Schalk v. Michigan Sewer Construction Co. , 62 Mich. App. 658 ( 1975 )

62 Mich. App. 658 (1975) 233 N.W.2d 825

SCHALK
v.
MICHIGAN SEWER CONSTRUCTION COMPANY

Docket No. 21083.

Michigan Court of Appeals.

Decided July 22, 1975.

Kauflin & Elliott, for plaintiffs Schalk.

Vandeveer, Garzia, Tonkin, Kerr and Heaphy, P.C., for intervening-plaintiff Aetna Casualty and Surety Company.

Richard A. Harvey, for defendant Michigan Sewer Construction Company.

Before: BASHARA P.J., and J.H. GILLIS and M.F. CAVANAGH, JJ.

Leave to appeal applied for.

J.H. GILLIS, J.

Plaintiff-appellee, Allen Schalk, received severe injuries which arose out of and in the course of his employment. Appellant, workmen's compensation insurance carrier of Allen Schalk's employer, paid appellee's medical expenses and compensation award from the date of the injury to the date of Schalk's action against the defendants.

The Schalks commenced a negligence action against the third-party defendant, Forsyth, as a third-party tortfeasor pursuant to MCLA 418.827; MSA 17.237(827). A $125,000 settlement was reached, with appellee receiving $110,000 and his wife $15,000.

On July 1, 1974 the trial judge entered an order awarding attorney fees, apportioning the cost of recovery and approving the distribution of settlement proceeds.

In making this order, the trial judge found the following facts. First, the settlement figure which these parties were concerned with was $110,000. This figure was derived by taking the total settlement ($125,000) and subtracting Mrs. Schalk's interest ($15,000). Second, the plaintiff expended $37,232.95 for attorney fees and incidental expenditures in suing the third-party defendants. Third, appellant insurance company expended $1,600 for attorney fees in joining plaintiffs' suit against the third-party defendants. The trial judge also found that the insurance company had paid plaintiff $22,588.13 in benefits by the time this case was settled.

After determining the above figures, the trial judge ruled that the insurance company was required to pay $23,299.77 as its share of the "expenses of recovery". This holding was based on MCLA 418.827(6); MSA 17.237(827)(6), as interpreted in Crawley v Schick, 48 Mich. App. 728; 211 NW2d 217 (1973). While we find it unnecessary to explain how the trial judge arrived at this figure, we have determined that he incorrectly applied the Crawley formula.

Under MCLA 418.827; MSA 17.237(827), an injured party is permitted to sue a third-party tortfeasor without that injured party waiving any right to collect from the insurance carrier. MCLA 418.827(1); MSA 17.237(827)(1). If such a suit results in recovery for the injured party, that party must reimburse the insurance carrier for money it paid and will have to pay to him as compensation. MCLA 418.827(5); MSA 17.237(827)(5). The "expenses of recovery" may, however, be first deducted from any recovery gained from the third-party tortfeasor. MCLA 418.827(5); MSA 17.237(827)(5). It has been determined that the costs of recovery must be shared proportionately by the injured party and the insurance carrier. MCLA 418.827(6); MSA 17.237(827)(6), Crawley v Schick, supra.^[1]

The issue on appeal in the instant case concerns the proportioning of the recovery costs between the carrier and plaintiff-husband. Our reading of Crawley, supra, convinces us that the following analysis is proper. The relevant settlement amount is $110,000. The combined recovery costs of plaintiffs and the carrier are $38,832.95 ($36,666.67 for plaintiffs' attorney fees, $1,600 for the carrier's attorney fees and $566.28 expenses). The carrier is entitled to $22,588.13 for benefits already paid. In addition, the carrier is entitled to treat the remaining $48,578.92 as "advance payments" to plaintiff-husband. MCLA 418.827(5); MSA 17.237(827)(5). The carrier received a benefit, therefore, of $71,167.05 ($22,588.13 plus $48,518.92). The carrier's share of the cost of recovery, in percentage terms, is 64.6973% (obtained by dividing $71,167.05 by $110,000). The carrier's share of the cost of recovery, in monetary terms, is $25,122.87 ($38,832.95 multiplied by .646973).

Since under the trial judge's formula the carrier was only required to pay $23,299.77 for costs of recovery, his determination was erroneous. However, the plaintiff-husband in his brief indicated complete satisfaction with the decision, and chose not to file a cross-appeal. GCR 1963, 807. Since the carrier suffered no prejudice by the trial court's error, and since plaintiff-husband failed to contest the decision, we affirm the awards as enunciated by the trial court.

Affirmed. Costs to appellee.

NOTES

[1] Although the insurance company's brief in the instant case is quite ambiguous, it appears that they are contending that the carrier should not have to bear any of the costs of recovery. This contention does violence to the equitable rationale of MCLA 418.827; MSA 17.237(827). It is only fair that the carrier, who stands to gain much more than the plaintiff does in a suit against the third party, bear at least a portion of the recovery costs. For a discussion of the contention that the carrier ought to bear the entire cost, see Kroll v Hyster Co, 48 Mich. App. 753; 211 NW2d 81 (1973); lv granted, 391 Mich. 756 (1974).