Schalk v. Michigan Sewer Const. Co., Docket No. 21083

• Decision Date: 22 July 1975
• Docket Number: Docket No. 21083
• Citation: 233 N.W.2d 825,62 Mich.App. 658
• Parties: Allen SCHALK and Mildred Schalk, his wife, Plaintiffs-Appellees, and Aetna Casualty & Surety Company, Intervening Plaintiff-Appellant, v. MICHGAN SEWER CONSTRUCTION COMPANY, a Michigan Corporation, et al., Defendants. WATER DEPARTMENT OF the CITY OF DETROIT, a Municipal Corporation of the State of Michigan, Defendant, Third-Party Plaintiff, v. FORSYTH ENGINEERING SERVICE, INC., a Michigan Corporation, et al., Third-Party Defendants. 62 Mich.App. 658, 233 N.W.2d 825
• Court: Court of Appeal of Michigan — District of US

Page 825

233 N.W.2d 825

Allen SCHALK and Mildred Schalk, his wife,

Plaintiffs-Appellees, and Aetna Casualty & Surety Company, Intervening Plaintiff-Appellant,

v.

MICHGAN SEWER CONSTRUCTION COMPANY, a Michigan Corporation,

et al., Defendants.

WATER DEPARTMENT OF the CITY OF DETROIT, a Municipal

Corporation of the State of Michigan, Defendant,

Third-Party Plaintiff,

v.

FORSYTH ENGINEERING SERVICE, INC., a Michigan Corporation,

et al., Third-Party Defendants.

Docket No. 21083.

62 Mich.App. 658, 233 N.W.2d 825

Court of Appeals of Michigan.

July 22, 1975.

Released for Publication Oct. 21, 1975.

[62 MICHAPP 659] VandeVeer, Garzia, Tonkin, Kerr & Heaphy, P.C. by Roy C. Hebert, Detroit, for Aetna.

Frederick W. Zizelman, East Detroit, S. Lee Elliott, Mt. Clemens, for Schalk.

Richard A. Harvey, Detroit, for Michigan Sewer Construction Co.

Harry H. Gemuend, Jr., St. Clair Shores, for Cooper Construction.

Joseph T. Sinclair, Detroit, for City of Detroit.

Richard A. Kitch, Detroit, for Forsyth.

Before BASHARA, P.J., and J. H. GILLIS and CAVANAGH, JJ.

J. H. GILLIS, Judge.

Plaintiff-appellee, Allen Schalk, received severe injuries which arose out of and in the course of his employment. Appellant, workmen's compensation insurance carrier of Allen Schalk's employer, paid appellee's medical expenses and compensation award from the date of the injury to the date of Schalk's action against the defendants.

The Schalks commenced a negligence action against the third-party defendant, Forsyth, as a third-party tortfeasor pursuant to M.C.L.A. § 418.827; M.S.A. § 17.237(827). A $125,000 settlement was [62 MICHAPP 660] reached, with appellee receiving $110,000 and his wife $15,000.

On July 1, 1974 the trial judge entered an order awarding attorney fees, apportioning the cost of recovery and approving the distribution of settlement proceeds.

In making this order, the trial judge found the following facts. First, the settlement figure which these parties were concerned with was $110,000. This figure was derived by taking the total settlement ($125,000) and subtracting Mrs. Schalk's interest ($15,000). Second, the plaintiff expended $37,232.95 for attorney fees and incidental expenditures in suing the third-party defendants. Third, appellant insurance company expended $1,600 for attorney fees in joining plaintiffs' suit against the third-party defendants. The trial judge also found that the insurance company had paid plaintiff $22,588.13 in benefits by the time this case was settled.

After determining the above figures, the trial judge ruled that the insurance company was required to pay $23,299.77 as its share of the 'expenses of recovery'. This holding was based on M.C.L.A. § 418.827(6); M.S.A. § 17,237(827)(6), as interpreted in Crawley v. Schick, 48 Mich.App. 728, 211 N.W.2d 217 (1973). While we find it unnecessary to explain how the trial judge arrived at this figure, we have determined that he incorrectly applied the Crawley formula.

Under M.C.L.A. § 418,827; M.S.A. § 17.237(827), an injured party is permitted to sue a third-party tort-feasor without that injured party waiving any right to collect from the insurance carrier. M.C.L.A. § 418.827(1); M.S.A. § 17.237(827)(1). If such a suit results in recovery for the injured party, that party must reimburse the insurance carrier for money it [62 MICHAPP 661] paid and will have to pay to him as compensation. M.C.L.A. § 418.827(5); M.S.A. § 17.237(827)(5). The 'expenses of recovery' may, however, be first deducted from any recovery gained from the third-party tortfeasor. M.C.L.A. § 418.827(5); M.S.A. § 17.237(827)(5). It has been determined that the costs of recovery must be shared proportionately by the injured party and the insurance carrier. M.C.L.A. § 418.827(6); M.S.A. § 17.237(827)(6), Crawley v. Schick, supra. ¹

The issue on appeal in the instant case concerns the proportioning of the recovery costs between the carrier and plaintiff-husband. Our reading of Crawley, supra, convinces us that the following analysis is proper. The relevant settlement amount is $110,000. The combined recovery costs of plaintiffs and the carrier are $38,832.95 ($36,666.67 for plaintiffs' attorney fees, $1,600 for the carrier's attorney fees and $566.28 expenses). The carrier is entitled to $22,588.13 for benefits already paid. In addition, the carrier is entitled to treat the remaining $48,578.92 as 'advance payments' to plaintiff-husband. M.C.L.A. § 418.827(5); M.S.A. § 17.237(827)(5). The carried received a benefit, therefore, of $71,167.05 ($22,588.13 plus $48,578.92). The carrier's share of the cost of recovery, in percentage terms, is 64.6973% (obtained by...