Corey M. Stowers v. Georgia Pacific, LLC and Old Republic Insurance Company of North America ( 2022 )

COURT OF APPEALS OF VIRGINIA
Present: Judges Humphreys, Ortiz and Chaney
UNPUBLISHED
Argued at Lexington, Virginia
COREY M. STOWERS
MEMORANDUM OPINION * BY
v. Record No. 0333-21-3 JUDGE VERNIDA R. CHANEY
MARCH 29, 2022
GEORGIA PACIFIC, LLC AND
OLD REPUBLIC INSURANCE COMPANY
OF NORTH AMERICA
FROM THE VIRGINIA WORKERS’ COMPENSATION COMMISSION
Joseph A. Sanzone (Sanzone & Baker, L.L.P., on brief), for
appellant.
Andrew H.D. Wilson (Two Rivers Law Group, P.C., on brief),
for appellees.
Corey Stowers (“Stowers”) appeals the decision of the Virginia Workers’ Compensation
Commission (“the Commission”) granting the appellees, Georgia Pacific, LLC and Old Republic
Insurance Company of North America (collectively, “the employer”), a credit against the
employer’s future liabilities for Stowers’ compensation payments and medical expenses based on
Stowers’ settlement of a federal civil action against a third party. Stowers filed a product
liability claim against a third-party safety equipment manufacturer seeking damages for his at-
work injuries, including, inter alia, pain and suffering damages, which are not covered by the
benefits under the Virginia Workers’ Compensation Act (“the Act”). In his single assignment of
error, Stowers contends that the Commission erred in interpreting Code § 65.2-309 in deciding
that “non-compensable damage recoveries” from the third-party settlement are subject to the
* Pursuant to Code § 17.1-413, this opinion is not designated for publication.
employer’s statutory right to subrogation.1 For the following reasons, we affirm the
Commission’s decision.
I. BACKGROUND
The essential facts are not in dispute. In March 2015, Stowers suffered serious injuries in
a work-related accident at the employer’s industrial plant in Gladys, Virginia. While Stowers
was performing routine maintenance on an enormous machine that was turned off, the conveyor
system started unexpectedly. A safety-lock hasp used to prevent the inadvertent starting of the
equipment failed to remain rigid, causing the equipment to turn on. 2 The engagement of the
equipment set in motion a flying chain that repeatedly struck Stowers. Stowers suffered a
fractured skull, broken bones, and other severe injuries.
The employer agreed to pay workers’ compensation benefits to Stowers, whose average
weekly wage was $1,865.60 at the time of the industrial accident. The parties signed an award
agreement in October 2015. The Commission entered an award order in November 2015
approving the parties’ agreement for the payment of compensation under the Act. The award
included weekly payments in the amount of $967 during temporary total disability and lifetime
medical benefits “for reasonable, necessary and authorized medical treatment” for Stowers’
1 Stowers’ assignment of error states:
The March 4, 2021, opinion of the Workers Compensation
Commission and the underlying related orders are in error since the
decisions award a right of recovery from a third-party settlement
against non-compensable damage recoveries from the third-party
settlement and as such these non-compensable damage recoveries
are not damages which the injured party recovered from a third
party within the meaning of 65.2-309 of the Code of Virginia of
1950 as amended.
2 A hasp is a device that is manually inserted into the controls of a machine which
physically restricts the reengagement of the equipment when it has been shut off for repair or
maintenance. Appellant’s Br. at 2.
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workplace injuries, specifically his “basilar skull fracture, left forearm/wrist fractures/lacerations,
frozen left shoulder and post-concussive syndrome.”
After Stowers returned to work in January 2016, the Commission entered additional
award orders for permanent partial disability and various temporary partial disability awards. On
October 30, 2017, by agreement of the parties, the Commission entered a stipulated order
awarding Stowers compensation for various periods of temporary partial disability with
continuing temporary partial disability to be determined quarterly based on Stowers’ earnings at
light duty. The stipulated order stated that Stowers earned above his pre-injury average weekly
wage beginning March 6, 2017.
