Skelly and Skelly v. Hertz Equipment Rental Corp. ( 2002 )

Tuesday 15th
January, 2002.
Shannon P. Skelly and Sarah E. Skelly,
as Beneficiaries of Michael L. Skelly, Deceased, Appellants,
against Record No. 2358-00-2
Claim No. 182-60-40
Hertz Equipment Rental Corporation and
Reliance National Indemnity Company, Appellees.
Upon a Rehearing En Banc
Before Chief Judge Fitzpatrick, Judges Benton, Willis, Elder,
Bray, Annunziata, Bumgardner, Frank, Humphreys, Clements and
Agee
Louis D. Snesil (Louis D. Snesil,
P.C., on brief), for appellants.
R. Ferrell Newman (Thompson, Smithers,
Newman, Wade & Childress, on brief),
for appellees.
By published opinion issued June 26, 2001, Skelly v.
Hertz Equipment Rental Corp. & Reliance Nat'l Indem. Co., 35 Va.
App. 689, 547 S.E.2d 551 (2001), a divided panel of this Court
affirmed the judgment of the Virginia Workers' Compensation
Commission. We stayed the mandate of that decision and granted
rehearing en banc.
Upon rehearing en banc, the stay of this Court's June
26, 2001 mandate is lifted and we affirm the judgment of the
Workers' Compensation Commission for the reasons set forth in
the majority panel decision.
____________________
Elder, J., with whom Fitzpatrick, C.J., Benton, Annunziata and
Frank, JJ., join, dissenting.
I would hold this case is controlled by rather than
distinguishable from Wood v. Caudle-Hyatt, Inc., 18 Va. App.
391, 444 S.E.2d 3 (1994). Here, the claimants notified Hertz of
the proposed settlement and the date on which they hoped to
obtain court approval. The settlement did not impair Hertz's
rights until a valid release was executed, which could not have
occurred until the claimants obtained court approval for the
settlement. Hertz had over four weeks before the court approved
the settlement in which to act, but it failed to voice any
objections during that time. Therefore, I respectfully dissent.
Wood involved a claimant with asbestosis who filed a
claim for workers' compensation benefits against his employer,
Caudle-Hyatt, Inc. Id. at 393, 444 S.E.2d at 5. Wood
simultaneously pursued common law tort actions against various
asbestos manufacturers and negotiated settlement offers for the
tort claims. Id. Wood notified Caudle-Hyatt in writing by
certified mail of the terms of the settlement offers and said he
intended to accept them unless Caudle-Hyatt objected within ten
days. Id. Caudle-Hyatt responded that it was not liable for
Wood's asbestosis claim; it did not agree or object to the
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proposed tort settlement or mention any subrogation rights. Id.
at 393-94, 444 S.E.2d at 5. Wood then settled the tort claims
for an amount that exceeded the sum he might have received for
his ailment under the Workers' Compensation Act, exclusive of
medical expenses. Id. at 394, 444 S.E.2d at 5.
On appeal, we held, inter alia, that Wood's claim for
compensation and a pro rata share of attorney's fees from
Caudle-Hyatt was not barred because Wood informed Caudle-Hyatt
of the terms of the settlement and gave it an opportunity to
object or to participate in order to protect its subrogation
rights. Id. at 398-99, 444 S.E.2d at 7-8. In essence, we held
that Caudle-Hyatt consented to the settlement through its
inaction.
Similarly, here, Hertz consented through inaction to
the settlement of the third-party wrongful death claim on behalf
of the claimants. Under general principles of insurance law, an
insurer's subrogation rights are not impaired by a settlement
until a valid release has been executed by one with authority to
do so. See 16 Lee R. Russ & Thomas F. Segalla, Couch on
Insurance 3d § 224:100 (1999); id. § 224:104 ("As with any
contract provision, there must be a meeting of the minds
concerning the terms and conditions of the applicable provision
as well as meeting all other requirements of an enforceable
contract (i.e., authority and consideration)."). Virginia's
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wrongful death statutes provide that a decedent's personal
representative may compromise a wrongful death claim only with
court approval. See Code § 8.01-55. Here, it is undisputed
that the claimants' attorney kept Hertz's attorneys apprised of
the settlement negotiations in the wrongful death suit as they
progressed. Although the commission found that the claimants'
counsel verbally accepted a settlement offer of $725,000 on
April 22, 1997, without first obtaining Hertz's approval for
that exact figure, claimants' counsel informed Hertz's attorneys
of the verbal acceptance that same day. The hearing required
under Code § 8.01-55 for formal approval of that settlement did
not occur until at least May 21, 1997, more than four weeks
later. The claimants could not execute a valid release until
after they obtained judicial approval and, thus, their actions
could not have impaired Hertz's subrogation rights prior to that
time.
