Schneider v. Farmers Merchant, Inc.

678 P.2d 33, 106 Idaho 241, 1983 Ida. LEXIS 563

Opinions

DONALDSON, Chief Justice.

In this case we decide the total damages that are available to an injured employee who received workmen’s compensation benefits from his employer, and later recovered damages against a third party in a separate negligence suit. We also decide the proper apportionment of these damages as between the employer and third party.

On May 13, 1977, Larry Schneider suffered an injury while employed as a truck driver for Nelsons’ Inc., (hereinafter referred to as Nelson). The injury occurred while Schneider was loading grain into his truck with an auger owned and supplied by Farmers Merchant, Inc. (Farmers). Argonaut Insurance Company, Nelson’s insurer, paid Schneider workmen’s compensation benefits totaling $5,638.52. A compensation agreement to this effect was entered into on August 18, 1977, and approved by the Industrial Commission on August 25, 1977.

On April 19, 1979, Schneider filed a suit against Farmers, alleging that as a result of Farmers’ failure to supply a chain guard and other protective devices on the grain auger, plaintiff’s left thumb was severed from his hand. Prior to trial, Farmers’ insurer, Aetna Insurance Company, entered into an agreement with Nelson’s insurer, Argonaut Insurance Company. Pursuant to this agreement, Aetna agreed to pay Argonaut $3,000.00, if Argonaut would release and discharge Farmers, and its insurer Aetna, from any demand, claim or liability based on the May 13, 1977 accident.¹

The jury assessed Schneider’s damages at $20,000, attributing sixty percent of the fault to Farmers and forty percent to Schneider. Schneider made alternative motions for a new trial or judgment notwithstanding the verdict, contending the jury reduced his award contrary to the express jury instructions. These motions were denied.

Farmers made a motion to reduce the judgment by $5,638.52, the amount of workmen’s compensation benefits Schneider had received. Farmers contended it had discharged Nelson’s subrogation rights in this amount by virtue of the release agreement. This motion was initially denied until Farmers supplied the court with sufficient evidence to support this request. Upon receiving the evidence, the court held that Farmers was entitled to a reduction in the judgment by the amount of workmen’s compensation benefits paid, “to prevent a double recovery by plaintiff.” Therefore, the court reduced Schneider’s total award, $20,000.00, by the amount representing plaintiff’s negligence, forty percent, and by the amount of workmen’s compensation benefits he had received, $5,638.52, resulting in a judgment of $6,361.48.

Schneider appeals from this judgment, claiming first, that the trial court erroneously reduced his judgment by the amount of workmen’s compensation benefits paid, without first determining the negligence of the employer. Appellant further asserts that the trial court erroneously reduced his judgment in order to prevent a double recovery. Finally, appellant contends that the trial court erroneously denied his motions for a new trial or judgment notwithstanding the verdict. We disagree on all counts.

I.C. § 72-209, and former I.C. § 72-223, provide the framework for this analysis. 1.C. § 72-209 establishes the employer’s liability under the Workmen’s Compensation Act. Under this provision, the employer’s liability is exclusive, subject only to I.C. § 72-223.² We previously held in Tucker v. Union Oil Co. of California, 100 Idaho 590, 603 P.2d 156 (1979), that these remedies are cumulative. “There appears no question but that an injured employee may receive workmen’s compensation benefits and thereafter bring a negligence action against a third party tortfeasor who was a nonemployer. I.C. § 7-223.” 100 Idaho at 603, 603 P.2d at 169. (Citations omitted.)

If an employee brings a suit against a third party in addition to receiving workmen’s compensation benefits, this Court has established a system of apportioning the employee’s damages between the employer and third party. The focus of this Court in apportionment is two-fold: (1) to achieve an equitable distribution of liability for the employee’s injuries as between the employer and the third party, based on the facts of each case, and (2) to prevent the overcompensation of an employee, i.e., to prevent the employee from retaining both the workmen’s compensation benefits and the full tort recovery.

Our system of apportionment has foundation in I.C. § 72-223(3). We summarized our interpretation of this section in Tucker, 100 Idaho at 603, 603 P.2d at 169.

“I.C. § 72-223 provides that an employer may be subrogated to the rights of the employee to the extent that the employee has received compensation benefits. In Liberty Mutual Ins. Co. v. Adams, 91 Idaho 151, 417 P.2d 417 (1966), however, the right of an employer to such subrogation and its ability to obtain reimbursement from the employee was limited. The Court held that when an employer’s negligence, together with the negligence of a third party nonemployer tortfeasor, concurrently contributed to the injury of an employee, neither the employer not [sic] his surety may obtain reimbursement for workmen’s compensation benefits from an employee who recovers damages from a third party tortfeasor.”

