nor is there Iowa case law on point. [Ewing] has abandoned the method he argued before the agency of an immediate lump-sum payment of attorney fees and now advocates the periodic payment of attorney fees. [Allied] advocates the method of a deferred payment of attorney fees.

I. In reversing the industrial commissioner, the district court ordered Allied to pay Ewing each week an amount equal to one-third (reflecting the contingent attorney fees) of the amount it would have been required to pay that week if it had not been for the third-party settlement.

Our review in Allied's appeal from that ruling is on error. Iowa's administrative procedure act, Iowa Code chapter 17A, governs our review. See Iowa Code § 86.26 (1997). We apply the standards of section 17A.19(8) to the agency's actions to determine whether our legal conclusions are the same as those reached by the district court. Mortimer v. Fruehauf Corp., 502 N.W.2d 12, 14 (Iowa 1993). If our conclusions are the same, we affirm;...