St. Paul Fire & Marine Ins. Co. v. Smith

• Decision Date: 30 November 1992
• Docket Number: No. 92-C-1043,92-C-1043
• Citation: 609 So.2d 809
• Parties: ST. PAUL FIRE & MARINE INSURANCE COMPANY v. E.R. SMITH, Jr. d/b/a E.R. Smith Electrical Contractor, et al.
• Court: Louisiana Supreme Court

Page 809

609 So.2d 809

ST. PAUL FIRE & MARINE INSURANCE COMPANY v. E.R. SMITH, Jr. d/b/a E.R. Smith Electrical Contractor, et

al.

No. 92-C-1043.

Supreme Court of Louisiana.

Nov. 30, 1992.Rehearing Denied Feb. 4, 1993.

Woodrow W. Wyatt, Brian L. Williams, Baton Rouge, for applicant.

Ronald F. DeFrances, Warren D. Ponder, Baton Rouge, Teresa C. Leyva, Kristi L. Stroebel, Sutherland, Juge, Horack & Dwyer, New Orleans, for respondents.

Stephen E. Broyles, Baton Rouge, for Earl Brooks (Amicus Curiae).

HALL, Justice.

This case raises the question of whether the 1989 amendment to LSA-R.S. 23:1103, effective January 1, 1990, granting an employer first payment for worker's compensation paid out of any damages recovered by the employee from a third party, regardless of how the damages are classified and whether the damages include compensation for losses other than medical expenses or lost wages, should be applied retroactively. The court of appeal, reversing the district court, classified the amendment as interpretive legislation and thus found it applies retroactively. Reversing the court of appeal, we conclude that the amendment is substantive legislation, changing the existing law as interpreted in Brooks v. Chicola, 514 So.2d 7 (La.1987), and Fontenot v. Hanover Ins. Co., 385 So.2d 238 (La.1980), and thus hold that it applies prospectively only.

I.

On May 19, 1988, plaintiff, Wayne Wagner, sustained serious injuries during his employment with Coastal Contractors, Inc. ("Coastal"), when a truck driven by Egles J. Hebert, and owned by Hebert's employer, E.R. Smith, Jr. d/b/a E.R. Smith Electrical Contractor ("Smith"), made an allegedly improper lane change into a closed road construction zone and ran into equipment owned by Coastal. Wagner sued the driver of the truck, Hebert; Hebert's employer, Smith; Smith's insurer, Boston Old Colony Insurance Co. ("Boston"); and Hebert's unnamed liability insurer in tort. Coastal's worker's compensation carrier, St. Paul Fire & Marine Insurance Company ("St. Paul"), intervened seeking reimbursement of compensation and medical expenses paid as a result of the accident. ¹

Boston invoked a concursus proceeding, depositing the available policy limits ($983,151.96, including accrued legal interest) into the registry of the court. ² In response, both Wagner and St. Paul sought a declaratory judgment on the apportionment of the funds. The district court rendered judgment in Wagner's favor; it found that Wagner was to receive all sums awarded him for "non-economic damages" arising out of the accident in preference to St. Paul receiving any reimbursement for past compensation paid, or credit for future compensation that may become due, under the Louisiana Worker's Compensation Law.

St. Paul suspensively appealed. ³ On appeal, St. Paul contended that LSA-R.S. 23:1103 mandates that the employer or its worker's compensation insurer be given a preference in the apportionment of damages recovered in suits against third parties regardless of the nomenclature used in the judgment to describe damages and that the district court thus erred in granting the employee, Wagner, the preference. Agreeing with St. Paul, the court of appeal reversed the district court. In so doing, the court reasoned that the 1989 amendment to LSA-R.S. 23:1103, providing employers the right to reimbursement from all damages awarded the employee and overruling prior jurisprudence prohibiting such reimbursement from the employee's general damage award, was interpretive and thus was retroactive. Applying LSA-R.S. 23:1103, as amended, the court held that St. Paul is entitled to a preference for reimbursement of any worker's compensation benefits actually paid before Wagner receives payment for any damages and is also entitled to a credit for any future compensation owed. ⁴ St. Paul Fire & Marine Ins. Co. v. Smith, 596 So.2d 272 (La.App. 3d Cir.1992). We granted Wagner's writ application. 600 So.2d 593 (La.1992).

II.

At the time of the accident in question, LSA-R.S. 23:1103 provided:

In the event that the employer or the employee or his dependent becomes party plaintiff in a suit against a third person, as provided in R.S. 23:1102, and damages are recovered, such damages shall be so apportioned in the judgment that the claim of the employer for the compensation actually paid shall take precedence over that of the injured employee or his dependent; and if the damages are not sufficient or are sufficient only to reimburse the employer for the compensation which he has actually paid, such damages shall be assessed solely in his favor; but if the damages are more than sufficient to so reimburse the employer, the excess shall be assessed in favor of the injured employee or his dependent, and upon payment thereof to the employee or his dependent, the liability of the employer for compensation shall cease for such part of the compensation due, computed at six per cent per annum, and shall be satisfied by such payment.

