Opinion
CLAIM NO. E713687
OPINION FILED OCTOBER 24, 2001
Upon review before the FULL COMMISSION in Little Rock.
Pulaski County, Arkansas.
Claimant represented by MR. MARK MARTIN, Attorney at Law, Fayetteville, Arkansas.
Respondents represented by Mr. Michael Mayton, Attorney at Law, Little Rock, Arkansas.
Decision of the Administrative Law Judge: Reversed.
SUBSTITUTED OPINION AND ORDER
The Full Commission, upon its own motion and after reconsideration of the opinion and order filed in this case on October 12, 2001, vacates the opinion and order filed on October 12, 2001 and substitutes the following opinion.
The claimant appeals an opinion and order filed by the Administrative Law Judge on July 13, 2000. In that opinion and order, the Administrative Law Judge determined that pursuant to Ark. Code Ann. § 11-9-410, respondents are entitled to a credit against future workers' compensation benefits in the amount of $476,144.61. Based on our de novo review of the record, we find that no entitlement to a credit exists. Therefore, we must reverse the Administrative Law Judge's decision.
On October 29, 1997, claimant fell as he exited an aircraft. He sustained serious injuries, including a closed head injury, which produced cognitive deficits. Respondents accepted the claim as compensable, furnishing medical treatment, and continuing claimant's salary in lieu of compensation. Additionally, claimant pursued a third party action. He reached an agreement to settle the lawsuit for $1,500,000. However, $300,000 of the settlement amount was designated for losses sustained by claimant's spouse.
The parties filed a Joint Motion for Order Approving Third Party Settlement and Distribution of Settlement Proceeds. Anticipating that claimant would require further medical treatment but disagreeing on respondents' entitlement, if any, to a credit against future workers' compensation benefits, a hearing was scheduled. Thus, a hearing was conducted so that the credit issue could be reserved. An Administrative Law Judge approved the settlement on September 30, 1999. The law judge's Order included language reserving the credit issue, and showed the following distribution of proceeds:
Gross Settlement . . . . . . $ 1,200,000.00
Attorney's Fees . . . . . . $ 387,445.00
Out-Of-Pocket Expenses . . . $ 49,763.05
Net Settlement . . . . . . . $ 762,791.95
Claimant's 1/3 . . . . . . . $ 254,263.98
Carrier Reimbursement. . . . $ 41,353.36
Balance . . . . . . . . . . $ 467,174.61
As the parties anticipated, claimant received additional medical treatment following the Administrative Law Judge's approval of the settlement. Respondents refused to pay these expenses, contending that they are entitled to a credit of $476,174.61. The sole issue for our resolution is the credit issue.
Relying on David Woolfolk v. City of Pine Bluff, Full Workers' Compensation Commission Opinion filed Dec. 11, 1998 ( E701836), the Administrative Law Judge held that respondents are entitled to a credit totaling $467,174.61 toward future benefits. In Woolfolk, a majority of the Commission declined to adopt the "made whole" doctrine to workers' compensation cases, reasoning that § 11-9-410 contained a formula for the distribution of proceeds in subrogation cases.
Following the administrative law judge's decision in this cause, the Arkansas Supreme Court decided General Accident Ins. v. Jaynes, 343 Ark. 143, 33 S.W.3d 161 (2000). Thereafter, the Full Commission received correspondence from both parties with respect to its applicability. On March 16, 2000, we issued an Order affording the parties an opportunity to file supplemental briefs, and instructed the Clerk of the Commission to establish a briefing schedule. Claimant and respondents accepted our invitation, submitting briefs addressing the relevancy of the Jaynes decision.
In Jaynes, the Supreme Court affirmed the circuit court's application of the "made whole" doctrine in a workers' compensation case. Relying on Franklin v. Healthsource of Arkansas (citation omitted), the lower court refused to enforce the statutory lien because the beneficiaries and survivors of the decedent would not have been made whole by the settlement.
In reaching their decision, the Supreme Court rejected several arguments advanced by the carrier. In this regard, the carrier asserted that Franklin is distinguishable because it did not involve a statutory lien. Unpersuaded, the Supreme Court noted that Franklin was predicated on Shelter Mutual Insurance Co. v. Bough, 310 Ark. 21, 834 S.W.2d 637 (1992), which held that the insured must be made whole before the insurer's statutorily created subrogation interest arises.
