Travelers Ins. Co. v. Henry

• Decision Date: 24 June 2005
• Docket Number: No. 04-174.,04-174.
• Citation: 882 A.2d 1133
• Parties: TRAVELERS INSURANCE COMPANY v. John P. HENRY.
• Court: Vermont Supreme Court

882 A.2d 1133

TRAVELERS INSURANCE COMPANY v. John P. HENRY.

No. 04-174.

Supreme Court of Vermont.

June 24, 2005.

Motion for Reargument Denied August 5, 2005.

Stephen D. Ellis and Jennifer K. Moore of Kiel Ellis & Boxer, Springfield, for Plaintiff-Counter-Defendant-Appellant.

Craig Weatherly of Gravel and Shea, Burlington, for Defendant-Counter-Claimant-Appellee.

Present: REIBER, C.J., DOOLEY, JOHNSON and SKOGLUND, JJ., and ALLEN, C.J. (Ret.), Specially Assigned.

¶ 1. REIBER, C.J.

In this appeal, we are asked by the United States Court of Appeals for the Second Circuit to answer the following certified question: under 21 V.S.A. § 624(e), does a workers' compensation carrier have a right to reimbursement from, or a future credit against, underinsured/uninsured (UIM) benefits recovered by an injured employee under an automobile liability policy that was purchased by his employer?¹ As discussed below, we conclude that under the plain language of 21 V.S.A. § 624(e) a workers' compensation carrier does not have a right to be reimbursed out of such proceeds, nor to have the balance of the proceeds treated as a credit against future payment of benefits, except to prevent a double recovery. The question of whether an employee has received a double recovery can be answered only after the nature and extent of the injured employee's damages has been determined. When this determination has been made, the extent of a workers' compensation carrier's right to reimbursement or to a credit against future payments can be ascertained.

¶ 2. The underlying facts are undisputed. In December 1999, defendant John Henry was seriously injured in a two-car automobile accident that occurred during the course of his employment. The driver of the second car, Kristy Herrick, was solely responsible for the accident. Henry received workers' compensation benefits from plaintiff Travelers Insurance Company, his employer's workers' compensation carrier. He also recovered $100,000 in damages from Herrick's personal liability insurer, the limit of the policy. After deducting the costs of recovery (including attorney's fees), $66,060.75 of this money was paid to Travelers ($56,004.42 for a lien and $10,103.83 as an advance payment of permanency benefits not yet paid). Henry also sought to recover under the UIM provisions of two automobile liability policies: one that he had purchased himself, which had a policy limit of $100,000, and one that had been purchased by his employer, and issued by Travelers, with a policy limit of $400,000.

¶ 3. In August 2001, Travelers filed a declaratory judgment action in the United States District Court for the District of Vermont seeking a declaration that pursuant to 21 V.S.A. § 624(e) it was entitled to reimbursement from all of the UIM proceeds that Henry recovered. According to Travelers, Henry's recovery of UIM proceeds in addition to his receipt of workers' compensation benefits constituted a "double recovery" within the meaning of 21 V.S.A. § 624(e). Thus, Travelers sought reimbursement out of the UIM proceeds for the workers' compensation benefits that it had paid up to the date of recovery, as well as a credit toward any future benefits that it would be obligated to pay.²

¶ 4. In an April 2002 entry order, the district court granted partial summary judgment to Henry, concluding that under 21 V.S.A. § 624(e) Travelers had a right to reimbursement out of the UIM proceeds only to the extent that Henry had received a double recovery. The court explained that the question of whether Henry had received a double recovery could not be decided until all potential coverage had been determined and the nature and extent of Henry's damages had been considered. In its order, the court also granted Henry's request to join his personal automobile liability insurer as a party and add a counterclaim against both UIM carriers for the benefits allegedly due under the policies. The parties then stipulated, solely for the purpose of determining their respective rights with respect to the UIM proceeds, that Henry's "total damages" were the sum of the available UIM coverage ($500,000) and the total amount of workers' compensation benefits paid through the date of the court's final judgment order.³

¶ 5. In late 2003, the court granted judgment in Henry's favor, dismissing Travelers' complaint and awarding Henry $500,000 in UIM proceeds. The court found that the plain language of 21 V.S.A. § 624(e) protected two types of recoveries from the reimbursement rights of workers' compensation insurers: (1) payments from privately purchased plans (including UIM coverage) and (2) payments from any other first party plan. Because the UIM policy purchased on Henry's behalf by his employer was a first party insurance policy, the court concluded that Henry was not obligated to reimburse Travelers out of the UIM proceeds. Travelers appealed to the Second Circuit, which certified the questions at issue in this appeal.