During the four-week period preceding judicial
approval of the settlement, claimants' counsel provided Hertz's
counsel with a copy of the letter confirming settlement of the
third-party claim. Claimants' counsel also wrote a separate
letter, dated May 9, 1997, directly to Hertz's counsel. That
letter notified Hertz of the May 21, 1997 hearing at which the
claimants intended to seek approval of the third-party
settlement. The letter also indicated the claimants' intent
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thereafter to "turn [their] attention to the subrogation
interest of Hertz," indicating clearly that they did not intend
to abandon their claim for workers' compensation benefits.
Despite this notice, Hertz did not appear at the May 21, 1997
hearing and did not object to the settlement prior to the
court's entry of an order approving the settlement on May 27,
1997. Although Hertz lacked standing to oppose the court's
entry of an order approving the third-party settlement, the
claimants' or personal representative's consent remained a
prerequisite to judicial approval of the settlement. If Hertz
had communicated its objections to the claimants prior to the
hearing, entry of the court's order of approval, or the
claimants' execution of a release, the claimants could have
withdrawn their consent.
Thus, I would hold that here, as in Wood, Hertz
consented to the settlement by its inaction, and I would reverse
and remand to the commission for further proceedings consistent
with this approach, including the mandate that the commission
address the issue raised by Hertz regarding apportionment of
attorneys' fees and costs incurred by Hertz in protecting its
interests in the third-party action. Therefore, I dissent.
____________________
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This order shall be published and certified to the
Virginia Workers' Compensation Commission.
A Copy,
Teste:
Cynthia L. McCoy, Clerk
By:
Deputy Clerk
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C O R R E C T E D C O P Y
Tuesday 7th
August, 2001.
Shannon P. Skelly and Sarah E. Skelly,
as Beneficiaries of Michael L. Skelly, Deceased,
Appellants,
against Record No. 2358-00-2
Claim No. 182-60-40
Hertz Equipment Rental Corporation and
Reliance National Indemnity Company, Appellees.
Upon a Petition for Rehearing En Banc
Before Chief Judge Fitzpatrick, Judges Benton, Willis, Elder,
Bray, Annunziata, Bumgardner, Frank, Humphreys, Clements and
Agee
On July 10, 2001 came the appellants, by counsel, and
filed a petition praying that the Court set aside the judgment
rendered herein on June 26, 2001, and grant a rehearing en banc
thereof.
On consideration whereof, the petition for rehearing
en banc is granted, the mandate entered herein on June 26, 2001
is stayed pending the decision of the Court en banc, and the
appeal is reinstated on the docket of this Court.
The parties shall file briefs in compliance with Rule
5A:35. The appellants shall attach as an addendum to the opening
brief upon rehearing en banc a copy of the opinion previously
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rendered by the Court in this matter. It is further ordered that
the appellants shall file with the clerk of this Court twelve
additional copies of the appendix previously filed in this case.
A Copy,
Teste:
Cynthia L. McCoy, Clerk
By:
Deputy Clerk
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COURT OF APPEALS OF VIRGINIA
Present: Judges Willis, Elder and Bray
Argued at Richmond, Virginia
SHANNON P. SKELLY AND SARAH E. SKELLY,
AS BENEFICIARIES OF MICHAEL L.
SKELLY, DECEASED
OPINION BY
v. Record No. 2358-00-2 JUDGE JERE M. H. WILLIS, JR.
JUNE 26, 2001
HERTZ EQUIPMENT RENTAL CORPORATION
AND RELIANCE NATIONAL INDEMNITY COMPANY
FROM THE VIRGINIA WORKERS' COMPENSATION COMMISSION
Louis D. Snesil (Louis D. Snesil, P.C., on
brief), for appellants.
R. Ferrell Newman (Thompson, Smithers,
Newman, Wade & Childress, on brief), for
appellees.
