White v. Weinberger Builders, Inc.

242 N.W.2d 427, 397 Mich. 23

• Court: Michigan Supreme Court
• Decided: June 4, 1976
• Docket: Docket 55304, 55305, 55339, 55346
• Status: Published

Opinions

Fitzgerald, J.

I would affirm the decisions of the Workmen’s Compensation Appeal Board and the Court of Appeals. The Second Injury Fund should hot be subjected to a separate, independent hearing to determine whether the fund is liable for differential payments when the claimant and employer redeem all alleged potential employer liability by entering into a negotiated settlement where employer liability has been neither admitted nor adjudicated.

This Court’s review is limited to a specific legal issue which is of major significance to the Workmen’s Compensation Law of Michigan. The factual circumstances of these four consolidated cases were succinctly stated in the Court of Appeals opinion.¹ In each case, a redemption agreement² was entered into between the injured claimant and the employer and redemption orders approving the agreements were issued by the hearing referee. Each then sought total and permanent disability benefits from the Second Injury Fund. ³

The claims of plaintiffs White, Moorhouse, and Pitts were dismissed in separate proceedings by the hearing referee on the basis that the Second Injury Fund’s liability is contingent upon payment of disability benefits by the employer or its insurance carrier following an admission or determination of employer liability. The Workmen’s Compensation Appeal Board affirmed in each case. Plaintiff Boyko’s claim differed in that it was dismissed "without prejudice to plaintiff’s right to re-file against said defendant [Second Injury Fund] in the future”. Boyko refiled., prevailed, and was awarded total and permanent disability benefits. However, the board reversed the referee’s decision and held that redemption of liability prior to a hearing on the merits of the claim constituted "neither acknowledgement nor legal establishment of Second Injury Fund liability”.

Leave was granted by the Court of Appeals and the four cases were consolidated for oral argument. That Court affirmed the board’s decision in holding that the "liability of the Second Injury Fund is derivative from that of the employer, so that the fund cannot be subjected to a separate, independent hearing as to liability for differential payments once the employer’s alleged prospective liability has been redeemed via a negotiated settlement”.⁴ We granted leave to consider the correctness of this ruling.

I would adopt entirely the analysis of and the result reached by the Court of Appeals opinion. My comments address those theories advanced by plaintiffs either not discussed by the Court of Appeals or which bear emphasis or elaboration.

Plaintiffs contend that Derouin v Director of Workmen’s Compensation Department, 19 Mich App 309; 172 NW2d 463 (1969), is not specifically limited to cases involving a previous award of permanent and total disability benefits. Rather than "break new ground” by restricting the applicability of Derouin, as plaintiffs argue, I can conceive of no interpretation other than that given by the board to the statement: who on or after June 25, 1955, is entitled to receive payments of workmen’s compensation, once these facts are determined affirmatively, the Second Injury Fund is required to pay the increased benefits as stated in the act.” (Emphasis added.) Derouin, supra, p 313.

"Although payment from the fund is dependent in the first instance upon the employee being a permanently and totally disabled person, as defined in the act,

There is no inconsistency in maintaining that the fund’s liability is derivative from that of the employer, yet requiring it to continue payments after the employer terminated its obligation to the plaintiff. The fund’s obligation to pay became separate and apart from the employer once it was ordered to pay and not before.⁵ I would affirm the interpretation given Derouin by the board and the Court of Appeals.⁶

Plaintiffs argue that if the Second Injury Fund’s liability were truly derivative, the fund should be entitled to share in the proceeds of a third-party recovery. The fund was denied such participation in Mead v Peterson-King Co, 24 Mich App 530; 180 NW2d 304 (1970). There were no provisions within MCLA 413.15; MSA 17.189⁷ which authorize the fund to share proceeds received from a third party. The statute permitted an employer or its compensation carrier to be subrogated to the rights of the employee against a third-party tortfeasor. These provisions relating to the mitigation of employer liability have no relevance to either the establishment of employer or Second Injury Fund liability or the financial responsibilities resulting from a redemption agreement.

Plaintiffs next contend that under proper circumstances the Second Injury Fund is liable for all additional total and permanent disability benefits in excess of $10,500. It is their belief that the fund may be obligated to pay differential benefits even though the employer has no obligation whatsoever. I fail to see how plaintiffs’ position gains support from the case authority cited. In Felcoskie v Lakey Foundry Corp, 382 Mich 438; 170 NW2d 129 (1969), the employee was required to offer proofs that the dust disease suffered by the claimant was so common and widespread that it represented a threat to the industry comparable to those specified diseases which limited employer liability to $10,500. The case dealt with the classification of a dust disease to determine the applicability of a statutory limitation upon employer liability after the employer was held responsible for total and permanent disability benefits. If this classification is the "proper circumstance” to which plaintiffs refer, I remain unconvinced of its application here.

