Thick v. Lapeer Metal Products Co.

• Decision Date: 27 August 1984
• Docket Number: Docket No. 67031
• Citation: 353 N.W.2d 464,419 Mich. 342
• Parties: Marilyn B. THICK, Plaintiff-Appellee, v. LAPEER METAL PRODUCTS COMPANY and Transamerica Insurance Group, Defendants-Appellants. 419 Mich. 342, 353 N.W.2d 464
• Court: Michigan Supreme Court

Page 464

353 N.W.2d 464

Marilyn B. THICK, Plaintiff-Appellee, v. LAPEER METAL PRODUCTS COMPANY and Transamerica Insurance Group, Defendants-Appellants.

Docket No. 67031.

419 Mich. 342, 353 N.W.2d 464

Supreme Court of Michigan.

Argued Dec. 6, 1983.

Decided Aug. 27, 1984.

Jerome H. Solomon, Southfield, for plaintiff-appellee.

Buck & Mangapora, Michael J. Mangapora, Flint, for defendants-appellants.

BOYLE, Justice.

At issue in this case is whether a non-settling insurance carrier in a workers' compensation case may offset its liability by the amount of the settlement paid by a second carrier for injuries determined to be covered solely by the non-settling carrier. Both the Workers' Compensation Appeal Board and the Court of Appeals refused to allow such a credit, and the non-settling carrier appeals. We reverse.

I

Plaintiff Marilyn B. Thick suffered a lower back injury in April, 1969, while employed by defendant Lapeer Metal Products Company. The injury necessitated disc surgery and resulted in some time off work as well as a change in work assignment until December 7, 1973, when she experienced a sharp back pain. Plaintiff has not returned to work since that date.

Defendant Lapeer was insured by two carriers successively during the period relevant to plaintiff's claim. Defendant Transamerica Insurance Group insured Lapeer for workers' compensation claims accruing up to and including June 30, 1969, at which time Great American Insurance Company took over the risk. Great American is not a party to this action.

In March, 1974, plaintiff filed a petition for benefits arising from her back condition, naming her employer Lapeer and both carriers as defendants. Before hearing, Great American agreed to settle its potential liability by paying plaintiff $20,000. The record of the hearing of approval of the redemption agreement establishes that the hearing referee clarified the settlement as eliminating only the employer's post-June 30, 1969, liability (i.e., that insured by Great American) for plaintiff's condition and that any pre-existing liability remained unresolved. The hearing then proceeded against the remaining defendants, Lapeer and Transamerica, as to prior liability.

In short, both the hearing referee and the WCAB found plaintiff's back condition to be solely attributable to her earlier April, 1969, injury. Accordingly, Transamerica was held liable for the full amount of benefits owed from that date forward. The Court of Appeals affirmed, agreeing with the WCAB that Transamerica was not entitled to a credit for the $20,000 settlement paid by Great American. Transamerica appeals, challenging the denial of credit as well as the lower courts' determination that plaintiff's condition is solely attributable to the April, 1969, injury.

II

In affirming the WCAB's denial of credit to Transamerica for the $20,000 redemption, the Court of Appeals in effect treated the settlement as addressing a separate, later injury. Since the settlement by its terms was limited to post-June 30, 1969, injuries, the Court concluded that plaintiff was "not twice recovering for liability for the injury which occurred on April 17, 1969". Thick v. Lapeer Metal Products Co., 103 Mich.App. 491, 498, 302 N.W.2d 902 (1981). Thus, Transamerica was denied credit notwithstanding the factual finding that only one "injury" had occurred. This result is inconsistent with the policy against double recovery in workers' compensation cases.

The fundamental principle underlying workers' compensation is full compensation for injuries sustained. Equally clear is the proposition that workers' compensation law does not favor double recovery. See Stanley v. Hinchliffe & Kenner, 395 Mich. 645, 657-659, 238 N.W.2d 13 (1976); Cline v. Byrne Doors, Inc., 324 Mich. 540, 554-559; 37 N.W.2d 630 (1949) (Butzel, J., concurring ). In Stanley, supra, the petitioner sought compensation benefits from his Michigan employer after having already received benefits for the same injury from his previous California employer. There we applied the foregoing principle to allow the Michigan employer credit for the benefits received in California.

