Podgurski v. OneBeacon Ins. Co.

• Citation: 374 Md. 133,821 A.2d 400
• Decision Date: 10 April 2003
• Docket Number: No. 90,90
• Parties: Deborah PODGURSKI v. ONEBEACON INSURANCE COMPANY.
• Court: Maryland Court of Appeals

821 A.2d 400

374 Md. 133

Deborah PODGURSKI v. ONEBEACON INSURANCE COMPANY.

No. 90, Sept. Term, 2002.

Court of Appeals of Maryland.

April 10, 2003.

Mark W. Oakley (Maggie I. Kaminer, Rockville, on brief), for appellant.

S. Patrick Sullivan (The Law Offices of Jonathan P. Stebenne, Baltimore, on brief), for appellee.

Argued before BELL, C.J., ELDRIDGE, RAKER, WILNER, CATHELL, HARRELL and BATTAGLIA, JJ. Opinion by CATHELL, J.

This case arises out of a complaint for declaratory judgment, together with a motion for summary judgment, filed by Deborah Podgurski, appellant, against OneBeacon Insurance Company, appellee, in the Circuit Court for Frederick County. Appellant opposes appellee's assertion that appellee was entitled to a full reimbursement of the monies it paid to appellant as workers' compensation benefits for an injury appellant sustained when she fell during the course of her employment, where the appellant, in a separate tort action against a third party arising out of the same incident that caused her compensable injury, recovered from the third party tort-feasor money damages in excess of the amount of compensation paid to her by the employer/insurer.

The case was argued before the Honorable G. Edward Dwyer, Jr. on April 17, 2002. Appellant argued that appellee had no right to reimbursement and, in the alternative, that appellee's right to reimbursement was at least limited to the same percentage by which appellant herself was limited as to the recovery of a settlement that was reduced as a result of the bankruptcy of the third party tort-feasor whose conduct was the cause of appellant's injuries. Appellee argued that the plain meaning of Maryland Code (1991, 1999 Repl.Vol.) § 9-902 of the Labor and Employment Article (hereinafter, § 9-902)¹ entitled it to receive a full reimbursement for the compensation award it paid to appellant from appellant's recovery from the third party tort-feasor. Judge Dwyer granted judgment in favor of appellee. On May 17, 2002, appellant filed a Notice of Appeal to the Court of Special Appeals. This Court, on December 11, 2002, on our own initiative, granted a writ of certiorari to undertake review of this issue before the intermediate appellate court acted. Podgurski v. Onebeacon, 372 Md. 132, 812 A.2d 288 (2002).

Appellant presents three questions for our review:

"A. Does an order of a United States Bankruptcy Court limiting a claimant's third-party recovery likewise limit the subrogation claim of a workers' compensation insurer under the Maryland Workers' Compensation Law?

"B. Does the `made whole doctrine' apply to, and therefore limit or bar, the subrogation claim of a workers' compensation insurer?

"C. Do other equitable considerations apply to limit an insurer's subrogation claim under the Maryland Workers's Compensation Law?"

Appellee rephrases the issue:

"1. Did the Circuit Court for Frederick County err in finding that a workers' compensation insurer is entitled to recover the full amount of its lien from any third party recovery received by the injured worker?"

While we resolve the issue, we do not specifically address each of appellant's questions. We hold that the essential question here presented, i.e., whether under its right of subrogation outlined in § 9-902, appellee can recover the entire amount of the money it paid to appellant pursuant to a workers' compensation claim after appellant received a greater amount from a third party tort-feasor, is directly governed by the plain meaning of § 9-902(e)(2). As such, we hold that the Circuit Court for Frederick County was correct in its finding that under the provisions of the Maryland Workers' Compensation Act, specifically § 9-902(e)(2), appellee, a workers' compensation insurer, was entitled to recover the full amount of its lien from appellee's actual recovery received from a third party tort-feasor.

I. Facts

The parties in the case sub judice, pursuant to Maryland Rule 8-501(g)² and in lieu of filing a record extract, agreed to stipulate to a statement of facts. The undisputed facts are, in part, as follows:

"On April 9, 1997, the Appellant Deborah Podgurski (`Podgurski') was employed as a hairstylist by Hairstylist Management Systems, Inc. (`HMS'), which operated a hairstyling salon within the Montgomery Ward & Co., Inc. (`Montgomery Ward'), department store located at the Frederick Towne Mall in Frederick, Maryland. While performing her normal duties, Podgurski slipped and fell on water leaking from defective plumbing on the premises and suffered from severe injuries to her knee. As a result of her fall, Podgurski pursued two claims: a workers' compensation claim against her employer, HMS, and a third party claim against Montgomery Ward.