In June 2017, Stowers filed a complaint against the third-party manufacturer of the
defective hasp in the United States District Court for the Western District of Virginia. 3 Stowers
sought $10,000,000 (ten million dollars) in compensatory damages for his at-work injuries
including, inter alia, damages for his suffering of “great pain of body and mind.”
In November 2017, the employer filed a notice of lien and petition of lien in Stowers’
third-party civil action, pursuant to Code § 65.2-310. The employer’s petition asked the trial
court to (i) ascertain the exact amount of its statutory lien, i.e., the amount of the employer’s
compensation payments and expenses under the provisions of the Act, and (ii) order payment of
the statutory subrogation amount to the employer from the proceeds of any judgment or
compromise settlement.
Stowers settled his third-party product liability suit for $550,000 (five hundred fifty
thousand dollars) on the eve of trial in April 2018. Neither party negotiated with the employer to
3Stowers’ third-party settlement was with 529900 Ontario Limited, a/k/a Niagara Safety
Products, a Canadian safety equipment manufacturer.
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compromise its lien in order to facilitate the third-party settlement. The federal trial court
dismissed the case with prejudice pursuant to the parties’ agreement and stipulation.
After Stowers resolved his federal third-party suit by settlement, the employer sought
payment from Stowers’ counsel of the employer’s total workers’ compensation lien to date.
Stowers’ counsel paid the employer $241,215.83, comprising $186,671.07 for payments made
for wage-based claims and $54,544.76 for medical expenses. The parties agreed that these
payments satisfied the employer’s lien to date as of October 2018.
In November 2020, the employer moved the Commission for entry of a third-party order.
The employer’s motion stated that Stowers had settled a claim against a third-party for $550,000
for injuries from his occupational accident. The motion stated that the employer’s statutory lien
at the time of the third-party recovery was $241,215.83 and had been satisfied to date. Employer
requested that the third-party order provide a 37.859% cost recovery ratio for future
compensation based on the third-party settlement amount and the amount of Stowers’ attorney
fees and costs for the third-party litigation. The employer stated that the parties agreed that
reimbursement to Stowers arising from indemnity benefits shall be paid directly to Stowers on a
weekly basis and that reimbursement of any medical entitlements shall be paid directly to the
medical provider.
A third-party order entered by the Commission on November 23, 2020, was superseded
by an amended third-party order entered on December 1, 2020, which included corrected
information about the total amount of third-party settlement attorney fees and costs.4 The
amended third-party order recognized that a third-party recovery in the amount of $550,000 had
been received on Stowers’ claim. The order stated that the employer had received $241,215.83
4 The employer’s motion to correct the third-party order stated that the correct total
amount of third-party settlement attorney fees and costs is $208,223.75, resulting in a 37.859%
cost recovery ratio.
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in satisfaction of the employer’s lien amount to date. Pursuant to Code § 65.2-313, the
Commission ordered that the employer is entitled to a credit of $308,784.17 against its liability
for additional compensation payments and medical expenses, after which its responsibility to
make such payments shall resume. The order stated that the employer is responsible for a pro
rata of expenses and attorney fees, as required by Code § 65.2-311. The order provided that
Stowers remains entitled to a reimbursement of attorney fees and expenses at the rate of 37.859%
of any additional compensation and/or medical entitlements as they are incurred, to be paid by
employer directly to Stowers on a quarterly basis from the date of the order. In addition, the
order required Stowers to provide the employer with medical bills when a pro rata
reimbursement is sought.
Stowers subsequently filed a request for review of the December 1, 2020 amended
third-party order. Stowers contended that the Commission erred in (i) granting the employer a
credit and reimbursement in the amount of $308,784.17 against its future liabilities and (ii) ruling
that employer is entitled to a lien recovery against that portion of the personal injury recovery
which related to pain and suffering and other non-compensable damages. The Commission
reviewed the case only on the record with no written statements.
The Commission affirmed the December 1, 2020 amended third-party order by an
opinion dated March 4, 2021. The Commission “den[ied] the claimant’s request to reduce the
corpus of the third-party recovery subject to subrogation.” Citing Liberty Mutual Ins. Co. v.
