¶1 The petitioner in this
case is the personal representative of the estate of Ivan G. Walker
(Ivan). Ivan suffered severe injuries while driving a truck for his
employer. Credit General Insurance Company (the insurer), insured Ivan's
employer and has paid workers' compensation benefits.
¶2 Ivan brought a third-party
action against the State of Idaho alleging a highway defect contributed
to his accident. He settled his claim before trial for $400,000.00 and
thereafter paid the insurer $49,021.56 in settlement of its subrogation
claim. The payment was pursuant to an oral agreement with the insurer.
The agreement was not submitted to nor approved by the Department of
Labor and Industry.
¶3 Ivan's personal representative
now seeks repayment of the $49,021.56, alleging that the insurer was
not entitled to the payment because the settlement did not fully compensate
claimant for his injuries, which included a closed head injury and a
spinal cord injury resulting in paraplegia. The insurer contends that
the agreement between itself and Ivan settled the matter and is binding
on the personal representative.
Procedural History
¶4 On April 16, 1999, the
parties filed a joint stipulation requesting a conference with the Court
for the express purpose of determining whether a trial was necessary
or whether the matter might be submitted upon briefs. Stipulation and
Request for Pretrial Conference with the Court to Resolve Dispute over
Statement of Issues and to Determine Whether a Trial Is Necessary or
Whether the Matter Should Be Submitted on Briefs.(1)
A conference was held on April 20, 1999, and with the assistance of
counsel for the parties, I adopted the following procedure for resolution
of the case:
- Initially, the parties
will file a further stipulation of facts, attaching relevant documents,
concerning the subrogation agreement. Most of the facts are already
set out in the stipulation counsel filed in anticipation of the conference,
but at least two additional documents need to be identified and submitted.
- The initial issue the
Court must determine is whether the subrogation agreement was valid
in absence of the approval of the Department of Labor and Industry
and any formal, signed agreement. The parties shall file briefs concerning
that issue, specifically addressing (1) whether Department approval
was required; (2) if not, whether there was a valid agreement; and
(3) if so, whether the approval may be dispensed with under the facts
of this case. Respondent shall file the opening brief by May 3, 1999.
Petitioner's answer brief is due May 17th and respondent's
reply on June 1st.
- Reserved for future argument
and consideration, if necessary, are other legal and factual issues,
including whether the subrogation agreement, if valid, should be reopened
for mutual mistake of fact or upon other grounds, and, if no valid
agreement exists, what subrogation amount, if any, is due respondent.
(April 20, 1999 Minute Entry.)
¶5 Subsequently, the parties
filed Stipulated Facts (docketed May 4, 1999) and briefs. The initial
issue, as set forth in the second paragraph of the procedure, is now
submitted for decision.
Stipulated Facts
¶6 The following facts are
stipulated as uncontroverted for purposes of the issues raised:
1. IVAN G. WALKER, petitioner's
decedent, sustained severe, permanent, and paralyzing injuries on
June 19, 1993, while employed as a commercial vehicle driver for employer
TRIPP BROTHERS TRUCKING OF MISSOULA, MONTANA.
2. IVAN G. WALKER's injuries
included complete paraplegia due to a spinal cord injury, a closed
head injury, and a left shoulder fracture involving the humeral head.
These injuries caused IVAN G. WALKER to be confined to a wheel chair
and suffer severe pain.
3. IVAN G. WALKER was
rendered permanently totally disabled as the result of his industrial
injury. He was 36 years of age on the date of his industrial injury.
IVAN G. WALKER was born on June 6, 1957.
4. Following his injuries,
IVAN G. WALKER brought a third party claim against the State of Idaho
alleging that a highway design defect caused his injuries. He was
represented by the Platis Law Firm of the State of Washington in his
third party claim.
5. In a letter to the
Platis Law Firm dated August 20, 1993, the insurer agreed to share
in the costs of the investigation and discovery of the third party
case against the State of Idaho.
