Nelson v. Rothering, 91-0875

• Decision Date: 17 March 1993
• Docket Number: No. 91-0875,91-0875
• Citation: 174 Wis.2d 296,496 N.W.2d 87
• Parties: Eleanor J. NELSON, Plaintiff-Respondent-Petitioner, v. Steven J. ROTHERING, General Casualty Company of Wisconsin, Gail M. Noltner, and Allstate Insurance Company, Defendants, Travelers Insurance Company, Defendant-Appellant.
• Court: Wisconsin Supreme Court

Page 87

496 N.W.2d 87

174 Wis.2d 296

Eleanor J. NELSON, Plaintiff-Respondent-Petitioner, v. Steven J. ROTHERING, General Casualty Company of Wisconsin Gail M. Noltner, and Allstate Insurance Company, Defendants Travelers Insurance Company, Defendant-Appellant.

No. 91-0875.

Supreme Court of Wisconsin.

Submitted on Briefs Nov. 4, 1992.

Opinion Filed March 17, 1993.

For the plaintiff-respondent-petitioner there were briefs by Michael R. Fitzpatrick and Brennan, Steil, Basting & MacDougall, S.C., Janesville.

For the defendant-appellant there was a brief by Richard A. Fortune and Schoone, Ware, Fortune & Leuck, S.C., Racine.

HEFFERNAN, Chief Justice.

This is a review of a decision of the court of appeals, ¹ which reversed a judgment of the circuit court for Dane county, Michael N. Nowakowski, Judge.

The court of appeals, in reversing the judgment of the circuit court, permitted Travelers Insurance Company, the worker's compensation insurer for Eleanor Nelson's employer, to share, according to the statutory formula of sec. 102.29(1), Stats., in Nelson's settlement with third party tortfeasors, whose conduct had not only caused the original compensable injury but also consequentially caused the aggravation of a pre-existing intestinal condition. This despite the fact that Travelers had refused to pay compensation for the aggravation caused by the injury but paid compensation only for the immediate consequences of the tort. It is argued on this review that the court of appeals erred as a matter of law. We conclude that Travelers was entitled to its statutory share ² of the settlement against the third party tortfeasor because it is indisputable that the aggravated intestinal condition was as a matter of law compensable as a consequence of the injury sustained in the work-related injury. We therefore affirm the court of appeals.

Eleanor Nelson worked for Martin Security as a security officer supervising fund transfers between banks. On January 25, 1988, Nelson was making such a transfer when the car she was driving was struck by a car driven by Steven Rothering. Rothering's car was then hit by a car driven by Noltner, which in turn caused Rothering's car to hit Nelson's a second time. Rothering and Noltner are insured by General Casualty Insurance and Allstate Insurance Company, respectively.

Nelson suffered a whiplash injury in the accident and injuries to her back, neck, and shoulders. Her treating physician prescribed non-steroidal, anti-inflammatory medication. Over the next eighteen months, as a result of the medication, Nelson developed severe gastrointestinal complications and underwent numerous medical procedures to enable her to eat and digest food. In the summer of 1990, as her conditioned worsened, Nelson underwent surgery to reroute her intestines. By January 1991, Nelson had incurred more than $47,000.00 in medical bills for her stomach condition alone.

Travelers paid more than $20,000.00 in worker's compensation before terminating Nelson's benefits in June, 1989, following an insurance company's physician's examination of her whiplash injuries. The doctor did not examine Nelson's gastrointestinal condition because the insurance company considered it to be a pre-existing "personal health condition" and therefore "not compensable under worker's compensation." After the company's decision, Nelson filed a worker's compensation claim against Travelers. In April 1990, the two parties settled Nelson's compensation claim in a lump-sum payment of $13,260.00: $12,100.00 for her permanent partial neck, back and shoulder disabilities and $1,160.50 for medical expenses. According to Travelers, no portion of the settlement went towards Nelson's "noncompensable" gastrointestinal condition. In consideration of the settlement, Nelson waived any further worker's compensation claims. Travelers ultimately paid Nelson a total of $33,637.77 in worker's compensation.

In 1988, Nelson filed suit against Rothering, Noltner and their insurers for damages from the automobile accident. The parties settled for $130,000.00, with the understanding that Nelson would in turn pay for any subrogated lien by Travelers against the third parties as provided by sec. 102.29(1), Stats. In accordance with that agreement, Nelson moved the circuit court to apportion the settlement between the whiplash and gastrointestinal injuries. The court agreed with this division, reasoning that Travelers' refusal to cover Nelson's pre-existing stomach condition rendered that portion of the settlement beyond the scope of the insurer's sec. 102.29(1), Stats., right to reimbursement and was therefore inequitable. It reasoned that, if the injury was not recognized by Travelers as a claim for worker's compensation, then it could not later be held a claim for purposes of reimbursement.

