McKeeman v. Cianbro Corp.

• Decision Date: 27 August 2002
• Docket Number: No. Cum-01-539.,Cum-01-539.
• Citation: 804 A.2d 406,2002 ME 144
• Parties: Sharon McKEEMAN v. CIANBRO CORP. et al.
• Court: Maine Supreme Court

804 A.2d 406

2002 ME 144

Sharon McKEEMAN v. CIANBRO CORP. et al.

No. Cum-01-539.

Supreme Judicial Court of Maine.

Argued: April 3, 2002.

Decided: August 27, 2002.

Alexander F. McCann, Esq. (orally), James J. MacAdam, Portland, for plaintiff.

Thomas V. Laprade, Esq. (orally), Lambert Coffin, Portland, for defendant.

Panel: SAUFLEY, C.J., and CLIFFORD, RUDMAN, DANA, ALEXANDER, CALKINS, and LEVY, JJ.

SAUFLEY, C.J.

[¶ 1] Sharon McKeeman appeals from the judgment of the Superior Court (Cumberland County, Mills, J.) determining the amount of workers' compensation death benefits that she must repay to S.D. Warren Company as a result of her settlement with a third party. Sharon contends that the court erred in calculating S.D. Warren's proportionate share of the costs of her recovery. We vacate the judgment and remand for further findings.

I. BACKGROUND

[¶ 2] The parties stipulated to the following facts. In 1996, Fred McKeeman was an employee of S.D. Warren Company when he died in a work-related accident. His wife, Sharon, and son, Patrick, then began receiving workers' compensation death benefits from S.D. Warren pursuant to 39-A M.R.S.A. § 215 (2001).¹ In 1998, Sharon filed a complaint against third party Cianbro Corporation, among others, for negligence and breach of implied and express warranties in connection with Fred's death. Sharon reached a settlement with Cianbro for a present value amount of $970,000. By agreement, Sharon's counsel was entitled to a contingent fee of one-third of the settlement, totalling $323,333. Sharon was also responsible for $60,195 in other costs and expenses.

[¶ 3] Following completion of Sharon's settlement with Cianbro, S.D. Warren ceased making payments to Sharon. By that time, S.D. Warren had paid Sharon $107,616 in weekly compensation payments, and $4000 in funeral expenses. In addition, S.D. Warren incurred $7500 in costs in assisting Sharon's litigation of her third-party claim.²

[¶ 4] S.D. Warren intervened in Sharon's action against Cianbro, and moved to enforce a workers' compensation lien against Sharon pursuant to 39-A M.R.S.A. § 107 (2001).³ The court ordered Sharon to repay S.D. Warren the amount of $71,744, but did not elaborate on its method of calculating that amount. Sharon's subsequent motion for findings of fact and conclusions of law was denied. This appeal followed.

II. DISCUSSION

[¶ 5] Pursuant to section 215, an employer must make death benefit payments to surviving dependents for 500 weeks from the date of death. 39-A M.R.S.A. § 215(1) (2001). In this case, S.D. Warren had made 228 payments when Sharon settled with Cianbro; the settlement therefore relieved S.D. Warren of 272 future payments totalling $124,801. Upon settlement, section 107 entitles the employer to a lien for the "value of compensation paid" and recovered, and requires the employee to "repay to the employer ... the benefits paid by the employer under this Act, less the employer's proportionate share of cost of collection, including reasonable attorney's fees." 39-A M.R.S.A. § 107 (2001).

[¶ 6] The issue before us in this case is how to determine S.D. Warren's proportionate share of the costs of the settlement. Sharon contends that S.D. Warren is required to pay its proportionate share of recovering not just the amounts it had already paid, but also the amount of future liability from which it has been relieved. She calculates, therefore, that in addition to paying attorney fees for the recovery of the amounts paid during the first 228 weeks, S.D. Warren should also be required to pay proportionate attorney fees for recovering the amounts that S.D. Warren would have paid during the remaining 272 weeks had Sharon not recovered from Cianbro.

[¶ 7] The correct method of calculating an employer's proportionate share of the costs of an employee's settlement with a third party pursuant to section 107 presents an issue of first impression. The interpretation of section 107 is a matter of law that we review de novo. Harding v. Wal-Mart Stores, Inc., 2001 ME 13, ¶ 9, 765 A.2d 73, 75. [¶ 8] We look first to the plain language of section 107 to discern the legislative intent underlying its enactment. We note that the Legislature has not disclosed the intent underlying section 107, and the Workers' Compensation Board has not had occasion to clarify it. Russell v. Russell's Appliance Serv., 2001 ME 32, ¶ 10 n. 3, 766 A.2d 67, 71 n. 3. S.D. Warren contends that because the language of section 107 entitles an employer to collect only "benefits paid," rather than "benefits paid and payable," the employer has a duty to pay its portion of attorney fees and expenses only to the extent of the benefits already paid. See 39-A M.R.S.A. § 107. This view is supported by neither the plain language of section 107 nor by our prior decisions.