Also, the carrier relied on the court's holding in Arkansas Department of Human Services v. Estate of Ferrel, 336 Ark. 297, 984 S.W.2d 807 (1999) (Recoupment of Medicaid benefits by the state is not restricted by equitable principles, including the "made whole" doctrine). The Supreme Court found these cases easily distinguishable, deeming it consequential that Ferrel involved a state agency charged with the responsibility of administering a federal program as opposed to a private insurance company.
Citing Travelers Ins. Co. v. McClusky, 252 Ark. 1045, 483 S.W.2d 179 (1972), the Supreme Court disagreed with the contention of respondents that § 11-9-410 established an absolute lien. The court noted that the employee and third-party defendant may "settle around" the insurance carrier. This is accomplished by obtaining court approval, satisfying the carrier's due process rights.
The Supreme Court observed that General Accident was an intervenor in the wrongful death action, and participated in the settlement hearing conducted by the circuit court. Since General Accident was afforded due process, the Supreme Court concluded that its lien rights were not extinguished. Turning to the facts of this case, claimant testified that he reached a compromise settlement because the third party tort-feasor had a preemption defense available. He offered evidence to support a finding that he was not wholly compensated. In this regard, claimant introduced a report prepared by Dr. Ralph D. Scott with Economic and Financial Consulting Group, Inc., which showed his economic loss totaled $4,996,842.20. This sum considered his lost earning capacity, and is premised on a yearly base salary of $338,701.50. Also, claimant's inability to perform household services is included in the calculation. When future medical care and rehabilitation costs are factored into the equation, claimant's economic loss totals $5,220.985.74. The medical projections were prepared by Dr. A.D. Sciara.
Moreover, claimant introduced an opinion letter from Mr. Robert E. Hornberger with ADR, Inc. It showed that Mr. Hornberger was responding to a request for a neutral evaluation of the damages sustained by claimant. He concluded that "the amount necessary to make [claimant] `whole', therefore, would be, at a minimum, that amount calculated by Dr. Scott, that is, $5,220,985.74. That amount does not appear to include certain recoverable elements of damage including the nature, extent, duration and permanency of the injury and any pain, suffering and mental anguish associated therewith, and may not include past medical expenses. Therefore, his `damages' could and most likely would be greater than Dr. Scott's figure."
The Supreme Court's decision in Franklin offers some guidance in applying the "made whole" doctrine:
Following Bough, an insurer is entitled to enforce its contractual right of subrogation after the insured has been fully compensated, or "made whole," for his total loss. This precludes the insured from recovering twice for some of his or her damages; therefore, the insurer is entitled to reimbursement from funds received by the insured from the third party when the insured receives more than the total of his or her loss. As stated by Professor Freedman, "the precise measure of reimbursement is the amount by which the sum received by the insured from the [third party], together with the insurance proceeds, exceeds the loss sustained and the expense incurred by the insured in realizing on his claim." (Citation omitted).
Claimant contends that Jaynes is controlling and compels a finding that respondents are not entitled to a credit. We agree. Claimant recovered $1,200,000.00 from TransWorld Airlines. The credible evidence established that his damages exceed $5,000,000.00. Since claimant's losses exceed his recovery, he has not been made whole. The compromise settlement was approved by the Commission as a result of a joint motion. Respondents were afforded due process. Therefore, the lien rights of respondents were not abrogated. Accordingly, we find that respondents are not entitled to a credit.
In reaching our decision, we note that the dissent asserts that the amendments of Act 796 of 1993 to Ark. Code Ann. § 11-9-410 have amended prior law to such an extent that the "made whole" doctrine discussed in Jaynes is no longer applicable to workers' compensation cases. For reasons previously discussed in our March 16, 2000 order affording the parties an opportunity to file supplemental briefs, we fail to see how the amendments of Act 796 of 1993 would have effectively overturned the doctrine discussed and applied by the Arkansas Supreme Court in General Accident Ins. v. Jaynes, 343 Ark. 143, 33 S.W.3d 161 (2000). Absent any further guidance to the contrary from the Arkansas courts, we find that the "made whole" doctrine remains in effect even after the amendments of Act 796 to Ark. Code Ann. § 11-9-410.
Finally, we find that the claimant's attorney is entitled to the maximum attorney's fee based on the credit requested by the respondents but disallowed herein. However, we find that the attorney's fee applies only to the extent of actual benefits which the respondents did not pay because of their reliance on the disallowed credit, one-half of which is to be paid by the claimant and one-half to be paid by the respondents, pursuant to Ark. Code Ann. § 11-9-715(a). See Coleman v. Holiday Inn, 31 Ark. App. 224, 792 S.W.2d 345 (1990).
