Travelers Ins. Co. v. Carpenter

Citation411 F.3d 323
Decision Date20 June 2005
Docket NumberDocket No. 01-9474.
PartiesTHE TRAVELERS INSURANCE COMPANY, Plaintiff-appellant, v. Susan J. CARPENTER, Defendant-appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
411 F.3d 323
Susan J. CARPENTER, Defendant-appellee.
Docket No. 01-9474.
United States Court of Appeals, Second Circuit.
Argued: October 2, 2002.
Decided: June 20, 2005.

Page 324

Andrew W. Goodger, Kiel Ellis & Boxer, Springfield, VT (Andrew C. Boxer, on the brief), for plaintiff-appellant.

Steven P. Robinson, Diamond & Robinson, Montpelier, VT, for defendant-appellee.

Before: MINER, SOTOMAYOR and KATZMANN, Circuit Judges.

SOTOMAYOR, Circuit Judge.

This case is before us for the second time, following our certification to the Vermont Supreme Court of three questions regarding Vermont workers' compensation law. See Travelers Ins. Co. v. Carpenter, 313 F.3d 97, 109 (2d Cir.2002) ("Travelers I"). By order dated August 31, 2004, the Vermont Supreme Court dismissed the certified proceeding, holding that its earlier acceptance was improvidently granted. Travelers Ins. Co. v. Carpenter, No.2002-558, 2004 WL 2332085, slip op. at 1-2 (Vt. Aug. 31, 2004). We proceed, in the absence of guidance from the state court, to answer two of the certified questions of state law and to dispose of the appeal from the judgment of the United States District Court for the District of Vermont (Murtha, C.J.). We hold that a workers' compensation insurer's right to reimbursement under Vt. Stat. Ann. tit. 21, § 624(e) (2003) of proceeds of an uninsured/underinsured motorist policy is governed by the law in effect at the time that the injured worker recovers those proceeds. We further hold that under § 624(e) as amended in 1999,

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the insurer has no right to reimbursement unless and until the injured worker has received compensation in excess of the total damages sustained. Finally, we hold that the district court erred in dismissing this action on abstention grounds instead of granting judgment in favor of defendant-appellee Susan J. Carpenter for the limited declaratory relief she requested.


The facts underlying this case are fully set forth in our order of certification, see Travelers I, 313 F.3d at 99-102, and we restate them only briefly here. On February 26, 1999, defendant-appellee Susan J. Carpenter was injured in a single-car accident. Carpenter's coworker Kimberly Webb was driving the car. Because the injury occurred within the scope of Carpenter's employment for Bell Atlantic Yellow Pages ("Bell Atlantic"), plaintiff-appellant Travelers Insurance Company ("Travelers"), the workers' compensation insurance carrier for Bell Atlantic, paid her resulting claim for workers' compensation benefits. Carpenter also sought compensation through at least three other channels. She made a claim against Webb's liability carrier, which was settled for $25,000. She made another claim under the underinsured motorist ("UIM") provision of her own personal automobile liability policy, coincidentally also carried by Travelers, which was settled in April of 2000 for $150,000. Finally, Carpenter sued Webb in state court for negligent driving. Because Travelers also happens to be the issuer of a commercial auto insurance policy to Bell Atlantic that covers the occupants of the vehicle involved in the accident, Travelers is the real party-in-interest to the state negligence suit as well. At the time of our first decision, the negligence lawsuit was still pending.

Travelers brought the instant action in the United States District Court for the District of Vermont in December of 2000 seeking, inter alia, a declaration that it was entitled to the value of Carpenter's settlement under her personal UIM policy, less the costs of recovery, as an offset against its workers' compensation benefits liability. Travelers based its claim on section 624 of title 21 of the Vermont Statutes. Under § 624(a), an injured employee may both claim workers' compensation benefits and seek compensation from a party other than the employer who is under some legal liability to pay. Vt. Stat. Ann. tit. 21, § 624(a) (2003). If the injured worker has not commenced an action against a responsible third party within a year of the injury, the employer or its insurance carrier may prosecute the action in the worker's name. Id.

Section 624(e) governs the operation of such dual liability where, as here, the worker brings the third party action. At the time of the accident in February of 1999, section 624(e) provided in relevant part:

In an action to enforce the liability of a third party, the injured employee may recover any amount which the employee... would be entitled to recover in a civil action. Any recovery against the third party for damages resulting from personal injuries or death only, after deducting expenses of recovery, shall first reimburse the employer or its workers' compensation insurance carrier for any amounts paid or payable ... to date of recovery, and the balance shall forthwith be paid to the employee ... and shall be treated as an advance payment by the employer on account of any future payment of compensation benefits.

