Smith v. Champion Trucking Co. Inc

• Decision Date: 15 April 2010
• Docket Number: No. 93S02-0906-EX-276.,93S02-0906-EX-276.
• Citation: 925 N.E.2d 362
• Parties: Jimmie C. SMITH, Appellant (Plaintiff below),v.CHAMPION TRUCKING COMPANY, INC., Appellee (Defendant below).
• Court: Indiana Supreme Court

925 N.E.2d 362

Jimmie C. SMITH, Appellant (Plaintiff below),v.CHAMPION TRUCKING COMPANY, INC., Appellee (Defendant below).

No. 93S02-0906-EX-276.

Supreme Court of Indiana.

April 15, 2010.

Paul A. Brizendine, Floyds Knobs, IN, Attorney for Appellant.

Trevor J. Crossen, Stephen M. Wagner, Carmel, IN, Attorneys for Amicus Curiae Indiana Trial Lawyers Association.

Timothy W. Wiseman, Lynne D. Lidke, Indianapolis, IN, Attorneys for Appellee.

Rori L. Goldman, Ty M. Craver, Indianapolis, IN, James D. Johnson, Evansville, IN, Attorneys for Amicus Curiae Defense Trial Counsel of Indiana.

On Petition to Transfer from the Indiana Court of Appeals, No. 93A02-0808-EX-701

BOEHM, Justice.

We hold that under Indiana's Worker's Compensation Act, an employer's worker's compensation liability for an employee's benefits terminates if the employee settles a claim against a third party for the same injury without first obtaining the employer's consent to the settlement. The Board's decision dismissing Smith's Application for Adjustment of Claim is affirmed.

Facts and Procedural History

In August 2003, Jimmie Smith, a truck driver employed by Champion Trucking Co., was injured in an Ohio accident with a third-party motorist. Smith's initial medical expenses in the amount of $4,342.42 were paid by Champion's worker's compensation coverage. He continued to work for a year after the accident, but left Champion's employ in August 2004.¹ According to Smith, he continued to suffer pain related to the accident, and in January 2005 he applied for an adjustment of his worker's compensation claim, asserting a permanent impairment and also seeking compensation for additional medical expenses.

Meanwhile, Smith retained counsel to explore the possibility of recovering from Jeremy Bittner, the third party motorist. At some point, Smith's worker's compensation attorney notified Champion of his intention to sue Bittner, and on July 6, 2005, Champion responded by notifying Smith's attorney in the third-party matter that Champion was entitled to a lien on any settlement proceeds in the amount of Champion's worker's compensation payments to Smith. Smith settled with Bittner for $10,342 on July 22, 2005. According to Smith, he accepted the settlement because, although Bittner was 95% at fault for the accident, he had only $12,000 in liability insurance. The settlement agreement released Bittner from liability for the accident. Smith does not claim that Champion was notified of the time and place of the settlement negotiations, or had any role in the negotiation. Smith's attorney paid 75% of the medical lien amount ($3,256.74) to Champion and retained 25% as the attorneys' fee authorized by the worker's compensation statute. In August 2005, less than one month after the settlement, a neurosurgeon evaluated Smith as having suffered a 19% potential permanent impairment, which would warrant approximately $26,500 in additional worker's compensation benefits.

Champion moved to dismiss Smith's application for adjustment of claim, and ultimately the Worker's Compensation Board ruled in July 2008 that Smith's settlement with Bittner terminated Champion's liability pursuant to an “absolute bar” provision of the statute described below. The Court of Appeals reversed, holding that the provision in question did not apply to Smith's claim because his worker's compensation case had not yet been resolved. Smith v. Champion Trucking Co., 901 N.E.2d 620, 624 (Ind.Ct.App.2009). Further, the court noted, Champion was aware of both the settlement negotiations before they were concluded and also the pending application for adjustment of claim and Champion was therefore free to challenge the amount received from Bittner as inadequate, but failed to do so. Id. at 623. We granted transfer.

Standard of Review

The Board's factual findings are to be affirmed if they are supported by substantial evidence. Walker v. State, 694 N.E.2d 258, 266 (Ind.1998). “To the extent the issue involves a conclusion of law based on undisputed facts, it is reviewed de novo.” DePuy, Inc. v. Farmer, 847 N.E.2d 160, 164 (Ind.2006). Here, the Board's ruling rested largely on undisputed facts and the question is one of statutory interpretation to be reviewed de novo. Porter Dev., LLC v. First Nat'l Bank of Valparaiso, 866 N.E.2d 775, 778 (Ind.2007).