Fisher, 263 Va. 78, 81 (2002), Eghbal v. Boston Coach Corp., 23 Va. App. 634, 638 (1996),
Emberton v. White Supply & Glass Co., 43 Va. App. 452, 457 (2004), and Code §§ 65.2-309
through 65.2-313, the Commission ruled that “the Act and these precedents do not allow any
deduction from the gross recovery for any non-compensable damages recovered.” The
Commission concluded that the credit to employer was accurately calculated: “[t]he gross
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recovery of $550,000.00 less the [employer’s] statutory lien at the time of the settlement,
$241,215.83, equals the awarded credit of $308,784.17.”
The Commission also concluded that the amended third-party order included the correct
cost recovery ratio, which is set by Code § 65.2-313. The Commission explained that “[t]he
correct cost recovery ratio equals the total costs and attorney’s fees expended in the third party
action divided by the gross recovery. The total costs and attorney’s fees of $208,223.75 divided
by the total recovery of $550,000.00 equals 37.859%.” Accordingly, the Commission affirmed
the amended third-party order.
Stowers’ appeal to this Court followed.
II. ANALYSIS
A. Standard of Review
On appellate review of a decision by the Commission, this Court “construe[s] the
Workers’ Compensation Act liberally for the benefit of employees to effectuate its remedial
purpose of making injured workers whole.” Intercept Youth Servs., Inc. v. Est. of Lopez, 71
Va. App. 760, 767 (2020) (quoting Advance Auto & Indem. Ins. Co. of N. Am. v. Craft, 63
Va. App. 502, 514 (2014)). “The [C]omission’s construction of the Act is entitled to great
weight on appeal.” Ceres Marine Terminals v. Armstrong, 59 Va. App. 694, 702 (2012)
(quoting Fairfax Cnty. Sch. Bd. v. Humphrey, 41 Va. App. 147, 155 (2003)). However, “when
an issue involves a pure question of statutory interpretation, that issue does not invoke the
[Commission]’s specialized competence . . . .” Alliance to Save the Mattaponi v.
Commonwealth, 270 Va. 423, 442 (2005). “An issue of statutory interpretation is a pure
question of law which we review de novo.” Ford Motor Co. v. Gordon, 281 Va. 543, 549
(2011). As stated in Ford Motor Co.:
When the language of a statute is unambiguous, we are bound by
the plain meaning of that language. Furthermore, we must give
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effect to the legislature’s intention as expressed by the language
used unless a literal interpretation of the language would result in a
manifest absurdity. If a statute is subject to more than one
interpretation, we must apply the interpretation that will carry out
the legislative intent behind the statute.
Id. (quoting Conyers v. Martial Arts World of Richmond, Inc., 273 Va. 96, 104 (2007)).
B. Code §§ 65.2-309 through 65.2-313
Stowers asserts on appeal that the Commission erred in interpreting Code § 65.2-309 in
deciding that “non-compensable damage recoveries” from his third-party settlement, including
damages for pain and suffering, are subject to the employer’s statutory right to subrogation. In
construing the Act,
we have a duty, whenever possible, to interpret the several parts of
a statute as a consistent and harmonious whole so as to effectuate
the legislative goal. Generally, the Court will look to the whole
body of [a statute] to determine the true intention of each part. [A]
statute should be read and considered as a whole, and the language
of a statute should be examined in its entirety to determine the
intent of the General Assembly from the words contained in the
statute. In doing so, the various parts of the statute should be
harmonized so that, if practicable, each is given a sensible and
intelligent effect.
Ford Motor Co., 281 Va. at 549-50 (alterations in original) (quoting Oraee v. Breeding, 270 Va.
488, 498 (2005)).
Code § 65.2-309(A) states:
A claim against an employer under this title for injury,
occupational disease, or death benefits shall create a lien on behalf
of the employer against any verdict or settlement arising from any
right to recover damages which the injured employee, his personal
representative or other person may have against any other party for
such injury, occupational disease, or death, and such employer also
shall be subrogated to any such right and may enforce, in his own
name or in the name of the injured employee or his personal
representative, the legal liability of such other party. . . .
