Rowland v. Department of Administrative Services

• Decision Date: 23 January 1996
• Docket Number: No. A95A2475,A95A2475
• Citation: 466 S.E.2d 923,219 Ga. App. 899
• Parties: ROWLAND v. DEPARTMENT OF ADMINISTRATIVE SERVICES.
• Court: Georgia Court of Appeals

Page 923

466 S.E.2d 923

219 Ga.App. 899

ROWLAND v.DEPARTMENT OF ADMINISTRATIVE SERVICES.

No. A95A2475.

Court of Appeals of Georgia.

Jan. 23, 1996.

Certiorari Denied April 25, 1996.

Workers' compensation subrogation.Chatham Superior Court.Before Judge Bass.

Barrow, Sims, Morrow & Lee, R. Stephen Sims, Savannah, for appellant.

Michael J. Bowers, Attorney General, William C. Joy, Senior Assistant Attorney General, Teresa E. Lazzaroni, Assistant Attorney General, Atlanta, Webb & Lindsey, Mark D. Oldenburg, Peachtree City, for appellee.

SMITH, Judge.

This is a subrogation action under OCGA § 34-9-11.1(b).When an employer pays workers' compensation benefits and the injured worker also recovers damages from a third-party tortfeasor, this statute creates a lien in favor of the employer against the worker's tort recovery.We must determine the effect of a settlement between the injured worker and the tortfeasor on the employer's subrogation lien.

The underlying facts have been stipulated by the parties.Joseph Young and Tracy Rowland were involved in a motor vehicle collision caused by Rowland's negligence.Young was driving his vehicle in the scope and course of his employment with a state agency.The Department of Administrative Services(DOAS) paid Young $3,324 in workers' compensation benefits and brought suit to recover that amount from Rowland.DOAS soon discovered, however, that Young had already settled his personal injury claim with Rowland without filing suit.The parties have stipulated that DOAS had no knowledge of Young's settlement of his personal injury claim, that Rowland and her insurer had no knowledge of the workers' compensation subrogation claim, and that no personal injury lawsuit was ever filed by Young.

The parties filed cross-motions for summary judgment.Rowland contended that her settlement with Young extinguished any subrogation lien against her.DOAS, on the other hand, contended that under OCGA § 34-9-11.1(c), it had a separate and distinct claim that was not extinguished by the settlement.The trial court denied Rowland's motion for summary judgment and granted summary judgment in favor of DOAS.Rowland appeals.

This appeal turns on the precise nature of the subrogation right granted under OCGA § 34-9-11.1.The statute became effective in 1992, approximately one month before the underlying collision between Young and Rowland, and we have little guidance in interpreting this aspect of the statute.Decisions exist interpreting a similar although not identical right of subrogation given to an automobile insurer paying benefits under the former no-fault law.See former OCGA § 33-34-3(d)(1).In their briefs here and below, both parties rely heavily on cases construing the former no-fault subrogation statute.

The language used in OCGA § 34-9-11.1, however, varies considerably from that of the no-fault statute, and it creates a substantially different right of subrogation.Under the no-fault statute, the insurer paying no-fault benefits to a party involved in a collision with an uninsured motorist was "subrogated to the rights " of the payee and had "a right of action to the extent of benefits provided against such tortfeasor."(Emphasis supplied.)FormerOCGA § 33-34-3(d)(1).The workers' compensation statute, in contrast, creates in favor of the employer or its insurer "a subrogation lien, not to exceed the actual amount of compensation paid pursuant to this chapter, against such recovery."(Emphasis supplied.)OCGA § 34-9-11.1(b).A right of action in the employer is not unconditionally granted by the statute.As the statute read at the time, ¹ only if the injured employee or his survivors failed to bring an action against the tortfeasor within a one-year period, was "any cause of action in tort which the injured employee ... may have against any other person" assigned to the employer by operation of law.(Emphasis supplied.)OCGA § 34-9-11.1(c).

Rowland contends that her settlement with Young and Young's release of all claims he may have had extinguished any potential subrogation claim of DOAS against her under § 34-9-11.1(c) before it could come into existence.Since the assignment did not occur until Young failed to bring suit within one year, and by the terms of the statute there was an assignment only of "any cause of action" which "the injured employee ... may have," an earlier settlement and release by Young operated to extinguish his cause of action against Rowland before the assignment took effect.Under well-established Georgia law, "in order for subrogation to take place the insured must have a right of recovery against some person to which the insurer can succeed by subrogation."(Citations and punctuation omitted.)Ga. Farm Bureau Mut. Ins. Co. v. Southeastern Fidelity Ins. Co., 144 Ga.App. 811, 812, 242 S.E.2d 743(1978).See alsoAetna Cas., etc., Co. v. Sosebee, 150 Ga.App. 354, 355, 258 S.E.2d 37(1979)(release executed by recipients of no-fault benefits extinguished rights supporting subrogation).

Under OCGA § 34-9-11.1(b), the employer or its insurer has a right to intervene in any tort action brought by the employee in order to "protect and enforce" its lien.SeeDept. of Admin. Svcs. v. Brown, 219 Ga.App. 27, 464 S.E.2d 7(1995).In this case, however, the parties to the tort claim settled before suit, and no action was ever filed.Under the plain wording of OCGA § 34-9-11.1, Bennett v. Williams Elec. Constr. Co., 215 Ga.App. 423, 424(3), 450 S.E.2d 873(1994), the employer has no remaining right of action against the tortfeasor.But the loss of the right to bring this cause of action did not extinguish DOAS's lien on the recovery, that is, the money now in the hands of the injured employee.²This lien is created by OCGA § 34-9-11.1(b) independently of the assignment of any cause of action against the tortfeasor under subsection (c).

Had Rowland settled with Young despite having knowledge of the workers' compensation claim and DOAS's right of subrogation, a different result would obtain."[A]s a matter of general law, where the wrongdoer settles with the insured ... without the consent of the insurer ... with the knowledge of the insurer's payment and right of subrogation, such right is not defeated by the settlement."(Citation omitted; emphasis supplied.)Vigilant Ins. Co. v. Bowman, 128 Ga.App. 872, 874, 198 S.E.2d 346(1973).The parties have stipulated that Rowland had no actual knowledge of the existence of the workers' compensation claim or the assertion of a subrogation lien.DOAS contends, however, that Young's release does not extinguish its subrogation rights because Rowland should be deemed to have had constructive knowledge of its potential claim.DOAS bases this contention on the holding in Poole Truck Line v. State Farm, etc., Ins. Co., 163 Ga.App. 755, 757-758, 294 S.E.2d 570(1982)(construing former OCGA § 33-34-3).

Poole Truck Line is inapplicable here for two reasons.First, as noted above, the lien on a recovery granted to DOAS by this statute is substantially different from the right of subrogation created by former OCGA § 33-34-3.Moreover, the theory of constructive notice relied on in Poole Truck Line is inapplicable here.Although the tortfeasor and insurer in...