Travelers Ins. Co. v. Haden, 13660.
| Decision Date | 20 August 1980 |
| Docket Number | No. 13661.,No. 13660.,13660.,13661. |
| Citation | 418 A.2d 1078 |
| Parties | TRAVELERS INSURANCE CO., Appellant, v. Mabel D. HADEN and District of Columbia, Appellees. TRAVELERS INSURANCE CO., Appellant, v. Jesse JONES and District of Columbia, Appellees. |
| Court | D.C. Court of Appeals |
Thomas Pace, Washington, D. C., with whom Edward J. Lopata, Washington, D. C., was on the brief, for appellant. Richard W. Boone, Washington, D. C., also entered an appearance for appellant.
Mabel D. Haden, pro se.
David P. Sutton, Deputy Corp. Counsel, Washington, D. C., with whom Louis P. Robbins, Acting Corp. Counsel, Washington, D. C., at the time the brief was filed, and Richard W. Barton, Deputy Corp. Counsel, Washington, D. C., were on the brief, for the District of Columbia. Dennis McDaniel, former Deputy Corp. Counsel, Washington, D. C., also entered an appearance for the District of Columbia.
Before KELLY, KERN and GALLAGHER, Associate Judges.
This appeal raises questions concerning the rights of a workmen's compensation carrier where the injured employee compromises his claim against the alleged third party tort-feasor without the carrier's consent. The insurer, Travelers Insurance Company ("Travelers"), asserts the right to (1) obtain reimbursement of compensation benefits paid from Jones and from the District of Columbia, the alleged tort-feasor, and (2) impose a duty on Jesse Jones, the employee, and his attorney, Mabel D. Haden, to transmit the settlement proceeds to the carrier. Finding both claims without merit, the trial court entered summary judgments in favor of the District, Mr. Jones, and Attorney Haden. We reverse in part.
Jesse Jones fell into a manhole while delivering milk to a District of Columbia public school in the course of his employment for Southland Corporation ("Southland"). Travelers, as Southland's workmen's compensation carrier, paid Mr. Jones $4,254.76 for injuries sustained without a formal award.1 Within six months after his fall, Mr. Jones filed suit against the District of Columbia as a third party tort-feasor. This claim was settled on February 12, 1974; Mr. Jones agreed to accept $1,500 in settlement,2 and his action was dismissed with prejudice.
At this point, the procedural threads become rather tangled. Travelers brought an action against the District of Columbia and Mr. Jones seeking to recover the settlement proceeds on a theory of equitable lien. The trial court granted the District's motion to dismiss, and this ruling was affirmed on appeal in Travelers Insurance Co. v. District of Columbia, D.C.App., 382 A.2d 269 (1978). While this appeal was pending, Travelers brought separate actions against the District and Attorney Haden. Travelers sought to recover $4,254.76 (the amount of benefits it had paid Jones) from the District under a right of subrogation. The action against Attorney Haden was based on an alleged breach of an oral agreement to protect its lien, by failure to remit the settlement proceeds to Travelers.
The trial court entered summary judgment in favor of the District on the grounds (1) Travelers failed to give written notice of the claim within six months as required by D.C. Code 1973, § 12-309, and (2) Travelers' sole remedy was against Jones, not the District, for recovery of the proceeds. The remaining actions against Attorney Haden and Jones were consolidated, and proceedings stayed pending outcome of the appeal in Travelers Insurance Co. v. District of Columbia, supra. After that appellate decision, the trial court granted the motions of Jones and Haden for summary judgment.
The appeal before us concerns the propriety of the summary judgments entered in favor of the District of Columbia, Attorney Haden and Mr. Jones. The actions will be considered separately since distinct issues are involved in each.
In this action, Travelers seeks indemnification from the District of Columbia, whose negligence allegedly caused Mr. Jones' accident. The right here asserted is essentially one of subrogation. It is Travelers' contention that the settlement did not bar a subrogation suit against the District for recovery of compensation paid to Mr. Jones. In support, Travelers relies principally upon Travelers Insurance Co. v. District of Columbia, supra and Liberty Mutual Insurance Co. v. Ameta & Co., 564 F.2d 1097 (4th Cir. 1977). We find Travelers' reliance misplaced, and conclude that the settlement foreclosed the carrier's right of subrogation against the District.
Under the Longshoremen's and Harbor Workers' Act ("the Act"), an insurance carrier who pays compensation benefits to an injured employee pursuant to an award is subrogated to the employer's rights against negligent third parties. 33 U.S.C. § 933(h) (1978). Where, as here, benefits are paid without an award, a right of subrogation is not expressly created by statute.3 However, the courts have long recognized a subrogation right based upon equitable principles. See, e. g., The Etna, 138 F.2d 37, 39 (3rd Cir. 1943); Davillier v. Cavn Venezuelan Line, 407 F.Supp. 1234, 1236 (E.D.La. 1976). See also Allen v. Texaco, Inc., 510 F.2d 977 (5th Cir. 1975) ().
