Overhead Door Co. of Norfolk v. Lewis, Record No. 0597-98-2.

• Docket Nº: Record No. 0597-98-2.
• Citation: 509 S.E.2d 535, 29 Va. App. 52
• Case Date: January 26, 1999
• Court: Court of Appeals of Virginia

509 S.E.2d 535
29 Va. App. 52

OVERHEAD DOOR COMPANY OF NORFOLK and Hartford Fire Insurance Company
v.
Daniel Lee LEWIS

Record No. 0597-98-2.

Court of Appeals of Virginia, Richmond.

January 26, 1999.

509 S.E.2d 536

S. Vernon Priddy, III (Sands, Anderson, Marks & Miller, on brief), Richmond, for appellants

No brief or argument for appellee.

Present: ELDER and LEMONS, JJ., and COLE, Senior Judge.

ELDER, Judge.

Overhead Door Company of Norfolk and Hartford Fire Insurance Company (collectively referred to as employer) appeal from a decision of the Workers' Compensation Commission denying employer's request to terminate or suspend an award of benefits payable by employer to Daniel Lee Lewis (claimant). Employer contends that claimant, who sustained his compensable injuries as a result of third-party negligence, failed to consult employer before settling a legal malpractice claim with an attorney whose negligence prevented claimant from recovering on the third-party claim.¹ Employer contends the commission erred (1) in failing to exercise its equitable powers to prevent claimant from realizing a double recovery; (2) in holding that employer had to have a valid lien on the malpractice settlement proceeds before the commission had power to grant the termination or credit employer sought; (3) in applying res judicata and/or collateral estoppel, based on prior circuit court rulings regarding employer's entitlement to a lien, to bar the application for termination or suspension of benefits; (4) in refusing to terminate claimant's claim after he settled his legal malpractice claim without employer's authorization; and (5) in issuing an opinion under the names of Commissioners Tarr, Dudley and Diamond, when the panel before which the parties argued consisted of Commissioners Tarr and Dudley and Chief Deputy Commissioner Link. For the reasons that follow, we affirm the commission's ruling.

I.

FACTS

While working for employer in 1990, claimant was injured in a motor vehicle accident in North Carolina due to the negligence of' a third party. The commission entered an award for benefits, and claimant hired an attorney to pursue an action against the third party tortfeasor. The attorney failed to have the suit served in a timely fashion, and claimant's negligence action was dismissed with prejudice.

Claimant filed a malpractice action in the Virginia Beach Circuit Court against the attorney and his law firm. Employer filed a notice of lien on the malpractice proceeds in that same court, alleging that it had paid over $120,000 in disability and medical benefits for claimant and that the Workers' Compensation Act (Act) entitled it to such a lien. Claimant and the attorney filed a joint motion to quash employer's notice of lien. They contended that Code §§ 65.2-309 and 65.2-310 provide an employer with subrogation rights when the injured employee recovers from a third party who caused the injury but that those code sections do not provide subrogation rights when the employee seeks

509 S.E.2d 537

damages from a party who did not cause the employee's injury. After considering the parties' pleadings and arguments, the trial court granted the motion to quash,² and claimant and the attorney settled the malpractice suit

Employer petitioned the Virginia Supreme Court for an appeal of the trial court's order quashing the lien. On September 8, 1995, the Court denied the petition on the merits, finding "no reversible error."

While awaiting the outcome of its appeal, employer pursued two other potential avenues for recovery. It filed an independent action for malpractice against the attorney in the Richmond Circuit Court, which was dismissed on the attorney's motion for summary judgment.³ It also filed an application for hearing before the commission, the same application on which the current appeal is based, alleging that claimant's failure to obtain employer's consent prior to settling the malpractice claim prejudiced employer's "statutory assignment and subrogation rights" and seeking termination or suspension of benefits. Claimant contended that employer raised the same issue already ruled on by the Virginia Beach Circuit Court and that res judicata and/or collateral estoppel therefore barred employer's application. Following briefs submitted by the parties in December 1995, the deputy commissioner issued an opinion adopting employer's arguments and suspending claimant's benefits. On appeal, following oral argument, the full commission issued an opinion reversing the deputy commissioner's suspension of benefits. It held that (1) absent a lien, the commission could not enforce any subrogation rights and that res judicata and collateral estoppel applied to bar any credit or suspension of benefits because the circuit courts already had concluded that no valid lien existed, and (2) because of the circuit courts' rulings, employer had no legally enforceable right which was prejudiced when claimant settled the malpractice claim without consulting employer.

II.

ANALYSIS

A.

COMMISSION'S AUTHORITY TO TERMINATE OR SUSPEND BENEFITS

Code § 65.2,309(A) provides, in relevant part, as follows:

A claim against an employer under this title for injury or death benefits shall operate as an assignment to the employer of any right to recover damages which the injured employee, his personal representative or other person may have against any other party for such injury or death, and such employer shall be subrogated to any such right and may enforce, in his own name or in the name of the injured employee or his personal representative, the legal liability of such other party.

"The purpose of the statute is to reimburse an employer who is compelled to pay compensation as a result of the negligence of a third party and to prevent an employee from obtaining a double recovery of funds." Tomlin v. Vance Int'l, Inc., 22 Va.App. 448, 452, 470 S.E.2d 599, 601 (1996). Under Code § 65.2-310, an employer may...