Rison v. Air Filter Systems, Inc.

• Decision Date: 02 February 1998
• Docket Number: No. 95-510-M,95-510-M
• Citation: 707 A.2d 675
• Parties: James RISON III v. AIR FILTER SYSTEMS, INC. P.
• Court: Rhode Island Supreme Court

Page 675

707 A.2d 675

James RISON III v. AIR FILTER SYSTEMS, INC.

No. 95-510-M.P.

Supreme Court of Rhode Island.

Feb. 2, 1998.

Bernard Patrick Healy, Brian T. Burns, Providence, for Plaintiff.

Tedford Radway, Cranston, for Defendant.

Before WEISBERGER, C.J., and LEDERBERG, BOURCIER, FLANDERS and GOLDBERG, JJ.

OPINION

FLANDERS, Justice.

This is a worker's compensation case in which we confront the following issue: How does an employee's settlement of a third-party tort claim arising out of his work-related injuries affect the employee's ability to obtain a workers' compensation award for his disfigurement and bodily loss of use?

This question comes before us on a petition for certiorari seeking review of a decision by a panel of the Workers' Compensation Court's (WCC) Appellate Division (the panel) construing G.L.1956 § 28-35-58 of the Rhode Island Workers' Compensation Act (WCA). ¹ To conduct this review, we must consider the workers' compensation ramifications of an injured employee's recovery of a settlement from an alleged third-party tortfeasor that is putatively responsible for causing the employee's work-related injuries. The panel's decision holds that the employer need not pay any specific-compensation award to the employee if the amount of the settlement (after reimbursing the employer for any worker's compensation benefits already paid to the employee) exceeds the amount of any specific-compensation award that would otherwise be payable. However, under the panel's view, the employee is entitled to a credit in the amount of such award that reduces the § 28-35-58 suspension period during which the employer's insurer is relieved from paying any compensation benefits to the employee.

Because we conclude that this result comports with the applicable statutory provisions and with the underlying policies of workers' compensation, we affirm.

Facts and Travel

The material facts of this case are not in dispute. On March 3, 1987 the employee, James Rison III (Rison), sustained employment-related injuries while laboring for his employer, Air Filter Systems, Inc. (Air Filter), as a sheet-metal worker. Rison suffered devastating third-degree burns over half his body when a cataclysmic flash fire of glue scorched him severely. The burns, combined with necessary surgical skin grafts, left Rison with permanent scarring and disfiguration over 78 percent of his body. As a result, patches of shriveled, discolored skin blanket Rison's elbows, back, and legs and severe scars mar his right jaw, ears, nose, and fingers. Largely because of his reduced manual dexterity, Rison also suffers from a permanent loss of use in his upper extremities of between 11 and 16 percent.

Beginning on March 24, 1987, and pursuant to a memorandum of agreement with Air Filter, Rison began to receive workers' compensation benefits in the form of weekly indemnity payments at a "weekly comp rate" of $244 per week. Pursuant to G.L.1956 § 28-33-17 of the WCA, these weekly benefits compensated Rison for lost wages due to his incapacity. Thereafter, on November 7, 1991, approximately four-and-a-half years after he began to receive weekly benefits, Rison filed an original WCC petition to obtain an additional specific-compensation award under § 28-33-19 of the WCA for his disfigurement and the loss of the use of his hands.

However, before that petition could be heard, Rison entered into a settlement on December 1, 1991, with Stanley Bostitch Company, an alleged third-party tortfeasor, in satisfaction of Rison's tort claims against Stanley Bostitch for the personal injuries he had sustained in the accident. Although the record does not reveal the precise amount of the settlement, it was apparently in excess of $2.5 million. On December 11, 1991 Rison reimbursed Air Filter $225,312 for the weekly benefits it had paid out to Rison up to the date of Rison's settlement with Stanley Bostitch (less the pro rata attorneys' fees and expenses attributable to Rison's recovery of this sum from Stanley Bostitch). The parties stipulated that this reimbursement reflected Air Filter's presettlement workers' compensation weekly indemnity payments to Rison and liquidated Air Filter's WCA subrogation rights for having made such payments.

