Hultin v. Francis Harvey & Sons, Inc.

• Citation: 40 Mass.App.Ct. 692,666 N.E.2d 1323
• Decision Date: 02 October 1996
• Docket Number: No. 95-P-427,95-P-427
• Court: Appeals Court of Massachusetts
• Parties: Ronald HULTIN & another 1 v. FRANCIS HARVEY & SONS, INC.

Page 1323

666 N.E.2d 1323

40 Mass.App.Ct. 692

Ronald HULTIN & another ¹ v. FRANCIS HARVEY & SONS, INC.

No. 95-P-427.

Appeals Court of Massachusetts,

Worcester.

Argued March 20, 1996.

Decided July 9, 1996.

Further Appellate Review Denied Oct. 2, 1996.

Elizabeth Mulvey, Boston, for plaintiffs.

Terrance J. Hamilton, Boston, for the insurer, submitted a brief.

Before SMITH, KAPLAN and IRELAND, JJ.

IRELAND, Justice.

This appeal by a workers' compensation insurance carrier arises from the way the proceeds from the settlement of a third-party negligence claim have been allocated between an injured insured employee and his spouse. The settlement was approved by a Superior Court judge pursuant to G.L. c. 152, § 15.

The appellant, Transportation Insurance Co. (TIC), ² is the workers' compensation insurer for the plaintiff's employer and, through it, for the plaintiff Ronald Hultin (Hultin), who on November 27, 1990, sustained serious and disabling injuries in the course of his employment while performing excavation work at a construction site. Hultin received workers' compensation benefits from TIC under G.L. c. 152. In addition, he and his wife, Dorothy, filed a third-party complaint seeking damages from Francis Harvey & Sons, Inc. (Harvey), the entity that had hired Hultin's employer to perform the excavation work. Harvey agreed to settle the Hultins' claims by paying them $650,000.

Upon execution of the settlement agreement between Harvey and the Hultins, the Hultins filed a petition pursuant to G.L. c. 152, § 15, with the Superior Court for approval of the settlement. The proposed settlement allocated ninety percent of the total damages to the wife and ten percent to Hultin. TIC, a lien holder for benefits paid and, therefore, an interested party, appeared at the hearing on the petition and objected to the allocation formula. ³ The judge rejected the petition, stating that the allocation "is unfair to the workers' compensation lien holder."

In a revised petition for approval of the settlement, Harvey and the Hultins agreed to allocate seventy-nine percent of the proceeds to the wife and twenty-one percent to Hultin. After a second hearing, at which TIC again appeared and objected, the judge approved the petition upon finding that the revised allocation was fair and reasonable under the circumstances. The ensuing two judgments from which TIC now appeals award damages of $136,500 to Hultin and $513,500 to his wife. The judge held and the parties do not dispute that the entire amount allocated to Hultin will be applied to TIC's lien. TIC claims, however, that its lien against benefits amounting to $469,400 which it has already paid to Hultin should be satisfied in full out of the $650,000 settlement before any of the proceeds are allocated and that a portion of the remainder constitutes an excess recovery under G.L. c. 152, § 15, which is subject to an offset against future benefits it may pay Hultin. ⁴ TIC also contends that a disproportionate amount of the total settlement was allocated to the wife's consortium claims.

1. TIC's reimbursement and offset rights. General Laws c. 152, § 15, enables an injured employee such as Hultin, who has received workers' compensation benefits, to seek damages against a negligent third party. "The sum recovered," however, "shall be for the benefit of the insurer, unless such sum is greater than that paid by [the insurer] to the employee...." G.L. c. 152, § 15, as appearing in St.1991, c. 398, § 39. ⁵

The cases have uniformly held that, when allocating the proceeds from the settlement of a third-party tort action brought by an injured employee, an insurer's right to full reimbursement of benefits it has paid to the injured employee under G.L. c. 152, or to members of his family under § 31 or § 35A of G.L. c. 152, may not be compromised, abridged, or equitably allocated to others so as to deprive the insurer of its lien. Eisner v. Hertz Corp., 381 Mass. 127, 132-133, 407 N.E.2d 1286 (1980) (proceeds of third-party settlement allocated to decedent employee's widow and dependents, who had received death benefits from the insurer under G.L. c. 152, § 31, were subject to reimbursement of insurer's lien under § 15). Rhode v. Beacon Sales Co., 416 Mass. 14, 17-18, 616 N.E.2d 103 (1993) (proceeds from settlement of employee's third-party action may not be equitably allocated by the judge between insurer and employee based on relative merits of employee's claim). Bongiorno v. Liberty Mut. Ins. Co., 417 Mass. 396, 402, 630 N.E.2d 274 (1994) (proceeds from legal malpractice action that stemmed from an injured employee's third-party tort claim were subject to insurer's lien under § 15). Taylor v. Trans-Lease Group, 34 Mass.App.Ct. 404, 407-409, 612 N.E.2d 254 (1993).