Code § 65.2-309 provides subrogation rights to an employer when an employee to whom the
employer paid workers’ compensation benefits recovers damages from a third party for his
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at-work injuries. See Emberton, 43 Va. App. at 457. “The employer’s subrogation rights are
triggered automatically when the injured employee files a claim against the employer and
thereby assigns to the employer any claims against third parties.” Tomlin v. Vance Int’l, Inc., 22
Va. App. 448, 452 (1996).
Pursuant to Code § 65.2-309(A), the employer is subrogated to Stowers’ rights against
the third-party manufacturer whose defective equipment caused the accidental injuries for which
the employer paid workers’ compensation. Under Code § 65.2-309, the employer’s payment of
workers’ compensation benefits to Stowers substitutes the employer in the place of Stowers
“with respect to any right of recovery [Stowers] may have against the third party to the extent of
employer’s payment of such benefits.” Emberton, 43 Va. App. at 459 (quoting Yellow Freight
Sys., Inc. v. Courtaulds Performance Films, Inc., 266 Va. 57, 64 (2003) (first emphasis added)).
“The purpose of [Code § 65.2-309(A)] is to reimburse an employer who is compelled to
pay compensation as a result of the negligence of a third party and to prevent an employee from
obtaining a double recovery of funds.” Williams v. Cap. Hospice & Companion Prop. & Cas.
Ins. Co., 66 Va. App. 161, 168 (2016) (quoting Tomlin, 22 Va. App. at 452). “The only
restriction that Code § 65.2-309 imposes on the employer’s lien rights is set forth in Code
§ 65.2-309(C), which takes effect when those lien rights are asserted in a compromise settlement
arising from an action that the employer has initiated against a third party.” Id. (quoting Liberty
Mutual, 263 Va. at 85).
Code § 65.2-310 allows an employer to recover compensation paid to its employee and
other expenses paid on behalf of the employee when the employee files an independent action
against the third party responsible for his at-work injuries. In relevant part, Code § 65.2-310
provides:
In any action by an employee . . . against any person other than the
employer, the court shall, after reasonable notice to the parties and
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the employer, ascertain the amount of compensation paid and
expenses for medical, surgical and hospital attention and supplies,
and funeral expenses incurred by the employer under the
provisions of this title . . . ; and, in event of judgment against such
person other than the employer, the court shall in its order require
that the judgment debtor pay such compensation and expenses of
the employer[.]
Here, the employer filed a notice and petition of lien in Stowers’ third-party civil action. After
Stowers and the third-party manufacturer agreed to a settlement of Stowers’ product liability
claim, the federal trial court entered a stipulated dismissal order without addressing the
employer’s statutory lien under Code § 65.2-309. However, “[t]he language of Code § 65.2-310
does not limit the lien rights created by Code § 65.2-309 when a compromise settlement is
reached in a third-party action brought by an injured employee or her personal representative.” 5
Williams, 66 Va. App. at 169 (quoting Liberty Mutual, 263 Va. at 85). “[T]he language of Code
§§ 65.2-309 and [65.2]-310, considered together, permits an employer to assert its statutory lien
against any recovery obtained in an action brought against a third party liable for the employee’s
injury or death.” Id. (emphasis added).
Pursuant to Code § 65.2-311, an employer who receives reimbursement of its payment of
workers’ compensation benefits from an employee’s third-party settlement is required to pay its
pro rata share of the employee’s reasonable expenses and attorney fees in effecting the recovery.
See Wood v. Caudle-Hyatt, Inc., 18 Va. App. 391, 399 (1994). Except in cases under Code
§ 65.2-311(B) where “the employer is required to institute an action against any party to recover
some or all of its lien pursuant to subsection D of § 65.2-309,” Code § 65.2-311(A) provides:
[I]n any action, or claim for damages, by an employee . . . against
any person other than the employer, . . . if a recovery is effected,
either by judgment or voluntary settlement, the reasonable
expenses and reasonable attorney’s fees of such claimants shall be
5 Code §§ 65.2-309 and 65.2-310 contain provisions for apportionment of attorney fees
and costs between the employer and the employee, but these provisions are not at issue in this
appeal.
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apportioned pro rata between the employer and the employee, his
personal representative or other person, as their respective interests
may appear.
