C. A. & I., INC. VS. COMP COOK (CHRISTOPHER E.), ET AL.
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RENDERED: APRIL 8, 2011; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2010-CA-001306-WC
C.A. & I., INC.
v.
APPELLANT
PETITION FOR REVIEW OF A DECISION
OF THE WORKERS’ COMPENSATION BOARD
ACTION NO. WC-07-99325
CHRISTOPHER E. COOK;
HON. HOWARD E. FRASIER, JR.,
ADMINISTRATIVE LAW JUDGE; AND
WORKERS’ COMPENSATION
BOARD
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: VANMETER AND WINE, JUDGES; SHAKE,1 SENIOR JUDGE.
SHAKE, SENIOR JUDGE: C.A. & I., Inc. (C.A. & I.) appeals from a Workers’
Compensation Board (Board) opinion that re-calculated the subrogation credit
awarded by the Administrative Law Judge (ALJ) against the workers’
1
Senior Judge Ann O’Malley Shake sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statutes
(KRS) 21.580.
compensation benefits that C.A. & I. paid to its employee, Christopher Cook
(Cook). On appeal, C.A. & I. raises three issues: (1) whether AIK Selective SelfInsurance Fund v. Minton, 192 S.W.3d 415 (Ky. 2006), requires the ALJ to make a
baseline comparison between the total amount of attorney fees and costs and the
amount of the subrogation credit with any difference payable to the employer; (2)
whether the Board erred in applying the “made whole” doctrine to this subrogation
claim under KRS 342.700; and (3) whether the formula utilized by the Board
created double recovery by subtracting pain and suffering from the gross
settlement proceeds and then subtracting the attorney fees incurred in the pursuit of
pain and suffering damages. After a careful review of the briefs, applicable case
law, and the record, we affirm.
Cook is thirty-four years old and has a twelfth grade education. He
was employed as a coal truck driver by C.A. & I. On January 5, 2007, Cook was
injured on the job when the coal truck that he was driving was struck head-on by
another vehicle.2
Cook filed a workers’ compensation claim based upon the injuries that
he sustained. Pursuant to KRS 342.040, C.A. & I. paid temporary total disability
benefits at the rate of $484.64 per week from January 6, 2007 through April 24,
2008, which totaled $33,232.96. On December 9, 2009, the ALJ awarded Cook
benefits in the amount of $276.23 per week for a period of 425 weeks for a
permanent disability rating based upon a 19% AMA whole person impairment.
2
The driver of the vehicle that struck Cook was pronounced dead at the scene as a result of the
injuries that she sustained in the crash.
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This portion of Cook’s benefits totaled $117,397.75. C.A. & I. also paid Cook’s
medical expenses in the amount of $24,774.51. Cook’s workers’ compensation
benefits totaled $174,779.58.
Cook also filed an action against the driver of the vehicle involved in
the accident. On August 27, 2008, Cook received a settlement from the third party
in the amount of $25,000.00. Based upon Cook’s settlement, C.A. & I. claimed an
entitlement to a subrogation credit.
In an order entered on December 9, 2009, the ALJ awarded C.A. & I.
a subrogation credit in the amount of $2,358.19. Although Cook settled his claim
with the third party for $25,000, the ALJ determined that Cook’s actual damages
were $132,331.69. The ALJ reached this amount by adding together Cook’s
damages for past medical expenses ($24,774.51), lost wages ($33,232.96), and
pain and suffering, which the ALJ calculated by tripling Cook’s past medical
expenses ($24,774.51 x 3 = $74,323.53).
ALJ Calculation of Cook’s Actual Damages
Past Medical Expenses
Lost Wages
Pain and Suffering
Actual Damages
$24,774.51
$33,232.96
+ $ 74,323.53
$132,331.69
The ALJ determined that Cook’s personal injury settlement only
equaled 17.86% of Cook’s actual damages. The ALJ therefore reduced each
damage item to 17.86% of the actual damage amount, resulting in a potential
subrogation claim of $10,358.19 ($132,331.69 x 17.86% = $10,358.19). The ALJ
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then reduced the potential subrogation claim by $8,000, the amount of attorney
fees, and granted C.A. & I. a subrogation credit of $2,358.19.
