Jeneary v. Com., Record No. 002550.

• Citation: 262 Va. 418,551 S.E.2d 321
• Decision Date: 14 September 2001
• Docket Number: Record No. 002550.
• Parties: William E. JENEARY, Administrator of the Estate of Donald Gordon Jeneary, II, Deceased, v. COMMONWEALTH of Virginia, The Uninsured Employer's Fund, et al.
• Court: Supreme Court of Virginia

551 S.E.2d 321

262 Va. 418

William E. JENEARY, Administrator of the Estate of Donald Gordon Jeneary, II, Deceased, v. COMMONWEALTH of Virginia, The Uninsured Employer's Fund, et al.

Record No. 002550.

Supreme Court of Virginia.

September 14, 2001.

John W. Drescher (Latane' W. Brown; Breit, Drescher & Breit, on brief), Norfolk, for appellant.

M.E. Bowerman (Bowerman & Willis, on brief), Virginia Beach, for appellee Virginia Beach General Hospital, Inc.

John J. Beall, Jr., Senior Assistant Attorney General (Mark L. Earley, Attorney General; Cheryl A. Wilkerson, Assistant Attorney General, on brief), for appellee Commonwealth of Virginia, Unisured Employer's Fund of the Virginia Worker's Compensation Commission.

Present: All the Justices.

KOONTZ, Justice.

In this appeal, we consider whether the trial court correctly applied Code §§ 65.2-1204 and 65.2-601.1 of the Virginia Workers' Compensation Act with respect to claims made by the Uninsured Employer's Fund and a health care provider against the proceeds of a compromise settlement in a wrongful death action.

BACKGROUND

The parties do not dispute the principal facts. Donald Gordon Jeneary, II, worked as a delivery person for a restaurant in Virginia Beach. On January 9, 1999, Jeneary was operating his sister's vehicle to make deliveries. On that same day, Jonathan R. Steele was fleeing from the police in his vehicle, driving on Shore Drive in Virginia Beach towards its intersection with Independence Boulevard.¹ Steele drove through a red light at the intersection, and his vehicle collided with the vehicle driven by Jeneary. Upon the impact of the vehicles, Jeneary was ejected from the rear driver's side window of his vehicle, sustaining serious injuries.

Immediately following the accident, Jeneary was transported to Virginia Beach General Hospital (VBGH). Jeneary remained at VBGH from January 9 to January 19, 1999, receiving surgical and nursing care. On January 19, 1999, Jeneary died from the injuries sustained in the collision. Jeneary's expenses arising from his injuries included $66,787.14 for treatment at VBGH, $7,432.15 for medical treatment received from other health care providers, and $14,009.35 for funeral and burial costs.

William E. Jeneary, the administrator of Jeneary's estate (the administrator), filed a claim against the employer on behalf of the estate for compensation benefits with the Workers' Compensation Commission. The restaurant, however, did not have workers' compensation insurance. Consequently, the administrator asserted a claim, pursuant to Code § 65.2-1203, against the Uninsured Employer's Fund (the Fund) for Jeneary's medical and funeral expenses. The Fund contested this claim asserting, among other things, that it was unclear whether the employer had a sufficient number of employees to bring it under the requirements of the Act.²

The Wrongful Death Action

On September 30, 1999, the administrator filed a wrongful death action against Steele. Steele did not have automobile liability insurance at the time of the accident. Jeneary's sister, however, had an automobile liability insurance policy with State Farm Mutual Automobile Insurance Company (State Farm) on the vehicle operated by Jeneary. The policy included $250,000 of uninsured/underinsured motorist coverage. Jeneary was an insured person entitled to recover under that provision of the policy.

On September 22, 1999, Steele, apparently already aware that the wrongful death action would be filed, had petitioned the trial court, pursuant to Code § 8.01-424, to approve a compromise settlement of the claim against him in the amount of $250,000 to be paid on his behalf under State Farm's policy described above. In his petition, Steele requested that the trial court allocate $88,228.64 to medical bills and funeral costs, $98,483.01 to Jeneary's three statutory heirs, and $63,288.35 to the administrator's attorneys for fees and expenses. The petition expressly provided that the settlement "in no way releases Jonathan Steele from any subrogation collection proceedings that State Farm Mutual Automobile Insurance Company may choose to institute against Jonathan Steele."