6. As a result of the
industrial accident, IVAN G. WALKER sustained damages in excess of
$400,000.00.
Approval of Disbursement
of Settlement
I, Ivan G. Walker, the
"Client" herein, hereby approve the following disbursments [sic] to
be made by my attorneys, Platis Law Firm out of the sum of Four Hundred
Thousand Dollars ($400,000.00) which I received as a result of an
accident that I was involved in on June 19,1993.
TOTAL SETTLEMENT CHECK
RECEIVED . . . . . . . . . . . . . . $400,000.00
LESS
Attorney Fee: 33.30% .
. . . . . . . . . . . .. . . . . $122,743.68
Costs Advanced by Attorney
(See Attached) . . . . . . . . . . . . . . . . . . . . . . . $108,234.76
Total Costs Advanced by
Attorney . . . . . . . . . $108,234.76
Medical Bills Due and
Owing . . . . . . . . . . . . . . $ 49,021.56
$ 0.00
$ 0.00
Total Medical Bills Due
and Owing . . . . . . . . . .$ 49,021.56
TOTAL COSTS AND BILLS
. . . . . . . . . . . . . . $280,000.00
NET AMOUNT DUE TO IVAN
WALKER . . . . . .$120,000.00
10. On or about December
16, 1996, the Claimant, by and through his attorneys, the Platis Law
Firm, reached a compromise agreement with Credit General Insurance
Company whereby the Claimant paid the sum of Forty-Nine Thousand Twenty-One
Dollars and 56/100 ($49,021.56), in exchange for a waiver of the insured's
subrogation lien.
11. At the time the subrogation
agreement was negotiated, Jim Salsbury discussed the finalization
of the agreement with the Platis Law Firm, and was told that the Platis
Law Firm would take care of any necessary paperwork.
12. The settlement of
insurer's subrogation claim was not submitted for approval by the
Department of Labor.
13. The Platis Law Firm
issued a check for $49,021.56 to the insurer on January 28, 1997.
The check's memorandum read,"Full and Final Release & Discharge."
(Exhibit D)
14. On January 22,1997,
Dennis C. Wade of the Platis Law Firm sent insured the following letter:
(Exhibit E)
January 22,1997
Mr. Jim Salsbury
Subrogation Specialist
CNA Insurance Companies
P O Box 759
Downers Grove, IL 60515-7059
RE: Our Client: Ivan
Walker
Claim #: 347-1a-0514
Insured: TTC, Inc.
Date of Loss: 6/19/93
Dear Jim:
Pursuant to our telephone
conversation this afternoon, we are enclosing our firm's check in
the amount of #49,021.56 [sic]. It is our understanding that this
amount represents payment in full on the subrogation lien rights
asserted by CNA Insurance Companies and will not affect the ongoing
workers compensation obligation to pay benefits.
Thank you again for
your assistance and cooperation in this matter and if you should
have any questions, please do not hesitate to give me a call.
Sincerely,
/s/ Dennis Wade
Denis [sic] C. Wade
DCW/cg
Enclosure: check #4138
15. On February 18, 1997,
as a result of his severe pain and depression caused by the industrial
accident, IVAN G. WALKER committed suicide.
16. JAMES H. WALKER is
the personal representative of the Estate of IVAN G. WALKER, deceased.
17. IVAN G. WALKER, deceased,
is survived by three (3) minor children: Ashley Marie Walker, Travis
Lee Walker, and Justin Gale Walker.
18. The insurer is paying
to the children of IVAN G. WALKER, benefits pursuant to MCA 39-71-721,
as the result of a negotiated compromise settlement which has been
approved by the Department of Labor.
19. The insurer has paid
$500,000 in compensation benefits to IVAN G. WALKER and his beneficiaries
as the result of his industrial injury of June 19, 1993. The insurer
has paid $150,029.51 in medical benefits.