The reimbursement of workmen’s compensation benefits to a negligent employer has been denied largely because it is contrary to the policy of the law for an employer (or his insurer) to profit from his own wrong. McDrummond v. Montgomery Elevator Co., 97 Idaho 679, 551 P.2d 966 (1976); Liberty Mutual Ins. Co. v. Adams, 91 Idaho 151, 417 P.2d 417 (1966); Associated Construction & Engineering Co. v. Workers Compensation Appeals Bd., 22 Cal.3d 829, 150 Cal.Rptr. 888, 587 P.2d 684 (1978); Witt v. Jackson, 57 Cal.2d 57, 17 Cal.Rptr. 369, 366 P.2d 641, 649 (1961).

Based on our focus in apportionment, and on the foundation of § 72-223, the system of apportionment generally works as follows. In those situations where the employer is not negligent, the employer is entitled to subrogate to the employee’s recovery against a third party, and thus obtain a reimbursement of the workmen’s compensation benefits he paid. Conversely, in those situations where the employer is negligent, the employer is denied this reimbursement and the third party is entitled to a credit against his judgment in the amount of the workmen’s compensation benefits the employer paid. Tucker, 100 Idaho at 603, 603 P.2d at 169. Thus, the employee’s award is reduced by the amount of workmen’s compensation he received. In either event, the employee does not retain both the workmen’s compensation benefits and the full tort recovery. Tucker, 100 Idaho at 603, 603 P.2d at 169; Shields v. Wyeth Laboratories, Inc., 95 Idaho 572, 513 P.2d 404 (1973); Associated Construction, 150 Cal.Rptr. at 890, 587 P.2d at 686; Witt, 17 Cal.Rptr. at 378, 366 P.2d at 650.

Typically, the employer or the third party seeks to determine whether the employer was negligent, each hoping to reduce his liability. In such cases, the negligence of the employer must be determined. In view of the release agreement in this case, however, the determination of the employer’s negligence is unnecessary. As previously noted, Farmers paid $3,000.00 in consideration for Nelson’s release of any claim Nelson may have had, based on the May 13, 1977 accident. Nelson’s subrogation rights were extinguished, and by virtue of Farmers’ payment to Nelson, Farmers became subrogated to Nelson’s right of reimbursement. May Trucking Co. v. International Harvester Co., 97 Idaho 319, 321, 543 P.2d 1159, 1161 (1975); Williams v. Johnston, 92 Idaho 292, 298, 442 P.2d 178, 184 (1968). Thus, in the event Nelson’s negligence was litigated, and Nelson was found not negligent, Farmers held Nelson’s right to be reimbursed for the workmen’s compensation benefits paid. Conversely, in the event Nelson was found negligent, Farmers retained its right to receive a credit towards his judgment, in the amount of the workmen’s compensation benefits paid. In either event, Farmers was entitled to the $5,638.52, either by way of reimbursement or by a credit. Therefore, in the posture of this case, the determination of the employer’s negligence was unnecessary.

The plaintiff relies on Pocatello Industrial Park Co. v. Steel West, Inc., 101 Idaho 783, 621 P.2d 399 (1980), for the proposition that the employer’s negligence must be determined. In Pocatello, we held that “[i]n order for the doctrine of collateral estoppel to apply the issue in question must have actually been litigated and resolved in the prior suit.” Id. at 786, 621 P.2d at 402. (Emphasis in original.) Because Pocatello was decided on the basis of collateral estoppel requirements, its holding is inapposite to the issues now before this Court.

Appellant next asserts that his judgment may not be reduced by the amount of workmen’s compensation benefits in order to prevent a double recovery. Our holding in Shields v. Wyeth, 95 Idaho 572, 513 P.2d 404 (1973), instructs otherwise. In Shields, we discussed whether the employer or its surety was entitled to a credit, in lieu of subrogation, where the employee settled a third-party claim before the permanent total disability award was issued. We cited with approval the following excerpt from Larson’s treatise on Workmen’s Compensation.

“It is equally elementary that the claimant should not be allowed to keep the entire amount both of his compensation award and of his common-law damage recovery ____

“It is true that in many jurisdictions the employee may collect both compensation and damages, as against the defendant’s objection of double recovery, since double recovery is prevented by the employee’s obligation to pay over the amount of compensation to the employer or insurer. But it is not true in any jurisdiction having a third-party statute that the employee may keep both recoveries.”

95 Idaho at 573-574, 513 P.2d at 405-406. In Shields, we granted the employer a credit against his liability in the amount of the third-party settlement, based on the following rationale.

“We can find nothing in the Idaho Workmen’s Compensation Laws in effect at the time this suit was brought to indicate that the legislature contemplated allowing an injured workman a ‘double recovery’ in situations where a third party was liable to pay for the damages sustained by the injured workman and a settlement was effected before a compensation award was made.”

