Knox v. Land Const. Co.

• Decision Date: 03 April 1961
• Docket Number: No. 23262,23262
• Citation: 345 S.W.2d 244
• Parties: Mary L. KNOX, Widow, Patricia D. Knox and Barbara A. Knox, Minor Children (Robert V. Knox, Deceased, Employee), Claimants and Respondents, v. LAND CONSTRUCTION COMPANY, Employer and Appellant, and Fireman's Fund Indemnity Company, Insurer and Appellant.
• Court: Missouri Court of Appeals

Page 244

345 S.W.2d 244

Mary L. KNOX, Widow, Patricia D. Knox and Barbara A. Knox Minor Children (Robert V. Knox, Deceased Employee), Claimants and Respondents, v. LAND CONSTRUCTION COMPANY, Employer and Appellant, and Fireman's Fund Indemnity Company, Insurer and Appellant.

No. 23262.

Kansas City Court of Appeals, Missouri.

April 3, 1961.

William H. Sanders, Caldwell, Blackwell, Oliver & Sanders, and James M. Moore, Kansas City, for appellants.

Richard W. Mason, St. Joseph, Abe Goldman, St. Joseph, of counsel, for respondents.

MAUGHMER, Commissioner.

The Industrial Commission of Missouri modified a compensation award and the Circuit Court of Buchanan County affirmed. The employer and insurer have appealed. It does not affirmatively appear that the amount involved exceeds $15,000. Therefore, jurisdiction is with this court.

Robert V. Knox, a resident of St. Joseph, Missouri, was killed January 17, 1956, as a result of an automobile collision. The accident occurred in Marshall County, Kansas, and arose out of decedent's employment with the Land Construction Company. At the time of his death Mr. Knox was 45 years of age and his wages were in excess of $60 per week. His widow, Mary L. Knox and two minor daughters, Patricia and Barbara, survive him.

On March 13, 1956, an 'award on agreed statement of facts' was entered by a referee, Division of Workmen's Compensation. Benefits thereunder (to the widow for herself and to her for the minor children) included death benefits of $12,000, payable from January 17, 1956, at the rate of $35 per week for 342 plus weeks and $400 funeral expenses. The employer, Land Construction Company, and the insurer, Fireman's Fund Indemnity Company, appellants here, paid the $400 funeral allowance, $397.85 in medical aid, and $3,800 (108.57 weeks) in weekly death benefits, aggregating $4,597.85. No further payments under the award have been made.

In March, 1956, Mary L. Knox, widow, through her attorneys, Richard W. Mason, St. Joseph, Missouri, and R. F. Galloway, Marysville, Kansas, filed suit in the District Court of Marshall County, Kansas, asking $25,000 damages under the Kansas Wrongful Death Statute, G.S.1949, 60-3201 et seq. Trial resulted in a verdict and judgment in the amount of $22,500. On appeal the Supreme Court of Kansas affirmed. Knox v. Barnard, 181 Kan. 943, 317 P.2d 452. When this judgment was paid it amounted, with accrued interest, to $23,896.88, which amount is for our purposes the 'amount of recovery effected by dependent against a third person.' This third party litigation was handled entirely by Mrs. Knox and her attorneys. Neither the employer nor the insurer, nor their attorneys, took any part therein although they knew the litigation was in progress and their claim agent from time to time talked with Mr. Mason about it.

The full amount of the judgment was paid to Mrs. Knox and her attorneys. Her chief counsel and fellow resident of St. Joseph, Missouri, Mr. Richard W. Mason, undertook allocation and distribution of the $23,896.88. By his letter of January 13, 1958, Mr. Mason advised the insurer that division of the recovery had been made as follows:

                Trial and traveling expense in
                 connection with Kansas suit,           $   626.81
                Fifty percent attorneys' fees ($2500
                 was paid to Kansas associate
                 counsel)                               $11,635.00
                Balance to Mrs. Mary L. Knox
                 dependent,                             $11,635.07
                                                        ----------
                                Total, ................ $23,896.88
                

In this letter Mr. Mason further calculated the insurer's share in the recovery to be $5,137.93, which he treated as a credit on future compensation payments to the extent of 165 3/4ths weeks. Apparently there was no response from the insurer and on October 14, 1958, and again on April 22, 1959, Mr. Mason wrote letters to Fireman's Fund Indemnity Company, urging resumption of compensation payments to Mrs. Knox. Under date of October 28, 1959, counsel for the employer and insurer filed with the Industrial Commission of Missouri a motion to modify and change the award for death benefits which had been entered on March 13, 1956. Therein it was alleged 'that there is a dispute between the dependents and the employer and insurer as to the proportionate share of expenses to be charged against the employer and insurer and the amount of a reasonable attorney fee to be allowed and the amount to be credited to the employer and insurer on said award.'

