Nicholas v. Morgan

• Decision Date: 12 November 2002
• Docket Number: No. 96,195.,96,195.
• Citation: 2002 OK 88,58 P.3d 775
• Parties: Teddy Raye NICHOLAS, Plaintiff/Appellee, v. Jay V. MORGAN, Attorney At Law, Michael C. Taylor, Attorney at Law, and Accidents & Personal Injuries, Inc., d/b/a Michael C. Taylor & Associates, Defendants/Appellees, State Insurance Fund, Intervenor/Appellant.
• Court: Oklahoma Supreme Court

58 P.3d 775

2002 OK 88

Teddy Raye NICHOLAS, Plaintiff/Appellee, v. Jay V. MORGAN, Attorney At Law, Michael C. Taylor, Attorney at Law, and Accidents & Personal Injuries, Inc., d/b/a Michael C. Taylor & Associates, Defendants/Appellees, State Insurance Fund, Intervenor/Appellant.

No. 96,195.

Supreme Court of Oklahoma.

November 12, 2002.

Renee Williams, Stephen Lawrence Andrew and D. Kevin Ikenberry, Tulsa, OK, for plaintiff/appellee.

Joseph R. Farris and Kristin Blue Fisher, Tulsa, OK, for defendants/appellees.

Victor Ronald Frangione, K. David Roberts and Angela Denise Thompson, Oklahoma City, OK, for intervenor/appellant. BOUDREAU, Justice.

¶ 1 This is an appeal by the State Insurance Fund¹ (Fund) from the district court's dismissal of its petition for intervention in a legal malpractice action.² The dispositive question presented on certiorari is whether the right of the insurance carrier prescribed by 85 O.S.1991, § 44(a) for pro tanto reimbursement of workers' compensation benefits paid extends to the proceeds of the injured worker's legal malpractice action against his attorney for failure to timely commence an action against the third-party tortfeasor. We answer in the affirmative. We hold the district court erred in dismissing the Fund's petition for intervention.

I. Background

¶ 2 On August 13, 1991, Teddy Raye Nicholas, plaintiff/appellee, an employee of Billy Boy Construction, was engaged in the construction of a log house when an untethered log swinging from a crane hit him in the chest. Nicholas retained attorney Michael C. Taylor, defendant/appellee, to represent him in his workers' compensation claim for this work-related injury and attorney Jay V. Morgan, defendant/appellee, to represent him in his tort claim against the crane operator. Both attorneys were associated with Accidents & Personal Injuries, Inc., d/b/a Michael C. Taylor & Associates.

¶ 3 Taylor pursued Nicholas' claim under the Workers' Compensation Act.³ The employer's insurer, the Fund, paid $83,516.75 workers' compensation benefits to Nicholas and $85,543.71 for medical expenses on behalf of Nicholas. ¶ 4 Nicholas engaged Morgan to represent him against the third-party tortfeasors. On August 13, 1993, two years after the work-related injury occurred, Morgan filed Nicholas' tort action against the unidentified crane company and crane operator as John Doe Crane Company and John Doe Crane Operator. Morgan never effected service of process in that action.

¶ 5 Nicholas subsequently discharged both his attorneys and filed a law suit pressing two legal malpractice claims against the corporate law firm and the two attorneys, one based on the representation provided by Taylor and the other based on the representation provided by Morgan.⁴ Nicholas alleged Taylor negligently failed to list all his injuries in the Form 3 resulting in a loss of workers' compensation benefits. He alleged Morgan negligently failed to investigate and timely file his action against the third-party torfeasors. The Fund filed a petition for intervention asserting it is entitled to be reimbursed for the workers' compensation benefits it paid to or on behalf of Nicholas from any recovery in the legal malpractice claim against Morgan. The Fund cited 85 O.S.1991, § 44(a) as the legal basis of its right to intervene under 12 O.S.1991, § 2024.

¶ 6 Taylor and Morgan and their firm pressed for dismissal of the petition for intervention. They contended that the language of 85 O.S.1991, § 44(a) restricts the assignment of an injured worker's right to sue the third-party tortfeasor only to claims against the tortfeasor and that it does not apply to other claims the injured worker may have. The district court agreed and dismissed the Fund's petition for intervention. Thereafter, according to the Fund, appellees, plaintiff and defendants in the legal malpractice action, settled the action without notice to the Fund and without court approval.

¶ 7 The Fund timely appealed the order dismissing its petition for intervention asserting that the trial court erred by failing "to recognize the Intervenor's statutory right of subrogation provided by title 85 O.S. § 44". The Court of Civil Appeals essentially determined that the Fund had no interest in the legal malpractice action. The Court of Civil Appeals viewed the § 44(a) assignment of an injured worker's right of action against a third-party tortfeasor when the worker elects to take workers' compensation benefits as an exception to our prohibition against assignment of tort claims and refused to extend the exception beyond the express statutory language. The Court of Civil Appeals affirmed the district court's dismissal and we granted the Fund's petition for writ of certiorari review of that opinion.

