Public Employee Claims Division v. Chitwood
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PUBLIC EMPLOYEE CLAIMS
DIVISION v. Richard CHITWOOD
95-456 ___ S.W.2d ___
Supreme Court of Arkansas
Opinion delivered March 25,
1996
1. Workers' compensation --
third-party liability --
computation of carrier's
entitlement. -- Arkansas
Code Annotated 11-9-410
(Supp. 1995), which deals
with third-party
liability in workers'
compensation cases, not
only provides for the
intervening carrier's
lien upon proceeds
received in an action
against a third party but
also spells out how the
carrier's entitlement
shall be computed;
reasonable costs of
collection are first
deducted, and the
employee is awarded
outright the first one-
third of the net
proceeds; the insurance
carrier is given a first
lien on only two-thirds
of the net proceeds.
2. Workers' compensation --
subrogation -- appellee's
attorneys' election not
to collect full fee did
not affect determination
of appellant's claim. --
Although appellee's
attorneys did not take a
full one-third attorney's
fee of the gross amount
of the judgment, in order
to preserve their claim
against appellant for
one-third of the
subrogation amount, Ark.
Code Ann. 11-9-410
provides for the
attorney's entitlement to
be first deducted from
the gross amount, and
their election not to
collect their full fee
did not affect the
determination of
appellant's claim.
3. Workers' compensation --
subrogation -- Ark. Code
Ann. 11-9-410 does not
provide for splitting of
gross sum in order to
make pro rata allocation
of costs. -- The supreme
court rejected appellee's
assertion that Ark. Code
Ann. 11-9-410(a)(2)(A)
requires a compensation
carrier in all instances
to participate in the
payment of reasonable
costs of collection of a
personal injury claim,
including attorney's
fees; the statutory
section provides only
that reasonable costs of
collection shall first be
deducted from the gross
amount received before
the net amount is
allocated between the
claimant and subrogee;
the statute clearly does
not provide for splitting
of the gross sum in order
to make a pro rata
allocation of the costs
of collection from both
the claimant and the
insurance carrier, as
suggested by appellee.
4. Workers' compensation --
subrogation -- carrier's
situation discussed. --
The supreme court noted
that the insurance
carrier will bear none of
the costs of collection
where the gross judgment
amount is in excess of
three times the
subrogation claim, absent
an agreement with the
claimant's attorney, as
in appellee's case;
although the carrier will
receive less than the
full amount of its claim
where the judgment is
less than three times the
subrogation claim, in
such a situation the
carrier will always
recover twice the amount
that the claimant
receives, no matter how
small the judgment.
5. Statutes -- clear and
unambiguous language --
court's task is to
follow, not interpret. --
The supreme court could
not say that the General
Assembly had been
ambiguous in spelling out
precisely how a gross
judgment or settlement is
to be divided; where
statutory language is
clear and unambiguous,
the supreme court's task
is to follow the statute,
not interpret it.
Appeal from Union Circuit
Court; Carol Crafton Anthony,
Judge; reversed and remanded.
Richard S. Smith, for
appellant.
David E. Smith, for
appellee.
Andree Layton Roaf,
Justice.March 25, 1996.
*ADVREP7*
PUBLIC EMPLOYEE CLAIMS
DIVISION,
APPELLANT,
V.
RICHARD CHITWOOD,
APPELLEE,
95-456
APPEAL FROM THE UNION COUNTY
CIRCUIT COURT,
NO. CIV-90-752,
HON. CAROL CRAFTON ANTHONY,
JUDGE,
REVERSED AND REMANDED.
Andree Layton Roaf, Justice.
The issue in this appeal is whether the appellant Public
Employee Claims Division of the Arkansas Insurance Department
(PECD), the workers' compensation carrier for state agencies, owes
a one-third attorney fee as costs of collection from its
subrogation claim against a personal injury judgment awarded to
appellee Richard Chitwood, a state employee. We agree that the
Circuit Court erred in finding that Chitwood's attorneys were
entitled to recover one-third of PECD's subrogation claim as costs
of collection, and reverse.
