MeKUSICK, Chief Justice.
This appeal presents a novel question closely akin to the issue resolved in
Liberty Mutual Insurance Co. v. Weeks,
Me., 404 A.2d 1006 (1979). The question here is whether an injured worker may proceed against his employer under the Workers’ Compensation Act despite his having already settled his claim against a third party tortfeasor arising out of the same injury. By applying the principles declared in
Weeks
and giving the Act the liberal reading mandated by 39 M.R.S.A. § 92 (Supp. 1981), we hold that the employee may so proceed, any award conferred under the Act to be set off by the net amount of the settlement.
Plaintiff Overend was employed by defendant Elan I Corporation as a resident director at a treatment center for juvenile offenders. On December 30, 1978, he received a call from an agent of his employer instructing him to search along Route 302 for two juveniles who had run away from the center. Such missions were a normal part of the employee’s job. The employee alleges that during the search his car collided with another, causing him internal injuries requiring extensive hospitalization. He suffered lasting pancreatic damage that becomes acute whenever he catches a cold or viral infection.
Two months after filing his petition for award of compensation, but before disposition of that petition by the Workers’ Compensation Commission, the employee settled his claim against the driver of the car that struck his. Following an evidentiary hearing on October 20, 1980, the commissioner ruled as a matter of law that the employee’s settlement barred him from any workers’ compensation benefits. The commissioner dismissed the employee’s claim without reaching the contested issue of whether the injury occurred in the course of employment.
At the heart of this case is 39 M.R.S.A. § 68 (1978).
The first paragraph of section
68 could be read to provide that compensation claims against employers
and common law actions against third party tortfeasors are to be mutually exclusive options that employees must choose between. That reading is clearly contradicted, however, by the balance of section 68. It provides that an employer who has paid or become liable to pay compensation or benefits under the Act enjoys a lien on any damages or settlement his employee obtains from a third party tortfeasor, to the extent of the employer’s payment. The statute also permits the employer to be subrogated to the rights of the employee if the latter fails to pursue his claim within 30 days after written demand by the employer. Whether the toft action against the third party is prosecuted by the employee or the employer, the former is entitled to the excess of the recovery over the latter’s payments.
Section 68 thus permits, and indeed encourages, third party tort actions following a workers’ compensation award or agreement; but the statute is silent on whether an employee may pursue a compensation claim after recovering from the tortfeasor. Some of the language suggests not: “any employer
having paid
such compensation or benefits
or having become liable
therefor . .. shall have a lien for the value of compensation
paid
on any damages
subsequently
recovered against the third person liable for the injury”; “[i]f the employee . . . recovers damages from a third person, he shall repay to the employer ... the benefits
paid
to him by the employer .... ” (Emphasis added) The commissioner reasoned in this case that since the third party tort settlement has already been paid, the employer would have nothing upon which to place a lien should he be found liable for workers’ compensation. Without a lien the employer would have no choice but to grant the employee an unjust double recovery. Accordingly, the commissioner dismissed the employee’s claim.
The commissioner’s reading of the statute injects an element of arbitrariness into the recovery scheme. Had the employee
obtained a workers’ compensation award or agreement
before
settling with the third party, his total recovery would be the greater of the two sums. By settling with the tortfeasor first, the employee is limited to that recovery, even if the employer would be liable for a greater sum under the Act. The employee is thus penalized for achieving what the law ordinarily encourages, namely, expeditious settlement with the third party without resort to litigation.
That penalty will be avoided if section 68 is construed to permit the employer to set off against his own liability any sum already paid to the employee by the tort-feasor. That was the solution this court adopted in
Weeks, supra,
a case very similar to this. In
Weeks,
an employer entered into a court-approved agreement to compensate an employee under the Act; after a third party tortfeasor paid the employee still more in settlement, the employer recouped its outlay under the statutory lien and argued that section 68 immunized it from further liability. We held that the employee could proceed against the employer under the Act for future payments, but that the employer would be entitled to set off against such future liability the unre-couped portion of the tortfeasor’s payment.
The employer in the case now at bar seeks to distinguish
Weeks
on the grounds that the lien there had already arisen to protect that employer. At bottom, however, the
Weeks
court was faced with the same problem as that which we now confront: how to safeguard an employer from paying for an injury already compensated by a tortfeasor, while at the same time permitting an injured employee to recover from his employer any workers’ compensation benefits that come due in the future in an amount aggregating more than the tort recovery. In
Weeks,
we fashioned a right to setoff that, while not expressly contemplated by section 68, was nonetheless essential to carrying out its plain purpose. There is no compelling reason not to do the same here.
In recognizing the right to setoff, we follow the dictate of 39 M.R.S.A. § 92 that the Act is to be construed “liberally and with a view to carrying out its general purpose.”
See Delano v. City of South Portland,
Me., 405 A.2d 222, 225 (1979). In
Weeks,
we noted that a special need existed for a flexible construction of section 68, because “the current lien provisions are the product of a somewhat disparate superimposition, during more than half a century, of one layer of language upon another.”
Liberty Mutual Insurance Co. v. Weeks, supra
at 1009. The purposes of section 68, as explicated in
Weeks, supra
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MeKUSICK, Chief Justice.
This appeal presents a novel question closely akin to the issue resolved in
Liberty Mutual Insurance Co. v. Weeks,
Me., 404 A.2d 1006 (1979). The question here is whether an injured worker may proceed against his employer under the Workers’ Compensation Act despite his having already settled his claim against a third party tortfeasor arising out of the same injury. By applying the principles declared in
Weeks
and giving the Act the liberal reading mandated by 39 M.R.S.A. § 92 (Supp. 1981), we hold that the employee may so proceed, any award conferred under the Act to be set off by the net amount of the settlement.