¶ 6. We begin with an overview of the reimbursement statute. Generally speaking, 21 V.S.A. § 624 allows an injured employee to pursue a cause of action against a third party where the injury for which workers' compensation is payable "was caused under circumstances creating a legal liability to pay the resulting damages in some person other than the employer. . . ." Id. § 624(a). If an injured employee recovers damages from a liable third party, the employer or workers' compensation carrier is generally entitled to reimbursement for the workers' compensation benefits that it has paid. Id. § 624(e). Ideally, the statute operates to provide a fair result for all parties:

[T]he insurance carrier, representing the employer, comes out even, being without fault or injury; the third party wrongdoer pays exactly the damages he would have paid without any workers' compensation law; the attorney is reimbursed for services rendered, and the employee — in addition to what he has already received in compensation benefits — is entitled to the remainder.

St. Paul Fire & Marine Ins. Co. v. Surdam, 156 Vt. 585, 590, 595 A.2d 264, 266 (1991) (quotation omitted); see also 6 A. Larson, Larson's Workers' Compensation Law § 110.02 (2004).

¶ 7. Prior to its amendment in 1999, 21 V.S.A. § 624(e) provided:

In an action to enforce the liability of a third party, the injured employee may recover any amount which the employee or the employee's personal representative 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 under this chapter to date of recovery, and the balance shall forthwith be paid to the employee or the employee's dependents or personal representative and shall be treated as an advance payment by the employer on account of any future payment of compensation benefits.

In Travelers Cos. v. Liberty Mutual Insurance Co., 164 Vt. 368, 372-73, 670 A.2d 827, 829-30 (1995), we interpreted this provision to allow a workers' compensation insurer to be reimbursed out of UM/UIM payments made to an employee by his employer's liability carrier after concluding that the employer's liability carrier was a "third party" within the meaning of 21 V.S.A. § 624(e) and UM/UIM payments constituted "damages."

¶ 8. Subsequent to our decision in Travelers Cos., we held that a workers' compensation insurer was entitled to "first dollar" reimbursement from any recovery that an employee received from a third party, regardless of whether the recovery represented economic or noneconomic damages. Brunet v. Liberty Mut. Ins. Group, 165 Vt. 315, 317, 682 A.2d 487, 488 (1996). Our conclusion rested on the plain language of § 624(e), which allowed an insurer to be reimbursed out of "any recovery" that an employee received from a third party. Id. This rationale implicitly extended to an employee's recovery of UM/UIM benefits under a privately purchased insurance policy under our holding in Travelers Cos., 164 Vt. at 373, 670 A.2d at 829-30.

¶ 9. Effective July 1, 1999, the Legislature amended 21 V.S.A. § 624(e) to include the following sentence:

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.

¶ 10. We are now asked to interpret the terms of the amended statute. Travelers argues that under § 624(e), as amended, it is still entitled to "first dollar" reimbursement from Henry's recovery of UIM benefits under his employer-purchased policy. According to Travelers, the 1999 amendment was enacted to protect an employee's recovery of UIM benefits under a privately-purchased policy, and it argues that there is no suggestion in either the plain language of the statute or its legislative history that the Legislature intended to protect UIM benefits recovered under an employer-purchased policy.

¶ 11. We disagree. In interpreting 21 V.S.A. § 624(e), our goal is "to discern and implement the intent of the Legislature." Merkel v. Nationwide Ins. Co., 166 Vt. 311, 314, 693 A.2d 706, 707 (1997). If the Legislature's intent is clear from the plain meaning of the words used, we must enforce the statute according to its terms. Tarrant v. Dep't of Taxes, 169 Vt. 189, 197, 733 A.2d 733, 739 (1999). In this case, the Legislature's intent is clear from the plain language of the statute — an employee's recovery of UIM proceeds under an automobile liability policy purchased by his employer is a "first party insurance payment or benefit" that is not subject to the workers' compensation carrier's right to reimbursement except to prevent a double...