20. Dennis Wade of the
Platis Law Firm in Lynnwood, Washington represented IVAN G. WALKER
in the third party claim against the State of Washington. Dennis Wade
is not licensed to practice law in the State of Montana.
21. JAMES H. WALKER, the
Personal Representative of IVAN G. WALKER'S Estate has filed with
the Workers' Compensation Court his petition to require insurer, CREDIT
GENERAL INSURANCE COMPANY (CNS), to return the subrogation payment
with pre-judgment interest.
Discussion
¶7 Based on the facts recited,
there is no question that Ivan and the insurer reached and executed
an agreement settling the insurer's claim for subrogation with respect
to his $400,000 settlement. The unanswered question is whether Ivan's
personal representative may now abrogate the agreement and seek reimbursement
of the monies Ivan paid the insurer.
¶8 The starting point for
the Court's analysis is section 39-71-414, MCA, which governs subrogation
in workers' compensation matters. Claimant's accident occurred in June
1993, while the 1991 version of the WCA was in effect. As relevant to
the present controversy, section 39-71-414, MCA (1991), provided:
39-71-414. Subrogation.
(1) If an action is prosecuted as provided for in 39-71-412
or 39-71-413 and except as otherwise provided in this section, the
insurer is entitled to subrogation for all compensation and benefits
paid or to be paid under the Workers' Compensation Act. The insurer's
right of subrogation is a first lien on the claim, judgment, or recovery.
. . . .
(4) An insurer may enter
into compromise agreements in settlement of subrogation rights.
(5) Regardless of whether
the amount of compensation and other benefits payable under the Workers'
Compensation Act have been fully determined, the insurer and the claimant's
heirs or personal representative may stipulate the proportion of the
third-party settlement to be allocated under subrogation. Upon
review and approval by the department, the agreement constitutes a
compromise settlement of the issue of subrogation and may not be reopened
by the department.
. . . .
(7) Regardless of whether
the amount of compensation and other benefits payable have been fully
determined, the insurer and the claimant may stipulate the proportion
of the third-party settlement to be allocated under subrogation. Upon
review and approval by the department, the agreement constitutes a
compromise settlement of the issue of subrogation and may not be reopened
by the department. [Emphasis added.]
Subsections (5) and (7) were
amended in 1997. As amended, the subsections presently read:
(5) Regardless of whether
the amount of compensation and other benefits payable under the Workers'
Compensation Act have been fully determined, the insurer and the claimant's
heirs or personal representative may stipulate the proportion of the
third-party settlement to be allocated under subrogation. Upon
review and approval by the department, the agreement constitutes a
compromise settlement of the issue of subrogation. A dispute
between the insurer and claimant concerning subrogation is a dispute
subject to the mediation requirements of 39-71-2401.
. . . .
(7) Regardless of whether
the amount of compensation and other benefits payable have been fully
determined, the insurer and the claimant may stipulate the proportion
of the third-party settlement to be allocated under subrogation. Upon
review and approval by the department, the agreement constitutes a
compromise settlement of the issue of subrogation. A dispute
between the insurer and claimant concerning subrogation is a dispute
subject to the mediation requirements of 39-71-2401. [Emphasis
added.]
1997 Mont. Laws, ch. 172.
The highlighted language is the language at issue. It is the same whether
the 1991 or 1997 version of section 39-71-414, MCA, is applied.(2)
¶9 Where the language of
a statute is plain and unambiguous, the Court's job is to simply apply
the statute as written. § 1-2-101, MCA; State ex rel. Cobbs v.
Montana Dept. of Social and Rehabilitation Services, 274 Mont.