95 Idaho at 574, 513 P.2d at 406.

We affirm the reasoning of Shields, and hold that it was not erroneous in this case for the trial court to reduce Schneider’s award by the amount of the workmen’s compensation benefits. This result comports with our focus in apportionment decisions discussed above. First, the apportionment of damages was equitable in this case. A reimbursement did not inure to the benefit of a negligent employer. The employer and third party arrived at a mutual agreement of their respective liability by virtue of their release agreement. This agreement relieved the court from litigating the issue of the employer’s negligence, without prejudicing Schneider’s recovery. Second, to allow Schneider to retain both the workmen’s compensation benefits and the full tort recovery, would be overcompensatory, and contrary to our holding in Shields.

Finally, Schneider contends that the trial court erroneously denied his motion for a new trial or judgment notwithstanding the verdict because the jury’s assessment of damages was grossly inadequate. We have held that

“this Court is firmly committed to the rule that a trial court possesses a discretion to be wisely exercised in granting or refusing to grant a new trial and that such discretion will not be disturbed on appeal unless it clearly appears to have been exercised unwisely and to have been manifestly abused.”

Blaine v. Byers, 91 Idaho 665, 671, 429 P.2d 397, 403 (1967) (emphasis in original); cited with approval in Dinneen v. Finch, 100 Idaho 620, 603 P.2d 575 (1979), and Meissner v. Smith, 94 Idaho 563, 494 P.2d 567 (1972).

Furthermore, in Dinneen, 100 Idaho at 626, 603 P.2d 575 we held as follows:

“While we must review the evidence, we are not in a position to ‘weigh’ it as a trial court can. Rather, the power of this Court over excessive or inadequate damages exists only when the facts are such that the excess or inadequacy appears as a matter of law. Blaine v. Byers, supra; Mendenhall v. MacGregor Triangle Co., [83 Idaho 145, 358 P.2d 860 (1961) ] citing Bond v. United Railroads, 159 Cal. 270, 113 P. 366 (1911).”

The damages here are not inadequate as a matter of law, nor has Schneider demonstrated that the trial court’s discretion was exercised unwisely or manifestly abused. Therefore, we affirm the trial court’s denial of Schneider’s motions for a new trial or a judgment notwithstanding the verdict.

We affirm on all counts.

Costs to respondent.

No attorney fees on appeal.

BAKES, J., concurs.

Footnotes

1

. The release agreement provided in pertinent part:

"That Argonaut Ins. Co. (Assured Nelson’s, Inc., claimant Larry Schneider) for and in consideration of the sum of Three thousand and no/100 Dollars, ($3,000.00), the receipt and sufficiency of which is hereby acknowledged, does hereby remise, release and forever discharge Farmers Merchant, Inc. and Aetna Cravens & Dargan his successors and assigns, and/or his, her, their heirs, executors, and administrators, and also any and all other persons, associations and corporations, whether herein named or referred to or not, and who, together with the above-named, may be jointly or severally liable to the Undersigned, of and from any and all, and all manner of actions, causes of action, rights, suits, covenants, contracts, agreements, judgments, claims, and demands whatsoever in law or equity, including claims for contribution, arising from and by reason of any and all KNOWN AND UNKNOWN, FORESEEN AND UNFORESEEN bodily and personal injuries or death, damage to property, and the consequences thereof, which heretofore have been, and which hereafter may be sustained by the Undersigned or by any and all persons, associations and corporations, whether herein named or referred to or not, and especially from all liability arising out of an occurrence that happened on or about the 13th day of May, 1978, at or near Blackfoot, Idaho."

2

. Appellant brought suit under former I.C. § 72-223 which provided as follows:

"72-223. Third party liability. — (1) The right to compensation under this law shall not be affected by the fact that the injury, occupational disease or death is caused under circumstances creating in some person other than the employer a legal liability to pay damages therefor, such person so liable being referred to as the third party. Such third party shall include those employers described in section 72-216, having under them contractors or subcontractors who have in fact complied with the provisions of section 72-301.

“(2) Action may be instituted against such third party by the employee, or in event compensation has been claimed and awarded, by the employee and employer jointly, in the employee’s name, or, if the employee refuses to participate in such action, by the employer in the employee’s name.

"(3) If compensation has been claimed and awarded, the employer having paid such compensation or having become liable therefor, shall be subrogated to the rights of the employee, to recover against such third party to the extent of the employer’s compensation liability.

"(4) On any recovery by the employee against a third party, the employer shall pay or have deducted from his subrogated portion thereof, a proportionate share of the costs and attorney’s fees incurred by the employee in obtaining such recovery.

“(5) If death results from the injury or occupational disease and if the employee leaves no dependents entitled to benefits under this law, the surety shall have a right of action against the third party for recovery of income benefits, reasonable expenses of medical and related services and burial expense actually paid by the surety and for recovery of amounts paid into the industrial special indemnity fund pursuant to section 72-420, and such right of action shall be in addition to any cause of action of the heirs or personal representatives of the deceased."