On October 1, 1999, the day after the wrongful death action was filed, the trial court entered an order consolidating that action and Steele's petition to approve the settlement into a single settlement proceeding. In a separate order, the trial court granted Steele's petition to approve the settlement and directed that the proceeds be disbursed as outlined in the petition. In that order, the trial court stated that the wrongful death action "has been settled by payment made to William E. Jeneary, Administrator of the Estate of Donald G. Jeneary, II, deceased, by State Farm Mutual Automobile Insurance Company." The trial court directed that the $88,228.64 allocated for medical and funeral expenses be placed in escrow with the administrator's attorneys.³

The Fund's Lien

On November 1, 1999, the administrator filed a motion in the trial court seeking a determination of the Fund's lien, if any, against the settlement proceeds obtained in the wrongful death action for any workers' compensation benefits paid by the Fund.⁴ On December 1, 1999, the Fund filed a brief asserting that it had a lien against the settlement proceeds pursuant to Code § 65.2-1204. The Fund, recognizing that this was an issue of first impression, asserted that under this statute, the Fund is "subrogated to any right to recover damages" which the injured employee or his estate might have against "any other party" in order to recoup payments made by the Fund when an employer has not complied with the Act. Thus, the Fund contended that the settlement of the claim against Steele with the proceeds of State Farm's uninsured motorist coverage arose from a "right to recover damages" from an "other party."

In a responding brief filed December 6, 1999, the administrator asserted that the settlement proceeds were not paid by an "other party," but as the result of a private contract of insurance. Thus, he contended that the Fund was not entitled to subrogate these specific settlement proceeds.

On March 3, 2000, the trial court issued a letter opinion recognizing the Fund's right to a lien. The trial court reasoned that State Farm was an "other party" contemplated under Code § 65.2-1204 because "State Farm certainly took part in this case" by paying the settlement proceeds "for injuries caused by [Steele's] negligence." The trial court held that Code § 65.2-309.1, which expressly limits an employer's right of subrogation against proceeds recovered by an injured employee pursuant to the uninsured motorist provisions of a policy of motor vehicle insurance carried by and at the expense of the employer, did not apply to the lien asserted by the Fund under Code § 65.2-1204. By order entered on May 19, 2000, the trial court ruled that the Fund had a valid lien against the settlement proceeds pending the outcome of the underlying workers' compensation benefits claim.

VBGH's Petition for Distribution of Funds

On January 12, 2000, VBGH filed a petition to intervene in the settlement proceeding. VBGH sought to be paid $66,787.14, the amount of the settlement funds apportioned to the hospital in the trial court's October 1, 1999 order. On April 16, 2000, the trial court granted VBGH leave to intervene and ordered that the settlement funds continued to be held in escrow pending further order of the court.

On May 25, 2000, VBGH filed a motion for distribution of all the funds apportioned to the creditors of Jeneary's estate for medical and funeral expenses. At a July 31, 2000 hearing, the administrator requested that the trial court stay VBGH's motion for distribution, asserting that Code § 65.2-601.1 prohibited all health care providers from instituting any debt collection proceedings pending resolution of the workers' compensation claim. VBGH contended that the list of prohibited debt collection activities under Code § 65.2-601.1(B) was exclusive and was limited to extra-legal methods of collecting the debt. Thus, VBGH contended that its intervention in the settlement proceeding did not amount to "debt collection activities" under Code § 65.2-601.1. The trial court agreed with VBGH's contentions and ruled that this statute was inapplicable to this case.

Immediately following the hearing, the trial court entered an order directing the payment of $88,228.64 from the settlement funds held in escrow to the creditors of Jeneary's estate, including $66,787.14 to VBGH. The order expressly incorporated the trial court's prior ruling that Code § 65.2-601.1 did not prevent VBGH's intervention in the settlement proceedings or bar its motion for distribution of the settlement proceeds. Additionally, the order incorporated the May 19, 2000 order imposing a statutory lien in favor of the Fund on the remaining settlement funds.⁵ We awarded the administrator of Jeneary's estate this appeal.

DISCUSSION

In previous decisions involving application of the Workers' Compensation Act, we have said that "[w]hile we must construe this remedial act broadly to afford coverage for the employee, we are constrained by the Act itself and its intent." Snead v. Harbaugh, 241 Va. 524, 527, 404 S.E.2d 53, 55 (1991); see also Baggett & Meador Cos. v. Dillon, 219 Va. 633, 637, 248 S.E.2d 819, 822 (1978)

. Furthermore, "[w]e must take the statute as we find it, gather the legislative intent from the words used and give effect to the purposes thus ascertained." Van Gender v. Commonwealth, 192 Va. 548, 554, 65 S.E.2d 565, 568 (1951). These principles guide our analysis of the issues in this case.

The Fund's Lien

The administrator contends that the trial court erred in ruling that the Fund's lien under Code § 65.2-1204 is not limited by Code § 65.2-309.1. The thrust of the administrator's contention is that when, pursuant to Code § 65.2-1203, the Fund pays compensation benefits to an injured...