There appears to be some confusion among the parties as to the nature of the carrier's subrogation right. The insurer is subrogated to the "employer's implied right of reimbursement out of an employee's third party recovery." Petition of Sheffield Tankers Corp., 222 F.Supp. 441, 443 (N.D.Ca1.1963). See also The Etna, supra at 41. To protect its right to reimbursement, the insurer may intervene in the employee's suit, even where compensation was paid without entry of a formal compensation award. Allen v. Texaco, supra at 979-80. See also International Terminal Operating Co. v. Waterman Steamship Co., 272 F.2d 15, 17 (2d Cir. 1959), cert. denied, 362 U.S. 919, 80 S.Ct. 671, 4 L.Ed.2d 739 (1960). Where the carrier chooses not to intervene in the employee's action, its subrogation right may still be protected by notification to the third party. If Travelers had filed notice of payment of benefits prior to settlement and claimed a lien upon any recovery made, the trial court could have fixed the amount of the lien and directed payment from the settlement proceeds. See, e. g., Albert v. Sao Paulo, 552 F.2d 1139 (5th Cir. 1977). See also National Emblem Insurance Co. v. Gillingham, 241 So.2d 707, 709 (Fla.Dist.Ct.App.1970).4 Here Travelers failed to notify the District of its subrogation claim. In the absence of notification, we decline to shift to the District the entire burden of protecting Travelers' right to a portion of any judgment or settlement.
Travelers cites Liberty Mutual Insurance Co. v. Ameta & Co., supra, for the principle that the employee's release of the third party does not bar a subrogation suit by the insurance company for the full amount of the benefits paid. We find Liberty Mutual distinguishable on its facts. In that case, no actual litigation was ever filed by the employee; a release of the employee's claim was executed for consideration. Since the employee never filed suit, his claim was assigned to the employer by operation of law. See 33 U.S.C. § 933(b). Thus, the release had no effect on the carrier's rights to sue for indemnification.
Several state courts, most notably Florida, have held that a settlement does not bar a subsequent action by the insurer against the third party to recover the extent of benefits it must pay. See, e. g., Dickerson v. Orange State Oil Co., 123 So.2d 562 (Fla.Dist.Ct.App.1960). Under this view, the third party, who is charged with notice of the employer's subrogation rights, may not evade liability to the employer as subrogee by settlement with the employee. See generally 2A Larson, The Law of Workmen's Compensation, § 74.17. This approach has not prevailed under the Federal Act. The federal courts have treated the carrier's subrogation rights as derivative ones where the employee seeks recovery from a third party. Under § 933(h) of the Act, the carrier is subrogated to the employer's rights against negligent third parties. Under § 933(b), however, assignment to the employer of the employee's claim occurs only if the employee fails to bring an action against the third party within the prescribed time. Thus, the carrier has no right of subrogation against the third party after the injured employee sues on his claim, and collects for the negligent conduct. See Travelers Insurance Co. v. District of Columbia, supra at 271.5 "The fact that [the] recovery took the form of a settlement, rather than a judgment, is irrelevant from the standpoint of the carrier's right of subrogation," Davillier v. Cavn Venezuelan Line, supra at 1238. We conclude summary judgment was properly granted in favor of the District of Columbia.6
As we have indicated, Travelers retained a right to reimbursement out of the settlement proceeds. The employer's or insurer's interest in recoupment, if the employee ultimately succeeds in recovering from the third party, is protected by a lien on the proceeds. See, e. g., Potomac Electric Power Co. v. Wynn, 120 U.S.App.D.C. 13, 16, 343 F.2d 295, 298 (1965); Morauer & Hartzell, Inc. v. Woodworth, 142 U.S.App. D.C. 40, 42, 439 F.2d 550, 552 (1970), cert. dismissed sub nom. McClanahan v. Morauer & Hartzell, Inc., 404 U.S. 16, 92 S.Ct. 170, 30 L.Ed.2d 136 (1971). By imposing an equitable lien upon the judgment or settlement, courts have sought to prevent a double recovery by the employee. See, e. g., Allen v. Texaco, Inc., supra at 982. See also S.Rep.No. 428, 86th Cong., 1st Sess. ____ (1959), reprinted in [1959] U.S.Code Cong. & Admin.News, p. 2135. Thus, the employee must reimburse the insurer to the extent of payments received. See, e. g., ...
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