The statutory beneficiaries of Michael L. Skelly
(claimants) appeal a decision of the Workers' Compensation
Commission holding that Hertz Equipment Rental Corporation and
its insurance carrier (together Hertz) were not responsible for
the payment of attorney's fees and costs related to the
settlement of a third-party tort claim. The claimants contend
that the commission erred in finding (1) that they settled a
third-party tort claim without Hertz's consent or knowledge, and
(2) that the settlement prejudiced Hertz's right of subrogation
against the third-party tort-feasor. Finding no error, we
affirm the commission's decision.
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I. BACKGROUND
On appeal, we view the evidence in the light most favorable
to the party prevailing below. See R.G. Moore Bldg. Corp. v.
Mullins, 10 Va. App. 211, 212, 390 S.E.2d 788, 788 (1990). The
commission's factual findings will be upheld on appeal if
supported by credible evidence. See James v. Capitol Steel
Constr. Co., 8 Va. App. 512, 515, 382 S.E.2d 487, 488 (1989).
On October 7, 1996, Michael Skelly was killed in an
automobile accident that arose out of and in the course of his
employment by Hertz. John Shea, an attorney with the law firm
of Marks and Harrison, was employed by the claimants to assert a
wrongful death claim and a workers' compensation claim. There
were three potential claimants, the deceased's wife, Shannon
Skelly, and two infants, Sarah Skelly and Taunnie Skelly. Hertz
employed the law firm of Sands, Anderson, Marks and Miller to
represent its interests. Cecil Creasey and Michael DeCamps of
that firm represented Hertz. Had the claimants sought it, an
award of $248,000 (500 weeks at $496 per week) plus funeral
expenses could have been entered in their favor under the
Workers' Compensation Act. However, no award was entered.
Hertz paid no compensation. The claimants proceeded directly
with their third-party wrongful death claim.
Skelly's estate filed a wrongful death suit against the
driver of the other vehicle, Charles Franklin, and his employer,
Metzler Brothers, Inc. In preparing for trial, the estate hired
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investigators, engaged in written discovery, motions and
hearings, hired experts, and conducted depositions. Trial was
set for April 29, 1997, but on April 22, 1997, the claimants
accepted a settlement in the amount of $725,000. Thereafter,
they sought from Hertz reimbursement of pro rata attorney's fees
and costs incurred in the third-party litigation, pursuant to
Code § 65.2-311.
In October and November, 1996, Mr. Shea and Mr. Creasey had
several telephone conversations and corresponded by letter
regarding how to proceed with the third-party tort claim and the
workers' compensation claim.
On October 17, 1996, Mr. Creasey wrote:
[Hertz], as you know, pursuant to 65.2-309,
et seq., holds an assignment of any right to
recover damages against the third parties
responsible for the death of Mr. Skelly. Of
course, [Hertz] may pursue such right in its
own name or that of the personal
representative. [Hertz] fully intends to
pursue its statutory interests against the
third parties and is presently weighing the
options on methodology.
On October 22, 1996, Mr. Creasey wrote Mr. Shea to advise
him that Hertz was weighing alternatives and asked for any
"thoughts on that issue." Mr. Shea and Mr. Creasey spoke on the
telephone on October 24, 1996, and Mr. Creasey followed up that
conversation with a letter, which stated in pertinent part:
[Hertz] has elected to exercise its right to
pursue its own interest against the
defendants, but we are willing to work with
you toward a mutually agreeable recovery. I
understand that you have filed suit against
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the defendants in the U.S. District Court
for the Eastern District of Virginia. Thank
you for sending me a courtesy copy of your
complaint. . . .
[Hertz's] exposure in this matter is in
excess of a quarter of a million dollars
($496 x 500 weeks = $248,000 plus cost of
living, funeral, and other expenses).
Consequently, [Hertz] does intend to pursue
the assigned right to recover and would
receive first dollar from such recovery. I
only assume you expect there is a case to be
made for recovery in excess of [Hertz's]
exposure, and your representation is
particularly for that purpose. As we
discussed, there may be some problems that
develop, but I believe we should be able to
work them out satisfactorily toward our
common goal. . . .
Regardless, [Hertz] would like to
cooperate with you in this matter. Toward
this end, [Hertz] does not want to be
blindsided at some point down the road with
respect to distribution of recovery and/or
attorneys fees. It is not [Hertz's] desire
to interfere with your representation of
Mrs. Skelly and the minor child(ren). . . .
