Eddington Estate v. Eppert Oil Co.

490 N.W.2d 872, 441 Mich. 200

• Court: Michigan Supreme Court
• Decided: September 29, 1992
• Docket: Docket Nos. 90273, 90274, (Calendar No. 9)
• Status: Published

Opinions

Brickley, J.

In this case we are called upon to determine the extent to which an employer, or workers’ compensation carrier, is entitled to seek reimbursement from a third-party tort recovery obtained as a result of the death of an employee. See MCL 418.827(5); MSA 17.237(827)(5). We would hold that an employer or workers’ compensation carrier is entitled to seek reimbursement from the entire amount of the third-party tort recovery obtained as a result of the death of an employee regardless of the classification of the damages, i.e., economic or noneconomic, or whether the recipient of the proceeds was entitled to receive compensation benefits.

i

Bobby Eddington was employed by Milford Fabricating Company, a subsidiary of intervening plaintiff-appellee The Budd Company, as a machine repairman. On February 16, 1982, he was cleaning a press pit with a chemical solvent manufactured by defendant Eppert Oil Company that contained methylene chloride.¹ He died of asphyxiation as a result of the fumes emitted from the chemical solvent._

After Mr. Eddington’s death, The Budd Company paid workers’ compensation benefits to plaintiff, the decedent’s surviving spouse. Plaintiff remarried one year later, and The Budd Company made payments to her on behalf of the decedent’s three minor children.²

Plaintiff, as personal representative of her deceased husband’s estate, brought a wrongful death action against the manufacturers and sellers of the chemical solvent that caused the death of Bobby Eddington.³ The case was settled by consent judgments entered on October 21, 1986, one against Ashland Oil and Ashland Chemical, and the other against Eppert Oil. The consent judgment against Ashland Oil and Ashland Chemical provided that plaintiff was to receive a total of $2,500 immediately; the consent judgment against Eppert Oil provided that $461,494 was payable upon entry of the judgment and that, in addition, Eppert was to pay a structured settlement to the decedent’s minor children.

The trial court entered an order for the distribution of the wrongful death proceeds on this same date. See MCL 600.2922(6); MSA 27A.2922(6). Pursuant to that order, $132,869.25 was allocated to plaintiff individually for her loss of society and companionship, and $49,482.18 was allocated to decedent’s parents for their loss of society and companionship. Approximately $206,643 was allocated for attorney fees, costs, and reimbursement, and $75,000 was placed in escrow with plaintiff’s counsel pending a determination of the amount of the workers’ compensation lien that would attach to the wrongful death proceeds. The decedent’s minor children each received an award of $333 per month until their nineteenth birthdays. Thereafter, monthly payments of between $944 and $1,019, depending on the age of each child at the time of the consent judgment, were to be made to the children for five years. These payments were intended to compensate the children for the loss of financial support and loss of society and companionship of their deceased father.

On December 19, 1986, The Budd Company was permitted by stipulation to intervene to assert its workers’ compensation lien. The Budd Company filed a motion to determine the amount of the workers’ compensation lien on May 19, 1987, in which it was asserted that its lien should attach to the entire settlement proceeds regardless of the damages that the proceeds were intended to compensate. The trial court held that The Budd Company was not entitled to enforce its lien on the settlement proceeds designated for loss of society and companionship damages, relying upon several Court of Appeals cases.⁴ However, the court permitted the lien to attach to the entirety of those proceeds allocated to the decedent’s children for loss of financial support including those to be received after they attain the age of eighteen.

Plaintiff appealed the trial court’s holding, contending that The Budd Company was not entitled to assert a lien on the portion of the proceeds awarded to the children after they attained the age of eighteen because no compensation benefits were recoverable by the children after age eighteen. The Budd Company appealed the trial court’s decision that loss of society and companionship damages are not subject to the employer’s statutory lien. The Court of Appeals held that The Budd Company’s lien attaches to the entire third-party recovery of the children without regard to apportionment of damages and also to plaintiff’s individual damages for loss of consortium⁵ because she received compensation benefits directly from the employer.⁶ 184 Mich App 771; 459 NW2d 103 (1990).