As to plaintiffs’ point that the fund can be obligated to pay differential benefits even where the employer’s obligation is zero, I would concede the accuracy of the statement but again question its applicability to this case. King v Second Injury Fund, 382 Mich 480; 170 NW2d 1 (1969), involved the construction of a 1927 statute which limited employer liability to two-thirds of claimant’s average weekly wage and the 1955 amendment which provided for payment from the Second Injury Fund based upon an amended schedule of workmen’s compensation benefits. At issue was the amount of differential payments due plaintiff from the Second Injury Fund. The case simply restricted the application of the statutory limitation of weekly benefits to the employer. The Second Injury Fund was required to pay an amount equal to the difference between the amount to which claimant was entitled in 1955 and the amount provided for total and permanent disability based upon the amended schedule of workmen’s compensation benefits. The employer’s obligation to the claimant was zero, as plaintiffs indicate, but due only to the fact that the period for which the employer was liable had terminated. Moreover, in King, unlike the instant case, there was a determination that plaintiff was entitled to total and permanent disability benefits.

Finally, the statutory language of MCLA 418.521(2); MSA 17.237(521)(2)⁸ providing differential benefits to those permanently and totally disabled requires that the claimant be entitled to receive payment of workmen’s compensation benefits. In the absence of a prior determination of employer liability, a redemption agreement between a claimant and an employer or insurance carrier does not entitle a claimant to benefits and constitutes neither an admission nor an adjudication of employer liability.

Affirmed.

Coleman, Lindemer, and Ryan, JJ., concurred with Fitzgerald, J.

1 "John B. White was a race driver who was injured on June 14, 1964 while driving one of defendant Weinberger’s vehicles at Terre Haute, Indiana. His injuries included partial severing of the spinal cord, leaving him described by medical testimony as a tetraplegic. There was strong disagreement over his actual employment status at the time of his injury and defendant and its insurer never admitted to liability. No voluntary compensation was paid until a redemption agreement was reached in the amount of $75,000. This was paid in the form of a six-month 'jurisdictional payment’ in the amount of $1,539 at the time of the redemption hearing, with the balance paid subsequent to the approval by the referee and director of the bureau. The record reveals that plaintiff was completely aware of his options before the redemption was consummated. Plaintiff and his counsel made clear their intent to proceed against the fund for additional benefits, but plaintiff acknowledged that he would be willing to redeem for the stated sum regardless of the outcome of his pending claim against the fund. No hearing on the merits of plaintiffs claim against defendant Weinberger was ever held, nor was any decision ever entered in that regard.

“John Boyko was injured when struck in the back by a hi-lo truck on October 19, 1957 and has not worked since November 14, 1957. Defendant Chrysler Corporation voluntarily paid total disability weekly benefits to the end of the statutory 500-week period. Plaintiff Boyko then petitioned for permanent and total disability, claiming loss of industrial use of both legs. The claim was denied by Chrysler. A redemption was entered into between plaintiff and Chrysler in the amount of $5,400 and was approved by the referee. The Second Injury Fund was dismissed as a defendant 'without prejudice to plaintiff’s right to refile against said defendant in the future’.

"Hansel O. Moorhouse fell from a ladder while in the employment of defendant Candler Company, at age 70, on September 11, 1956. His injury was reported as 'severe spinal injury’, and voluntarily weekly benefits were paid for 500 weeks. At the end of this period, plaintiff petitioned for permanent and total disability based on the loss of industrial use of his legs. A redemption of defendant firm’s prospective liability was approved by the referee in the amount of $5,000. No proofs were taken on the claim of loss of industrial use. The record reveals that plaintiff and counsel intended to proceed against the Second Injury Fund subsequent to the redemption, but were also aware that the redemption involved possible waiver of plaintiff’s right to proceed against the fund.