Richard Chitwood, an employee of the Arkansas Department of
Labor, was involved in a job-related automobile accident in January
6, 1988. Chitwood filed a workers' compensation claim with PECD,
and also filed suit against the negligent driver, the driver's
employer, and their respective insurance companies. PECD paid
$8,096.80 in worker's compensation benefits to Chitwood and advised
Chitwood's attorney of its subrogation lien.
PECD learned of Chitwood's lawsuit a few days before the trial
date, and filed a Motion to Intervene and Complaint in Intervention
on the day of trial. The trial court granted the Motion to
Intervene, and trial was held on the third-party tort claim.
PECD's only participation in the litigation was to provide
Chitwood's attorney with copies of medical bills. The jury awarded
Chitwood $33,654.99. The trial court ordered the judgment paid
into the registry of the court pending resolution of the
subrogation claim, and allowed Chitwood to withdraw $25,549.14,
leaving $8,096.80, or the amount of PECD's claim. Chitwood's
attorney received one-third of the amount withdrawn as attorney's
fees plus court costs of $634.55, and the remainder was paid to
Chitwood.
After a hearing, the trial court ruled that since attorney's
fees had not been taken from the entire amount of the judgment,
one-third should be deducted from the $8,096.80 subrogation amount
for attorney's fees and costs. The trial court ordered $5,417.40
to be paid to PECD and the remainder paid to Chitwood and his
attorney.
PECD argues that the trial court incorrectly interpreted and
applied statutory law in finding that Chitwood's attorneys were
entitled to recover one-third of its subrogation claim as fees and
costs. Arkansas Code Annotated 11-9-410 (Supp. 1995) deals with
third-party liability, and provides in pertinent part:
(a) LIABILITY UNAFFECTED.
(1) The making of a claim for compensation
against any employer or carrier for the injury
or death of an employee shall not affect the
right of the employee, or his dependents, to
make claim or maintain an action in court
against any third party for the injury, but
the employer or his carrier shall be entitled
to reasonable notice and opportunity to join
in the action. If they, or either of them,
join in the action, they shall be entitled to
a first lien upon two-thirds (2/3) of the net
proceeds recovered in the action that remain
after the payment of the reasonable costs of
collection, for the payment to them of the
amount paid and to be paid by them as
compensation to the injured employee or his
dependents.
(2) The commencement of an action by an
employee or his dependents against a third
party for damages by reason of an injury to
which this chapter is applicable, or the
adjustment of any claim, shall not affect the
rights of the injured employee or his
dependents to recover compensation, but any
amount recovered by the injured employee or
his dependents from a third party shall be
applied as follows:
(A) Reasonable costs of collection shall
be deducted;
(B) Then, in every case, one-third (1/3)
of the remainder shall belong to the injured
employee or his dependents, as the case may
be;
(C) The remainder, or so much as is
necessary to discharge the actual amount of
the liability of the employer and the carrier;
and
(D) Any excess shall belong to the injured
employee or his dependents. (Emphasis added).
The statute provides not only for the intervening carrier's
lien upon proceeds received in an action against a third party, but
also spells out how the carrier's entitlement shall be computed.
Reasonable costs of collection are first deducted, and the employee
is awarded outright the first one-third of the net proceeds. The
insurance carrier is given a first lien on only two-thirds of the
net proceeds. PECD submits the following distribution as the
correct application of the statutory formula:
GROSS JUDGMENT SUM $33,645.99
COST OF COLLECTION (hypothetical) $ 1,000.00
AFTER COST AMOUNT $32,645.00
1/3 ATTORNEY FEE $10,882.00
NET AFTER FEE $21,763.00
1/3 TO CLAIMANT $ 7,254.34
BALANCE AVAILABLE FOR
SUBROGATION $14,508.66
SUBROGATION TO PUBLIC EMPLOYEE
CLAIMS DIVISION $ 8,096.80
BALANCE PAYABLE TO CLAIMANT
AND RESERVED AS FUTURE
CREDIT TO PUBLIC EMPLOYEE
CLAIMS DIVISION $ 6411.86
Chitwood's attorneys did not take a full one-third attorney's
fee of the gross amount of the judgment, in order to preserve their
claim against PECD for one-third of the subrogation amount.
