QUILLEN (JAMES) WORKERS VS. COMPENSATION TRU-CHECK, INC. , ET AL.
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RENDERED: OCTOBER 16, 2009; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2009-CA-000747-WC
JAMES QUILLEN
v.
APPELLANT
PETITION FOR REVIEW OF A DECISION
OF THE WORKERS’ COMPENSATION BOARD
ACTION NO. WC-08-99276
TRU-CHECK, INC.;
HONORABLE HOWARD E. FRASER,
ADMINISTRATIVE LAW JUDGE; AND
WORKERS' COMPENSATION BOARD
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CAPERTON, DIXON, AND TAYLOR, JUDGES.
DIXON, JUDGE: James Quillen seeks review of a decision of the Workers’
Compensation Board, which reversed in part and remanded an Administrative Law
Judge’s opinion on the issue of subrogation credit for Quillen’s former employer,
Tru-Check, Inc. We affirm.
Quillen was involved in an automobile accident during the course of
his employment with Tru-Check, a meter reading company. As a result, Quillen
sustained a back injury that rendered him unable to continue his employment with
Tru-Check. In April 2008, Quillen filed a claim for workers’ compensation
benefits against Tru-Check, and shortly thereafter, Quillen accepted a $50,000
settlement from Glenn Singleton, the driver responsible for the accident. The
settlement agreement did not itemize damages, and after attorney’s fees, Quillen’s
net recovery was $33,333.33.
Following an administrative hearing, the ALJ assigned Quillen a 5%
impairment rating and awarded temporary total disability (TTD) benefits,
permanent partial disability (PPD) benefits, medical expenses, and vocational
rehabilitation. The ALJ also granted Tru-Check a subrogation credit for its
workers’ compensation liability against the proceeds of Quillen’s settlement. The
ALJ concluded:
For purposes of any jury award on April 3, 2008, the
undersigned finds the damages, based on the proof
submitted by the parties, would be the following:
Past wages
Future wages
Past medical expenses
Pain and suffering
$ 7,871.25
11,309.68
7,101.76
30,000.00
$56,282.69
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Of these elements of damages, the Defendant is
only entitled to a credit for past wages, future wages, and
past medical expenses out of the remaining amount
available of $33,333.33, out of a total settlement amount
of $50,000.00. Because the settlement amount of
$50.000.00 is only 88.83726% of the damages found
above, it is necessary to reduce each element of damages
to be considered for subrogation purposes as follows:
Past wages
Future wages
Past medical expenses
Pain and suffering
$ 6,992.64
10,047.20
6,309.00
26,651.16
$50,000.00
Moreover, because only $33,333.33, after
subtraction of litigation expenses, is available for
consideration of subrogation, it is also necessary to
determine which portion of this remaining sum represents
each of the element of damages as follows:
Past Wages
$ 4,661.76 (13.985% of $50,000.00)
Future Wages
6,698.13 (20.094% of $50,000.00)
Past Medical Exp 4,206.00 (12.618% of $50,000.00)
Pain and Suffering 17,767.44 (53.302% of $50,000.00)
$33,333.33
Based on these calculations, the undersigned finds
that the Defendant is entitled to a subrogation credit of
$11,360.49 toward the TTD awarded above. As to past
medical expenses, the undersigned finds that the
Defendant is entitled to a subrogation credit of $4,206.00.
Because pain and suffering is not an element of damages
recoverable in a workers compensation claim, no
subrogation credit is permitted for the $17,767.44
representing the pain and suffering portion of the
remaining settlement proceeds of $33,333.34.
Both Quillen and Tru-Check filed petitions for reconsideration with
the ALJ. The ALJ denied Quillen’s petition challenging the subrogation credit,
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and the ALJ granted Tru-Check’s petition relating to an offset against PPD
benefits. Thereafter, Quillen appealed to the Board.
The Board rejected Quillen’s primary argument that Tru-Check was
entitled to no subrogation credit because Quillen was not “made whole” by the
third party settlement. However, the Board, sua sponte, determined the ALJ had
incorrectly calculated the subrogation credit by subtracting the attorney’s fee at the
beginning of the calculation. The Board concluded:
[T]he ALJ’s calculation of Tru-Check’s subrogation
credit, while commendably meticulous, is in error. It is
undisputed Quillen received $50,000.00 in third party
proceeds as a result of his settlement with Singleton. Of
that amount, the ALJ allocated $26,651.16 to damages
for pain and suffering that are not subject to subrogation
under KRS 342.700(1). Deducting that amount from the
amount of the settlement leaves a balance of $23,348.84,
representing that portion of Quillen’s third party recovery
for past and future lost wages and medical treatment
amenable to subrogation under KRS 342.700(1). In
accordance with the Supreme Court’s instructions,
$16,666.67, representing the whole of the attorney’s fee
paid as the result of Quillen’s third party settlement with
Singleton, must be subtracted from the remaining
$23,348.84, yielding a residual subrogation interest of
$6,682.17. The record contains no evidence of other
legal expenses incurred by Quillen as a result of the third
party settlement, so no other sums are subject to be
deducted from the remaining $6,682.17. To the extent
the ALJ’s calculations concerning the amount of TruCheck’s subrogation credit differ from this opinion, the
decision below is reversed.
Quillen thereafter filed this petition for review. Quillen does not
challenge the Board’s sua sponte finding regarding attorney’s fees; rather, he
argues Tru-Check was not entitled to any subrogation credit pursuant to the “made
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whole” rule. Quillen further contends the Board erroneously calculated pain and
suffering and lost wages.
When this Court reviews a workers’ compensation decision, our
function is to correct the Board only where we believe “the Board has overlooked
or misconstrued controlling statutes or precedent, or committed an error in
assessing the evidence so flagrant as to cause gross injustice.” Western Baptist
Hosp. v. Kelly, 827 S.W.2d 685, 687-88 (Ky. 1992).