On June 11, 2010, the Board issued an opinion concluding that the
ALJ miscalculated C.A. & I.’s subrogation credit. By its calculations, the Board
concluded that the employer’s subrogation credit was $1,588.87 rather than
$2,358.19. The Board concluded that the settlement agreement constituted
18.8919 % of Cook’s actual damages. The discrepancy between the percentage
used by the ALJ and the Board was caused by the amount of the settlement
agreement used in each calculation. The Board correctly determined that the
settlement agreement was $25,000.00. In its calculations, however, the ALJ cited
that the settlement amount was $23,360.00, which was erroneous.
To arrive at C.A. & I.’s total subrogation credit, the Board deducted
18.8919 % of the pain and suffering damages, $14,041.13, from the $25,000
personal injury settlement to arrive at C.A. & I.’s potential subrogation claim of
$10,598.87. This calculation was based upon the Board’s conclusion that pain and
suffering damages are not recoverable in workers’ compensation subrogation
claims.
The Board’s calculations also differed from the ALJ’s calculations in
the amount of attorney’s fees and costs. The Board subtracted $8,250.00 in
attorney’s fees from C.A. & I.’s potential subrogation credit. Then the Board
deducted two additional expenses in the amounts of $85.00 and $35.00 from the
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subrogation amount. This calculation yielded a total subrogation credit of
$1,588.87.
Board Calculation of Subrogation Credit
Settlement/Actual damages ratio: $25,000 ÷ $132,331.69 =18.8919%
Pain & suffering damages in settlement: 18.8919% x $74,323.53 = $14,041.13
Personal injury settlement
Pain & suffering (deduction)
Attorney fees (deduction)
Medicaid lien (deduction)
Expense (deduction)
Expense (deduction)
C.A. & I. Net Subrogation Credit
$25,000.00
$14,041.13
$8,250.00
$1,000.00
$85.00
$35.00
$1,588.87
This appeal follows.
When an employee is injured on the job the worker may recover
workers’ compensation benefits. When the worker is injured on the job through
the fault of a third party, the worker may also seek damages from the third party.
KRS 342.700 (1). The employer3 may seek subrogation against the third party for
the workers’ compensation benefits paid to the employee. Id. KRS 342.700 (1)
provides:
Whenever an injury for which compensation is payable
under this chapter has been sustained under
circumstances creating in some other person than the
employer a legal liability to pay damages, the injured
employee may either claim compensation or proceed at
law by civil action against the other person to recover
damages, or proceed both against the employer for
compensation and the other person to recover damages,
but he shall not collect from both. If the injured
3
The employer or the employer’s insurance company may seek subrogation for workers’
compensation benefits paid to the employee.
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employee elects to proceed at law by civil action against
the other person to recover damages, he shall give due
and timely notice to the employer and the special fund of
the filing of the action. If compensation is awarded
under this chapter, the employer, his insurance carrier,
the special fund, and the uninsured employer’s fund, or
any of them, having paid the compensation or having
become liable thereof, may recover in his or its own
name or that of the injured employee from the other
person in whom legal liability for damages exists, not to
exceed the indemnity paid and payable to the injured
employee, less the employee’s legal fees and
expense. . . .
C.A. & I. first questions whether Minton, 192 S.W.3d at 415, requires
the ALJ to make a baseline comparison between the total amount of attorney fees
and costs and the amount of the subrogation credit and allocate the difference to
the employer. Although employers may seek subrogation from third party
tortfeasors, the Kentucky Supreme Court stated, in AIK Selective Self-Insurance
Fund v. Bush, 74 S.W.3d 251 (Ky. 2002), that KRS 342.700 (1) requires the
employee’s entire legal expense to be deducted from the employer’s subrogation
credit. Id. at 257. In Minton, the Supreme Court reasoned that “[t]ort claims
involve a significant risk and require substantial energy in pursuing recovery. It is
only fair to require employers/insurers benefitting from the fruits of such an
endeavor to share in its costs.” Minton, 192 S.W.3d at 418.