This Court granted leave to appeal on July 19, 1991. 437 Mich 1046.

n

We must determine the extent to which the reimbursement provision of the Workers’ Disability Compensation Act, MCL 418.827(5); MSA 17.237(827X5), applies to the wrongful death recovery obtained by the plaintiff, as personal representative of Mr. Eddington’s estate, and subsequently distributed to the several individuals involved in this case. To properly evaluate this issue, it is necessary to understand the manner in which the tort recovery was obtained and the interplay between the wrongful death act and the wdca.

First, plaintiff, as personal representative of the decedent’s estate, is designated within the wrongful death act as the appropriate person to bring an action to enforce the liability of any tortfeasor contributing to the decedent’s death. See MCL 600.2922(2); MSA 27A.2922(2). Any recovery obtained by the personal representative is to be received on behalf of all who are entitled to relief pursuant to the wrongful death act as provided by MCL 600.2922(3); MSA 27A.2922(3).

Secondly, an employer or compensation carrier is entitled to seek reimbursement from "[a]ny recovery against the third party for damages resulting from personal injuries or death” of an employee. MCL 418.827(5); MSA 17.237(827X5). A reimbursement provision of this nature has been a part of the wdca from the early stages of its enactment, even when the receipt of benefits had operated as an election of remedies by the injured employee. See 1915 CL 5468. The basic reimbursement provision has carried over into the current statutory framework and is the focus of the matter to be resolved in this case. The question then is whether the language of §827(5) permits reimbursement by the employer from the entire wrongful death recovery, and, if not, what portions of the recovery are to be subject to that reimbursement provision.

hi

Section 827(5) provides:

In an action to enforce the liability of a third party, the plaintiff may recover any amount which the employee or his dependents or personal representative would be entitled to recover in an action in tort. Any recovery against the third party for damages resulting from personal injuries or death only, after deducting expenses of recovery, shall first reimburse the employer or carrier for any amounts paid or payable under this act to date of recovery and the balance shall forthwith be paid to the employee or his dependents or personal representative and shall be treated as an advance payment by the employer on account of any future payments of compensation benefits. [Id. Emphasis added.]

We have previously indicated that the reimbursement section of the wdca

"provides clearly and unambiguously that the employer or carrier is to be reimbursed from 'any recovery’ against a third party for 'any amounts’ paid or payable to the employee under the wdca as of the date of the recovery. The statute speaks for itself; there is no room for judicial interpretation or construction.” [Downie v Kent Products, Inc, 420 Mich 197, 216; 362 NW2d 605 (1984), quoting Land v The George Schmidt Co, 122 Mich App 167, 170; 333 NW2d 30 (1982).]

Today we would reaffirm our finding that the language of § 827(5) is clear and unambiguous, thereby removing any need to look beyond its ordinary meaning in giving it effect. See Livonia v Dep’t of Social Services, 423 Mich 466; 378 NW2d 402 (1985); Kalamazoo Ed Ass’n v Kalamazoo Public Schools, 406 Mich 579; 281 NW2d 454 (1979).

iv

Plaintiff asserts that § 827(5) should be interpreted to provide reimbursement to the employer only to the extent that the third-party tort recovery duplicates damages compensable under the wdca. On the basis of this argument, plaintiff contends that the loss of society and companionship damages and the loss of financial support recovery by decedent’s dependent children for the period after their eighteenth birthdays should not be subject to reimbursement under § 827(5) because such damages are not obtainable as compensation benefits under the wdca.

