Tucker v. Clare Bros. Ltd.

493 N.W.2d 918, 196 Mich. App. 513

Opinions

Connor, J.

Appellants R. A. Townsend Company and Citizens Insurance Company appeal as of right from a final judgment entered on October 29, 1990, in favor of plaintiffs Maurice and Donna Tucker in their action for personal injury. We remand to the trial court for additional proceedings.

Maurice Tucker suffered personal injuries while in the course of delivering a furnace for his employer, R. A. Townsend Company. Plaintiffs sued the manufacturer of the furnace being delivered, defendant Clare Brothers Limited. It was alleged that plaintiff was injured when a plastic band holding the furnace in the packaging broke while the furnace was being unloaded from the truck, causing plaintiff to fall. Plaintiff Maurice Tucker claimed he suffered severe physical injuries to his shoulders, back, head, skeletal frame, and internal organs. Plaintiff Donna Tucker alleged that as a result of her husband’s injuries, she suffered a loss of consortium.

On September 6, 1990, an attorney for Citizens Insurance Company, Townsend’s workers’ compensation carrier, wrote to plaintiffs’ attorney regarding the trial date of September 17, 1990. The letter also provided notice to plaintiffs that Citizens was asserting its workers’ compensation lien for over $100,000 in weekly and medical benefits paid to plaintiff Maurice Tucker. Copies of the letter were provided to defense counsel and the trial court.

Instead of proceeding to trial as scheduled, plaintiffs and defendant agreed to settle, and on October 4, 1990, plaintiffs filed a motion for entry of judgment. The proposed judgment provided that plaintiff Donna Tucker would receive $30,000, while plaintiff Maurice Tucker would receive $10,000. Costs would not be awarded to either side.

On October 26, 1990, Townsend and Citizens filed a joint appearance and answer to the motion for entry of a judgment. In the answer, Townsend and Citizens requested that the proposed judgment not be entered and that an evidentiary hearing be held to determine plaintiff Donna Tucker’s actual damages. Townsend and Citizens alleged that the allocation of the damages between the two plaintiffs was disproportionate and an attempt to circumvent the workers’ compensation lien because any award made to plaintiff Donna Tucker could not be reached to satisfy the lien.

The trial court heard the motion for entry of a judgment on October 29, 1990, and ruled as follows:

The Court: Well, as I perceive the matter, we have a case here involving a closed-head injury to an individual who would receive, as I understand it, $10,000 under the $40,000 settlement as allocated in the proposed judgment. The spouse would receive $30,000. And the rationale for this is that the liability of Clare Brothers, Limited, was tenuous at best and, further, that the mediation panel awarded $30,000 as its considered opinion as to how much the case was worth. And also, there was the prospect of a significant amount of dollars involved in possible sanctions if the plaintiff proceeded with his claim, notwithstanding the fact that the mediators had assessed the case at less than what the settlement was.

So it seems to me that, first of all, as to the value of the case, the $40,000 settlement is appropriate and reasonable. It’s certainly not excessive or it’s not a sham. It looks to me like, under the facts and circumstances of this case, it’s a bona fide, arm’s length settlement. Now the question then becomes whether the allocation is appropriate.

It seems to me again that even though there’s no doubt in my mind that the dollar amount of the medical and the pain and suffering that Mr. Tucker sustained would ordinarily be considered greater than what his wife’s loss of consortium would be, under the facts and circumstances of this case, the value of his interest was substan tially diminished by the fact of the mediator’s award of such a comparatively low amount and also the fact that the case was one of tenuous liability. Certainly her claim would be one of some independence and magnitude that contrasted with his claims status.

I think, under the facts and circumstances of this case as I understand them, that the judgment is appropriate, and I’ve signed it. We’re never going to reach perfection. I don’t find it to be the kind of derogation of the work comp carrier’s rights that would warrant its not being approved, so I’ve signed it.

Townsend and Citizens filed this appeal, arguing that the trial court erred in approving the settlement without first granting their request for an evidentiary hearing regarding the actual damages sustained by plaintiff Donna Tucker for loss of consortium. Townsend and Citizens argue that the allocation of the settlement evidences an intent to circumvent the lien for workers’ compensation proceeds and that the parties must justify the division provided in the settlement.

