John Trout v. Edwards Trucking Company, Inc. and Credit General Insurance Company

ca00-032

ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

JUDGE JOHN F. STROUD, JR.

DIVISION III

JOHN TROUT

APPELLANT

V.

EDWARDS TRUCKING COMPANY, INC., and CREDIT GENERAL

INSURANCE COMPANY

APPELLEES

CA 00-32

September 20, 2000

APPEAL FROM THE ARKANSAS

WORKERS' COMPENSATION

COMMISSION [E803646]

AFFIRMED

This is a workers' compensation case involving a statutory lien on funds. Appellant, John Trout, was seriously injured while delivering a load of sand to Robert's Soil Company for his employer, appellee Edwards Trucking Company, Inc. Appellant received a $10,000 check from Kemper Insurance Company, the third-party insurance carrier for Robert's Soil Company, pursuant to a specific provision of its insurance policy whereby $10,000 is provided to assist with the medical expenses of invitees who are injured on the premises. Appellee Credit General Insurance Company is the employer's insurance carrier. The Commission affirmed and adopted the ALJ's finding that the appellees were entitled to a lien on the proceeds of the $10,000 check tendered to appellant. We affirm.

This case was presented to the ALJ on the following stipulated facts:

1. On March 16, 1998, John Trout, an employee of Certified Systems, Inc./Edwards Trucking Company, Inc., suffered serious injuries while delivering a load of sand to Robert's Soil Company, located in Rogers, Arkansas. Edwards Trucking Company's Workers' Compensation Carrier is Credit General Insurance Company, which is administered by Lindsey Morden Claims Management, Inc.

2. John Trout has filed suit, which is presently pending, against Robert's Soil Company in the circuit court of Washington County, Arkansas alleging third party negligence. Robert's Soil Company's insurance carrier, Kemper Insurance Company, is defending that suit.

3. Edwards Trucking Company, Inc. and its insurance carrier, Credit General Insurance Company, have been required to pay John Trout workers' compensation benefits pursuant to Arkansas Workers' Compensation Act.

4. Edwards Trucking Company, Inc. and Credit General Insurance Company have intervened in the suit brought by John Trout against Robert's Soil Company and Kemper Insurance Company. Under Ark. Code Ann. § 11-9-410(3)(A)(B) of Arkansas Workers' Compensation Act, employers/insurance carriers are entitled to a lien on two-thirds of the net proceeds of recovery by suit or otherwise.

5. Trout concedes that Edwards Trucking Company, Inc. and Credit General Insurance Company have an interest in the subject matter involved in the suit brought by Trout against Robert's Soil Company, and, therefore, have a right to intervene in the suit.

6. Kemper Insurance Company, the third party insurance carrier for Robert's Soil Company where the accident occurred, issued John Trout a $10,000 check pursuant to a specific provision of the third party, Robert's Soil Company's insurance policy, whereby they provide $10,000 to assist with the medical expenses of those invitees who are injured on their premises.

7. As to the issue in dispute, John Trout contends that he is the only party entitled to these funds issued by Kemper Insurance Company; that the issuance of this check was not the result of an action maintained in court, as the language of Ark. Code Ann. § 11-9-410(a)(1)(A) requires, but was the fulfillment of a contractual obligation on the part of Kemper Insurance Company; that, Lindsey Morden Claims Management, Inc. does not have any interest in the check that Kemper Insurance Company issued Trout.

8. Respondents claim an interest in the $10,000 that Trout received. They claim they are entitled to a lien on two-thirds of the net proceeds of any recovery from defendant, Robert's Soil Company or Kemper Insurance Company by judgement, settlement or otherwise pursuant to Ark. Code Ann. § 11-9-410.

(Emphasis added.)

For his sole point of appeal, appellant contends that the $10,000 he received was "not recovered as the result of a suit or settlement with a third party tortfeasor, but merely received as the result of a contractual obligation," and consequently, the Commission erred in finding that appellee's carrier was entitled to a lien on a portion of the funds pursuant to Arkansas Code Annotated section 11-9-410. We disagree.

Arkansas Code Annotated section 11-9-410 (Repl. 1996), provides:

(a) Liability Unaffected. (1)(A) 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 a 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.

(B) 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.

(b) Subrogation. (1) An employer or carrier liable for compensation under this chapter for the injury or death of an employee shall have the right to maintain an action in tort against any third party responsible for the injury or death. However, the employer or the carrier must notify the claimant in writing that the claimant has the right to hire a private attorney to pursue any benefits that the claimant is entitled to in addition to the subrogation interest against any third party responsible for the injury or death.

