Stafford v. Westchester Fire Ins. Co. of New York, Inc.
| Decision Date | 13 September 1974 |
| Docket Number | No. 2030,2030 |
| Citation | 526 P.2d 37 |
| Parties | Glenn STAFFORD, Appellant, v. WESTCHESTER FIRE INSURANCE COMPANY OF NEW YORK, INC., Appellee. WESTCHESTER FIRE INSURANCE COMPANY OF NEW YORK, INC., Cross-appellant, v. Glenn STAFFORD, Cross-Appellee. |
| Court | Alaska Supreme Court |
Sandra K. Saville, Kay, Miller, Libbey, Kelly, Christie & Fuld, Anchorage, for appellant and cross-appellee.
Sanford M. Gibbs, Hagans, Smith & Brown, Anchorage, for appellee and cross-appellant.
Before RABINOWITZ, Chief Justice, and CONNOR, ERWIN, and FITZGERALD, Justices.
This appeal raises questions of whether an injured employee must reimburse his employer's workmen's compensation carrier for all benefits received upon obtaining a settlement from a third-party tort-feasor, and whether, under the exclusive remedy provisions of Alaska's Workmen's Compensation Act, an employee is barred from suing his employer's compensation carrier for intentional torts.
On May 2, 1970, Stafford sustained serious injuries while attempting to shut off a shredder, which had been manufactured and distributed by W. W. Grinder Corporation and Alaska Greenhouses, Inc. At the time of the injury, Stafford was acting in the course and scope of his employment for G. B. Bordewick Co., Anchorage, Alaska, which was insured by Westchester.
On June 2, 1971, Stafford commenced an action against W. W. Grinder and Alaska Greenhouses, Inc., alleging that while operating the shredder he had suffered substantial injuries by virtue of its defects. Westchester filed a complaint in intervention in this case on September 14, 1971. Westchester alleged that it was the workmen's compensation carrier for Bordewick, and in such capacity and paid a substantial amount of compensation to Stafford for injuries sustained while using the shredder. 1 Westchester demanded judgment against the parties for the amount of compensation paid pursuant to AS 23.30.015.
On March 12, 1972, Stafford settled his suit against W. W. Grinder and Alaska Greenhouses, Inc. for the sum of $137,500. On March 15, 1973, Stafford filed an answer and counterclaim to Westchester's complaint for intervention. In this answer, Stafford challenged Westchester's right to reimbursement. He further alleged that Westchester, through its agents, did wilfully, deliberately, and maliciously withhold Workmen's Compensation Act benefits in an effort to discourage Stafford from proceeding and securing compensation under the act. Stafford contended that this tortious conduct by Westchester precluded it from receiving any reimbursement of compensation payments from Stafford's settlement with the third-party tort-feasor, and entitled him to substantial damages for conscious infliction of mental injury. Stafford further asserted that Westchester's malicious actions and the resulting injury should also be considered as constituting a defense of recoupment to Westchester's claim in intervention for reimbursement.
In preparation for trial, Stafford noticed the deposition of Charles Hagans, attorney for the Bordewick Co. and Westchester, for March 30, 1973. Westchester then filed a motion for a protective order against the taking of Hagans' deposition based primarily on the attorney-client privilege. The superior court denied Westchester's motion on the basis that Westchester had waived the attorney-client privilege. 2 Thereafter, Westchester filed a motion for summary judgment, which was granted by the superior court. The court found a workmen's compensation carrier was entitled to complete reimbursement for compensation paid by it to the injured employee out of any damages recovered by the employee against a third-party tort-feasor. The trial court concluded that this reimbursement should be without deduction for attorney's fees and costs incurred by the employee in obtaining the judgment or effecting settlement with the third-party tort-feasor. The court also held that the exclusive remedy for dealy in making compensation payments, for whatever reasons, is found in the provisions of AS 23.30.155 of the Alaska Workmen's Compensation Act. Implicit in this conclusion is the superior court's determination that an injured employee is legally unable to assert a claim against the employer's carrier for intentional infliction of mental distress or to interpose the defense of recoupment based on a purposeful delay in making compensation payments. Westchester was awarded $10,340.42, the uncontroverted amount of compensation payments and medical benefits it paid to Stafford, but was not awarded any attorney's fees. Stafford appeals from the order granting summary judgment, and Westchester cross-appeals from the superior court's denial of attorney's fees.