Initially, we must address defendant’s argument that Townsend and Citizens never formally intervened in this matter by complying with MCR 2.209(C) and should have been barred from objecting to the settlement both below and on appeal. This issue was first raised on appeal. Defendant did not file a cross appeal challenging Townsend’s and Citizens’ appearance in this case in the lower court. For these reasons, we could decline to address the issue. Joyce v Vemulapalli, 193 Mich App 225, 228; 483 NW2d 445 (1992); Kim v Ford Motor Co, 170 Mich App 544, 550; 429 NW2d 203 (1988). However, we note that Townsend and Citizens are real parties in interest and consequently they could have intervened in this case. The par ties’ treatment of Townsend and Citizens’ appearance and answer acknowledges this. Had plaintiffs or defendant objected below on the ground that Townsend and Citizens did not comply with the court rules for intervention, any error could have been easily corrected, and it is clear that Townsend and Citizens would have been allowed to intervene. See Harrison v Ford Motor Co, 370 Mich 683, 686; 122 NW2d 680 (1963); Mason v Scarpuzza, 147 Mich App 180, 184-185; 383 NW2d 158 (1985); MCL 418.827(1); MSA 17.237(827)(1). Compare American States Ins Co v Albin, 118 Mich App 201, 209-210; 324 NW2d 574 (1982); Kolar v Hudson, 55 Mich App 114, 118-120; 222 NW2d 53 (1974).¹ Moreover, although the better practice is to formally intervene, whether one has the right to intervene does not affect the statutory right to a lien against any proceeds of the third-party action. A workers’ compensation carrier is not under an obligation to intervene in a third-party tort action in order to protect its statutory lien. Fritsch v Magnaflux Corp, 150 Mich App 573, 578; 389 NW2d 94 (1986); Ohio Farmer’s Ins Co v Neff 112 Mich App 53; 315 NW2d 553 (1981).² However, because it is clear that Townsend and Citizens in fact sought to timely intervene in this matter, but merely failed to file a motion to intervene, we now correct the lower court record to reflect that Townsend and Citizens are permitted to intervene, nunc pro tunc, to cure this procedural defect. MCR 7.216(A)(2). Krajewski v Klawon, 84 Mich App 532, 536-537; 270 NW2d 9 (1978).

This Court has held that neither the employer’s nor the workers’ compensation carrier’s right to reimbursement extends to a spouse’s recovery of damages for loss of consortium for nonfatal injuries to the employee. Treadeau v Wausau Area Contractors, Inc, 112 Mich App 130, 136-137; 316 NW2d 231 (1982); Lone v Esco Elevators, Inc, 78 Mich App 97, 106-108, n 7; 259 NW2d 869 (1977). Compare Eddington Estate v Eppert Oil Co, 441 Mich 200, 207, n 5; — NW2d — (1992); Hearns v Ujkaj, 180 Mich App 363, 370-371; 446 NW2d 657 (1989). Townsend and Citizens point out that by allocating a greater share of the settlement to plaintiff Donna Tucker, plaintiffs have avoided subjecting the bulk of the settlement to the workers’ compensation lien. The parties conceded that this was the result below, but argue that the allocation is justified because defendant would have had to pay a greater portion to Donna Tucker rather than Maurice Tucker because of the amount of setoffs that could affect Maurice Tucker’s allocation. The only setoff defendant refers to is the workers’ compensation insurance benefits paid. by Townsend and Citizens. Under MCL 600.6303(4); MSA 27A.6303(4), these benefits do not fall within the definition of a collateral source³ for purposes of a setoff for economic damages because Townsend and Citizens are entitled by law to a lien for these insurance benefits. Accordingly, the justification for a significant reduction of plaintiff Maurice Tucker’s award, but not for plaintiff Donna Tucker’s award, has not been established by the parties.

We believe the parties’ settlement division does not properly represent the actual amount of damages each plaintiff would have been entitled to receive, given their justification for the allocation. From our review of the record, it appears that the parties have attempted to circumvent the lien by arbitrarily determining an allocation of the settlement. As a result of this settlement, the bulk of the $10,000 payment would go to Townsend and Citizens, after expenses, while the $30,000 payment would go to Donna Tucker. On the record made, we find that the parties have not established that the apportionment of the settlement represented Donna Tucker’s actual damages. See Fritsch, supra, pp 579-580; Treadeau, supra, pp 136-137.

We believe that the trial court must conduct an evidentiary hearing to determine the damages sustained by plaintiff Donna Tucker, in comparison to her husband’s injuries, and adjust the settlement allocation appropriately.⁴

Reversed and remanded for proceedings consistent with this opinion. We do not retain jurisdiction.

Hood, P.J., concurred.

Footnotes

1

We believe these cases, which generally hold that an appellant who does not perfect his status as an intervening party lacks standing as an aggrieved party under MCR 7.203(A), can be distinguished. In American States, the appellant was not granted the status of an intervening party and also failed to perfect the record by filing pleadings in support of intervention. American States, supra, pp 209-210. In Kolar, the appellant also failed to state in a pleading the grounds for intervention. Because the appellant in Kolar was requesting affirmative action against the parties, a complaint was required, not merely an answer or other response. Consequently, the failure to file a complaint setting forth the grounds for intervention was fatal to his appeal. However, he also was not bound by the trial court’s determinations in the original action. Kolar, supra, pp 119-120. In contrast, in the case at bar, the intervening parties’ participation was limited to protecting their respective rights to a lien, which we believe was adequately explained by their joint answer in objecting to the proposed judgment. It is clear that all parties and the trial court believed Townsend and Citizens had a right to participate in these proceedings to protect their lien. Thus, to affirm for the reason that no formal motion to intervene was made would merely place form over substance.