Thus, under Code § 65.2-311, an employee “is not required to bear the full financial burden of
recovering . . . tort damages which benefit the employer.” See Wood, 18 Va. App. at 399.
Code § 65.2-313 provides the method of determining an employer’s offset or credit
where the amount of an employee’s recovery from a third-party tortfeasor exceeds the amount of
the employer’s past payment of workers’ compensation benefits. See Emberton, 43 Va. App. at
459 (citing Hawkins v. Commonwealth/Southside Va. Training Center, 255 Va. 261 (1998)).
Under these circumstances, the employee’s third-party recovery exceeds the amount of the
employer’s statutory lien at the time of recovery. See id. at 457-58 (citing McKnight v. Work
Env’t Assocs. & Travelers, 43 Va. App. 189, 194 (2004)). Here, at the time of Stowers’
third-party settlement, the amount of Stowers’ third-party recovery exceeded the amount of the
employer’s statutory lien.
Code § 65.2-313 provides:
In any action or claim for damages by an employee . . . against any
person other than the employer under § 65.2-310, or in any action
brought, or claim asserted, by the employer under his right of
subrogation provided for in § 65.2-309, if a recovery is effected,
the employer shall pay to the employee a percentage of each
further entitlement as it is submitted equal to the ratio the total
attorney’s fees and costs bear to the total third-party recovery until
such time as the accrued post-recovery entitlement equals that sum
which is the difference between the gross recovery and the
employer’s compensation lien. In ordering payments under this
section, the Commission shall take into account any apportionment
made pursuant to § 65.2-311.
For the purposes of this section, “entitlement” means
compensation and expenses for medical, surgical and hospital
attention and funeral expenses to which the claimant is entitled
under the provisions of this title, which entitlements are related to
the injury for which the third-party recovery was effected.
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Under this statute, a portion of the employer’s payments of Stowers’ “further entitlements” may
be offset as a credit, “based on the ratio of attorney’s fees to the settlement, until ‘post-recovery
entitlement equals that sum which is the difference between the gross recovery and the
employer’s compensation lien.’” Emberton, 43 Va. App. at 458 (quoting Code § 65.2-313); see
also Eghbal, 23 Va. App. at 638-39.
Upon Stowers’ realization of the third-party recovery, the employer “was entitled to
reimbursement for benefits that it had paid, less its proportionate share of recovery costs.” Id. at
638; see Code §§ 65.2-310 and 65.2-311. The employer “was entitled to the suspension of its
liability for the payment of further benefits until the third-party recovery was exhausted.” Id. at
639. However, the employer “remained liable to [Stowers] for the recovery costs of each
increment of offset, as it accrued.” Id.; see Code § 65.2-313.
The Commission’s amended third-party order addressed the employer’s entitlements and
liabilities under Code §§ 65.2-310, 65.2-311, and 65.2-313. From the total third-party recovery
of $550,000, the amount of the employer’s lien for previously-paid workers’ compensation
benefits—$241,215.83—was subtracted. The difference, which the Commission determined to
be $308,784.17, is the offset or credit against future compensation liability to which employer is
entitled under the Commission’s order. The Commission determined the cost recovery ratio by
dividing the total costs and attorney fees of $208,223.75 by the total recovery of $550,000,
which equals 37.859%. See Code § 65.2-313. Under the amended third-party order, the process
of reimbursing employer from Stowers’ third-party recovery will proceed as follows:
As each increment of [Stowers’] future entitlement accrues,
[employer] will be entitled to an offset. However, as each
increment accrues, [employer] will reimburse [Stowers] for the
recovery costs attributable to that increment. Thus, at any given
time, [employer] will have received its full entitlement from the
third-party recovery and [Stowers] will have been reimbursed for
the recovery costs attributable to the benefit received by
[employer]. The proceeds of the third-party recovery will remain
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in [Stowers’] hands, as his property, until such time as they are
charged to [employer’s] offset. To the extent that those proceeds
remain [Stowers’] property, he has been charged with their
recovery costs. However, as each increment of offset accrues to
the benefit of [employer], [employer] will reimburse [Stowers] the
recovery costs attributable to that increment.