Stafford's first contention on appeal is that the superior court erred in limiting the testimony that Stafford proposed to elicit from Westchester's attorney, Charles Hagans, in a prospective deposition. We find no evidence in the record to support this assertion. After denying Westchester's motion for a protective order, the superior court stated it might sustain an objection, if areas of confidentiality not previously waived were the subject of questioning at the time of Hagans' deposition. However, the court repeatedly stated, 'I'm not prohibiting anything at this time, because I do not know what the line of testimony is going to take.' We hold, therefore, that there was no error as the court's remarks did not constitute a limitation upon Stafford's examination of Westchester's counsel. Further, we note that Hagans' deposition was never taken by Stafford.
Stafford next argues that the superior court erred in awarding Westchester complete reimbursement for benefits paid, and further, if reimbursement was appropriate, Westchester should have been required to pay to Stafford a pro rata share of his costs or expenses in obtaining a settlement from the third-party tort-feasor. It is provided in AS 23.30.015(g) of our compensation act that:
If the employee or his representative recovers damages from the third person, the employee or representative shall promptly pay to the employer the total amounts paid by the employer under (e)(1)(A), (B), and (C) of this section, insofar as the recovery is sufficient after deducting all litigation costs and expenses. Any excess recovery by the employee or representative shall be credited against any amount payable by the employer thereafter. (emphasis added)
Stafford asserts first that a compromise settlement does not involve 'recovery of damages' within the ambit of AS 23.30.015(g). Second, he contends that if Westchester is held to be entitled to reimbursement, it should bear a share of the expenses he incurred in effecting the settlement.
We find the first portion of Stafford's argument untenable. One of the dominant themes of Alaska's Workmen's Compensation Act is the avoidance of double recovery, which theme is reflected in the requirement of AS 23.30.015(g) that the total amounts paid by the compensation carrier be returned to it when damages are recovered by the employee from a third person. Professor Larson, in discussing this theme which is commonly found in compensation acts, states that the
claimant should not be allowed to keep the entire amount both of his compensation award and of his common-law damage recovery. The obvious disposition of the matter is to give the employer so much of the negligence recovery as is necessary to reimburse him for his compensation outlay, and to give the employee the excess. 3
This principle applies equally when a suit is settled as when a final judgment is rendered. The federal Longshoremen's and Harbor Workers' Compensation Act 4 has been found to dictate such a result. Ashcraft and Gerel v. Liberty Mutual Insurance Co., 120 U.S.App.D.C. 51, 343 F.2d 333 (1965); Davis v. United States Lines Co., 253 F.2d 262 (3d Cir. 1958). 5 We are not persuaded that Stafford's construction of the term 'recovery', as used in AS 23.30.150(g), should be adopted.
Stafford argues alternatively that it would be just and equitable in the instant case to place the burden of attorney's fees and costs in effecting his settlement with the third-party tort-feasor either entirely or partially on Westchester, if Westchester is to share in the compromise settlement. Stafford cites Strachan Shipping Co. v. Melvin 6 and Chouest v. A & P Boat Rentals, Inc. 7 in support of this argument. However, these cases are distinguishable as both involved situations in which the amount recovered by the injured employee against the third person was not sufficient both to pay the attorney's fees and to reimburse completely the carrier for its compensation payments. The Fifth Circuit concluded that in such a situation, the worker should be awarded sufficient funds to pay his attorney's fees from the amount recovered, and the remainder should then be paid to the carrier. The court noted in Chouest that:
(T)he question of reallocation will never even arise in the majority of cases, where the amount of recovery is sufficient both to reimburse the intervenor and pay the plaintiff's attorney. 8
In Davis v. United States Lines Co., 253 F.2d 262 (3d Cir. 1958), the Third Circuit held that litigation costs should come out of the recovery against the third-party tort-feasor. In the Davis court's view, this result should be reached whether the employee or the employer brings the thirdparty suit. In Ashcraft and Gerel v. Liberty Mutual Insurance Co., 120 U.S.App.D.C. 51, 343 F.2d 333 (D.C.C.ir. 1965), Judge McGowan noted that the change in the federal workmen's compensation statute 9 that allowed the employee to sue, should not result in the employee obtaining a greater recovery than if the employer brought the suit. The line of cases from the Fifth Circuit was differentiated by Davis and Ashcraft as involving insufficient funds to reimburse all parties completely.
Turning to the language of AS 23.30.015(g) of...
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