[Hertz] is glad to share the litigation
expenses. . . . In assisting us to evaluate
how best to effect [Hertz's] interests,
including whether to file a separate suit,
please let me know how you view the relative
rights in this matter, particularly with
respect to the distribution of any recovery
ultimately obtained from the defendants.
Mr. Shea testified that he read the October 17 and
October 24 letters "together to lead [him] to believe that [Mr.
Creasey] did not countenance or agree with the personal
representative's right to pursue the action which had already
been filed and that's when [he] last wrote [Mr. Creasey] . . .
and said, well, apparently good lawyers can have differences of
opinion." According to Mr. Shea, Mr. Creasey's position
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regarding the wrongful death case was that Hertz had an
assignment of any right to recover damages against the
third-party and Hertz would "have the right to be reimbursed for
the first dollar recovered."
On November 4, 1996, Mr. Shea wrote a letter stating:
We have filed and will pursue to a full
recovery the cause of action against
Franklin and Metzler Brothers. Under these
circumstances, the filing of any separate
action or claim by [Hertz] . . . against
Franklin and Metzler Brothers would be
unauthorized and wholly unnecessary.
Moreover, there is no need for [Hertz] or
your firm to incur any expenses or
attorney's fees in connection with the
action and recovery against Franklin and
Metzler Brothers.
Although we appreciate your offer to
share in the litigation expenses, the
plaintiff and our firm will bear all
litigation expenses necessary to pursue the
action. Our firm will provide all attorney
and related services necessary to recover
this cause of action. Your client's
subrogation rights are fully protected by
statute. There is no need for your firm to
provide any services or expenses of any kind
in connection with the cause of action
against Franklin and Metzler Brothers. . . .
Although I will keep you informed
regarding the progress of our action, we do
not require a "shared endeavor" in the sense
that you seem to mean. The Plaintiff and
our firm will provide the expenses and
attorney services necessary to pursue the
plaintiff's cause of action to a full
recovery, and will claim the right to be
reimbursed by the employer (by deduction
from the amount of the employer's
subrogation rights) for the full
proportionate share of the Plaintiff's
expenses and attorney's fees.
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Mr. Shea stated that any attorney fees or expenses incurred by
Hertz would be wholly superfluous, duplicative, and unnecessary
to the pursuit of the action and recovery, were not requested or
authorized by his client, and would not alter the statutory
distribution of the recovery.
On November 5, 1996, Mr. Creasey responded by letter,
reminding Mr. Shea "that [he is] not authorized to negotiate or
settle the claim against third parties." Mr. Creasey expressed
his concern that Hertz's rights would be prejudiced if it were
not allowed to participate in the suit.
Mr. Shea testified that, for litigation strategy purposes,
he was concerned about letting the jury know that Hertz was
involved in the case. He did not, however, object to Hertz
intervening by a petition or motion to intervene, informing the
court of its interests under the Workers' Compensation Act. He
stated that he "didn't want . . . [Hertz] to go find another
courthouse and file another lawsuit." He testified further that
he told Mr. Creasey on November 8, 1996, to take whatever steps
he thought necessary, and he promised to protect Hertz's
subrogation rights in the wrongful death settlement.
In light of the position taken by Mr. Shea, Hertz continued
to employ Mr. Creasey's law firm to protect its subrogation
interest. Due to the strained relationship that developed
between Mr. Shea and Mr. Creasey, Michael DeCamps of Sands,
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Anderson, Marks and Miller assumed responsibility for the matter
on behalf of Hertz.
On April 10, 1997, Mr. Shea received a settlement offer of
$200,000 from the third-party tort-feasor. He replied on
April 13, 1997, demanding $1,375,000. Mr. Shea testified that
he tried to keep Mr. DeCamps informed of the settlement
negotiations. On April 14, 1997, he wrote Mr. DeCamps, stating:
Obviously, time is going to be of the
essence. Therefore, I am trying to keep you
and Hertz advised as carefully as I can of
the settlement negotiations. Although it is
not clear to me under the law whether or not
I need Hertz's permission to settle a
wrongful death action when no benefits have
been paid, I certainly anticipate seeking
that permission and hope you will keep Hertz
advised so that a quick decision can be made
in the event that a favorable offer is
extended.