During evidentiary hearings Travelers unsuccessfully urged the court to reject Nelson's "equitable lien" argument. The court eventually valued the gastrointestinal damages at $90,000.00 and the whiplash damages at $40,000.00. Because the court applied the formula of sec. 102.29(1), Stats., to only the whiplash damages of $40,000.00, Travelers received only $16,716.50 for its share in the recovery, although it had paid in excess of $33,000.00 in worker'scompensation. ^{3 3} The court dismissed all claims between the parties.

Travelers appealed the circuit court's judgment apportioning the settlement. The court of appeals reversed, concluding that Nelson's accident gave rise to only one claim, not two as Nelson asserted. Accordingly, the court of appeals held that Nelson's entire third-party settlement was to be apportioned in accordance with the statutory formula.

The question before this court is whether sec. 102.29(1), Stats., of the Wisconsin Workers Compensation Act permits courts to divide third-party settlement proceeds into injury-related segments when one of the injuries is consequential to the original worker-related event. In other words, whether sec. 102.29(1), Stats., requires that a worker's compensation insurer be paid in a third-party settlement for an injury that it concluded was noncompensable but which injury was in fact consequential to the original injury although an aggravation of a pre-existing condition. To resolve the instant dispute, this court must construe sec. 102.29(1). Statutory construction is a question of law for which we need not defer to the lower court's determination. Kottka v. PPG Industries Inc., 130 Wis.2d 499, 388 N.W.2d 160 (1986); Ball v. District No. 4 Area Bd., 117 Wis.2d 529, 537, 345 N.W.2d 389, 394 (1984).

Worker's Compensation is a legislatively enacted compromise designed to bring employers and employees together in a mutually beneficial scheme of guaranteeing benefits in the event of work-related injury and disease. The compromise offers employees certain and speedy financial assistance, even if the employer be without fault, in return for exempting employers from tort liability. See Mulder v. Acme Cleveland Corp., 95 Wis.2d 173, 180, 290 N.W.2d 276 (1980). Although worker's compensation is the employee's exclusive remedy under the Act against the employer, it does not affect the employee's and employer's right to assert claims against third-party tortfeasors. ⁴ The purpose of the Act was to protect workers and their employers, not to extend immunity to tortfeasors outside the worker-employer relationship. Kottka, 130 Wis.2d at 508-09, 388 N.W.2d 160 (citing 2A Larson, Workmen's Compensation Law sec. 71.00, p. 14-1 and sec. 71.20, p. 14-3).

Section 102.29(1), Stats., was enacted to direct the courts in the distribution of proceeds of third-party tort actions. The legislature devised a scheme of distribution that gives effect to the original compromise underlying the Worker's Compensation Act by specifying what it determined to be a reasonable apportionment of proceeds between the parties involved. Specifically, sec. 102.29(1), Stats., ensures that the employee receive at least one-third of any third-party proceeds after costs and collection fees and that the compensation insurer be reimbursed as fully as possible from the remainder of the sum collected, with any balance going to the employee. While other methods of apportioning the proceeds might "be more just and equitable than that decreed by the legislature.... the legislature evidently considered it better policy to divide the funds by the formula it devised than to commit the matter to the discretion of court or commission." Huck v. Chicago, St. P., M. & O. R. Co., 14 Wis.2d 445, 449-50, 111 N.W.2d 434 (1961). See also Kottka, 130 Wis.2d at 510, 388 N.W.2d 160 (citing Huck ). ⁵

The division of proceeds set forth in sec. 102.29(1), Stats., has been legislatively mandated and is not open to judicial interpretation. Huck, 14 Wis.2d at 449-50, 111 N.W.2d 434; Kottka, 130 Wis.2d at 510, 388 N.W.2d 160. Only with the consent of both parties may a circuit court deviate from the statutory formula devised by the legislature. Kottka, 130 Wis.2d at 510, 388 N.W.2d 160 (citing Huck). Accordingly, we are concerned in the instant dispute only with whether the settlement between Nelson and the third-party tortfeasors involved one claim or multiple claims. In keeping with prior rulings from this court, if multiple claims contributed to the total sum agreed to in settlement then the value of each claim must be judicially determined and the proceeds attributed to each claim distributed according to sec. 102.29(1), Stats. If, however, Nelson's work injuries constituted only one claim, then the court of appeals was correct to require the circuit court to treat the settlement as one lump sum to be distributed under sec. 102.29(1), Stats.

The Wisconsin case law, as well as persuasive decisions of other jurisdictions, require that Nelson's whiplash-related injuries and the aggravated gastrointestinal condition constitute a single claim within the meaning of sec. 102.29(1),...