"At the time of Podgurski's injury, General Accident Insurance Company of America (`General Accident') provided the workers' compensation insurance coverage for Podgurski's employer, HMS. Podgurski received workers' compensation benefits in the total amount of $11,705.51, and General Accident notified Podgurski of its intent to claim a subrogation interest in any amounts recovered in her third party action against Montgomery Ward. Sometime thereafter, Appellee OneBeacon Insurance Company (`OneBeacon') succeeded to General Accident's subrogation interests.

"On October 5, 2001, a binding arbitration proceeding was held and an award of arbitration was issued in favor of Podgurski on her third party claim against Montgomery Ward in the amount of $90,000.00, consisting of $8,689.71 in medical expenses, $4,500.00 in lost wages, and the remainder for pain and suffering.

"At all times relevant Montgomery Ward was self-insured, and prior to the arbitration of Podgurski's claim, Montgomery Ward filed for protection under Chapter 7 of the United States Bankruptcy Code. In the administration of Montgomery Ward's bankrupt estate, the United States Bankruptcy Court for the District of Delaware established a $650 Million insurance distribution pool out of which holders of allowed unsecured claims, such as Podgurski, could be paid. The amount of allowed unsecured claims exceeded the available funds in the distribution pool, as a result of which all claims against the pool were reduced proportionately and Podgurski recovered only a fraction of her arbitration award. The fraction received by Podgurski was established by the bankruptcy court as 29.54% ($26,589.21) of the original $90,000.00 award.

"A dispute arose between OneBeacon and Podgurski as to whether OneBeacon was entitled to recover its full lien for worker's compensation benefits previously paid. OneBeacon asserted that the reduction of Podgurski's award to 29.54% did not apply to its lien and, therefore, it was entitled to the original lien amount of $11,705.51, less one-third attorney's fees, which totals $7,803.67. Podgurski claimed that OneBeacon was entitled to 29.54% of their lien, less one-third attorney's fees, or $2,275.51.

"Podgurski filed a complaint for declaratory judgment in the Circuit Court for Frederick County in order to resolve the parties' dispute. On April 17, 2002, a hearing was held on Podgurski's motion for summary judgment before the Honorable G. Edward Dwyer, Jr. Judge Dwyer decided the case in favor of One-Beacon, applying the formula set forth under Maryland Labor and Employment Code Annotated, Section 9-902(e)(2), and awarded OneBeacon its full lien, after deduction of attorney's fees, of $7,803.67."

II. Discussion

A. Background

Generally, the Maryland Workers' Compensation Act (hereinafter, the Act), § 9-101 through § 9-1201 of the Labor and Employment Article of the Maryland Code, requires an employer to pay workers' compensation benefits to an employee if that employee suffers an accidental personal injury during the course of the employee's employment, without regard to whether the employer was at fault for the injury. See § 9-501(b). Where a third party's actions result in the employee's injury, the Act grants the employer or its insurer³ the right to bring suit against the third party tort-feasor in an effort to recover an amount equal to the workers' compensation benefits paid to the employee for the employee's injury pursuant to the terms of the Act; any award over the amount previously paid by the employer must be given to the employee. See § 9-902. For the two months following the award of workers' compensation benefits to the employee by the State Workers' Compensation Commission (hereinafter, Commission), the employer has the exclusive right to bring such an action against the third party. See Franch v. Ankney, 341 Md. 350, 357-58, 670 A.2d 951, 954-55 (1996)

; Erie Insurance Co. v. Curtis, 330 Md. 160, 164, 623 A.2d 184, 186 (1993). See also § 9-902(c). When an employer fails to file within that two-month period, the employee may then bring suit against the third party tort-feasor while the employer retains a subrogation interest in the reimbursement of the workers' compensation funds it paid pursuant to the Act, which is an interest that "acts as a `statutory lien' on any recovery the employee may obtain from the third-party." Franch, 341 Md. at 358,

670 A.2d at 955 (citing Richard P. Gilbert & Robert L. Humphreys, Jr., Maryland Workers' Compensation Handbook § 16.1-5, 325 (2d ed.1993, 1995 Cum.Supp.).) Section 9-902(e), in turn, directs the distribution of the award received by the employee from the third party.

In Bachmann v. Glazer, 316 Md. 405, 412-13, 559 A.2d 365, 368-69 (1989), this Court stated that:

"Subrogation is founded upon the equitable powers of the court. It is intended to provide relief against loss and damage to a meritorious creditor who has paid the debt of another. Milholland v. Tiffany, 64 Md. 455, 460, 2 A. 831 (1886).... The rationale underlying the doctrine of subrogation is to prevent the party primarily liable on the debt from being unjustly enriched when someone pays his debt. Security Ins. Co. v. Mangan, 250 Md. 241, 246-47, 242

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