A

The Court of Appeals rejected the argument that only those damages which are compensable under the wdca are entitled to be sought as reimbursement under § 827(5). Reliance was placed upon Pelkey v Elsea Realty & Investment Co, 394 Mich 485; 232 NW2d 154 (1975), for the proposition that reimbursement may be sought from a third-party tort recovery despite the damages not being the type of loss compensable under the wdca. In Pelkey, we held that the entire third-party tort recovery was subject to the reimbursement provision, even though pain and suffering damages were part of the recovery and not compensable under the wdca. In fact we made the following blanket statement regarding the application of § 827(5):

The 1952 amendment permits the employee to seek both workmen’s compensation and damages from a third party, but provides that any third-party recovery for damages resulting from personal injuries may be reached by the insurer. [Id. at 493. Emphasis added.]

We further expanded our holding in Pelkey that the entire recovery is subject to reimbursement despite a portion of the recovery being for damages not compensable pursuant to the wdca:

If he [the employee] is awarded damages, the employer or workers’ compensation carrier is entitied to reimbursement for benefits paid and to a credit against future payments, without regard to whether the recovery is for the same elements of loss compensated by the beneñts paid under the statute. [Great American Ins Co v Queen, 410 Mich 73, 89; 300 NW2d 895 (1980). See also Workman v DAIIE, 404 Mich 477, 511; 274 NW2d 373 (1979). Emphasis added.]

Accordingly, the Court of Appeals correctly determined that the reimbursement provision of the wdca applies to any third-party tort recovery obtained as a result of the compensable death of the employee without regard to whether such damages are compensable under the wdca. That analysis is consistent with our decision in Pelkey and the line of cases following it. Today we would reaffirm that an employer or compensation carrier may seek reimbursement from the entirety of a third-party tort recovery resulting from the death of the employee even when a portion of that recovery includes damages not compensable under the wdca.

b

The panel in this case found that a loss of consortium claim⁷ predicated upon the death of the employee, to the extent that there is direct payment of compensation benefits to the spouse, entitles the employer or compensation carrier to seek reimbursement regardless of whether "the third-party recovery is for the same element of loss compensated by the workers’ compensation benefits.” 184 Mich App 776. We do not agree with the Court of Appeals rationale that application of § 827(5) to a recovery for loss of society and companionship by a spouse for the death of the employee should be predicated upon whether the spouse was a direct or indirect recipient of compensation benefits. Such an interpretation is not consistent with the literal language of § 827(5) and should not be incorporated into it.

The clear and unambiguous language of § 827(5) indicates that "any recovery” obtained from the third party shall first be subject to a claim of reimbursement by the employer or carrier before there is a distribution of the remaining balance to those listed, i.e., the employee, the dependents, or personal representative. There is no indication in § 827(5) that it is necessary to evaluate the eligibility of the tort-recovery recipient for compensation benefits before allowing the employer or compensation carrier to be reimbursed out of any recovery obtained. To place such a requirement upon the application of § 827(5) would essentially require this Court to rewrite the language of the provision, which we are not empowered to do.

It is asserted that the phrase "for any amounts paid or payable under this act” should restrict application of § 827(5) to instances in which compensation benefits were received. However, we would find that this phrase does not limit the application of § 827(5) to instances in which compensation benefits were directly provided to a particular individual; rather, it limits the amount of reimbursement that may be recouped by an employer from any third-party tort recovery obtained as a result of the death of the employee. As we stated in Franges v General Motors Corp, 404 Mich 590, 614-615; 274 NW2d 392 (1979):

The employer or its insurance carrier may receive two interests in any given third-party action. First, there is the reimbursement interest: the refunding of monies previously paid or payable as workers’ compensation benefits as of the date of judgment. Additionally, a second interest appears when the dollar amount of recovery exceeds the insurer’s reimbursement. [Emphasis added.]

In essence, the employer or carrier is limited to recoupment of the amount paid as compensation benefits and is merely entitled to any remaining excess as a credit toward future compensation benefits that may be owed. This is a logical limitation to be placed upon the employer or compensation carrier because there should only be reimbursement for the amount expended up to the date of recovery. Such an approach is consistent with the early versions of the reimbursement provision. We have consistently held that an employer or compensation carrier is entitled to receive recoupment only for the amount expended for benefits. See Grand Rapids v Crocker, 219 Mich 178; 189 NW 221 (1922); Albert A Albrecht Co v Whitehead & Kales Iron Works, 200 Mich 109; 166 NW 855 (1918). Thus, the Legislature incorporated that limitation into § 827(5) along with the provision that any excess recovery is to constitute a credit toward future compensation obligations.