Eghbal, 23 Va. App. at 639.
C. Stowers’ Interpretation of Code § 65.2-309
According to Stowers’ proposed construction of Code § 65.2-309, “non-compensable
damage recoveries” from his third-party settlement are not subject to employer’s statutory right
to subrogation. Because damages for pain and suffering and legal inconvenience are not covered
by workers’ compensation benefits, Stowers argues that such damages should be subtracted from
the total amount of his third-party recovery to determine the base amount of the recovery subject
to the employer’s subrogation rights.
Stowers’ proposed reading of Code § 65.2-309 focuses on the phrase “for such injury,”
italicized below:
A claim against an employer under this title for injury,
occupational disease, or death benefits shall create a lien on behalf
of the employer against any verdict or settlement arising from any
right to recover damages which the injured employee . . . may have
against any other party for such injury . . . or death . . . .
Code § 65.2-309(A) (emphasis added). Stowers argues that in the context of this statute, the
phrase “for such injury” refers to “injury” in the opening phrase, “[a] claim against an employer
under this title for injury . . . benefits . . . .” In this context, Stowers contends that “injury”
means compensable injury. On this reading, an employer would have no statutory lien against an
employee’s third-party recovery of damages for pain and suffering, legal inconvenience, or other
non-compensable damage recoveries. In support of this reading, Stowers notes that the Act
should be liberally construed to give relief to workers. Stowers also contends that his reading of
Code § 65.2-309 is in accord with the legislative purpose to prevent an employee from obtaining
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a double recovery because the only possible recovery of damages for pain and suffering from
at-work injuries is from a third party. Accordingly, excluding non-compensable damages from
the employer’s lien against an employee’s third-party recovery does not deny the employer
reimbursement because the employer cannot be reimbursed for something that it did not pay in
the first place.
Stowers contends that this issue has not been directly decided in Virginia, and therefore
urges this Court to take guidance from Massachusetts appellate courts, which resolved the issue
in favor of the employee. Appellant’s Br. at 6 (citing DiCarlo v. Suffolk Const. Co., 45 N.E.3d
571, 573 (Mass. 2016) (holding that an insurer’s workers’ compensation lien does not extend to
damages allocated to an employee’s pain and suffering)). In DiCarlo, the Massachusetts
Supreme Judicial Court construed a section of the Massachusetts workers’ compensation statute,
which “generally provides that, where an injured employee collects workers’ compensation
benefits and then recovers damages for the same injury from a third-party tortfeasor, ‘[t]he sum
recovered [from the third party] shall be for the benefit of the [workers’ compensation] insurer.’”
DiCarlo, 45 N.E.3d at 575. The court noted that “[t]he ‘sum’ to which the insurer is entitled is
described, in the next sentence, as ‘the gross sum received in payment for the injury.’” Id. This
statute “provides an insurer with a lien on the ‘gross sum received in payment for the injury.’”
Id. at 576 (emphasis added). Given that “[i]n the section’s opening phrase, ‘injury’ is used
narrowly to refer to ‘the injury for which [workers’] compensation is payable,’” the court
concluded that the legislature intended each reference to “injury” in that paragraph to refer to
injury for which workers’ compensation is payable. On this reading, the court held that the
insurer’s lien on an employee’s third-party recovery does not extend to damages allocated to an
employee’s pain and suffering because such injury is not compensable under workers’
compensation. Id. at 576-77.