No compromise with such third person by either the employer or the injured employee or his dependent shall be binding upon or affect the rights of the others unless assented to by him.

Construing pre-amendment LSA-R.S. 23:1103, we held in Fontenot, supra, that the statute provides a preference for the employer who seeks reimbursement of medical expenses paid only on that part of the employee's award itemized as medical expenses. This construction, we found, was warranted by the underlying policy of the apportionment scheme between employees and employers in suits against third parties that the employee not be doubly compensated for the same element of damages. 385 So.2d at 240 (citing Roberson v. Fontenot Petroleum Co., Inc., 322 So.2d 287 (La.App. 1st Cir.1975), writ denied, 325 So.2d 277 (La.1976)). More particularly, we observed that "[i]t does not appear that the legislature intended for the employer to be reimbursed from the employee's award for items which the employee has not recovered from the third person." 385 So.2d at 240 (collecting cases).

Following this court's lead, the appellate courts confined an intervening employer's reimbursement rights accordingly. ⁵ Indeed, Fontenot was extended to apply to future medical expenses. Landaiche v. Lou-Con, 461 So.2d 1107, 1117 (La.App. 5th Cir.1984) (holding "that future medical expenses are to be credited only against the allowance for future medical expenses"). Moreover, pre-Brooks, at least two lower courts extended Fontenot to weekly compensation benefits: Lagraize v. Bickham, 391 So.2d 1185, 1192 (La.App. 4th Cir.1980) (on rehearing), and Price v. Mitchell Const. Co., Inc., 482 So.2d 869 (La.App.2d Cir.), writ denied, 484 So.2d 671 (La.1986). The Lagraize court reasoned that while Fontenot only addressed medical expenses, Fontenot's rationale "clearly contemplates reimbursement for weekly compensation benefits." 391 So.2d at 1192. Paraphrasing Fontenot, the LaGraize court found that "the compensation statute 'does not require an employee to reimburse out of his award for pain and suffering [the weekly benefits for wage-replacement] which [wage-replacement] he failed to recover from a third party tortfeasor.' " Id. Likewise, the Price court limited reimbursement for weekly compensation benefits to the employee's lost wages award.

The extension of the Fontenot rationale to weekly compensation benefits, however, was not uniformly followed and eventually lead to a split in the circuits on the issue of whether Fontenot could be read as encompassing not only medical benefits, but also weekly compensation benefits. See Stewart v. Hanover Ins. Co., 416 So.2d 286 (La.App. 3d Cir.), writ denied, 421 So.2d 907 (La.1982). In Brooks v. Chicola, 514 So.2d 7 (La.1987), we resolved the conflict, finding the same rationale applies to both types of benefits; "reimbursement to the compensation insurer ... must necessarily be limited only to the damage awards for loss of earnings and medical expenses." 514 So.2d at 13. ⁶ We further found that "[i]t necessarily follows that credit for future compensation likewise must be limited to the award for future loss of earnings." 514 So.2d at 14. Since Brooks, numerous state appellate courts, as well as a few federal courts, have applied this limitation. ⁷

In 1989, two years after Brooks, supra, and nine years after Fontenot, supra, as part of a comprehensive revision of the worker's compensation law by Act 454 of 1989, the legislature amended LSA-R.S. 23:1103, subdividing it and adding two significant new provisions, one of which is the object of the instant dispute, LSA-R.S. 23:1103(B), ⁸ which provides:

The claim of the employer shall be satisfied in the manner described above from the first dollar of the judgment without regard to how the damages have been itemized or classified by the judge or jury. Such first dollar satisfaction shall be paid from the entire judgment, regardless of whether the judgment includes compensation for losses other than medical expenses and lost wages.

The above provision was an obvious legislative attempt to change the law as construed by this court in Brooks and Fontenot. This provision eliminates the exclusion of the employee's general damage award from the employer's right of reimbursement by prohibiting the employer's preference from being defeated by the nomenclature used to describe the award and by expressly making the employee's entire award subject to "dollar for dollar" reimbursement of the employer. A noted commentator expressed the view that this provision was designed "properly to restore the law to the reading which had been given to it prior to the Brooks decision." Malone and Johnson, 14 La.Civil Law Treatise: Workers' Compensation Sec. 369 (1991 Supp.). This commentator noted elsewhere that "[u]ntil th[e Brooks ] decision, our courts had properly permitted reimbursement from the award regardless of the labels that might have been attached to the award." Johnson,...