Butori v. Bruce Metcalf Sportsman 66 , 228 Mont. 52 ( 1987 )

No. 87-100
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
FRANCIS J. BUTORI, JR.,
Claimant and Appellant,
-vs-
BRUCE METCALF SPORTSMAN 66,
Employer,
and
STATE COMPENSATION INSURANCE FUND,
Defendant and Respondent.
APPEAL FROM: The Workers' Compensation Court, The Honorable
Timothy Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Leonard J. Haxby, Butte, Montana
For Respondent :
Hughes, Kellner, Sullivan & Alke; Stuart Kellner,
Helena, Montana
Submitted on Briefs: May 21, 1987
Decided: August 11, 1987
Filed: AUG 111987
*,-
Clerk
I -7
Mr. Justice William E. Hunt, Sr. delivered the Opinion of the
Court.
This is an appeal from the Workers' Compensation Court,
State of Montana. Claimant alleges error by the court in
holding that defendant State Compensation Insurance Fund
(State Fund) is entitled to 50 percent subrogation against
his entire third party recovery.
We affirm this order of the Workers' Compensation Court.
The issues presented on appeal are:
1. Whether the Workers' Compensation Court erred in
deciding that the State Fund is entitled to assert its
subrogation right against the employee's entire third party
settlement, including the economic and non-economic damages
received.
2. Whether the Workers' Compensation Court calculated
the amount of the State Fund's subrogation correctly.
The following facts were stipulated to by the parties
and adopted by the Workers' Compensation Court:
1. That the employer, Bruce Metcalf Sportsman 66, is
enrolled under Compensation Plan No. 3 of the Workers'
Compensation Act, and its insurer is the State Compensation
Insurance Fund.
2. That on June 22, 1981, claimant received an injury
arising out of and in the course of his employment as a
service station helper when his legs were pinned between two
customers' automobiles. Claimant's actual weekly wage at the
time of the injury was $107.20 per week.
3. That the insurer accepted liability for the claim
and has paid claimant the following disability benefits:
a. On July 15, 1981, for the period from and
including June 22, 1981 through July 14, 1981, temporary
total disability benefits at the rate of $71.46 per week,
totaling $235.37;
b. On December 21, 1982, for the period from and
including March 10, 1982 through April 13, 1982, temporary
total disability benefits at the rate of $71.46 per week,
totaling $357.30.
c. On January 16, 1984, pursuant to Dr. Buehler's
whole man impairment rating of 5 percent, claimant was paid
$893.25, which represented 25 weeks permanent partial
disability benefits at claimant's permanent partial rate of
$71.46, reduced by 50 percent to partially satisfy
defendant's subrogation interest in claimant's third party
settlement.
4. That from the time of the accident through December
6, 1983, defendant paid claimant's medical expenses in the
amount of $2,133.21.
5. That on December 27, 1983, claimant settled his
third party claim against the driver of the automobile that
struck him. In settlement of that claim, Travelers Indemnity
Company, the third party's automobile liability insurer paid
claimant the sum of $26,000, from an automobile liability
insurance policy with bodily injury limits of liability for
one person of $500,000.
6. That on January 10, 1984, claimant's attorney
reimbursed defendant in the sum of $1,362.94, which
represented defendant's 50 percent subrogation interest in
both the temporary total disability benefits of $592.67 paid
claimant and the medical expenses of $2,133.21 paid for
claimant.
7. That since being reimbursed by claimant, defendant
has paid medical expenses of $618.36, which is equal to the
total medical expense of $1,236.72 incurred by claimant
during that period of time, reduced by 50 percent to satisfy
defendant's subrogation interest in claimant's third party
settlement.
8. That defendant elected not to participate in the
cost of claimant's third party action and waived 50% of its
subrogation rights in claimant's third party settlement.
9. In settling his third party claim, claimant incurred
attorney fees and costs totaling $6,500.
10. With the exception of the $1,362.94 payable to the
State Fund, the $26,000 was paid entirely for pain and
suffering, non-economic loss.
The subrogation rights of Workers' Compensation
insurance carriers upon third party recovery has a
straightforward history in Montana case law.
The statutorily given right of subrogation has been
recognized as constitutional and as being in furtherance of
equity and justice.