However, the statute provides for the attorney's entitlement to
first be deducted from the gross amount, and their election not to
collect their full fee does not affect the determination of PECD's
claim.
Chitwood asserts that Ark. Code Ann. 11-9-410(a)(2)(A)
requires a compensation carrier in all instances to participate in
the payment of reasonable costs of collection of a personal injury
claim, including attorney's fees. We do not agree. This section
provides only that reasonable costs of collection shall first be
deducted from the gross amount received, before the net amount is
allocated between the claimant and subrogee. The statute clearly
does not provide for splitting of the gross sum in order to make a
pro rata allocation of the costs of collection from both the
claimant and the insurance carrier, as Chitwood suggests.
In fact, the insurance carrier will bear none of the costs of
collection where the gross judgment amount is in excess of three
times the subrogation claim, absent an agreement with the
claimant's attorney, as in Chitwood's case. Although the carrier
will receive less than the full amount of its claim where the
judgment is less than three times the subrogation claim, in such a
situation the carrier will always recover twice the amount that the
claimant receives, no matter how small the judgment. It is
debatable whether the carrier can ever be said to share in the
costs of collection under this statutory scheme. However, we
cannot say that the general assembly has been ambiguous in spelling
out precisely how a gross judgment or settlement is to be divided.
Where statutory language is clear and unambiguous, our task is to
follow the statute, not interpret it. See Office of Child Support
Enforcement v. Harnage, 322 Ark. 461, 910 S.W.2d 207 (1995);
Arkansas Dep't of Human Serv. v. State, 312 Ark. 481, 850 S.W.2d 847 (1993).
PECD cites only one case as supportive of its interpretation
of 11-9-410. In Continental Casualty Co. v. Sharp, 312 Ark. 286,
849 S.W.2d 481 (1993), we reversed the trial court's award to Sharp
of an attorney's fee from the insurance carrier's subrogation
claim, because Sharp's attorney had already collected a full one-
third attorney's fee from the gross amount of the judgment.
Chitwood submits that the holding in Sharp has left the door open
for the allocation of collection costs between the claimant and
insurance carrier where the attorney does not collect a full fee
from the gross amount. However, in Sharp, we said that the carrier
had "effectively paid its proportionate share of the attorney's
fees" pursuant to the statute, even though our holding resulted in
the carrier receiving the full amount of its subrogation claim and
paying none of the costs of collection.
Moreover, the several cases relied upon by Chitwood as
supportive of the trial court's ruling are also consistent with
today's holding. In Winfrey & Carlile v. Nickles Admr., 223 Ark.
894, 270 S.W.2d 923 (1954) this court affirmed an award to the
claimant's attorney of a fifty-percent contingency fee from the
gross judgment of $6,433.10; the carrier had resisted payment of
any costs of collection because it had employed separate counsel.
In Burt v. Hartford Acc. & Ind. Co., 252 Ark. 1236, 483 S.W.2d 218 (1972), the claimant's attorney was denied an attorney's fee
from the carrier's share of the recovery; however, the claimant had
resisted the carrier's intervention and the carrier was required to
retain counsel to assert its right to a lien. State Farm Mut.
Auto. Ins. Co. v. Bing, 305 Ark. 280, 808 S.W.2d 204 (1991),
involved a subrogation claim for medical payments made by the
claimant's automobile insurance carrier; such claims are governed
by a different statute, and this case is not relevant to the
interpretation of 11-9-410.
Reversed and remanded for further proceedings consistent with
this opinion.
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