The claims of the spouse of an injured employee for loss of consortium, however, are entirely independent and distinct from the personal injury claims of the employee. Feltch v. General Rental Co., 383 Mass. 603, 607-608, 421 N.E.2d 67 (1981). Moreover, a spouse's loss of consortium is not a compensable injury under G.L. c. 152. Bongiorno v. Liberty Mut. Ins. Co., 417 Mass. at 404 n. 9, 630 N.E.2d 274. Taylor v. Trans-Lease Group, 34 Mass.App.Ct. at 405 n. 4, 612 N.E.2d 254, citing Eisner v. Hertz Corp., supra at 133-134, 407 N.E.2d 1286. Hence, TIC's lien for "benefits provided under this chapter [G.L. c. 152]" does not extend to that portion of the settlement that has been allocated to a nonemployee spouse for loss of consortium. See Bongiorno v. Liberty Mut. Ins. Co., supra; Walsh v. Telesector Resources Group, Inc., 40 Mass.App.Ct. 227, 229, 662 N.E.2d 1043. (1996).

TIC urges us, nonetheless, to construe the 1991 amendment to G.L. c. 152, § 15 (see note 5, supra ), to create, in essence, an absolute right for the insurer to have its lien rights satisfied out of the total available proceeds of a third-party tort action before any allocation has been made. As support, TIC relies on the cases previously cited in this opinion, all holding that, as between the insurer and the insured employee, the insurer's lien rights may not be compromised. Those cases are distinguishable for the simple reason that the settlement proceeds were derived exclusively from the insured employee's third-party tort claims, and not from the spouse's loss of consortium claims.

We also see nothing within the 1991 amendment that points us in the direction TIC would have us travel. Section 15, as amended, requires the court during a hearing on approval of a settlement, to "inquire and make a finding as to the taking of evidence on the merits of the settlement, [and] on the fair allocation of amounts payable to the employee and the employee's spouse ... and any other member of the employee's family." The 1991 amendment further requires that "the amount of excess [once the insurer's lien has been satisfied] that shall be subject to offset against any future payment of benefits ... shall be determined at the time of such approval" in light of "the fair allocation of amounts payable to and amongst family members."

The 1991 amendment focuses in large part upon an insured employee's statutory excess recovery and on the insurer's possible corresponding rights of offset for future benefits against any such excess. Language inserted by that amendment requires that the insurer's rights to an offset from the statutory excess be determined at the time of the hearing, taking into consideration the "fair allocation" of damages between the injured employee and other family members. Finding nothing in the 1991 language that expands the insurer's basic lien rights at the expense of the consortium claim of a spouse, we hold that § 15 does not allow a workers' compensation insurer to satisfy its statutory lien against past benefits paid out of the total proceeds available in a third-party claim prior to allocation of those proceeds between the insured employee's personal injury claims and the spouse's loss of consortium claims. From this, it follows that TIC is entitled to reimbursement of its lien (after proportionate deductions described elsewhere in § 15 for attorney's fees and other costs) only from the twenty-one percent portion of the total recovery allocated to Hultin as the insured employee. Moreover, because its lien against benefits already paid remains partially unsatisfied and where the proposed split was a fair one in the circumstances (as we decide, infra ), we can safely conclude--as did the judge--that TIC has no offset rights.

2. Fairness of the allocation. At the hearing for approval of the Hultins' settlement agreement, the judge was required to "inquire and make a finding as to the taking of evidence on the merits of the settlement [and] on the fair allocation [of the proceeds]." G.L. c. 152, § 15. In his memorandum of decision approving the settlement, the judge stated simply that the seventy-nine and twenty-one percent allocation was "fair." We think that the better course--and one more in keeping with the statute's intent--would have been for the judge to have made subsidiary findings of fact which led him to his conclusion that the allocation was "fair." Nevertheless, we accept the judge's over-all finding as it is not clearly erroneous and is supported by evidence in the record.

Attached to the judge's memorandum, and incorporated therein, is the Hultins' own memorandum in support of their petition for approval of the settlement. In it, the Hultins describe with particularity Hultin's and his wife's injuries. Hultin's injuries are well...