When as here, a worker, in the course of his
employment is injured by the act or omission of one
other than his employer or co-employee, his injury,
because it was incurred in the course of his
employment, gives rise to an obligation on the part
of his employer or his employer's insurer, to
provide the workers with benefits under the
Workers' Compensation Act. The employer or insured
in that case is called upon to make payments to the
worker which really should be the burden and the
responsibility of the third-party tortfeasor. It
is a doctrine as old as equity that when a party is
burdened by a debt or obligation that in natural
justice, equity and good conscience should be paid
by another, that party is subrogated to the rights
of his payee to the extent of the payments made, as
against the responsible party.
Brandner v. Travelers Ins. Co. (1978), 179 Mont. 2081 587
P.2d 933, 936-937; See also Skauge v. Mountain States Tel. &
Tel. Co. (1977), 172 Mont. 521, 565 ~ . 2 d
628.
When claimant elects to pursue a third party action, §§
39-71-412 and 39-71-414, MCA, govern.
If the insurer elects to participate in the cost of the
third party action the insurer is entitled to full
subrogation for the amount which has been or will be paid to
claimant. Section 39-71-414 (I), MCA. Tuttle v.
Morrison-Knudson Co., Inc. (1978), 177 Mont. 166, 580 P.2d
1379.
If the insurer elects not to participate, the insurer is
entitled to 50 percent of the amount paid or owed to claimant
for up to two-thirds the amount of claimant's recovery.
Section 39-71-414 (2)(c), MCA.
Occasions in which this right of subrogation has been
limited by this Court are few. In Fisher v. Missoula White
Pine Sash Co. (1974), 164 Mont. 41, 518 p.2d 795, this Court
held that the statutory language did not differentiate
between a survival action and a wrongful death action. In
Swanson v. Champion International (1982), 197 Mont. 509, 646
P.2d 1166, the Fisher ruling was distinguished as no longer
applicable after the 1977 amendment to the Workers'
Compensation subrogation statute was enacted.
[Ulnder the present statutory scheme,. .. and
because of the intrinsic differences that exist now
and have always existed in the source and effect of
recoveries made in survival actions as
distinguished from wrongful death actions, the
subrogation rights of the employer or its insurer
under the Workers' Compensation Act do not extend
to recoveries made under wrongful death claims.
The other distinguishable situation in which subrogation
by the Workers' Compensation insurance carrier is limited is
"in a case of reasonably clear liability, where a claimant is
forced to settle for the limits of an insurance policy which,
together with claimant's Workers' Compensation award, do not
grant full legal redress to claimant . . ." Hall v. State
Compensation Fund (Mont. 1985), 708 P.2d 234, 237, 42 St.Rep.
1502, 1505. See also Skauge, 565 P.2d at 632.
The case before this Court embraces none of the
distinguishable facts which would negate or infringe upon the
subrogation rights of the State Fund. Butori was not killed
as a result of the industrial accident at issue.
Consequently, there is no question concerning wrongful death
versus survival actions. Nor is there an issue of Butori not
having been "made whole." Butori settled his third party
action for $26,000 on a policy with a $500,000 liability
limit. The $1,362.94 portion of the settlement was
designated as the subrogated amount payable to the State Fund
for prior benefits paid. The remainder of the $26,000 was
designated as non-economic loss damages, compensating Butori
for pain and suffering. These designated amounts were agreed
upon by the settling parties. However, "[wlhen subrogation
is considered, neither the court nor the Workers'
Compensation Court or Division should be bound by the
allocations so made between private counsel." Swanson, 646
P.2d at 1175.
Further, as discussed above, the only occasions in which
this Court has allowed an infringement on the rights of
subrogation for a Workers' Compensation insurance carrier are
when there is a wrongful death recovery or when claimant has
not been made whole. More specifically, the only time this
Court has differentiated between economic and non-economic
losses is when the death was instantaneous, thereby barring a
survival action. In such a situation, the Workers'
Compensation Court can determine the value of the economic
damages contained in the settlement or judgment and award
such amount as subrogation to the insurance carrier.
By "economic damages" we refer to those elements of
damages in a wrongful death case that would have
their source in the earnings of the decedent, and
recompensed medical and burial expenses paid partly
or wholly by the subrogating carrier.