All accrued benefits shall be paid in a lump sum and without discount with interest thereon at the lawful rate from the date of the administrative law judge's decision in accordance with Ark. Code Ann. § 11-9-809 (Repl. 1996). For prevailing on this appeal before the Full Commission, claimant's attorney is hereby awarded an additional attorney's fee in the amount of $250.00 in accordance with Ark. Code Ann. § 11-9-715 (Repl. 1996).
IT IS SO ORDERED.
________________________________ ELDON F. COFFMAN, Chairman
Commissioner Turner concurs.
CONCURRING OPINION
I concur with the findings and conclusions contained in the principal opinion in this case. I write separately to address the contents of the supplemental brief filed on behalf of respondents by Mr. Eric Newkirk.
The Supreme Court's decision in General Accident Ins. v. Jaynes, 343 Ark. 143, 33 S.W.3d 161 (2000), was issued after this cause was submitted to the Full Commission. Predicated upon the importance of Jaynes and due process concerns, we invited the parties to file supplemental briefs. Against this backdrop, respondents took this opportunity to criticize the Arkansas Supreme Court. It is axiomatic that the Full Commission must follow precedents established by the appellate courts. Therefore, the gratuitous criticism of the Jaynes decision as well as the Supreme Court, which permeates respondents' brief, is difficult to fathom. The following quotations are illustrative:
Quite notably, the Respondents were surprised to learn when reviewing the Jaynes decision in greater detail that the Arkansas Supreme Court did not even look to see how other courts with similar workers' compensation statutes had handled the "made whole" issue. Instead, the Arkansas Supreme Court focused most of its Opinion on earlier subrogation decisions which had nothing to do with work injuries involving a negligent third party.
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[I]t appears as though the Arkansas Supreme Court never even looked to [Larson's treatise] for guidance in reaching the Jaynes decision, which makes its decision even more baffling.
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It is the Respondents' position that the rationale for Bough to a workers' compensation case is extremely misplaced.
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Moreover, the Jaynes decision also analyzed its recent decision of Arkansas Department of Human Services v. Estate of Ferrel, 336 Ark. 397[ 336 Ark. 297], 984 S.W.2d 807 (1999), and somehow found it to be inapplicable. It is very difficult for respondents to fathom how the Arkansas Supreme Court found the Ferrel decision to be inapplicable when that case likewise involved the interpretation of similar statutory language and the applicability of the "made whole" doctrine. However, the key distinction is that the Arkansas Supreme Court somehow reached a different result.
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Most surprisingly of all, the Arkansas Supreme Court had even already reviewed the language contained in Arkansas Code Annotated § 11-9-410 previously and found that the statutory language was clear and unambiguous . . . Therefore, if the Supreme Court itself had already held in the past that the statutory language contained in Arkansas Code Annotated § 11-9-410 is clear and unambiguous as they did in Chitwood, they have no choice but to follow the statute and not attempt to interpret it or subject common law principles of equitable subrogation to it.
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The lack of respect toward the Supreme Court is very troubling.
I concur.
_________________________________ SHELBY W. TURNER, Commissioner
Commissioner Wilson dissents.
DISSENTING OPINION
I respectfully dissent from the majority opinion finding that the made-whole doctrine applies to this case and that the respondents are not entitled to a credit in the amount of $467,174.61 against future benefits pursuant to A.C.A. § 11-9-410.
As a result of a third party action, the claimant settled and received 1.5 million dollars. $300,000 of that went directly to the claimant's wife. The claimant's attorney received his fee right off the top and the claimant received his one-third also.
The Commission has no authority to overrule the Supreme Court's decision in the Jaynes case. However, in my opinion, Jaynes is not applicable to the facts of this case. I would note that the Jaynes case applied the law as it was prior to Act 796. Act 796 added the following section to Arkansas Workers' Compensation Law which states: the "purpose and intent of this subsection was to prevent double payment to the employee." That section did not exist at the time of Mr. Jaynes' injury. Further, this statutory section did exist at the time of the claimant's injury in the matter presently before us. In order to prevent the claimant from receiving a double payment, the respondents should receive a credit in the amount of $467,174.61 against future benefits which they may be responsible to pay for the claimant.
As an additional note, I find that the respondents have made legitimate arguments and I agree with them. Further, I feel that it is improper for this issue to be raised by the Commission. Therefore, I respectfully dissent from the majority opinion.
_______________________________ MIKE WILSON, Commissioner