On February 29, 1960, the Commission entered its order modifying the original award. This order recited the recovery of $23,896.00 and then ruled: (1) that appellants' interest in the recovery is in that proportion which the original total award ($12,797.85) bears to the total amount recovered ($23,896.00) or 53.56 percent; (2) the trial expense of $626 and the attorney fees of $11,635 (50 percent contingent) were fair and reasonable, and approved deduction of same, leaving a balance or net recovery of $11,635.07; (3) that the employer and insurer are entitled to be credited with 53.56 percent of the net recovery ($11,635.07) or $6,231.71, which is the equivalent of 178.05 weeks of compensation at $35 per week; (4) that to this 178.05 weeks, shall be added 108.57 weeks which have been paid, making a total of 286.62 weeks paid by either cash or credit; (5) that the employer and insurer shall be absolved from further liability until July 17, 1961, this being 286.62 weeks after the employee's death on January 17, 1956. That on July 17, 1961, the employer and insurer shall resume payment of death benefits for 55.95 weeks in final and complete satisfaction of the award. We note that 56 weeks of benefits at $35 per week, totals $1,960. This amount, the Commission ruled, was still owed to dependents.

The judgment of the Circuit Court of Buchanan County affirmed this modified award of the Commission. On appeal the employer and insurer allege there was no substantial evidence to justify an allowance of a 50 percent attorney fee. They assert further that the balance of recovery was not apportioned in accordance with the statutory requirement of Section 287.150, V.A.M.S. (as amended, Laws 1955, p. 597), that the Commission erred in treating all of the appellants' share in the recovery as advance payments, rather than paying direct to them 'the amount due the employer' and that it was error not to treat all of the recovery paid to dependent as advance payments of future installments of compensation.

Originally most states passed rather restricted Workmen's Compensation Laws. Legislatures and courts seemed fearful of possible double recovery and had no desire to promote litigation. It is elementary that a claimant should not be allowed to keep the entire amount both of his compensation award and his common law damage recovery. The obvious disposition of the matter is to give the employer so much of the negligence recovery as is necessary to reimburse him for his compensation outlay and give the employee the excess. This is fair to everyone; the employer who, in a fault sense, is neutral, comes out even; the third person pays exactly the damages he would normally pay, which is correct, since to reduce his burden because of the relation between employer and employee would be a simple windfall to him, which he had done nothing to deserve; and the employee gets a fuller reimbursement for actual damages sustained than is possible under the compensation system alone. However, in recent years as our experience with Workmen's Compensation Laws has increased, there has been a tendency in many stated to broaden their laws with respect to distribution of the proceeds from third-party actions. In Larson's Workmen's Compensation Law, Vol. 2, par. 74.31, p. 209, we find this statement: 'Under most subrogation statutes the payor of compensation gets reimbursement for the amount of his expenditure as a first claim upon the proceeds of the third-party recovery, and the employee gets the excess. Some of the leading compensation states are beginning to vary this slightly. In Massachusetts the employee gets only four-fifths of the excess, presumably on the theory that the subrogee will thereby have a greater incentive to sue or settle for more than the bare amount necessary to cover the compensation expenditures. In New York the employee gets the entire excess over the employer's compensation outlay if the employee himself is the plaintiff, but only two-thirds if the employer or insurer is the plaintiff. This gives the employee, who under the New York statute has the first opportunity to sue, a financial motivation for taking direct action against the tortfeasor; it also impels the subrogee, if the cause of action passes to him, to achieve as large a recovery as possible, and to refrain from the temptation of making an easy settlement for no more than the out-of-pocket compensation cost.'

In Schumacher v. Leslie, 360 Mo. 1238, 232 S.W.2d 913, 919 (decided 1950 under the Missouri Act as it then existed) it was held that '* * * whoever, the employer or the employee, recovers against a third person tort-feasor holds so much of such recovery as in truth and in fact belongs to the other as an express trustee--the employee so see that the employer's right of subrogation is protected, and the employer to see that the employee receives any surplus after his indemnification. (citing cases)'.

The process of allocation, division, distribution and credit of proceeds secured in recovery against a third party is provided for by Section 287.150, V.A.M.S., as amended, Laws 1955. There seems to be little doubt as to the mechanics where the recovery against the third person is made by the employer. Subsection (1), after...