Franges v. General Motors Corp.
| Citation | 274 N.W.2d 392,404 Mich. 590 |
| Decision Date | 05 January 1979 |
| Docket Number | 22,Nos. 19,Docket Nos. 58369,21,58832 and 57356,s. 19 |
| Parties | Joseph FRANGES, Jr. and Constance Franges, Plaintiffs-Appellees, and Michigan Mutual Liability Company, A Michigan Insurance Corporation, Intervenor Plaintiff-Appellant, v. GENERAL MOTORS CORPORATION, A Foreign Corporation, Defendant. Gloria BETKER, Administratrix of the Estate of Ralph R. Betker, Deceased, Plaintiff-Appellee, and Hardware Mutual Casualty Company, Subrogee of Carlson Brothers, Incorporated, Plaintiff-Appellant, v. GENERAL MOTORS CORPORATION and Robert Carter Corporation, A Michigan Corporation, Jointly and Severally, Defendants-Appellees. Allen SCHALK and Mildred Schalk, his wife, Plaintiffs-Appellees, and Aetna Casualty & Surety Company, Intervenor Plaintiff-Appellant, v. MICHIGAN SEWER CONSTRUCTION COMPANY, A Michigan Corporation, Cooper Construction Company, A Michigan Corporation, Water Department of the City of Detroit, A Michigan Corporation of the State of Michigan, Jointly and Severally, Defendants. WATER DEPARTMENT OF the CITY OF DETROIT, A Municipal Corporation of the State of Michigan, Defendant and Third Party Plaintiff, v. FORSYTH ENGINEERING SERVICE, INC., A Michigan Corporation, Frank Mario and Benjamine Diponio, d/b/a Construction Equipment Company, A Limited Partnership, Jointly and Severally, Third Party Defendants. Calendar |
| Court | Supreme Court of Michigan |
We granted leave to appeal and consolidated the following three cases: Franges v. General Motors Corp., 398 Mich. 810 (1976); Schalk v. Michigan Sewer Construction Co., 398 Mich. 810 (1976); Betker v. General Motors Corp., 398 Mich. 810 (1976).
Each of these cases involves a recovery by an employee/personal representative and his employer/insurance carrier against a third party tortfeasor. The common issue presented is whether and to what extent the dollar amount credited to the employer as advance payment of future workers' compensation benefits should be included in computing the share of recovery expenses (legal fees and costs) attributable to the employer or its workers' compensation insurance carrier. M.C.L.A. § 418.827; M.S.A. § 17.237(827).
Certain common elements appear in these three cases. In each case, the intervenor, the individual workers' compensation insurance carrier, has appealed the trial court's apportionment of settlement 1 recovery expenses reached in the third party tortfeasor action. While computing the apportionment of total expenses by slightly different methods, all three trial judges basically followed the reasoning of Crawley v. Schick, 48 Mich.App. 728, 211 N.W.2d 217 (1973). In determining the interests of the insurance carrier, each court included the dollar amount credited as advance payment of future workers' compensation benefits.
In February of 1970, the plaintiff, Joseph Franges, Jr., an employee of a company insured by Michigan Mutual Liability Company, sustained a work related injury on the premises of General Motors Corporation. The Worker's Disability Compensation Bureau issued an open-end award 2 requiring plaintiff's employer through its carrier Michigan Mutual to pay workers' compensation benefits at the rate of $104.00 per week for Franges' life or until his disability ended.
Two years later, a third party damage action against defendant General Motors Corporation was filed and Michigan Mutual intervened as a party plaintiff pursuant to Section 827 of the Workers' Disability Compensation Act. On December 13, 1974, plaintiffs-appellees 3 settled their cause of action against the defendant for $120,000.00 and on April 7, 1975, an opinion and order for disbursement of funds were filed by the Wayne Circuit Court as follows:
The total cost of recovery was apportioned between the parties as follows:
Employee's pro rata share (34%) $ 13,874.55
Insurer's pro rata share (66%) 26,932.62
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Total Cost of Recovery $ 40,807.17
The Court of Appeals in an unpublished per curiam opinion affirmed the disbursement of the trial court on March 30, 1976.