Section 827(5) provides that an employer or compensation carrier is entitled to reimbursement from any recovery obtained from a third party and that that ability is only constrained by the limitation that the reimbursement not exceed the total amount of compensation benefits paid or payable by the employer or compensation carrier to the date of recovery for the death of the employee. To interpret the statutory provision differently would essentially render the analysis of Pelkey, and our decisions following that opinion, meaningless. Those cases predicated their rationales on the basis that reimbursement is not limited to damages compensable under the wdca.

c

The Court of Appeals in this case did not address whether § 827(5) should be held applicable to the loss of society and companionship damages obtained by Mr. Eddington’s parents pursuant to the action for wrongful death. Nonetheless, plaintiff has sought to have this issue resolved and asserts that the Court of Appeals appears to subject such recoveries to reimbursement by the employer even though the decedent’s parents are alleged to have received no compensation benefits either directly or indirectly from the employer. Although the Court of Appeals did not address this particular matter, for purposes of judicial economy and in the interest of clarifying this aspect of the wdca, we address the question whether, in fact, the employer or compensation carrier may seek reimbursement from a loss of society and companionship recovery obtained by the parents of a deceased employee under the wrongful death act.

As discussed in subsection b, the Court of Appeals determined that, in determining whether a spouse’s loss of society and companionship recovery, which the panel characterized as a loss of consortium claim, is exempt from §827(5), a distinction was made between compensation benefits directly received from the employer or compensation carrier and those received indirectly. That approach would appear to apply with equal force to the parents’ claim because they were neither direct nor indirect recipients of compensation benefits. However, as we stated in subsection b, that interpretation is contrary to the express language of § 827(5) and is not the proper evaluation to be adopted.

Section 827(5) clearly states that "[a]ny recovery against the third party for damages resulting from . . . death . . ., shall fírst reimburse the employer or carrier for any amounts paid or payable under this act . . . (Emphasis added.) Nothing in § 827(5) requires, as a condition precedent, that a third-party tort-recovery recipient receive compensation benefits. Furthermore, the express language of § 827(5) indicates that the employer or compensation carrier is entitled to reimbursement and the balance is then to be given to the employee, the employee’s dependents, or the personal representative, depending upon the manner in which the third-party tort recovery was obtained. The decedent’s parents received their recovery through the efforts of the personal representative, as provided in the wrongful death act; thus, the reimbursement to the employer or carrier appears to attach before the distribution of the proceeds to the personal representative and any subsequent distribution to those listed in MCL 600.2922(3); MSA 27A.2922(3). Such an analysis of § 827(5) permits each part of that provision to be internally consistent, unlike the approach adopted by the Court of Appeals. Thus, we should not attempt to rewrite the clear language of § 827(5) by requiring that it only apply in those instances where compensation benefits were available to the recipient of the third-party tort recovery obtained as a result of the compensable death of the employee.

The purpose of allowing third-party tort recoveries and immediate reimbursement of the employer was adequately summarized in Franges:

Accordingly, we believe that one of the major purposes for the Legislature permitting actions by both the injured employee and the insurer is to provide the opportunity for full recovery by each and thereby place the liability for the injury and the resulting cost upon the negligent party. [Id. at 613. Emphasis added.]