(2) After reasonable notice and opportunity to be represented in the action has been given to the compensation beneficiary, the liability of the third party to the compensation beneficiary shall be determined in the action, as well as the third party's liability to the employer and carrier.

(3)(A) After recovery shall be had against the third party, by suit or otherwise, the compensation beneficiary shall be entitled to any amount recovered over and above the amount that the employer and carrier have paid or are liable for in compensation, after deducting reasonable costs of collection.

(B) In no event shall the compensation beneficiary be entitled to less than one-third (1/3) of the amount recovered from the third party, after deducting the reasonable cost of collection.

(4) An employer or carrier who is liable for compensation under this chapter on account of injury or death of an employee shall be entitled to maintain a third party action against the employer's uninsured motorist coverage or underinsured motorist coverage.

(5) The purpose and intent of this subsection is to prevent double payment to the employee.

(c) Settlement of Claims. (1) Settlement of claims under subsections (a) and (b) of this section must have the approval of the court or of the commission, except that the distribution of that portion of the settlement which represents the compensation payable under this chapter must have the approval of the commission.

(2) Where liability is admitted to the injured employee or his dependents by the employer or carrier, the cost of collection may be deducted from that portion of the settlement under subsections (a) or (b) of this section representing compensation, upon direction and approval of the commission.

(3) No party shall settle a claim under subsections (a) and (b) of this section without first giving three (3) days' written notice to all parties with an interest in the claim of the intent to settle.

(4) Each party with an interest in a claim under subsections (a) and (b) shall cooperate with all other parties in litigation or settlement of such claims.

(Emphasis added.)

One of appellant's main contentions is that "an action in court must have been brought or settled against a third party who caused injury to the employee in order for an employer-insurance carrier to have a right to recover money from a third party tortfeasor." Appellant relies upon Jackson Cookie Co. v. Fausett, 17 Ark. App. 76, 703 S.W.2d 468 (1986), to support his position. His reliance is misplaced. In Fausett, we held that in situations where the employee has made a claim under the Workers' Compensation Act and the employer or carrier has had reasonable notice and opportunity to join in a third-party action, "the employer and its carrier must intervene in a third-party action to have a right to a credit, whether or not the liability of the employer or the carrier has been determined." 17 Ark. App. at 81, 703 S.W.2d at 471. Here, the stipulated facts demonstrate that the appellees have intervened in appellant's third-party action involving Robert's Soil Company and its carrier, and appellant concedes their right to do so. He argues, however, that the $10,000 payment at issue here was merely the fulfillment of a contractual obligation, and not the result of anaction maintained in court. The argument ignores the fact that the statutory language is not limited to amounts recovered by lawsuits.

Subsection (b)(3)(A) provides in pertinent part that "[a]fter recovery shall be had against the third party, by suit or otherwise, the compensation beneficiary shall be entitled to any amount recovered over and above the amount that the employer and carrier have paid or are liable for in compensation, after deducting reasonable costs of collection." Moreover, the statute specifically provides that "[t]he purpose and intent of this subsection [subrogation] is to prevent double payment to the employee." Ark. Code Ann. § 11-9-410(b)(5) (Repl. 1996).

Appellant further contends that "the statute is inapplicable to the check that Kemper Insurance Company issued" because "Robert's Soil Company, not Kemper Insurance Company, is the third party tortfeasor who caused [his] injury[.]" We disagree because Kemper Insurance Company clearly issued the $10,000 check on behalf of Robert's Soil Company pursuant to its policy of insurance.

Appellant acknowledges that the statutory language specifically includes payments made in settlement of a claim, but he next contends that the $10,000 was not paid in settlement of his claim. That distinction, however, does not eliminate the more general statutory language previously emphasized, i.e., "by suit or otherwise," which is contained in the "subrogation" subsection of the statute that precedes the "settlement" subsection.

Finally, appellant contends that even if the statute were applicable to his case, he has "suffered losses that were not covered by workers' compensation and to allow him to retainthe full amount of the $10,000 check does not provide him with double recovery, it simply reimburses him for his losses." As noted by appellee, this argument was not presented to the Commission, and therefore was not properly preserved for review. Shaw v. Commercial Refrigeration, 36 Ark. App. 76, 818 S.W.2d 589 (1991).

Affirmed.

Pittman and Neal, JJ., agree.