Settlements with Third Parties Under Indiana's Worker's Compensation Act

Section 13 of Indiana's Worker's Compensation Act (WCA), titled “Claims Against Third Persons; Subrogation; Procedures,” contains a number of potentially relevant provisions.² Smith argues that none of the provisions of Section 13 bars his claim. Champion responds that this case is governed by language from Paragraph 1, which provides that if an injured employee has received worker's compensation and later settles a claim against a responsible third party, “ then from the amount received by the employee,” the employer is to be reimbursed for its expenditures, “and the liability of the employer or the employer's compensation insurance carrier to pay further compensation or other expenses shall thereupon terminate.” Ind.Code § 22-3-2-13 (2004) (emphasis added). Paragraph 2 has a similar provision applicable to settlements made before any worker's compensation has been paid.³

Smith's contention presents a pure question of statutory interpretation. “When faced with a question of statutory interpretation, we first examine whether the language of the statute is clear and unambiguous.... The statute itself is the best evidence of legislative intent.... We construe statutes only where there is some ambiguity which requires construction.” State v. American Family Voices, Inc., 898 N.E.2d 293, 297 (Ind.2008). Therefore, we look first to the language of the statute to determine whether Champion is liable for additional worker's compensation benefits after Smith's settlement with Bittner. We conclude that precedent and the statute itself dictate that the “absolute bar” language of the statute is unambiguous and that it protects Champion from further worker's compensation liability.

A long line of Indiana decisions supports the proposition that an employer's worker's compensation liability terminates when the injured employee settles with a third-party tortfeasor without first obtaining the employer's consent.⁴ See Koughn v. Utrad Indust., Inc., 150 Ind.App. 110, 275 N.E.2d 572 (1971) (original Indiana case holding that termination language in WCA meant that employer's worker's compensation liability ceased after employee settled with third party); Waldridge v. Futurex Indust., Inc., 714 N.E.2d 783, 786 (Ind.Ct.App.1999) trans. denied (employee injured by exposure to chemicals settled with manufacturer of one chemical; court held that this settlement barred employee's worker's compensation liability under Section 13); Carrier Agency, Inc. v. Top Quality Bldg. Prods., Inc., 519 N.E.2d 739, 743 (Ind.Ct.App.1988) trans. denied; McCammon v. Youngstown Sheet and Tube Co., 426 N.E.2d 1360, 1363 (Ind.Ct.App.1981) (“Clearly the statute provides that if an action is brought by an injured employee against a third party and a settlement is made, the liability of the employer or employer's compensation carrier to pay further compensation terminates.”).

Smith argues that these “absolute bar” provisions apply only when the amount received from the third party exceeds the total worker's compensation claim. He bases this argument in part on the italicized language quoted above, claiming without further explanation that it implies that the third party damages exceed the worker's compensation claim, and only in that circumstance does the employer's liability terminate. The directive to reimburse the employer “from” the settlement proceeds suggests an assumption that the settlement amount exceeds the worker's compensation benefit, but the unequivocal bar language is in no way qualified by that requirement.

The cases cited above discussing the effect of a settlement do not specifically address whether the worker's compensation claim was greater or less than the settlement received from the third party. In DePuy, Inc. v. Farmer, 847 N.E.2d 160 (Ind.2006), we addressed the effect of a settlement of a worker's claim against a fellow employee for an intentional tort. Because the claim was against a fellow employee, Section 13 did not apply and the case was governed by common law principles. Smith argues, however, that dicta from our opinion in DePuy mandates that Paragraph 1 of Section 13 applies only when the amount of the settlement is greater than the anticipated worker's compensation claim. To the contrary, in DePuy, we indicated our understanding of this general rule and its application in Indiana: “[w]e assume without deciding that ... this rule [that settlement with a third party bars a worker's compensation claim], announced over thirty years ago as a matter of statutory interpretation, remains the law as to claims against third parties.” Id. at 168. We also noted that in each of these cases the amount of the third-party settlement might be greater than the worker's compensation benefit. We identified the issue Smith raises but expressly did not resolve it: “[w]hether [this] rule applies where the settlement is obtained before a worker's compensation award has been resolved, and is in an amount less than the anticipated worker's compensation benefit is an open question that we need not resolve here.” Id.

Although we noted the unresolved issue in DePuy, we also found a general consensus that the employee's settlement with a third party without the employer's consent terminates the employer's worker's compensation liability. Id. “[I]f an employee settles a third-party claim without the employer's consent, the employee forfeits any right to future compensation.” 6 Larson's Workers' Compensation Law § 116.07[2] (2009). Because the settlement with a third party terminates the employer's opportunity to recover its...