Lone v. Esco Elevators, Inc., Docket No. 29624
| Decision Date | 07 September 1977 |
| Docket Number | Docket No. 29624 |
| Citation | 78 Mich.App. 97,259 N.W.2d 869 |
| Parties | Walter M. LONE and Marnee N. Lone, Plaintiffs-Appellees, and Employer's Commercial Union, Intervening Plaintiff-Appellant, v. ESCO ELEVATORS, INC., and Yellow Freight Systems, Inc., Defendants. |
| Court | Court of Appeal of Michigan — District of US |
Ripple & Chambers by John F. Chambers, Detroit, for Employer's Commercial Union.
John P. O'Brien, Mason, for Walter M. Lone.
Foster, Swift & Collins by John L. Collins, Lansing, for Esco Elevators, Inc.
Roy H. Christiansen, Detroit, for Yellow Freight Systems.
Before D. E. HOLBROOK, Jr., P. J., and ALLEN and FREEMAN, * JJ.
This appeal 1 presents two difficult questions of first impression of worker's compensation law.
(1) When an employer or its insurer pays worker's compensation benefits to an injured employee and the employee and his wife obtain a tort judgment from a third-party tortfeasor, does M.C.L.A. § 418.827; M.S.A. § 17.237(827) authorize the employer to claim reimbursement or an advance payment credit from that portion of the judgment which compensates the injured employee's wife for loss of consortium?
(2) When an injured employee successfully pursues a tort action against the third-party tortfeasor, and a portion of the judgment is treated as an advance payment credit against future worker's compensation liability, is the employer required to pay a percentage of the employee's attorney fees in recognition of the advance payment credit?
Plaintiff-appellee, Walter Lone, suffered an injury on June 30, 1972, while working for the Lardner Elevator Company of Detroit. Intervening plaintiff-appellant, Employers Commercial Union Insurance Company, (ECU) is Lardner's worker's compensation insurance carrier. From the date of the injury through August of 1975, ECU voluntarily paid compensation benefits totaling $25,867.13. Mr. Lone's rights to further worker's compensation are now being determined in contested proceedings before the Workmen's Compensation Bureau.
On November 28, 1973, Mr. Lone and his wife, plaintiff-appellee Marnee Lone, filed a tort suit against defendants Esco Elevators and Yellow Freight System, alleging that those parties had tortiously caused the injury for which Mr. Lone was then receiving worker's compensation benefits. Mr. Lone's complaint sought damages for his injuries, loss of wages and pain and suffering. Mrs. Lone asked damages for loss of consortium. Neither individual could have sued Mr. Lone's employer, Lardner Elevator Company, because worker's compensation is the employee's exclusive remedy against his employer and the employer's insurance company. M.C.L.A. § 418.131; M.S.A. § 17.237(131). That statute has also been interpreted as barring a loss of consortium suit by an employee's spouse against the employer. Haddad v. Justice, 64 Mich.App. 74, 235 N.W.2d 159 (1975), Balcer v. Leonard Refineries, Inc., 370 Mich. 531, 122 N.W.2d 805 (1963). But the suit against the two named defendants was authorized by M.C.L.A. § 418.827(1); M.S.A. § 17.237(827)(1):
"Where the injury for which compensation is payable under this act was caused under circumstances creating a legal liability in some person other than a natural person in the same employ or the employer to pay damages in respect thereof * * * the injured employee or his dependents or personal representative may also proceed to enforce the liability of the third party for damages * * *."
The initial phase of the lawsuit ended with a settlement judgment entered on June 7, 1976. That settlement provided that Walter Lone would receive $65,000 from the defendants, and Marnee Lone would receive $60,000. At that point, ECU intervened to assert its rights under M.C.L.A. § 418.827(5); M.S.A. § 17.237(827)(5):
"Any recovery against the third party for damages resulting from personal injuries or death only, after deducting expenses of recovery, shall first reimburse the employer or carrier for any amounts paid or payable under this act to date of recovery and the balance shall forthwith be paid to the employee or his dependents or personal representative and shall be treated as an advance payment by the employer on account of any future payments of compensation benefits." (Emphasis added.)
Before ECU could claim its share of the judgment, it was required to pay a percentage of the attorney fees charged by the Lones' attorney and a percentage of the court costs. 2
(Emphasis added.) M.C.L.A. § 418.827(6); M.S.A. § 17.237(827)(6).