II. Standard of Review

¶ 8 We must decide whether the district court properly construed the provisions of 85 O.S.1991, § 44(a) when it dismissed the Fund's petition for intervention in the legal malpractice action below. Statutory construction presents a question of law. Arrow Tool & Gauge v. Mead, 2000 OK 86, ¶ 6, 16 P.3d 1120, 1122-1123. On review, a district court's legal rulings are subject to an appellate court's plenary, independent and nondeferential reexamination. Id.

III. 85 O.S.1991, § 44(a) provides a paying employer or insurance carrier, as a statutory assignee, the right to seek reimbursement from an injured worker after the latter is paid settlement proceeds of a claim against a third-party tortfeasor.

¶ 9 When a worker suffers an on-the-job injury at the hands of a tortfeasor not in the same employ, two potential claims come into being, 1) a workers' compensation claim, and 2) a third-party tort claim. Title 85 O.S.1991, § 44(a)⁵ governs the rights of the employer or insurance carrier liable for workers' compensation benefits as to claims against third parties. Parkhill Truck Co. v. Wilson, 1942 OK 168, 190 Okla. 473, 125 P.2d 203;⁶ and, Prettyman v. Halliburton Co., 1992 OK 63, 841 P.2d 573. It provides the procedural requirements to be followed when an injured worker pursues a third-party tortfeasor.

¶ 10 A worker injured by the tortious conduct of another not in the same employ must elect to take workers' compensation benefits or to pursue recovery from the tortfeasor. If the injured worker elects to take workers' compensation benefits, § 44(a) unequivocally assigns the injured worker's action against the third-party tortfeasor to the employer or insurance carrier. ACCOSIF v. American States Insurance Company, 2000 OK 21, 1 P.3d 987, 990, footnote 4. By the terms of the statute, the paying employer or insurance carrier stands as a statutory, pro tanto assignee of the injured worker's chose in action against the tortfeasor. Id.

¶ 11 In ACCOSIF v. American States Insurance Company, 2000 OK 21, at ¶ 10, 1 P.3d at 992, this Court held that the status of a paying employer or insurance carrier, as an assignee, provides the employer or insurance carrier with the right to seek reimbursement against the injured worker after the latter is paid the settlement proceeds of a claim against a third-party tortfeasor. In Nestle Food Co. v. Crews, 2000 OK 58, ¶ 17, 11 P.3d 205, 211, this Court described the employer's or insurance carrier's claim against the injured worker as an action to recover its "statute-based pro tanto share of its § 44(a) assignment." In both cases, the Court recognized the right of the employer or insurance carrier, as assignee of a chose in action against the tortfeasor, to bring an action against the injured worker to recover its statutory-assigned share of the worker's settlement with the tortfeasor.

IV. The right of the Fund under 85 O.S. 1991, § 44(a) for reimbursement of workers' compensation benefits paid extends to the proceeds of the workers' malpractice action against his attorney for failure to timely file the third-party tort action.

¶ 12 Section 44(a) is designed to protect the employer or insurance carrier, as an assignee, against the injured worker and the third-party tortfeasor to the full extent of the workers' compensation benefits paid and to guard against double recovery by the injured worker. Prettyman v. Halliburton Co., 841 P.2d at 577; and Parkhill Truck Co. v. Wilson, 125 P.2d at 207 (the "entire section of the act was enacted to accomplish the avowed purpose of protecting the employer and insurance carrier" and "in no event . . . can the injured employee have the benefits of double compensation"). This Court has consistently construed § 44(a) to guard against double recovery. German v. Chemray, Inc., 1977 OK 90, 564 P.2d 636; Russell v. Bill Hodges Truck Company, 1983 OK 48, 663 P.2d 724; and, Landrum v. National Union Insurance Company, 1996 OK 18, 912 P.2d 324.⁷

¶ 13 When a cause of action against the third-party tortfeasor is lost due to the negligence of the injured worker's attorney, a different claim arises against the attorney. Defendants argue that neither the employer nor the insurance carrier has any rights in the proceeds of this claim. They contend that under the explicit language of § 44(a), the rights possessed by the insurance carrier, as an assignee, are limited to the proceeds of an action against or a settlement with a third party who is alleged to be responsible for the worker's compensable injury. We disagree.

¶ 14 In this jurisdiction, an injured worker must establish the recovery which he or she could have obtained if the legal malpractice had not occurred in order to recover against an attorney for missing the time bar for filing the claim. Allred v. Rabon, 1977 OK 216, 572 P.2d 979.⁸ In such a case, damages are normally proved by introducing evidence establishing the value of the claim lost due to the attorney's neglect.⁹ Such a case has been referred to as a "case within a case" because the damages against the attorney are wholly derived from the original action against the third-party tortfeasor. Bloustine v. Fagin, 1996 OK CIV...