Pelkey v. Elsea Realty & Inv. Co.

• Decision Date: 19 August 1975
• Docket Number: O,No. 3,3
• Citation: 232 N.W.2d 154,394 Mich. 485
• Parties: Theresa A. PELKEY, Plaintiff-Appellant, v. ELSEA REALTY & INVESTMENT COMPANY and General Accident Group, Defendants-Appellees. ct. Term 1974.
• Court: Michigan Supreme Court

Page 154

232 N.W.2d 154

394 Mich. 485

Theresa A. PELKEY, Plaintiff-Appellant, v. ELSEA REALTY & INVESTMENT COMPANY and General Accident Group, Defendants-Appellees.

No. 3, Oct. Term 1974.

Supreme Court of Michigan.

Aug. 19, 1975.

Law Offices of Leonard C. Jaques, P.C., by J. Douglas Smith, Detroit, for plaintiff-appellant.

Plunkett, Cooney, Rutt, Watters, Stanczyk & Pedersen by Edward K. Pedersen, Jr., and Jeannette A. Paskin, Detroit, for defendants-appellees.

Before the Entire Bench except SWAINSON and LINDEMER, JJ.

T. G. KAVANAGH, Chief Justice.

In November, 1967, plaintiff-appellant while in the course of her employment with Elsea Realty incurred a compensable injury in an automobile accident resulting in payment of $3,364.60 by defendant workmen's compensation insurer, General Accident Group.

In October of 1968 plaintiff, her husband, and defendant insurer jointly settled their claim against an alleged third party tort-feasor for $10,000 apportioned as follows: $3,000 for plaintiff's husband for loss of consortium and services; $3,364.60 to defendant insurer; and.$3,635.40 to plaintiff for pain and suffering. There was no agreement between the plaintiff and the insurer as to future payments of compensation.

Subsequent to the settlement plaintiff employee required psychiatric treatment as a result of the injuries sustained in the 1967 accident. In October, 1970, plaintiff petitioned for compensation for that treatment. The referee and Appeal Board held that the psychiatric treatment related to her earlier injury and was compensable, but also held that 2/3 of the amount recovered in the 1968 settlement as pain and suffering was a credit in favor of defendant carrier under M.C.L.A. § 413.15; M.S.A. § 17.189 (now M.C.L.A. § 418.827; M.S.A. § 17.237(827)), a seven (now eight) paragraph section of the Workmen's Compensation Act which, Inter alia, sets forth the statutory scheme for recovery from third party tortfeasors. M.C.L.A. § 418.827; M.S.A. § 17.237(827) reads in pertinent part:

Sec. 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 acceptance of compensation benefits or the taking of proceedings to enforce compensation payments shall not act as an election of remedies but the injured employee or his dependents or personal representative may also proceed to enforce the liability of the third party for damages in accordance with the provisions of this section. If the injured employee or his dependents or personal representative does not commence the action within 1 year after the occurrence of the personal injury, then the employer or carrier, within the period of time for the commencement of actions prescribed by statute, may enforce the liability of such other person in the name of that person. Not less than 30 days before the commencement of action by any party under this section, the parties shall notify, by certified mail at their last known address, the bureau, the injured employee, or in the event of his death, his known dependents or personal representative or his known next of kin, his employer and the carrier. Any party in interest shall have a right to join in the action.

(2) Prior to the entry of judgment, either the employer or carrier or the employee or his personal representative may settle their claims as their interest shall appear and may execute releases therefor.

(3) Settlement and release by the employee is not a bar to action by the employer or carrier to proceed against the third party for any interest or claim it might have.

(4) If the injured employee or his dependents or personal representative settle their claim for injury or death or commence proceedings thereon against the third party before the payment of workmen's compensation, such recovery or commencement of proceedings shall not act as an election of remedies and any moneys so recovered shall be applied as herein provided.

(5) In an action to enforce the liability of a third party, the plaintiff may recover any amount which the employee or his dependents or personal representative would be entitled to recover in an action in tort. 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.

The Court of Appeals denied leave.

Plaintiff argues that the Court, as a matter of public policy, should not permit an employer or carrier to receive a credit against a pain and suffering recovery when the Workmen's Compensation Act does not require the employer to pay anything for pain and suffering.