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Additional support for Stowers’ position appears to be provided by the Indiana Supreme
Court’s construction of Indiana’s Workers’ Compensation Act, which the Supreme Court of
Virginia has recognized as serving as the basis for Virginia’s Act. See Giordano v. McBar
Indus., Inc., 284 Va. 259, 265 n.5 (2012) (Virginia’s Act “is based upon Indiana’s Workers’
Compensation Act, therefore, we have recognized that ‘the construction placed upon the Indiana
law by the courts of that state merits our consideration.’” (quoting Barksdale v. H.O. Engen, Inc.,
218 Va. 496, 499 (1977))). In Walkup v. Wabash Nat. Corp., 702 N.E.2d 713, 715 (Ind. 1998),
the Indiana Supreme Court construed the workers’ compensation statute “which provides for a
lien by a worker’s compensation carrier on ‘any settlement award, judgment or fund out of which
the employee might be compensated from the third party.’” Id. The court noted that emphasis
on the single word “any” is misplaced because “[t]his ignores the fact that the entire section,
including the lien provision, applies to injuries ‘for which compensation is payable under’ the
worker’s compensation law.” Id. The court held that where damages from an employee’s
third-party recovery are exclusively for injuries that are not compensable under the Act, such
damages are not subject to the employer’s workers’ compensation lien. Id. at 715-16. The court
noted that this reading of the Act serves the legislative purpose “to prevent the injured employee
from recovering twice at the expense of the employer.” Id. at 715. Moreover, the court
concluded that the injured employee would not be made whole if a lien was allowed on a
third-party recovery of damages for non-compensable injuries. Id.The Indiana Supreme Court distinguished its decision in Walkup from the Indiana Court
of Appeals’ decision in Dearing v. Perry, 499 N.E.2d 268 (Ind. Ct. App. 1986), which appeared
to reach a contrary holding. In Dearing, the court held that recovery for pain and suffering from
the third-party tortfeasor is subject to a lien by a worker’s compensation carrier. However,
according to the Indiana Supreme Court, this holding was based on the appellate court’s finding
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that “the parties colluded to ‘arbitrarily apportion the settlement to evade a statutory lien’” that
was enforceable against Dearing’s settlement. Walkup, 702 N.E.2d at 715 (citing Dearing, 499
N.E.2d at 271). “Under those facts, where the tortfeasor had exposure to lienable items and the
allocation between lienable and nonlienable items is unknown, the Court of Appeals held that the
lien is valid.” Id. at 716. The Indiana Supreme Court concluded that the facts in Dearing were
distinguished from the facts in Walkup, where no collusion was involved. Id.
We cannot accept Stowers’ invitation to follow Massachusetts caselaw because our
decision is guided by the statutory construction of Code § 65.2-309 in Liberty Mutual, 263 Va. at
81. 6 The holding in Liberty Mutual leads us to reject Stowers’ interpretation of Code § 65.2-309,
which would limit an employer’s lien on an employee’s third-party recovery to damages for
compensable injuries. Although Liberty Mutual does not address the specific issue raised by
Stowers, it holds that an employer’s statutory lien may be asserted “against any recovery
obtained in an action brought against a third party liable for the employee’s injury or death.” Id.
at 85.
In Liberty Mutual, the Virginia Supreme Court considered a settlement of a third-party
wrongful death action and determined that the employer was erroneously barred from recovering
under a workers’ compensation lien. A workers’ compensation claim was filed after a nursing
home employee was killed in a tragic train accident. The decedent’s two minor dependents were
awarded workers’ compensation benefits. Subsequently, the decedent’s brother and adult
daughter filed a wrongful death action against Amtrack and CSX Transportation, Inc. While a
$250,000 settlement was pending court approval, the decedent’s employer and the employer’s
insurance carrier, Liberty Mutual, sought to intervene in the wrongful death action based on
Code § 65.2-309 has been amended twice since Liberty Mutual was decided, in 2004
6
and 2017, but these statutory amendments did not change or clarify the meaning of “injury” in
Code § 65.2-309.
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Code §§ 65.2-309 and 65.2-310. Liberty Mutual asked the trial court to order Amtrack and CSX
to pay Liberty Mutual the amount of all compensation benefits paid and expenses incurred by
Liberty Mutual on decedent’s behalf. The legal guardian and the trustee of one of the decedent’s
minor dependents renounced that dependent’s right to receive any proceeds from the wrongful
death settlement. The trial court ruled that Liberty Mutual could assert its right to subrogation on
behalf of each individual recipient of workers’ compensation benefits only to the extent that the
individual has recovered money in the third-party settlement. Liberty Mutual argued on appeal
that the employer’s lien created by Code § 65.2-309 attaches whether or not the recipient of
workers’ compensation benefits participated in the settlement.