Plaintiff Overend was employed by defendant Elan I Corporation as a resident director at a treatment center for juvenile offenders. On December 30, 1978, he received a call from an agent of his employer instructing him to search along Route 302 for two juveniles who had run away from the center. Such missions were a normal part of the employee’s job. The employee alleges that during the search his car collided with another, causing him internal injuries requiring extensive hospitalization. He suffered lasting pancreatic damage that becomes acute whenever he catches a cold or viral infection.
Two months after filing his petition for award of compensation, but before disposition of that petition by the Workers’ Compensation Commission, the employee settled his claim against the driver of the car that struck his. Following an evidentiary hearing on October 20, 1980, the commissioner ruled as a matter of law that the employee’s settlement barred him from any workers’ compensation benefits. The commissioner dismissed the employee’s claim without reaching the contested issue of whether the injury occurred in the course of employment.
At the heart of this case is 39 M.R.S.A. § 68 (1978).
The first paragraph of section
68 could be read to provide that compensation claims against employers
and common law actions against third party tortfeasors are to be mutually exclusive options that employees must choose between. That reading is clearly contradicted, however, by the balance of section 68. It provides that an employer who has paid or become liable to pay compensation or benefits under the Act enjoys a lien on any damages or settlement his employee obtains from a third party tortfeasor, to the extent of the employer’s payment. The statute also permits the employer to be subrogated to the rights of the employee if the latter fails to pursue his claim within 30 days after written demand by the employer. Whether the toft action against the third party is prosecuted by the employee or the employer, the former is entitled to the excess of the recovery over the latter’s payments.
Section 68 thus permits, and indeed encourages, third party tort actions following a workers’ compensation award or agreement; but the statute is silent on whether an employee may pursue a compensation claim after recovering from the tortfeasor. Some of the language suggests not: “any employer
having paid
such compensation or benefits
or having become liable
therefor . .. shall have a lien for the value of compensation
paid
on any damages
subsequently
recovered against the third person liable for the injury”; “[i]f the employee . . . recovers damages from a third person, he shall repay to the employer ... the benefits
paid
to him by the employer .... ” (Emphasis added) The commissioner reasoned in this case that since the third party tort settlement has already been paid, the employer would have nothing upon which to place a lien should he be found liable for workers’ compensation. Without a lien the employer would have no choice but to grant the employee an unjust double recovery. Accordingly, the commissioner dismissed the employee’s claim.
The commissioner’s reading of the statute injects an element of arbitrariness into the recovery scheme. Had the employee
obtained a workers’ compensation award or agreement
before
settling with the third party, his total recovery would be the greater of the two sums. By settling with the tortfeasor first, the employee is limited to that recovery, even if the employer would be liable for a greater sum under the Act. The employee is thus penalized for achieving what the law ordinarily encourages, namely, expeditious settlement with the third party without resort to litigation.
That penalty will be avoided if section 68 is construed to permit the employer to set off against his own liability any sum already paid to the employee by the tort-feasor. That was the solution this court adopted in
Weeks, supra,
a case very similar to this. In
Weeks,
an employer entered into a court-approved agreement to compensate an employee under the Act; after a third party tortfeasor paid the employee still more in settlement, the employer recouped its outlay under the statutory lien and argued that section 68 immunized it from further liability. We held that the employee could proceed against the employer under the Act for future payments, but that the employer would be entitled to set off against such future liability the unre-couped portion of the tortfeasor’s payment.
The employer in the case now at bar seeks to distinguish
Weeks
on the grounds that the lien there had already arisen to protect that employer. At bottom, however, the
Weeks
court was faced with the same problem as that which we now confront: how to safeguard an employer from paying for an injury already compensated by a tortfeasor, while at the same time permitting an injured employee to recover from his employer any workers’ compensation benefits that come due in the future in an amount aggregating more than the tort recovery. In
Weeks,
we fashioned a right to setoff that, while not expressly contemplated by section 68, was nonetheless essential to carrying out its plain purpose. There is no compelling reason not to do the same here.
In recognizing the right to setoff, we follow the dictate of 39 M.R.S.A. § 92 that the Act is to be construed “liberally and with a view to carrying out its general purpose.”
See Delano v. City of South Portland,
Me., 405 A.2d 222, 225 (1979). In
Weeks,
we noted that a special need existed for a flexible construction of section 68, because “the current lien provisions are the product of a somewhat disparate superimposition, during more than half a century, of one layer of language upon another.”
Liberty Mutual Insurance Co. v. Weeks, supra
at 1009. The purposes of section 68, as explicated in
Weeks, supra
at 1012-13, are (i) to give the injured worker the benefit of the greater of any tort recovery and any workers’ compensation award, (ii) to relieve the carrier of the compensation burden that the third party’s fault has caused it to shoulder, and (iii) to prevent either a double recovery by the employee or an immunity for the third party tortfeasor.
To carry out those purposes of section 68, we hold that the employee’s settlement with the third party tortfeasor does not bar him from seeking workers’ compensation from his employer, but that the employer is entitled to set off against any subsequently determined liability under the Act the net amount
the employee has recovered in settlement from the tortfeasor.
The entry must be:
Pro forma judgment of the Superior Court vacated.
Case remanded to the Workers’ Compensation Commission for further proceedings consistent with the opinion herein.
Further ordered that the employer pay to the employee an allowance for counsel fees in the amount of $550.00 together with his reasonable out-of-pocket expenses for this appeal.
All concurring.