Vt. Stat. Ann. tit. 21, § 624(e) (1987 & Supp.1993). In 1995, the Vermont Supreme

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Court interpreted the phrase "third party" in this version of § 624(e) to include carriers of UIM policies. See Travelers Cos. v. Liberty Mut. Ins. Co., 164 Vt. 368, 372-73, 670 A.2d 827, 829-30 (1995). Accordingly, an injured employee who received workers' compensation benefits and who also recovered under his or her own first party UIM policy was obliged, after deducting expenses of recovery, to reimburse the employer or its insurance carrier fully before retaining any of the proceeds.1 Id. In other words, as the law stood on the date of Carpenter's accident, recovery of the proceeds of a UIM first party insurance policy was treated like any recovery from a liable third party under § 624(e).

In May of 1999, the Vermont legislature amended § 624(e) by adding at the end of the text quoted a third sentence, as follows:

Reimbursement required under this subsection, except to prevent double recovery, shall not reduce the employee's recovery of any benefit or payment provided by a plan or policy that was privately purchased by the injured employee, including uninsured-under insured motorist coverage, or any other first party insurance payments or benefits.

Act of May 12, 1999, No. 41, § 4, 1999 Vt. Acts & Resolves 765, 770 (codified at Vt. Stat. Ann. tit. 21, § 624(e) (2003)). This amendment became effective in July of 1999, id., after Carpenter was injured in the car accident but before she settled her claim under her UIM policy.

The parties cross-moved for summary judgment before the district court, disputing both the applicability and the meaning of the amendment to § 624(e). The district court held that the July 1999 change to § 624(e) was a "clarification" of the law as it stood prior to the change and applied to Carpenter's claim no matter when the law governing that claim was fixed. It agreed with Carpenter's contention that the amended version of § 624(e), in specifying that an insurer has no right to reimbursement from first party proceeds "except to prevent double recovery," did not require Carpenter to reimburse Travelers unless and until she received more compensation than the amount of her "total" damages. The district court concluded that because the amount of Carpenter's total loss was unknown, "the instant record provides no basis for granting the defendant's Cross Motion for Summary Judgment." Instead it ordered the parties to address whether, in light of the pendency of Carpenter's lawsuit against Webb in state court (to which, as noted above, Travelers was coincidentally the real party-in-interest), Travelers' federal action should not be dismissed as seeking a declaration on questions more suitably addressed in a pending state proceeding.2 The district court subsequently dismissed the federal action on that ground.

Travelers appealed the district court's denial of summary judgment. Travelers argued that the law governing its rights under § 624(e) was fixed at the time of

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Carpenter's February 1999 injury, and that under the version of § 624(e) effective prior to July of 1999, it was entitled to first-dollar reimbursement from her UIM recovery and a credit against future workers' compensation benefit payments. Carpenter argued in response that the amended version of § 624(e) controlled, and that the district court was correct that the effect of the amendment was to shield her UIM recovery from reimbursement except to the extent that it represented recovery of more than her total damages from the accident. Finding "no clear guidance from the Vermont courts or the Vermont legislature" on either the temporal choice of law issue or the meaning of "double recovery," we certified the following three questions to the Vermont Supreme Court:

1. Under the circumstances of this case, in which a worker was injured in February 1999 and settled under her privately purchased liability insurance policy in April 2000, was the § 624(e) reimbursement right of a workers' compensation carrier "acquired [or] accrued" under [Vt. Stat. Ann. tit. 1] § 214(b)(2) before or after the July 1, 1999 amendment to § 624(e)?

2. If the § 624(e) reimbursement right accrued before July 1, 1999, is the amendment to § 624(e) a "clarifying" amendment that should be applied retroactively?

3. If the post-amendment text controls, under the circumstances of this case in which an injured worker received both workers' compensation benefits and a recovery under the UIM provision of a privately purchased insurance policy, how is the prohibition on "double recovery" in § 624(e) defined and, if relevant, when and how are an injured worker's "total" damages determined?

Travelers I, 313 F.3d at 109. We reserved for decision, if necessary, the question of whether the district court was correct to abstain from settling the question of Carpenter's total damages. Id. at 102 n. 4, 109.


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