Rocky Mountain General v. Simon, 91CA0625

• Decision Date: 27 February 1992
• Docket Number: No. 91CA0625,91CA0625
• Citation: 827 P.2d 629
• Parties: ROCKY MOUNTAIN GENERAL, and Colorado Compensation Insurance Authority, Petitioners, v. Mark B. SIMON, and The Industrial Claim Appeals Office of the State of Colorado, Respondents. . I
• Court: Colorado Court of Appeals

Page 629

827 P.2d 629

ROCKY MOUNTAIN GENERAL, and Colorado Compensation Insurance

Authority, Petitioners, v. Mark B. SIMON, and The Industrial Claim Appeals Office of

the State of Colorado, Respondents.

No. 91CA0625.

Colorado Court of Appeals,

Div. I.

Feb. 27, 1992.

Anderson, Campbell & Laugesen, P.C., Thomas M. Schrant, Denver, for petitioners.

Benjamin P. Kramer, P.C., Benjamin P. Kramer, Denver, for respondent Mark B. Simon.

Gale A. Norton, Atty. Gen., Raymond T. Slaughter, Chief Deputy Atty. Gen., Timothy M. Tymkovich, Sol. Gen., John R. Parsons, Asst. Atty. Gen., Denver, for respondent Indus. Claim Appeals Office.

Opinion by Judge REED.

The petitioners, Rocky Mountain General and Colorado Compensation Insurance Authority (CCIA), contest an order of the Industrial Claim Appeals Panel denying them credit for the full amount of a third-party settlement received by the claimant, Mark B. Simon. We set aside the order.

The claimant, a construction worker, was permanently and totally disabled in January 1985 when a mobile home fell off its cinder block foundation, crushing his hip and pelvic area. The insurer did not admit liability until April 1990, when disputed questions of carrier coverage were resolved in the claimant's favor. In the interim, the claimant underwent various surgical procedures and extensive rehabilitation. Claimant's medical expenses were paid in part by the Colorado Department of Social Services, subject to reimbursement under the Colorado Medical Assistance Act (Medicaid). Section 26-4-112(3), C.R.S. (1989 Repl.Vol. 11B).

In September 1988, the claimant settled his third-party tort claim against the manufacturer of the cinder blocks. Although CCIA was at that time contesting liability, the carrier granted the claimant written approval to settle the claim, on the sole condition that the recovery be greater than $50,000.

The subsequent settlement agreement provided for monthly annuity payments into the corpus of an irrevocable, discretionary trust, the "Mark B. Simon Trust," in which the claimant is the primary beneficiary and claimant's brother is the trustee. The trust was established more than eighteen months prior to CCIA's admission of liability and was designed to preserve the claimant's eligibility for continued Medicaid benefits.

Under the trust instrument, the trustee has "sole, absolute and uncontrolled discretion" to make distributions at such times and in such amounts as he deems appropriate. The trust corpus is funded under the settlement agreement with monthly annuity payments of $636 for a period of forty years or the duration of claimant's life, whichever is longer, and an additional lump sum of $300,000, payable in the year 2028.

At the time of hearing, the trust corpus had received annuity payments totalling $14,628; however, the claimant had received only two trust fund distributions to him personally amounting to $27.57.

At the hearing, CCIA asserted its statutory right to subrogation under § 8-41-203, C.R.S. (1991 Cum.Supp.) (formerly § 8-52-108, C.R.S. (1986 Repl.Vol. 3B)). However, the Administrative Law Judge (ALJ) ruled that settlement proceeds paid into the Mark B. Simon trust are exempt from the carrier's claim of subrogation except that portion which are distributed by the trust to the claimant individually. On review, the Panel affirmed the ALJ's order.

I.

The petitioners contend that the claimant cannot unilaterally defeat their subrogation interest by placing the third-party settlement proceeds in an irrevocable discretionary trust. They argue that a similar attempt to circumvent subrogation was disallowed by this court in Kennedy v. Industrial Commission, 735 P.2d 891 (Colo.App.1986). We agree.

Section 8-41-203 provides that in cases of third party tort recoveries, a workers' compensation carrier "shall contribute only the deficiency, if any, between the amount of the recovery actually collected and the compensation provided by said articles...." (emphasis added)

In determining the extent of CCIA's subrogation claim to the third-party settlement proceeds, the ALJ found:

[T]he proceeds of the third-party settlement have been actually collected by the Mark B. Simon Trust, and not by Claimant. The evidence available supports the conclusion that this Trust was established to preserve Claimant's eligibility for Medicaid benefits, rather than for any other purpose, such as diminishing Colorado Compensation Insurance Authority's right of subrogation. Claimant has no discretion or control over the corpus of the Trust and the Trust is irrevocable: the ... Mark B. Simon Trust is an entity separate and distinct from Claimant, which exists for valid reasons independent of the complications of Claimant's workmen's compensation claim.

Relying upon the words "actually collected," the ALJ, and the Panel on review, interpreted § 8-41-203 as restricting the claim of subrogation to those proceeds from the settlement paid to the claimant personally rather than all of the settlement proceeds paid to the trust. We reject this statutory interpretation as being contrary to the overriding legislative intent of the statute designed to adjust the rights between the injured worker and the workers' compensation carrier for industrial injuries.

A statute must be construed in a manner that gives effect to the legislative purpose underlying its enactment and that achieves a just and reasonable result consistent with that purpose. Section 2-4-201(1)(c), C.R.S. (1980 Repl.Vol. 1B); Johnson v. Industrial Commission, 761 P.2d 1140 (Colo.1988)....