Thereafter, a WCC judge heard Rison's § 28-33-19 petition for specific compensation on stipulated facts and evidence. After considering medical reports and observing Rison's injuries, the judge determined that the evidence warranted the maximum statutory award. Consequently, she ordered Air Filter to pay $52,582 to Rison, compensating him for loss of use in his extremities and for his disfigurement. ² At the parties' request, the court also ruled on whether this specific-compensation award should be offset against Rison's recently obtained settlement proceeds. Describing the issue as "apparently a case of first impression," the WCC trial judge ruled that a specific award under § 28-33-19 would not be subject to the payment-suspension mechanism detailed in § 28-35-58. However, the WCC judge also held that Air Filter properly had been reimbursed for the weekly indemnity benefits it had paid to Rison before the Stanley Bostitch settlement and that Air Filter's duty to pay future weekly indemnity benefits to Rison would be suspended in accordance with § 28-35-58. As stated by the WCC judge, "Consequently, any award of specific compensation after a third-party settlement would be paid in full to the employee without any offset or consideration of the monies which have been paid to him by the third-party settlement."

Air Filter appealed to the WCC's Appellate Division, alleging that it should be entitled to set off the amount of the specific-compensation award against the settlement proceeds Rison had received from Stanley Bostitch without having to pay this sum to Rison. The panel agreed and reversed the trial judge, holding that any specific compensation awarded under § 28-33-19 would be subject to the suspension mechanism of § 28-35-58. The panel further determined that although Air Filter would not be required to pay any specific-compensation monies to Rison, the amount of the specific award would reduce "on a dollar for dollar basis" the period of time during which Air Filter's duty to pay future workers' compensation benefits to Rison would be suspended.

Rison petitioned this court for a writ of certiorari, which we granted, to resolve this important workers' compensation question.

I Standard of Review

This petition presents questions of statutory construction. We review the Appellate Division's decision de novo, pursuant to § 28-35-30, for any error of law or equity. See also Pion v. Bess Eaton Donuts Flour Co., 637 A.2d 367, 370 (R.I.1994); Wright v. Superior Court, 535 A.2d 318, 320 (R.I.1988).

II Discussion

Before we turn to the questions of statutory interpretation raised by this petition, it is helpful to consider what is not at issue here. No party disputes that in WCA parlance "weekly benefits" (also referred to as "regular compensation," "disability benefits," or "indemnity benefits") are awarded pursuant to § 28-33-17 as compensation for an employee's lost wages due to his or her work-related incapacity, whereas "special compensation" or "specific compensation" is awarded pursuant to § 28-33-19 for an employee's specific, scheduled bodily injuries, including disfigurement. The parties also appear to agree that the WCA, as a general proposition, does not bar an injured employee from recovering damages from a third-party tortfeasor and thereafter obtaining workers' compensation benefits from the date of settlement forward. Although the parties clash over how the statutorily prescribed suspension period affects their respective rights and obligations, they appear to agree that Rison sustained a work-related injury and that Air Filter remains potentially obligated to pay future weekly disability benefits to Rison despite Rison's settlement with Stanley Bostitch. ³ They also appear to agree that Air Filter's obligations, at least with respect to weekly indemnity benefits, are suspended for as long as the WCA benefits that would otherwise be due and payable to Rison can be set off or credited against any settlement proceeds remaining from the Rison-Stanley Bostitch settlement after Air Filter has been reimbursed for its presettlement compensation payments. ⁴ The essential controversy then is whether any specific benefits awarded to an employee under § 28-33-19 after the employee has received a third-party settlement of a tort claim are likewise subject to § 28-35-58's suspension mechanism.

A. Background

Before 1985, the law in Rhode Island was that an injured employee who settled or recovered a money judgment in connection with a tort claim against a nonemployer third party could not thereafter obtain workers' compensation benefits for the same injury. See Travis v. Rialto Furniture Co., 101 R.I. 45, 48, 220 A.2d 179, 181 (1966); Colarusso v. Mills, 99 R.I. 409, 416, 208 A.2d 381, 385 (1965); see also Matteson v. Travelers Insurance Co., 738 F.2d 619, 621-22 (1st Cir.1984) (Breyer, J.). Rather, an injured employee who chose to pursue a third-party tort claim was compelled to sink or swim monetarily based upon the results of that lawsuit. Thus in Travis a truckdriver injured in an on-the-job traffic collision elected to pursue a tort claim against a third party and recovered $6,750. Travis, 101 R.I. at 46, 220 A.2d at 180. The Travis court held that the employee was thereafter barred from seeking weekly WCA indemnity benefits from his employer for his incapacity to work--regardless of whether the tort settlement proved to be sufficient to compensate him for all the lost earnings he might otherwise have been entitled to recover under the WCA during the period of his incapacity. Id. at 48-49, 220 A.2d at 181.

The Travis court based this holding on its construction of § 28-35-58 of the WCA, which at the time...