157, 162, 906 P.2d 204, 207 (1995). On its face, the highlighted language
is plain. It contemplates Department approval for any subrogation agreement
and specifies that where approval is granted a subrogation agreement
between the parties becomes a compromise settlement. By plain and necessary
implication, an agreement not approved by the Department does not constitute
a compromise settlement. "Where a statute directs that a thing may be
done in one manner it ordinarily implies that it shall not be done in
any other manner." Fletcher v. Paige, 124 Mont. 114, 118,
220 P.2d 484, 486 (1950). In Fletcher the statute in question
permitted beer and malt liquor signs to be displayed at breweries and
warehouses. The Court held that by implication the statute precluded
signs in other places:
In providing that signs
advertising beer or malt liquor can be placed upon a brewery or premises
where beer or malt liquor was lawfully stored or kept, it logically
follows that beer cannot be advertised by signboard or billboards
in any other place. This is merely an application of the familiar
maxim of expressio unius est exclusio alterius.
Id.
¶10 The insurer strenuously
urges that the agreement constitutes an enforceable contract. Assuming
the agreement would be enforceable absent section 39-71-414, MCA, the
section imposes an additional requirement which must be met and the
parties have not met it. Citing Hein v. Fox, 126 Mont. 514,
254 P.2d 1076 (1953), the insurer also urges that the parties waived
the approval provision by executing their agreement. Hein is
a contract case in which the parties waived a provision of their original
agreement. The approval provision at issue in this case was not a negotiated
part of the parties' contract, it is a statutory requirement which must
be met. It was not met, therefore the agreement does not constitute
a compromise settlement cutting off the subrogation rights of either
party.
¶11 Whether the insurer is
entitled to subrogation in any amount is a question of fact. The insurer
is not entitled to subrogation until the amount received by claimant
from the third-party recovery plus the amounts received and to be received
in workers' compensation benefits exceed claimant's entire loss, including
costs of recovery. Zacher v. American Ins. Co. 243 Mont. 226,
231, 794 P.2d 335, 338 (1990).
The stipulated facts show
claimant's recovery as follows:
3rd Party Action
(without deduction for attorney fees) $400,000.00
Workers' Compensation
Benefits . . . . . . . . . . . . . . . $500,000.00
Medical Benefits . . .
. . . . . . . . . . . . . . . . . . . . . . . . $150,029.51
TOTAL . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .$1,050,029.51
His minimum loss is:
Damages in excess
of . . . . . . . . . . . . . . . . . . . . . . .$400,000.00
Attorney Fees and Costs
. . . . . . . . . . . . . . . . . . . . . .$230,978.44
Medical bills paid by
the State Fund . . . . . . . . . . . . . . $150,029.51
Medical bills paid out
of settlement proceeds . . . . . . . .$ 49,021.56
TOTAL . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . $830,029.51
While his minimum
loss is less than his recovery, actual loss is
the measure of subrogation. Therefore, a trial must be held to determine
his actual loss and thereby determine the insurer's right to subrogation.
PARTIAL SUMMARY JUDGMENT
¶12 The subrogation agreement
between the claimant and Credit General Insurance Company is not an
enforceable compromise settlement and does not bar petitioner from recovering
all or part of the payment made pursuant to the agreement.
¶13 A trial to determine
the amount of the insurer's subrogation interest, if any, is necessary.
A scheduling order setting the matter for trial will be issued separately.
DATED in Helena, Montana,
this 24th day of August, 1999.
(SEAL)
\s\ Mike
McCarter
JUDGE
c: Mr. Bernard J. Everett
Mr. Charles G. Adams
Date Submitted: June 3, 1999
1. The
caption of the request merits an award for longest caption for a motion.
2. Buckman
v. Montana Deaconess Hospital, 224 Mont. 318, 321, 730 P.2d 380,
382 (1986) and a host of other cases hold the substantive law in effect
at the time of the claimant's injury applies in determining the claimant's
entitlement to benefits. However, the procedural law in effect at the
time of the determination applies. Wolfe v. Webb, 251 Mont.
217, 824 P.2d 240 (1992); State Compensation Mut. Ins. Fund v. Sky
Country, Inc., 239 Mont. 376, 780 P.2d 1135 (1989). Since
the requirement for Department approval is a continuous one, the Court
need not determine whether the requirement is substantive or procedural,
or which particular version of the WCA applies.