In the instant case, by comparison, the petition for workers' compensation benefits was brought against the employer's two successive insurance carriers for benefits arising from plaintiff's back condition. When the petition was filed, both carriers were potentially liable. Before the hearing, one carrier settled, thereby releasing it from any further liability. After the hearing, it turned out that plaintiff's condition was solely traceable to an injury that predated the settling carrier's period of coverage. Thus, the settling carrier in fact bore no liability and, in hindsight, had improvidently settled.

We conclude that notwithstanding the non-liability of the settling carrier, the resulting judgment against the non-settling carrier must be reduced pro tanto by the settlement amount to the extent that settlement was in satisfaction of the identical claim. In reaching this result, we depart from the "dual-injury" analysis applied below.

Plaintiff sought benefits to compensate her for an injury or injuries sustained over a period that potentially spanned both carriers' periods of risk. The settling carrier assumed a later injury date and chose to redeem its potential liability. The hearing referee and the WCAB found that the later injuries related back to an earlier injury date that made the non-settling carrier fully liable. Implicit in that finding was a determination that all of plaintiff's employment-related back injuries were reducible to a single claim for benefits accruing at the earlier injury date.

We deal solely with an award against the non-settling carrier of benefits arising from all of plaintiff's back injuries, and a settlement with the settling carrier arising from some of plaintiff's back injuries. We find the conclusion inescapable that the settlement for the later injury is necessarily subsumed by the award for all injuries, and therefore hold that Transamerica is entitled to a credit for the settlement amount. To hold otherwise would ignore the reality of the situation and create two claims where only one was found to exist.

Plaintiff correctly contends that pro tanto reduction of a judgment by the amount of a settlement reached is a principle of tort liability, ¹ and that "[m]ost principles of tort law are founded in common law, and, consequently, such principles are not automatically applicable to workers' disability compensation law, unless made applicable by specific legislative enactment", but see Solo v. Chrysler Corp. (On Rehearing ), 408 Mich. 345, 351-352, 292 N.W.2d 438 (1980) (applying equitable principles where workers' compensation statute "neither provides for, nor forbids" rescission of redemption agreement); Wilson v. Doehler-Jarvis Division, 358 Mich. 510, 100 N.W.2d 226 (1960) (permitting recovery of interest on a compensation award where statute "neither provides for, nor forbids" such recovery).

Moreover, while our workers' compensation statute does not speak to the precise issue raised by the case at hand, Sec. 811 of the act ² does support provision of a credit under these circumstances:

"Any savings or insurance of the injured employee, or any contribution made by the injured employee to any benefit fund or protective association independent of this act, shall not be taken into consideration in determining the compensation to be paid under this act, nor shall benefits derived from any other source than those paid or caused to be paid by the employer as provided in this act, be considered in fixing the compensation under this act." (Emphasis added.)

In Stanley, supra, we adopted a liberal construction of that section to allow an insurer credit for a recovery obtained out of state, notwithstanding the apparent import of the emphasized language denying consideration for benefits received from any source other than the employer. ³ In reaching that result, we stressed the primacy of the policy against double recovery of workers' compensation benefits, concluding that the crediting of foreign awards "is necessary to avoid injustice and to remain consistent with the principles of workmen's compensation". 395 Mich. 659, 238 N.W.2d 13. The instant case, by contrast, involves benefits that are indeed traceable to the same employer and hence are to "be considered in fixing the compensation" under that section. No less here than in Stanley is the policy against double recovery to be applied to prevent "windfalls not intended by the act". 395 Mich. 658, 238 N.W.2d 13.

In sum, not only does the redemption provision of our statute ⁴ "neither provide for, nor forbid" crediting under these circumstances, but Sec. 811 and the workers' compensation principles enunciated in Stanley provide persuasive support for application of a rule to prevent double recovery for what are in fact the same injuries. ⁵

Finally, we note that a contrary holding would create an unjustified distinction between plaintiffs employed by successively insured employers and those employed by self- or singly insured employers. As conceded by plaintiff's attorney during argument, the instant situation would not have arisen if Lapeer had been self-insured, since the resulting award or settlement would have been addressed to one party. It may be presumed that the same result would obtain if Lapeer were insured by a single carrier during the relevant period. Thus, we find that the mere happenstance of successive carriers insuring Lapeer during the period of plaintiff's injuries should not benefit plaintiff to the extent of an extra $20,000 in compensation benefits. To paraphrase our statement in Stanley, supra, p. 658, 238 N.W.2d 13:

"To preclude credits would allow claimants to receive windfalls not intended by the act. It would have the effect of allowing some workers to receive more compensation than their...