[¶ 9] The plain language of section 107 is more accurately read in two parts. The first part requires: "the employee shall repay ... the benefits paid by the employer," and therefore merely describes the employer's right of reimbursement of benefits paid upon the employee's settlement with a third party. Id. The second part of section 107 requires that the employer pay its "proportionate share of cost of collection," but is otherwise silent on how to calculate that proportionate share. Id. Thus, the plain language of section 107 indicates the employer's right of reimbursement of amounts paid, but does not guide our inquiry into the calculation of the employer's proportionate share of costs.

[¶ 10] It has long been established in Maine, however, that section 107 entitles employers to both a lien on benefits already paid and to a right to offset any future liability against the settlement amount netted by the employee. In Liberty Mutual Insurance Co. v. Weeks, 404 A.2d 1006 (Me.1979), the employee, Weeks, was injured in a work-related car accident. Id. at 1008. The employer's insurer, Liberty Mutual, then began making weekly workers' compensation benefits to Weeks. Id. Some time later, Weeks reached a settlement agreement with the third parties actually responsible for the accident. Id. Pursuant to the predecessor statute to section 107, identical in language, Liberty Mutual obtained a lien on the amounts it had already paid Weeks. Id. We determined that, notwithstanding the language of the statute entitling the employer only to "benefits paid," the employer "is entitled as well to set off against its liability for future compensation payments the difference between the amount paid as compensation after the disposition of that action and the [employee's] net recovery from it." Id. at 1013; see also Dionne v. Libby-Owens Ford Co., 565 A.2d 657, 658 (Me.1989). This right of setoff was necessarily read into the statutory scheme in order to prevent the employee's double recovery — from both the settlement with the third party at fault, and the employer through its continuing workers' compensation liability to the employee independent of the settlement. Id.

[¶ 11] Following Weeks, in Overend v. Elan I Corp., 441 A.2d 311 (Me.1982), we held that an employee could proceed against his employer for workers' compensation benefits even though he had already settled his claim against a third-party tortfeasor. Id. at 312. Thus, in Overend we explicitly recognized the employer's continuing liability to the employee independent of settlement. Id. We also reiterated in Overend that "any award conferred under the [Workers' Compensation] Act [may] be set off by the net amount of the settlement." Id.

[¶ 12] The import of Weeks and Overend is this: the employer is liable for death or disability payments for the entire duration prescribed by statute — in this case 500 weeks — regardless of the existence or extent of the employee's settlement with a third party — subject to a setoff commensurate with the settlement. See 39-A M.R.S.A. §§ 107, 215. Because the settlement signifies only the extent of the third party's liability, the employer's liability may extend well beyond that. If the amount of settlement obtained by the employee is greater than the present value of future payments the employer would have paid, the employer's payments are entirely suspended for the duration of the period of liability. If, however, the amount of settlement obtained by the employee is not sufficient to cover the amount of future payments for which the employer would eventually become liable, then the employer's liability is suspended only to the extent of the settlement amount. The employer again becomes liable for continuing payments once the amount of the settlement received by the employee is depleted based on the weekly amount the employer would have paid the employee but for the settlement. In this way, all three goals of section 107 are fulfilled: (1) the injured employee gets the benefit of the greater of the tort recovery or the workers' compensation award, (2) the employer is relieved of the compensation burden caused by the third party, and (3) the employee gets no double recovery and the third party tortfeasor gets no immunity at the expense of the employer. See Weeks, 404 A.2d at 1012-13; Overend, 441 A.2d at 314.

[¶ 13] Because of this right of setoff, the benefit that inures to the employer upon the employee's settlement with a third party includes both reimbursement of amounts paid and the relief of future amounts payable to the extent of the settlement amount netted by the employee. In this case, Sharon's settlement with Cianbro exceeds the amount of benefits for which S.D. Warren would be liable if there had been no settlement, and S.D. Warren's payments are therefore entirely suspended. S.D. Warren has benefitted by the settlement in the amount of the $111,616⁴ already paid plus the full amount of payments suspended due to the settlement, allegedly totalling $124,801 according to Sharon. Because the employer's rights in the settlement include not only past amounts paid, but also...