An April 22, 1997 letter from Mr. Shea to Taunnie Skelly's
attorney stated that his client would instruct him to accept an
offer of $700,000. In this letter, Mr. Shea noted that he
understood from Mr. DeCamps that "Hertz's only reservation about
agreeing to this settlement was the uncertainty that surrounds
their subrogation interest as it relates to Taunnie." That same
day, April 22, 1997, Mr. Shea accepted the third-party
tort-feasor's offer of $725,000. A copy of Mr. Shea's letter
accepting settlement was sent to Mr. DeCamps.
According to Mr. Shea, Mr. DeCamps was satisfied with any
settlement because negotiations had gone beyond the $250,000
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lien of Hertz. However, Mr. Shea did not seek Mr. DeCamps'
permission to settle the third-party claim. Mr. Shea testified:
We [Mr. Shea and Mr. DeCamps] talked in
terms of where we were and if Hertz had any
questions about it, and as I've indicated,
[he] was like, well, I mean, you're so far
beyond two fifty, I don't know what
reservation they could have, but if there's
any, you know, anything comes up, I will let
you know, and he never got back to me. . . .
And then [the third-party tort-feasor] went
to seven twenty-five and having told them
that I was right around seven hundred and I
called my client back and she said, please
take it, and I took it.
On May 9, 1997, Mr. Shea wrote Mr. Creasey, confirming that
other counsel was now representing Shannon and Sarah Skelly
individually. This letter also reminded Mr. Creasey about an
upcoming hearing "regarding the status of Taunnie L. Skelly as a
statutory beneficiary in the wrongful death case." The letter
further stated that it was his hope that they would "be able to
seek Court approval of the wrongful death action at that time,
and that [they could] then turn [their] attention to the
subrogation interest of [Hertz]."
At the settlement hearing, the judge approved the
settlement and asked for briefs on the only issue left to be
settled, whether Taunnie Skelly should share in the
distribution. An agreement was reached on that issue and a
December 23, 1997 order distributed the settlement money.
Mr. Creasey testified that he and Mr. Shea disagreed about
"the extent of Hertz's rights with respect to the assignment of
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the right to recover against a third party." According to Mr.
Creasey, he "specifically asked [Mr. Shea if] . . . he [was] in
the position or was he willing to assume the representation of
[Hertz] at the time against the third parties and his response
was an unequivocal no."
Mr. DeCamps testified that he attended depositions,
participated in consultation with expert witnesses and offered
some suggestions regarding their direction, reviewed
correspondence and pleadings, offered suggestions about the
direction of the case, and provided an "in" for Mr. Shea to get
information from Hertz. He acknowledged that Mr. Shea apprised
him of the ongoing negotiations and that he and Mr. Shea had two
conversations on April 22, 1997. He testified that, during
those conversations, Mr. Shea asked him to "get in touch with
Hertz to see if they would be on watch so to speak for whatever
number they ultimately arrived at so that they could bless it or
not bless it." He testified that he tried to contact Hertz but
no one with settlement authority was available that day.
Therefore, he stated that he and Mr. Creasey called Mr. Shea to
tell him that Hertz could not approve a settlement that day and
that Mr. Shea told them at that time that an offer of $725,000
had been made and accepted. Mr. DeCamps denied that he told Mr.
Shea that he would tell him if Hertz objected to the settlement.
The deputy commissioner held that Hertz had not consented
to the third-party settlement, that the parties had no agreement
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regarding attorney's fees, that "the claimants had 'one full
recovery' and were not entitled to any additional benefits under
the Workers' Compensation Act, and, further, that the settlement
of the third-party claim without the consent of [Hertz],
prejudiced [Hertz], and as a result thereof, the claimant is
barred from benefits." The full commission affirmed. The
record supports those findings.
II. HERTZ'S SUBROGATION RIGHT
An employee injured in the course of employment by a
negligent third party may pursue a common law remedy against the
tort-feasor and a claim for compensation benefits under the
Workers' Compensation Act, but may obtain only one full recovery
for the injury. Noblin v. Randolph Corp., 180 Va. 345, 358-59,
23 S.E.2d 209, 214 (1942).
If the employee pursues both remedies, at
such time that the employee makes a claim
for workers' compensation benefits, the
"claim . . . shall operate as an assignment
to the employer of any right to recover
damages," and the employer "shall be
subrogated to [the right to recover damages]
in his own name or in the name of the
injured employee."