Plaintiff employee first contends that permitting a workmen's compensation insurer to receive credit against the payment of future compensation (future credit) for money recovered for pain and suffering against a third party tortfeasor is unfair and violates her equal protection and due process of law rights under the Michigan and United States constitutions.

Damages for lost income, medical expenses, disfigurement, and pain and suffering have traditionally been thought of as damages resulting from personal injury. In 22 Am.Jur.2d, Damages, § 86 at 124 we read:

'In the case of a personal injury by reason of the tortious conduct of the defendant, the damages of the person injured fall into two general categories. Because of the injury, plaintiff has lost income which he otherwise would have received (for example, wages, profits, commissions, etc.), and certain damage has been thrust upon him which he otherwise would not have had (for example, medical expenses, pain and suffering, etc.). It is for these elements that the law grants recovery under the heading of damages in personal injury cases.' (footnote omitted)

From the foregoing we conclude that, when the Legislature stated that damages recovered by an employee from a third party tortfeasor for 'personal injuries or death only' could be reached by an insurer, the Legislature meant to include damages resulting from pain and suffering.

The rule in Michigan ¹ is not unusual. Professor Larson in his treatise, Workmen's Compensation Law, states in § 74.35:

'. . . it is quite clear, as the cases now stand, that the prevailing rule in the United States refuses to place an employee's third-party recovery outside the reach of the employer's lien on the ground that some or all of it was accounted for by damages for pain and suffering.' (footnote omitted)

Plaintiff states that the legislature acted arbitrarily when it permitted insurers to reach an employee's recovery for pain and suffering and, therefore, she is being denied her right to substantive due process of laws, U.S.Const., Am. XIV; Const.1963, art. 1, § 17, and the equal protection of the laws, U.S.Const., Am. XIV; Const.1963, art. 1, § 2.

We do not find the Legislature acted arbitrarily. Prior to 1952 P.A. 155 which amended M.C.L.A. § 413.15; M.S.A. § 17.189, an injured employee had to elect to pursue his common law remedy against the third party or pursue his workmen's compensation remedy. Albert A. Albrecht Co. v. Whitehead & Kales Iron Works, 200 Mich. 109, 166 N.W. 855 (1918).

The 1952 amendment permits the employee to seek both workmen's compensation and damages from a third party, but provides that any third party recovery for damages resulting from personal injuries may be reached by the insurer.

We do not find the provision for reimbursement to be an arbitrary denial of a property right. The right to reimbursement is justified by the abrogation of the election of remedies requirement.

While it is true that employees who suffer injuries compensable under the Workmen's Compensation law have rights under the law different than the rights of those who suffer injuries not so compensable, we do not find that such different treatment amounts to a constitutional denial of equal protection of laws. The difference in treatment is founded on a rational basis: the provision of no fault wage benefits and medical care to employees with work connected injuries. Such differentiation is constitutionally firm.

Plaintiff employee also contends that the insurer by entering into a settlement and release with the third party waived its right to reach the money she received for pain and suffering.

The fact that the insurer released the third party does not mean that the insurer waived any rights it might acquire against the employee. No language in the agreement indicates waiver, and there is no equitable basis for waiver, because the employee did not give up any rights against the insurer; in fact, she subsequently sought compensation.

While we do not rule out the possibility that an insurer may waive its future credit, we are not persuaded that there was such a waiver in the case before us.

Affirmed. Costs to defendants.

LEVIN, COLEMAN and FITZGERALD, JJ., concur.

WILLIAMS, Justice (To Reverse).

We have been asked to consider whether the Workmen's Compensation Act (WCA) gives the employer or compensation carrier the right to be reimbursed from damages attributable to pain and suffering obtained by the injured workman from a third-party tortfeasor. We hold it does not.

I--FACTS

Plaintiff Theresa Pelkey suffered 20 weeks of disability as a result of a work-related injury incurred on November 28, 1967, while working for Elsea Realty & Investment Company. She received payments totaling $3,364.60 from defendant workmen's compensation carrier. On October 25, 1968, plaintiff, plaintiff's husband, and defendant carrier...