The issues presented on appeal are completely framed by the quoted subsections (5) and (6) of M.C.L.A. § 418.827; M.S.A. § 17.237(827) and the data in footnote 2, supra. The Lones' position which was adopted by the trial judge is that ECU has no claim to any of Mrs. Lone's $60,000 settlement judgment. The trial court held that Mr. Lone's $65,000 judgment should be divided as follows:
65,000 (Mr. Lone's 52% share of the total judgment)
-26,000 (40% contingent fee to Mr. Lone's attorney)
----------
39,000
628.53 (52% share of total litigation costs)
----------
38.371.47
-25,876.13 (Reimbursement to ECU for benefits already paid)
----------
12,504.34 (Advance payment credit for future compensation
liability)
On appeal, ECU first argues that the preceding distribution was incorrect because Mrs. Lone's $60,000 share of the judgment should also be subject to a lien for past and future compensation payments. If that approach is used, the breakdown would appear as follows:
125,000 (Total judgment)
- 50,000 (40% contingent attorney fee)
------------
75,000
- 1,208.72 (Total litigation costs)
------------
73,791.28
- 25,867.13 (Reimbursement to ECU for benefits already paid)
------------
47,924.15 (Advance payment credit for future compensation
liability)
Mr. Lone's judgment alone is large enough to fully reimburse ECU for the worker's compensation benefits which have already been paid. The difference between the two methods is the amount of advance payment credit awarded to ECU. If the proceedings currently pending in the Workmen's Compensation Bureau lead to a finding that Mr. Lone is still disabled and ECU is liable for continuing payments, no payments will actually have to be made until the total amount due exceeds the amount of the advance payment credit awarded in this action. This summarizes the first issue raised on appeal.
Since ECU benefits from the tort recovery, the statutes require that it reimburse Mr. Lone (or both Lones) for a portion of their attorney fees and litigation expenses. The percentage of fees and expenses which ECU must pay is determined from a fraction whose numerator is ECU's interest "at the time of the recovery" (M.C.L.A. § 418.827(6); M.S.A. § 17.237(827)(6)) and whose denominator is the amount of the judgment subject to ECU's lien (either $65,000 or $125,000). The crucial question is what the statute means when it says "interest at the time of the recovery". ECU contends that its interest is a $25,867.13 refund which it will receive for benefits already paid. On the other hand, the Lones argue and the trial judge agreed that ECU's "interest at the time of the recovery" is the total of the reimbursement and the advance payment credit. That ruling led to the following calculation:
25,867.13 (Reimbursement to ECU for past benefits paid)
k12,504.34 (Advance payment fredit for future compensation
liability)
----------
37,371.47 (ECU's "interest at the time of recovery")
Since ECU had a 59.03% interest in Mr. Lone's $65,000 judgment, it was required to pay 59.03% of his attorney fees and litigation costs. This charge was assessed against ECU's reimbursement for past benefits paid as follows:
25,867.13 (Reimbursement to ECU for past benefits paid)
-15,718.50 (59.03% of $26,000 attorney fee and $628.53 costs)
----------
10,148.63 (Amount actually paid to ECU as full reimbursement
for past benefits paid)
ECU argues on appeal that its "interest at the time of the judgment" was limited to the $25,867.13 which it had already paid in benefits. If that figure is adopted, ECU would be responsible for only 39.79% of Mr. Lone's attorney fee and litigation costs. This interpretation would increase the amount actually refunded to ECU without diminishing the amount of its advance payment credit in the event that it becomes liable for future compensation benefits. 3 This summarizes the second issue on appeal.
As mentioned, the trial judge adopted the Lones' argument on both issues. we
now consider the correctness of those rulings. I. IS ECU
ENTITLED TO ANY PART OF THE PROCEEDS FROM MRS.
M.C.L.A. § 418.827(5); M.S.A. § 17.237(827)(5) defines the problem:
"Any recovery against the third party for damages resulting from personal injuries or death only, after deducting expenses of recovery, shall first reimburse the employer or carrier for any amounts paid or payable under this act to date of recovery and the balance * * * shall be treated as an advance payment by the employer on account of any future payment of compensation benefits."
We must decide whether Mrs. Lone's judgment is "any recovery for damages resulting from personal injuries or death" as that phrase is used in the preceding quotation. We hold that Mrs. Lone's judgment is not subject to ECU's lien.
There is no authority directly on point in Michigan, although several cases have touched upon similar questions. In Hix v. Besser Co., 19 Mich.App. 468, 172 N.W.2d 821 (1969), aff'd in part, vacated in part, 386 Mich. 499, 194 N.W.2d 333 (1972), this Court...
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