Wood v. Caudle-Hyatt, Inc., 18 Va. App. 391, 395-96, 444 S.E.2d
3, 6 (1994) (quoting Code § 65.2-309(A)). "[T]he employee may
not pursue his common law remedy in such a manner or settle his
claim to the prejudice of the employer's subrogation right and
thereafter continue to receive workers' compensation benefits."
Id. at 397, 444 S.E.2d at 7 (citations omitted).
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The employee necessarily prejudices his
employer's subrogation rights and, thus, is
barred from obtaining or continuing to
receive benefits under a workers'
compensation award when an employee settles
a third-party tort claim without notice, or
without making a claim for workers'
compensation benefits, or without obtaining
the consent of the employer.
Id. (citation omitted).
In Wood, the employee promptly, by certified mail, notified
the employer of the terms of the proposed third-party
settlement, which was in excess of his potential workers'
compensation benefits, and requested the employer's consent or
objection within ten days. Id. at 398, 444 S.E.2d at 7. We
held that the employer was thus afforded an opportunity to
object and to protect its subrogation rights, and was not
prejudiced by the settlement. See id.
Here, Hertz was neither told of, nor given the opportunity
to object to, the settlement offer prior to its acceptance by
the claimants. Unlike the situation in Wood, the claimants'
unauthorized settlement of their third-party claim prejudiced
Hertz by depriving it of the opportunity to protect and assert
its subrogation rights against the third-party tort-feasor. See
Safety-Kleen Corp. v. Van Hoy, 225 Va. 64, 69, 300 S.E.2d 750,
753 (1983); Green v. Warwick Plumbing & Heating Corp., 5 Va.
App. 409, 412, 364 S.E.2d 4, 6 (1988).
Relying on Wood, the dissent asserts that "Hertz consented
through inaction to the settlement of the third-party wrongful
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death claim . . . ." That was the situation in Wood. In that
case, the employer was informed in advance of the settlement to
be made and was told that unless it objected, the settlement
would be undertaken. The situation in this case is just the
opposite. While Hertz was told that settlement negotiations
were in progress, it was not informed of the settlement until
the settlement agreement had been made. Thus, unlike the
situation in Wood, Hertz was never given the opportunity to
forestall the settlement. The settlement was presented to it
initially as a fait accompli which, subject to court approval,
was binding.
The dissent further contends that Hertz had a full
opportunity to oppose the settlement at the approval hearing
before the trial court. This contention overlooks the purpose
and character of that hearing. Because a wrongful death action
is brought by a personal representative on behalf of statutory
beneficiaries, court approval is required to ensure that the
rights and interests of those beneficiaries are protected.
Hertz was not a party whose interests were subject to protection
by the trial court. It was not represented by the personal
representative. Indeed, the personal representative's counsel
expressly refused to represent Hertz. Hertz was left to pursue
its own rights as an independent party. Its exclusion from
settlement negotiations forestalled its ability pro tanto to
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enforce its rights. The approval hearing before the trial court
could in no way reverse that exclusion.
The claimants argue that Safety-Kleen and Green do not
control decision in this case. They argue that because the
third-party settlement exceeded Hertz's maximum potential
liability, the settlement effectively insulated Hertz from any
liability under the Act and, thus, effected no prejudice. The
commission addressed this contention. The commission, citing
Stone v. George W. Helme Co., 184 Va. 1051, 1059-60, 37 S.E.2d
70, 73-74, (1946), held that the extinguishment of the
third-party claim prejudiced per se Hertz's right of
subrogation. It further held that variation in the amount of
the third-party settlement would affect Hertz's potential
fractional liability for fees and costs, and that Hertz,
therefore, had an interest in the amount of the third-party
settlement and the right to participate in its determination.
The commission concluded:
[Mr. Shea], by his decision, did not
represent [Hertz's] interests in the
third-party claim. The claimants did not
advise [Hertz] of the settlement offer nor
obtain its consent. These actions impaired
[Hertz's] right of subrogation and
foreclosed the possibility that [Hertz]
could lessen its obligation by negotiating a
higher settlement. The claimants' right to
compensation, in this case the reimbursement
of attorney's fees and costs, is barred.
