Great American Ins. Companies v. Witt

• Decision Date: 13 February 1998
• Docket Number: No. 96-CA-3423-MR,96-CA-3423-MR
• Citation: 964 S.W.2d 428
• Parties: GREAT AMERICAN INSURANCE COMPANIES, Appellant, v. Loretta WITT; Hardigg Industries, Inc. Appellees.
• Court: Kentucky Court of Appeals

Page 428

964 S.W.2d 428

GREAT AMERICAN INSURANCE COMPANIES, Appellant, v. Loretta WITT; Hardigg Industries, Inc. Appellees.

No. 96-CA-3423-MR.

Court of Appeals of Kentucky.

Feb. 13, 1998.

Otto Daniel Wolff, McMurty & Wolff, Covington, for Appellant.

James T. Gilbert, Coy, Gilbert & Gilbert, Richmond, for Appellee.

Before DYCHE, HUDDLESTON and KNOPF, JJ.

OPINION

KNOPF, Judge.

Great American Insurance Companies appeals a trial court order which reduced its subrogation recovery from the proceeds of a jury verdict. Great American is the workers' compensation insurance carrier for Yuasa Exide which is an automotive battery manufacturer. Yuasa Exide is the employer of Loretta Witt who injured herself on the job. Ms. Witt collected workers' compensation benefits from Great American in the amount of $17,211.00 for medical expenses, $10,180.00 for lost wages, and $30,000.00 for future lost wages, all totalling $57,391.00. Ms. Witt also filed a products liability claim against Hardigg Industries, Inc., the manufacturer of the equipment she was using when she was injured. Great American intervened to recover the workers' compensation benefits it paid to Ms. Witt. The defendant manufacturer filed a third party complaint against Yuasa Exide, the employer, and the defendant manufacturer alleged contributory negligence against Ms. Witt.

The case proceeded to a jury which returned a verdict finding that Ms. Witt suffered a total of $157,391.76 in damages. ¹ The damages were specifically $100,000.00 for pain and suffering, $10,180.76 for lost wages, $17,211.00 for medical expenses, and $30,000.00 for diminution of her power to labor and earn. The jury also apportioned sixty percent (60%) of fault to the defendant manufacturer, twenty percent (20%) of fault to Ms. Witt, and twenty percent (20%) of fault to Yuasa Exide.

Great American contends that its subrogation interest entitles it to sixty percent (60%) of the total it paid in benefits. Thus, sixty percent (60%) of $57,391.00 equals $34,434.60, which is the amount Great American claims. Ms. Witt argues that Great American's subrogation recovery should be further reduced by the employer's degree of fault. The trial court agreed with Ms. Witt and made the following calculation: 1) first the trial court multiplied the total damage award of $157,391.76 by twenty percent (20%) (the employer's degree of fault). This calculation equals $31,478.00, which the trial court explained was the loss to Ms. Witt attributable to the apportionment of fault to the employer; 2) the trial court then subtracted this total loss of $31,478.00 from the $34,434.60, the amount Great American claims it is entitled. This calculation leaves $2,956.60 left to reimburse Great American for its subrogation interest according to the trial court's order.

The trial court determined that Great American's recovery of sixty percent (60%) of paid benefits should be further reduced by twenty percent (20%) of the entire judgment. The trial court reasoned that neither the employer nor its carrier should benefit from a loss the employer caused to the plaintiff. We believe, however, that Great American's recovery of sixty percent (60%) of paid benefits already includes a reduction for the employer's twenty percent (20%) of fault. If the employer had not been at fault, the twenty percent (20%) could have been applied to the defendant manufacturer raising its fault to eighty percent (80%). Great American then would have been entitled to eighty percent (80%) of the paid benefits. However, because the employer was twenty percent (20%) at fault, Great American's recovery is reduced by that twenty percent (20%) just as the plaintiff's recovery is reduced by the twenty percent (20%) of fault attributed to the employer.

Reducing the subrogation interest simply by multiplying the degree of fault of the defendant manufacturer by the amount of paid benefits was the method utilized by the Court in Dix & Associates Pipeline Contractors, Inc. v. Key, Ky., 799 S.W.2d 24 (1990). In Dix the jury apportioned ninety-five percent (95%) of fault to the defendant tortfeasor and five percent (5%) of fault to the employer. The Court allowed the employer to recoup ninety-five percent (95%) of the workers' compensation benefits paid or payable by it. The Court in Dix explained that reducing the employer's subrogation interest by the amount of fault apportioned to the defendant tortfeasor prevents a double recovery and prevents the employer from profiting from his own negligence. Id. at 30.

Although the above method of determining the workers' compensation carrier's subrogation interest has been the law since Dix, this case presents a new and different situation than Dix. In Dix the plaintiff settled with the tortfeasor. In the settlement the tortfeasor assumed responsibility for any subrogation rights of the employer under the workers' compensation statutes and the case was tried to determine that subrogation interest. Id. at 25. Thus, in Dix the plaintiff was able to recover fully from both the tortfeasor and the workers' compensation insurance carrier. The Court in Dix also recognized that to allow the employer to recover more than ninety-five percent (95%) of the paid benefits would prevent the employee from being made "whole." Dix, supra, at 30.

The concept of the plaintiff being "made whole" has been mentioned in other Kentucky cases, such as Fireman's Fund Ins Co. v. Government Employees Ins. Co., Ky., 635 S.W.2d 475 (1982), but has only recently been more developed and recognized as a primary principle of law in Wine v. Globe American Casualty Co., Ky., 917 S.W.2d 558 (1996). In Wine an uninsured motorist caused the death of David Webb. Webb's estate collected uninsured motorist benefits from three (3) different insurance carriers. Subsequently, the three (3) insurance carriers and Webb's estate each settled with the tortfeasor for different amounts. Because the tortfeasor did not have sufficient assets to satisfy all of the settlements, the trial court determined that priority should be given to the insurance companies'...