"Roosevelt Pitts froze the fingers of both hands while working for a gas station on January 1, 1968 in sub-zero weather. This resulted in amputations through the middle phalanges of the four fingers of the left hand and through the middle phalanges of the index and middle fingers of the right hand. No weekly benefits were paid because of a lack of insurance being carried by the gas station proprietor, and because there was (quoting plaintiffs brief) 'substantial question as to whether the Citron Oil Company was a statutory employer within the meaning of Section 10(a) of Part I of the Workmen’s Compensation Act’, formerly MCLA 411.10; MSA 17.150, currently MCLA 418.171; MSA 17.237(171). The liability of defendant gas station and defendant oil company was redeemed for $9,000 in an action approved by the referee. Plaintiff’s counsel stated on the record at the redemption hearing that he believed 'there is a good chance of perhaps collecting benefits from the second injury fund even though this Redemption is approved’. Plaintiff thereafter petitioned for benefits from the fund, claiming loss of industrial use of both hands.” 49 Mich App 430, 432-434; 212 NW2d 307, 309-310.

2 MCLA 412.22; MSA 17.172, currently MCLA 418.835; MSA 17.237(835), provided:

"Whenever any weekly payment has been continued for not less than 6 months, the liability therefor may be redeemed by the payment of a lump sum by agreement of the parties, subject to the approval of the compensation commission, and said compensation commission may at any time direct in any case, if special circumstances be found which in its judgment require the same, that the deferred payments due under this act be commuted on the present worth thereof at 5% per annum to 1 or more lump sum payments, and that such payments shall be made by the employer or the insurance company carrying such risk, or commissioner of insurance. When an application is made to redeem liability, the application may, within the discretion of the department be treated also as being an application for an advance lump sum payment. The filing of a petition for redemption or advance lump sum payment shall not be considered an admission of liability and in any case where the department treats any application for redemption as an application for advance lump sum payment under this section, the employer shall be entitled to a hearing on the question of liability.”

3 MCLA 412.9(a); MSA 17.159(a) provided:

" * * * Any permanently and totally disabled person as defined in this act who, on or after June 25, 1955, is entitled to receive payments of workmen’s compensation under this act in amounts per week of less than is presently provided in the workmen’s compensation schedule of benefits for permanent and total disability and for a lesser number of weeks than the duration of such permanent and total disability shall after the effective date of any amendatory act, by which his disability is defined as permanent and total disability or by which the weekly benefit for permanent and total disability is increased, receive weekly, without application, from the second injury fund, an amount equal to the difference between what he is now or shall hereafter be entitled to receive from his employer under the provisions of this act as the same was in effect at the time of his injury and the amount now provided for his permanent and total disability by this or any other amendatory act with appropriate application of the provisions of paragraphs (b), (c), (d) and (e) of this section since the date of injury. Payments from this second injury fund shall continue after the period for which any such person is otherwise entitled to compensation under this act for the duration of such permanent and total disability according to the full rate provided in the schedule of benefits.”

4 49 Mich App 430, 432; 212 NW2d 307 (1973).

5 2 Larson’s Workmen’s Compensation Law, § 59.31, pp 10-292 to 10-293.

6 Plaintiffs also cite Dokter v City of Holland, 1971 WCABO 730, in support of their contention that the fund’s liability is separate and apart from the employer. However, in that case, plaintiff claimed benefits from the deceased’s employer as a dependent widow in her own right and also from the Second Injury Fund as administratrix of the deceased’s estate. Redemption of the former claim did not foreclose the latter. Further, as indicated by defendants, the liability of the fund for differential payment differs greatly from employers’ liability for death benefits.

7 "If the injured employee or his dependents or personal representative does not commence such action within 1 year after the occurrence of the personal injury, then the employer or its compensation insurance carrier may, within the period of time for the commencement of actions prescribed by statute, enforce the liability of such other person in the name of that person.”

8 This subsection (previously MCLA 412.9[a]; MSA 17.159[9] [a]) provides:

"Any permanently and totally disabled person as defined in this act, if such total and permanent disability arose out of and in the course of his employment, who, on and after June 25, 1955, is entitled to receive payments of workmen’s compensation in amounts per week of less than is presently provided in the workmen’s compensation schedule of benefits for permanent and total disability, and for a lesser number of weeks than the duration of such permanent and total disability, after the effective date of any amendatory act by which his disability is defined as permanent and total disability, or by which the weekly benefits for permanent and total disability are increased, shall receive weekly from the carrier on behalf of the second injury fund differential benefits equal to the difference between what he is now or shall hereafter be entitled to receive from his employer under the provisions of this act as the same was in effect at the time of his injury, and the amounts now provided for his permanent and total disability by this or any other amendatory act, with appropriate application of the provisions of sections 351 to 359.”