C.A. & I. argues that this literal interpretation of KRS 342.700 (1) is
unfair and will result in employers failing to pursue subrogation for small workers’
compensation claims. This argument has been previously rejected by the Supreme
Court. The Court concluded that it is not unreasonable to deny subrogation credits
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from tort awards where the attorney fees and litigation costs exceed the amount of
the subrogation claim. Minton, 192 S.W.3d at 419.
Second, C.A. & I. claims that the Board erroneously held that the
“made whole” doctrine applies to statutory subrogation authorized by KRS
342.700 (1). The “made whole” doctrine is a common law principle that requires
the injured person to be “made whole” before the insurer recovers subrogation
credit. The “made whole” doctrine was adopted in Wine v. Globe American Cas.
Co., 917 S.W.2d 558 (Ky. 1996), and made applicable to workers’ compensation
cases in Great American Ins. Cos. v. Witt, 964 S.W.2d 428 (Ky. App. 1998).
However, Witt was overruled by AIK Selective Self-Insurance Fund v. Bush, 74
S.W.3d 251 (Ky. 2002).
C.A. & I. relies on Bush to argue that the common law “made whole”
doctrine is precluded by KRS 342.700 (1). In Bush, the Supreme Court stated:
. . . KRS 342.700 (1) expresses a legislative purpose that
the employer or insurer is entitled to recoup from the
third-party tortfeasor the workers’ compensation benefits
it paid to the injured worker: thus, the common law
‘made whole’ rule cannot be applied to preclude that
recovery.
Id. at 257 (internal citations omitted).
Four years after Bush was rendered, the Kentucky Supreme Court
specifically re-addressed this issue in Minton. The Court concluded that KRS
342.700 (1) effectively codified the “made whole” doctrine in workers’
compensation subrogation claims. Minton, 192 S.W.3d at 419.
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While the ‘made whole’ doctrine may not be employed to
trump or undermine the statutory scheme set forth in
workers’ compensation cases . . . its underlying
principles remain relevant when explicating the statute’s
primary functions. Paying workers’ compensation
benefits is an obligation derived by contract. In
exchange for agreeing to pay benefits, employersubrogees receive revenues and profits from the labor of
its employees, as does the insurer-subrogee consequently
receive its revenue and profits from the premiums paid
by the employer. Thus, in order for the injured worker to
receive the full benefit of his bargain, his right to receive
a maximum recovery under the statute must take priority
over the right of the employer/insurer to receive
reimbursement for the benefits which it was already
obligated to pay by contract. . . . The conditional right to
subrogation authorized by KRS 342.700 (1) merely
recognizes and codifies this underlying principle of the
‘made whole’ doctrine.
Id. (internal citations omitted). In light of the Supreme Court’s opinion in Minton,
the Board did not err in concluding that the “made whole” doctrine applied to
workers’ compensation claims through KRS 342.700 (1).
Finally, C.A. & I. claims that the Board’s calculations resulted in
double recovery by subtracting pain and suffering damages from the settlement
proceeds and then subtracting attorney fees which were incurred in the pursuit of
pain and suffering damages. This issue was also specifically addressed by the
Court in Minton. The Court concluded that the failure to apportion fees incurred in
the pursuit of pain and suffering damages from other fees deducted from the
subrogation claim does not constitute double recovery. The Court reasoned that,
“[i]t is not irrational for the legislature to regard the cost of the injured worker’s
pursuit of a tort judgment as a whole and singular endeavor, not subject to
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apportionment based on the elements of damages actually awarded.” Id. at 419.
Therefore, no error existed in the Board’s failure to deduct fees incurred in the
pursuit of pain and suffering damages.
Accordingly, we affirm the Board’s opinion.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
W. Barry Lewis
Hazard, Kentucky
John Earl Hunt
Stanville, Kentucky
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