Nevada Bell v. Hurn

774 P.2d 1002 (1989)

NEVADA BELL, Appellant, v. Brian C. HURN, Respondent.

No. 19129.

Supreme Court of Nevada.

May 12, 1989.

Woodburn, Wedge and Jeppson and Suellen Fulstone, Reno, for appellant.

Durney and Brennan, Reno, for respondent.

PER CURIAM:

Respondent, Brian Hurn, is an employee of appellant, Nevada Bell. Hurn was injured in the course of his employment and received worker's compensation benefits from Nevada Bell. Hurn instituted two civil actions against third parties for compensatory damages resulting from the accident. One action was brought against the tortfeasor, Mr. Padellford, and the other action was brought against Hurn's own insurer, Valley Forge. Nevada Bell filed a notice of lien pursuant to NRS 616.560, the Nevada Industrial Insurance Act, in the amount of $24,901.60.

Hurn settled the Padellford action for $50,000.00. Subsequently, Hurn settled the action against his insurer for $30,000.00, bringing his total recovery to $80,000.00. The total litigation expenses for the two actions was $27,658.90. Hurn then moved for partial summary judgment to apportion the litigation expenses according to the formula used in Breen v. Caesar's Palace, 102 Nev. 79, 715 P.2d 1070 (1986). Nevada Bell opposed Hurn's motion and proposed two alternate apportionment formulas based upon the ratio of its lien to the gross settlement proceeds. The district court apportioned the litigation expenses according to the Breen formula.[1] This appeal followed.

Nevada Bell argues that the Breen formula is inequitable because its share of the *1003 net proceeds, after paying its share of the litigation expenses, decreases while Hurn's share of net proceeds increases. Consequently, Nevada Bell argues that the Breen formula should be rejected in favor of one of the formulas used in other jurisdictions. We disagree.

Other jurisdictions have used two methods for determining the insurer's share of litigation expenses. The first method reduces the insurer's award by the same percentage as the litigation expenses bear to the total recovery. See Transport Indemnity Co. v. Garcia, 89 N.M. 342, 552 P.2d 473 (N.M.Ct.App. 1976); Worthen v. Shurtleff and Andrews, Inc., 19 Utah 2d 80, 426 P.2d 223 (Utah 1967); Security Insurance Co. of Hartford v. Norris, 439 S.W.2d 68 (Ky. 1969). The second method reduces the insurer's award in the same ratio as the award bears to the total recovery. See Cooper v. Argonaut Insurance Co., 556 P.2d 525 (Ala. 1976).

In Breen we determined that an insurer "would be unjustly enriched if it were permitted to assess its lien against the total proceeds of the settlement without bearing its share of litigation expenses." Breen, 102 Nev. at 85, 715 P.2d at 1074. This court then determined that fundamental fairness requires that the insurer pay litigation expenses in the same proportion as the insurer's lien recovery bears to the net proceeds. Thus, because Nevada Bell receives 47% of the net proceeds, its fair share of the litigation expenses is 47%.

No further adjustment in determining shares of net proceeds should be made. It is the injured employee who bears the risks of recovering from the tortfeasor. The injured employee may expend thousands of dollars and recover little or nothing from the tortfeasor. The insurer risks no additional expenditures, yet may recover the full amount it has paid in benefits. The Breen formula encourages the injured employee to seek a recovery for his injuries from the tortfeasor. Use of the formulas developed in other jurisdictions could lead to the injured employee who risks losing substantial amounts of additional money, receiving nothing even though a recovery is obtained. Such a result is unfair to the employee and his family. The Breen formula is consistent with this court's policy of liberally construing worker's compensation statutes to protect employees and their families. See SIIS v. Jesch, 101 Nev. 690, 709 P.2d 172 (1985).

Therefore, we reaffirm the Breen formula and affirm the decision of the district court.

STEFFEN, A.C.J., SPRINGER, MOWBRAY and ROSE, JJ., and JERRY V. SULLIVAN, District Judge,[2] concur.

[1] Bell's share of litigation expenses = Total Amount of Lien ____________________ Settlement-[Fees and Costs] = $24,901.60 _____________________________ $80,000.00-$27,658.98 = $24,901.60 _____________________________ $52,341.02 = .47 [or 47%] Hurn's share of litigation expenses = Excess recovery over NIIA amount ________________________________ Settlement-[Fees and Costs] = Settlement-Litigation Expenses-Lien ________________________________ Settlement-[Fees and Costs] = $80,000-$27,658.98-$24,901.60 ________________________________ $80,000-$27,658.98 = $27,658.98 ________________________________ $52,341.02 = .53 [or 53%]

[2] The Honorable Jerry V. Sullivan, Judge of the Sixth Judicial District, was designated by the Governor to sit in the place of the Honorable Cliff Young, Chief Justice. Nev. Const., art. 6, § 4.