Plaintiff-appellee, Allen Schalk, also received injuries during the course of his employment. Plaintiff brought a negligence action against the defendants as third party tortfeasors and the workers' compensation insurance carrier, Aetna Casualty & Surety Company, intervened. This action resulted in a settlement of $125,000.00 of which plaintiff's wife, Mildred Schalk, received $15,000.00 and the injured plaintiff $110,000.00. On July 1, 1974, an order was entered apportioning the cost of recovery and approving the distribution of settlement proceeds as follows:
Gross Recovery 4 $110,000.00
4. The gross recovery figure does not include the $15,000.00 amount in the
settlemement representing plaintiff-wife's recovery for loss of consortium
Insurer's Reimbursement -22,588.13
Total Cost of Recovery -38,832.95
Advance Payment Credit $ 43,411.87
The total cost of recovery was broken down between the parties as follows:
Employee's pro rata share (40%) $ 15,533.18
Insurer's pro rata share (60%) 23,299.77
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Total Cost of Recovery $ 38,832.95
The Court of Appeals determined that the trial judge incorrectly applied the Crawley formula. The insurer's pro rata share should have been 64.6973% Or $25,122.87, and $48,578.92 should have been treated as advance payment credit. Nevertheless, the court affirmed the awards since the employee failed to contest the decision. 62 Mich.App. 658, 233 N.W.2d 825 (1975).
This cause of action arose out of the accidental death of plaintiff-appellee's husband, Ralph Betker. Mr. Betker, an employee of Carlson Brothers, Incorporated, fell 40 feet to his death while attempting to repair a heating and ventilation unit located in the defendant General Motors Corporation's Fisher Body plant. Plaintiff-administratrix, Gloria Betker, commenced a wrongful death action and Hardware Mutual Casualty Company, Carlson Brothers' workers' compensation carrier, intervened as a party plaintiff. While a trial on the merits was in progress, the parties agreed to settle the suit for $150,000.00. The Oakland Circuit Court's order apportioning the costs of recovery and distributing the proceeds was entered on December 12, 1974, as follows:
Gross Recovery $150,000.00
Insurer's Reimbursement -23,825.20
Total Cost of Recovery -57,131.99
Advance Payment Credit 5 $ 19,935.00
5. Unlike the advance payment credit amounts in the Franges disbursement
order and in the Schalk Court of Appeals opinion, the $19,935.00 credit is
not equal to the gross recovery minus the insurer's reimbursement and total
cost of recovery. Franges and Schalk involve open-end compensation benefits
this case involves survivor's benefits with a specific dollar amount ceiling
The total cost of recovery was apportioned between the parties as follows:
On August 2, 1976, the Court of Appeals granted plaintiff-administratrix's motion to affirm the disbursement of the trial court.
The basic issue before this Court is whether the employer or its insurance carrier in a third party action is entitled by statute to a credit against workers' compensation benefits potentially payable in the future, without sharing the burden of the recovery expenses (attorney fees and costs).
The statutory provisions concerning litigation expenses incurred in actions against third party tortfeasors which have been referred to the courts for interpretation fall into three general classifications:
(1) those statutory provisions which contain no express reference to attorneys' fees and costs incurred by the employee in the third party tort action;
(2) those statutes which provide for the deduction from the third party recovery fund of the attorneys' fees and costs incurred by the employee in the third party litigation, but which do not expressly provide for the apportionment of such fees and costs between the employee and the employer or insurance carrier;
(3) those statutory provisions which contain an express direction that the attorneys' fees and costs incurred by the employee in the third party tort action should be apportioned between the employee and the employer or compensation insurance carrier.
Workmen's Compensation: Attorney's Fee or Other Expenses of Litigation Incurred by Employee in Action Against Third Party Tortfeasor as Charge Against Employer's Distributive Share, 74 A.L.R.3d 854.
In 25 jurisdictions, including Michigan, ". . . when the suit is brought or recovery is effected by the employee, and sometimes in all cases, the carrier is obligated to pay a portion of the attorney's fee out of his share, usually in proportion to his share of the recovery". 2A Larson, Workmen's Compensation Law, § 74.32. 6
Section 827 of the Worker's Compensation Act of 1969, M.C.L.A. § 418.827; M.S.A. § 17.237(827), sets forth the procedure that must be followed in Michigan suits against third party tortfeasors. Subsections 5 and 6, the controlling provisions for these cases, prescribe how the judgment is to be divided. Since the Michigan statute fits firmly into the third category, we will evaluate only those interpretations of statutory provisions which contain express directions for apportionment of recovery expenses...
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