2

Some comment at this point is necessary to address the concerns raised by Judge R. C. Kaufman in his dissent. First, the dissenting opinion ignores the statutory mandate that any recovery against a third party "shall ñrst 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.” MCL 418.827(5); MSA 17.237(827)(5); emphasis added.

Second, nothing in MCL 418.827; MSA 17.237(827) mandates that the allocation of any recovery be dependent upon the employer’s or the carrier’s actual intervention; these parties are given the right to intervene, but are not required to intervene. MCL 418.827(1); MSA 17.237(827)(1).

Consequently, we believe that the Legislature has given a priority to the employer’s or the carrier’s right of first recovery, and has chosen not to make this right of recovery dependent upon formal intervention. In this case, the employer and the carrier both informally objected to the proposed settlement before it was approved by the trial court, and the parties did not object to either having standing to make objections below. We believe that the parties’ failure to raise any objections to Townsend’s and Citizens’ failure to formally intervene waives the issue. As we have already noted, both Townsend and Citizens had the right to intervene and any error associated with failing to formally do so could have been easily corrected in the trial court if the parties had made timely objections. As a matter of judicial economy, we also believe that intervention is the favored method for resolving such issues, rather than creating a multiplicity of suits by employers and insurers filing separate actions against third-party tortfeasors, as the dissent endorses.

We believe Judge Kaufman’s reliance on out-of-state authority, Rascop v Nationwide Carriers, 281 NW2d 170 (Minn, 1979), is also misplaced. In that case, the employer-insurer did not intervene in the tort action or make its objections to the settlement allocation known to the trial judge. Id., p 171. The employer-insurer sent a letter to the employee’s attorney, stating its objections. However, the case was settled in the trial court with no objection on the record from the employer-insurer. Id. It was not until the employee requested approval of the settlement in the Workers’ Compensation Division that the employer-insurer noted its objections. Id., pp 171-172. Under Michigan’s workers’ compensation law, like Minnesota’s law, any issues over apportionment of a third-party tort recovery must be decided in the court where the tort action was resolved, not before the administrative agency. Seay v Spartan Aggregate, Inc, 183 Mich App 46, 49-51; 454 NW2d 186 (1990).

We believe that the court in Rascop based a portion of its analysis on the failure of the employer-insurer to make any effort to convey its objections to the trial court before the settlement-was approved, as well as the failure to formally intervene. Id., pp 171, 173.

In the case at bar, it clearly was communicated to the trial court, before this settlement was approved, that both the employer and the insurer had no objection to the settlement itself, but that they strenuously objected to the allocation of the settlement proceeds. Their request for an evidentiary hearing was conveyed to the trial court in a timely fashion before the court approved the settlement. While formal intervention is preferable, we believe that it is sufficient if the employer or insurer has appeared in court and notice of specific objections has been provided to the trial court before the settlement is approved. See, e.g., Easterlin v State, 330 NW2d 704, 708 (Minn, 1983); Naig v Bloomington Sanitation, 258 NW2d 891, 894 (Minn, 1977). The situation where the insurer or employer does not intervene and fails to appear or object before a judgment is accepted is not before this Court.

3

MCL 600.6303(4); MSA 27A.6303(4) provides in pertinent part as follows: "As used in this section, 'collateral source’ means benefits received or receivable from an insurance policy; . . . worker’s compensation benefits .... Collateral source does not include . . . benefits paid by a person, partnership, association, corporation, or other legal entity entitled by law to a lien against the proceeds of a recovery by a plaintiff in a civil action for damages. ...” To apply the collateral source rule for economic damages in this situation would effectively nullify the employer’s or insurer’s right under MCL 418.827; MSA 17.237(827) to a lien against any recovery from third-party tortfeasors.

4

We again must address the concerns raised by Judge Kaufman in his dissent, regarding our directions to the trial court. We have not established any set formula for the trial court to follow upon remand to assess whether the settlement proposed by the parties was fair. We believe the decision whether the settlement involved a fair apportionment will be dependent upon additional evidence and arguments not currently reflected in the record.' In fact, because Donna Tucker’s claim was for loss of consortium, reference to a precise formula for determining damages is not appropriate. See, e.g., In re Claim of Carr, 189 Mich App 234, 238; 471 NW2d 637 (1991). What other factors will enter into this decision will depend upon what the parties argue before the trial court. In deciding if an allocation is fair, “a court must examine and weigh all the factors existing that bear upon the issue. By necessity, each factual setting will contain different factors to be considered. No hard and fast mathematical ratio can be applicable to all cases without risking gross injustice. Each allocation must turn on its own merits. The court must conduct an ad hoc balancing of the factors and circumstances of the settlement.” Krause v Merickel, 344 NW2d 398, 403 (Minn, 1984). See also Locher v Gareis, 411 NW2d 273, 276 (Minn App, 1987). However, in order to aid appellate review, the trial court must state on the record the findings and conclusions justifying its decision.