The Virginia Supreme Court held in Liberty Mutual “that the language of Code
§§ 65.2-309 and [65.2]-310, considered together, permits an employer to assert its statutory lien
against any recovery obtained in an action brought against a third party liable for the employee’s
injury or death.” 7 Id. The Supreme Court noted that “Code § 65.2-309(A) assigns to the
employer ‘any right to recover damages which the injured employee, his personal representative
or other person may have against any other party for such injury or death . . . .’” Id. Thus, the
Supreme Court interpreted the word “any” in Code § 65.2-309(A) as having expansive meaning,
in keeping with its plain meaning. See United States v. Gonzales, 520 U.S. 1, 5 (1997) (“Read
naturally, the word ‘any’ has an expansive meaning, that is, ‘one or some indiscriminately of
whatever kind.’” (quoting Webster’s Third New International Dictionary 97 (1976))).
7 Prior to the 2004 amendment to Code § 65.2-309, an employer’s payment of
compensation benefits did not create an actual lien against an employee’s third-party recovery.
Rather, the employer had a subrogation interest in an employee’s third-party recovery that the
employer had to enforce independently or perfect prior to verdict. See 2004 Va. Acts ch. 941;
see also Yellow Freight, 266 Va. at 63 (“It is also clear that Code § 65.2-309 does not refer to
‘lien rights’ but, rather, to a ‘right of subrogation’ in favor of the employer who has paid benefits
to or on behalf of an injured employee. Our use of the term ‘lien rights’ in Liberty Mutual was
merely a generic reference to the employer’s rights under Code § 65.2-309.”).
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Additionally, the Supreme Court held in Liberty Mutual that “[t]he only restriction that Code
§ 65.2-309 imposes on the employer’s lien rights is set forth in Code § 65.2-309(C), which takes
effect when those lien rights are asserted in a compromise settlement arising from an action that
the employer has initiated against a third party.” 263 Va. at 85 (emphasis added).
The Supreme Court further observed in Liberty Mutual that the appellee’s
interpretation [of Code § 65.2-309] also would improperly allow
employees who settle their claims against third parties to shield
their recovery from an employer’s lien. Such a result would
directly conflict with the established principle that an employee
may not prosecute an action against a negligent third party to the
prejudice of an employer’s lien rights.
Id. at 86. This analysis would also serve as a basis for rejecting Stowers’ proposed interpretation
of Code § 65.2-309 on the grounds that it would allow employees to shield their third-party
recovery from an employer’s lien by classifying the damages as non-compensable. See 10 Lex
K. Larson & Thomas A Robinson, Larson’s Workers’ Compensation Law § 117.05 (Matthew
Bender, rev. ed. 2021) (noting that “the prevailing rule” in the United States refuses to place an
employee’s third-party recovery of damages for pain and suffering outside the reach of the
employer’s lien).
Moreover, even if the Liberty Mutual holdings were not dispositive in this appeal,
consideration of the record would preclude this Court from granting Stowers’ requested relief.
As Stowers acknowledges, the record is “devoid of valuations concerning the value of the
damage categories.” Appellant’s Br. at 8. Thus, there is no basis for finding that Stowers’
third-party settlement included any non-compensable damages. To remedy this deficiency,
Stowers requests that the case be “remanded to allow the creation of a more complete record
concerning the dollar value of damage categories and a determination of an allocation of damage
values and lien recoveries with respect to the third-party settlement.” Id. at 9. However, without
a factual basis for finding that Stowers’ third-party settlement included any non-compensable
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damages, there is no basis for finding error in the Commission’s calculation of the employer’s
credit against its future compensation liabilities.
III. CONCLUSION
The Commission properly construed and applied Code § 65.2-309 in denying Stowers’
request to exclude non-compensable damages from the amount of the third-party recovery
subject to employer’s right of subrogation. Accordingly, we affirm the Commission’s decision.8
Affirmed.
8 Stowers moved this Court to take judicial notice of particular pleadings and orders in
the third-party federal civil action related to this appeal. However, because the parties conceded
at oral argument that it is not necessary for this Court to take judicial notice of these documents
to resolve this appeal, the motion is denied.
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