We approve that rationale.
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The claimants never pursued their rights under the Workers'
Compensation Act. They proceeded directly with their
third-party wrongful death suit, excluding Hertz from
participation in that suit or in its settlement. They sought
and received no intervening benefits under the Workers'
Compensation Act. Thus, they rejected their rights under the
Act and proceeded directly and independently to a full recovery
at law.
The judgment of the commission is affirmed.
Affirmed.
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Elder, J., dissenting.
I would hold this case is controlled by rather than
distinguishable from Wood v. Caudle-Hyatt, Inc., 18 Va. App.
391, 444 S.E.2d 3 (1994). Here, the claimants notified Hertz of
the proposed settlement and the date on which they hoped to
obtain court approval. Hertz had over four weeks in which to
act but failed to voice any objections during that time.
Therefore, I respectfully dissent.
Wood involved a claimant with asbestosis who filed a claim
for workers' compensation benefits against his employer,
Caudle-Hyatt, Inc. Id. at 393, 444 S.E.2d at 5. Wood
simultaneously pursued common law tort actions against various
asbestos manufacturers and negotiated settlement offers for the
tort claims. Id. Wood notified Caudle-Hyatt in writing by
certified mail of the terms of the settlement offers and said he
intended to accept them unless Caudle-Hyatt objected within ten
days. Id. Caudle-Hyatt responded that it was not liable for
Wood's asbestosis claim; it did not agree or object to the
proposed tort settlement or mention any subrogation rights. Id.
at 393-94, 444 S.E.2d at 5. Wood then settled the tort claims
for an amount that exceeded the sum he might have received for
his ailment under the Workers' Compensation Act, exclusive of
medical expenses. Id. at 394, 444 S.E.2d at 5.
On appeal, we held, inter alia, that Wood's claim for
compensation and a pro rata share of attorney's fees from
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Caudle-Hyatt was not barred because Wood informed Caudle-Hyatt
of the terms of the settlement and gave it an opportunity to
object or to participate in order to protect its subrogation
rights. Id. at 398-99, 444 S.E.2d at 7-8. In essence, we held
that Caudle-Hyatt consented to the settlement through its
inaction.
Similarly, here, Hertz consented through inaction to the
settlement of the third-party wrongful death claim on behalf of
the claimants. Virginia's wrongful death statutes provide that
a decedent's personal representative may compromise a wrongful
death claim only with court approval. See Code § 8.01-55. It
is undisputed that the claimants' attorney kept Hertz's
attorneys apprised of the settlement negotiations in the
wrongful death suit as they progressed. Although the commission
found that the claimants' counsel verbally accepted a settlement
offer of $725,000 on April 22, 1997, without first obtaining
Hertz's approval for that exact figure, claimants' counsel
informed Hertz's attorneys of the verbal acceptance that same
day. The hearing required under Code § 8.01-55 for formal
approval of that settlement did not occur until at least May 21,
1997, more than four weeks later.
During that four-week period, claimants' counsel provided
Hertz's counsel with a copy of the letter confirming settlement
of the third-party claim. Claimants' counsel also wrote a
separate letter, dated May 9, 1997, directly to Hertz's counsel.
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That letter notified Hertz of the May 21, 1997 hearing at which
the claimants intended to seek approval of the third-party
settlement. The letter also indicated the claimants' intent
thereafter to "turn [their] attention to the subrogation
interest of Hertz," indicating clearly that they did not intend
to abandon their claim for workers' compensation benefits.
Despite this notice, Hertz did not appear at the May 21, 1997
hearing and did not object to the settlement prior to the
court's entry of an order approving the settlement on May 27,
1997. Although Hertz lacked standing to oppose the court's
entry of an order approving the third-party settlement, the
claimants' or personal representative's consent remained a
prerequisite to judicial approval of the settlement. If Hertz
had communicated its objections to the claimants prior to the
hearing or entry of the court's order of approval, the claimants
could have withdrawn their consent.
Thus, I would hold that here, as in Wood, Hertz consented
to the settlement by its inaction, and I would reverse and
remand to the commission for further proceedings consistent with
this approach, including the mandate that the commission address
the issue raised by Hertz regarding apportionment of attorneys'
fees and costs incurred by Hertz in protecting its interests in
the third-party action. Therefore, I dissent.
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