Swanson, 646 P.2d at 1174.
Appellant has not demonstrated that he falls under any
of these extenuating circumstances. Therefore, we affirm the
order of the Workers' Compensation Court in holding that the
State Fund is entitled to 50 percent subrogation of
appellant's entire third party settlement.
The second issue of whether the Workers' Compensation
Court correctly calculated the amount of subrogation is
resolved by a review of the applicable formula and its
application by the Workers' Compensation Court.
The record shows that the Workers' Compensation Court
correctly utilized the statutorily designed formula as
outlined in Brandner, 587 P.2d at 938, 939:
(1) Amount of recovery $26,000
(2) Attorney fees and costs 6,500
(3) Net recovery after fees and costs 19,500
(4) Claimant's minimum entitlement
1/3 x $19,500 6,500
(5) Insurers maximum recovery
50% ( % x $26,000) 13,000
(6) Sum of (4) and (5) 19, [5]00
The net recovery of $19,500 is sufficient to provide
claimant with his minimum statutory entitlement of $6,500.
(7) Insurer maximum entitlement 13,000
(8) Recapitulation
Amount of Recovery $26,000 $ 6,500
Cost and fees 6,500
Claimant's entitlement 13,000
(9) Benefits paid to date
Temporary Total Disability
$ 235.37 (agreed fact 3a)
357.30 (agreed fact 3b)
$ 592.67
$2,133.21 (agreed fact 4)
(impairment 5%) 1,786.50 (agreed fact 3c!
$3,919.71
10) Insurer share of payments
to date (50% of $4,512.38) $ 2,256.19
This calculation, taken directly from the judgment of
the Workers1 Compensation Court, provides that Butori receive
at least one-third of the net recovery, less claimant's
proportionate share of fees and costs. This amount is
required by S 39-71-414 (2)( d ) , MCA, when the insured party
initiates a third party action without insurer participation.
The Workers' Compensation judge held further that:
Claimant is entitled to any credit for amounts
previously reimbursed to insurer for its
subrogation claim. In addition, the insurer may
reduce future benefits by 50 percent until $13,000
is paid, at which time full benefits are restored.
Butori cannot claim that he is being inadequately
recompensed. He is being paid monthly benefits from the
State Fund which cover his medical expenses and disability
benefits. In addition, he will receive - least $6,500 as
at
damages recovered from his third party action.
The court's calculations ensure that Butori will receive
a minimum amount, but does not limit his recovery to only
one-third of the entire amount received. The State Fund is
entitled to 50 percent subrogation of amounts paid to
claimant up to $13,000. If State Fund's obligations to
Butori never total $26,000, he will receive the remainder of
the recovery amount. The court correctly calculated the
subrogated amount of appellant's third party recovery.
We affirm the judgment of the Workers' Compensation
Court.
We Concur:
Total $ 592.67
Medical $2,133.21 (agreed fact 4)
(impairment 5%) 1,786.50 (agreed fact 3c)
Total $3,919.71
(10) Insurer share of payments
to date (50% of $4,512.38)
This calculation, taken directly from the judgment of
the Workers' Compensation Court, provides that Butori receive
at least one-third of the net recovery, less claimant's
proportionate share of fees and costs. This amount is
required by 39-71-414 (2)(d), MCA, when the insured party
initiates a third party action without insurer participation.
The Workers' Compensation judge held further that:
Claimant is entitled to any credit for amounts
previously reimbursed to insurer for its
subrogation claim. In addition, the insurer may
reduce future benefits by 50 percent until $13,000
is paid, at which time full benefits are restored.
Butori cannot claim that he is being inadequately
recompensed. He is being paid monthly benefits from the
State Fund which cover his medical expenses and disability
benefits. In addition, he will receive - least $6,500 as
at
damages recovered from his third party action.
The court's calculations ensure that Butori will receive
a minimum amount, but does not limit his recovery to only
one-third of the entire amount received. The State Fund is
entitled to 50 percent subrogation of amounts paid to
claimant up to $13,000. If State Fund's obligations to
Butori never total $26,000, he will receive the remainder of
the recovery amount. The court correctly calculated the
subrogated amount of appellant's third party recovery.
We affirm the judgment of the Workers' Compensation
Court.