Thus, the Legislature quite probably determined that it was necessary to permit the employer or compensation carrier to be allowed recoupment from any recovery in order to ensure complete satisfaction to them. Accordingly, we would find that any third-party tort recovery for damages obtained as a result of the death of the employee is available to the employer or compensation carrier for reimbursement to the extent compensation benefits have been paid or are payable to the date of recovery and are a credit for future compensation obligations.

v

Our reading of the language of § 827(5) leads to the following analysis regarding application of that provision. First, the Legislature has clearly permitted a "plaintiff” to bring a third-party tort action to recover any amount that the employee or the employee’s dependents or personal representative would be entitled to receive.⁸ Second, any recovery obtained as a result of the death of the employee shall immediately be subject to application of the reimbursement provision on behalf of the employer or compensation carrier to the extent of any workers’ compensation benefits paid or payable to the date of the recovery. Third, any balance of the third-party tort recovery remaining after application of the reimbursement provision is to be allocated to the "employee,”⁹ or the employee’s dependents or personal representative, depending upon the manner in which the recovery had been obtained. Finally, any excess amount allocated to those individuals after reimbursement is considered to be an advance payment of future compensation benefits that the employer or carrier may consider as a credit for such future payments. This is a straightforward reading of the language of § 827(5), giving each word within that provision its ordinary meaning.

VI

Applying this analysis to the facts of the instant case, we would find that the employer, The Budd Company, is entitled to seek reimbursement from the entire tort recovery obtained by the personal representative because of the wrongful death of Mr. Eddington, to the extent that benefits had been paid or are payable by the employer to the date of recovery. Any balance of the wrongful death recovery remaining after application of this provision should be allocated to the personal representative for disposition of the proceeds to those entitled pursuant to the wrongful death act in accordance with the distribution ordered by the trial court. In addition, the balance that is allocated to the personal representative after the reimbursement should be treated as a credit toward future compensation obligations owed by The Budd Company under the wdca.

We would remand the case to the trial court for further proceedings consistent with this opinion.

Riley and Griffin, JJ., concurred with Brickley, J.

1 The methylene chloride was produced by defendants Ashland Chemical, Inc., and Ashland Oil, Inc.

2 MCL 418.335; MSA 17.237(335).

3 MCL 600.2922; MSA 27A.2922.

4 See Treadeau v Wausau Area Contractors, Inc, 112 Mich App 130; 316 NW2d 231 (1982); Logan v Edward C Levy Co, 99 Mich App 356; 297 NW2d 664 (1980); Lone v Esco Elevators, Inc, 78 Mich App 97; 259 NW2d 869 (1977).

5 It must be noted that the Court of Appeals characterized the claims as loss of consortium; however, the claims were brought under the wrongful death act, which describes loss of society and companionship of the deceased as damages to be compensated by that act. Although the damages received are for similar losses, a common-law loss of consortium claim is not necessarily treated the same as loss of society and companionship damages allocated in a wrongful death action. Because we are not presented with a common-law loss of consortium claim in this case, we do not opine regarding the effect of the employer’s, or carrier’s, compensation lien on such a recovery. We do not mean to imply that the analysis by Justice Boyle regarding a loss of consortium cause of action is correct; rather, we do not address the question because loss of society and companionship are damages recoverable pursuant to the wrongful death act, which are predicated upon the death of the employee rather than personal injury, and are obtained through the actions of the decedent’s personal representative.

6 The loss of society and companionship damages allocated to Mr. Eddington’s parents were not addressed by the Court of Appeals.

7 As noted earlier, the Court of Appeals incorrectly characterized the loss of society and companionship damages allocated pursuant to the wrongful death act provision, MCL 600.2922(6); MSA 27A.2922(6), as a separate common-law loss of consortium claim. See n 5.

8 The Legislature did not specify those who may he classified as "plaintiffs” for the purpose of bringing a third-party tort action because it is possible that the employer or compensation carrier or other individuals may be the party bringing the action. See MCL 418.827(1), (3); MSA 17.237(827)(1), (3).

9 Employee is given an expansive definition for purposes of § 827, including subsection 5; thus, it must be considered in the allocation of the balance of damages of the recovery remaining after reimbursement to the employer or compensation carrier. See MCL 418.131(2); MSA 17.237(131)(2).