Kentucky Revised Statutes (KRS) 342.700(1) states in relevant part:
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
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 therefor, 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.
Quillen asserts he was entitled to be “made whole” by the settlement
proceeds before Tru-Check was entitled to a subrogation credit. As a result,
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Quillen contends Tru-Check was precluded from receiving any credit because
Quillen’s civil damages exceeded the total value of the settlement.1 We disagree.
The “made whole” rule was adopted in Wine v. Globe American Cas.
Co., 917 S.W.2d 558 (Ky. 1996), and thereafter made applicable to workers’
compensation cases in Great American Ins. Companies v. Witt, 964 S.W.2d 428
(Ky. App. 1998). The Witt Court concluded, “KRS 342.700(1) merely establishes
a right of subrogation to the carrier. The statute does not make any reference to
priority of rights between the injured employee and the workers' compensation
insurance carrier.” Id. at 430. Accordingly, the Court held that the “made whole”
rule applied, giving priority to the injured worker to recover damages from a third
party tortfeasor, thereby making the worker “whole” before the employer was
entitled to a subrogation credit. Id.
As Quillen points out, the “made whole” rule was also applied in the
subsequent cases of Whittaker v. Hardin, 32 S.W.3d 497, 499 (Ky. 2000), and
Davidson v. Travelers Ins. Co., 56 S.W.3d 457, 459-60 (Ky. App. 2001), to
preclude a subrogation credit until the injured workers recovered all of their
damages.
Pursuant to Witt, Quillen asserts that he was entitled to keep his entire
settlement because his damages exceeded $50,000.00; consequently, he was not
“made whole,” and Tru-Check was entitled to nothing. Quillen opines his case
1
Quillen cites his total civil damages as $56,282.69, pursuant to the ALJ’s initial calculation.
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turns on the theory that an injured worker is entitled to priority over the subrogee
when the pool of available funds cannot fully compensate the injured worker.
However, in AIK Selective Self Ins. Fund v. Bush, 74 S.W.3d 251 (Ky.
2002), the Kentucky Supreme Court overruled Witt, holding:
KRS 342.700(1) does not merely provide for a right of
subrogation, which, of course, the employer or insurer
would be entitled to under common law principles, Wine,
supra, at 561-62, but specifies that the employee ‘shall
not collect from both’ the employer and the third-party
tortfeasor and that the employer or insurer can recover
damages in its own name, not to exceed the
compensation paid or payable to the injured employee,
less the employee's legal fees and expense. Clearly, this
is not a mere codification of the broad common law right
of subrogation defined in Wine. KRS 342.700(1)
specifies the rights and limitations of both the subrogor
and the subrogee and tailors those rights and limitations
to the peculiar nature of workers' compensation. It also
requires that the employee's entire legal expense, not just
a pro rata share, be deducted from the employer's or
insurer's portion of any recovery. Unlike the uninsured
motorists statute interpreted in Wine, 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. Wine,
supra, at 562. To the extent that Great American
Insurance Companies v. Witt, supra, holds otherwise, it
is overruled.
Id. at 257.
We find the mandate of Bush, supra, to be clear, and we are not
persuaded by Quillen’s attempt to distinguish Bush from the case at bar.
Furthermore, based upon our review of the record, we believe Quillen is mistaken
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that his civil damages exceeded his settlement. Bush, supra, is illustrative on this
point. The claimant in Bush recovered 25% of his total damages from the third
party tortfeasor, and he was precluded from recovering the remaining 75% because
it was apportioned to the negligence of his employer. Id. at 256. The Court noted,
Bush's reduced recovery is not due to the tortfeasor's
inability to pay the judgment ([the tortfeasor] has
satisfied the judgment in full), but to the fact that the law
does not permit him to recover a judgment for the full
amount of the damages he sustained. As would have
been the case if his judgment had been reduced because
of his own contributory fault . . ., Bush's judgment was
reduced because, by law, he cannot recover that portion
of the judgment attributable to the negligence of his
employer.
Id. (citations omitted).
Similarly, Quillen’s recovery was reduced because he chose to accept
a $50,000.00 settlement for his civil claim, rather than proceed to trial. Although
the ALJ initially allocated damages totaling $56,282.69, the ALJ properly reduced
each element of damages proportionally to equal $50,000.00, as that was the value
of Quillen’s settlement.2
Quillen also relies on the most recent case to mention the “made
whole” rule, AIK Selective Self-Insurance Fund v. Minton, 192 S.W.3d 415 (Ky.
2006). In Minton, supra, the Kentucky Supreme Court addressed the proper
allocation of attorney’s fees in the context of subrogation credit to a workers’
compensation insurance carrier. Id. The Court concluded that the insurer could
2
Quillen did not challenge the ALJ’s reduction of damages.
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not claim “an additional subrogation credit from the tort award unless the
employer/insurer's subrogation claim is greater than the costs incurred to pursue
the tort award.” Id. at 419. In concluding a worker has priority to recover
attorney’s fees before the subrogee is entitled to credit, the Court noted: “The
conditional right to subrogation authorized under KRS 342.700(1) merely
recognizes and codifies this underlying principle of the ‘made whole’ doctrine.”
Id.
Despite Quillen’s argument to the contrary, we do not believe the
Minton Court’s brief discussion resurrects the “made whole” rule enunciated in
Witt, supra, as it was explicitly overruled by Bush, supra.3 After thorough
consideration, we conclude the Board did not err by finding the “made whole” rule
inapplicable to the case at bar.
Quillen also disputes the Board’s calculation of pain and suffering and
lost wages. As to pain and suffering, Quillen asserts that the Board erroneously
utilized the figure of $26,651.16, rather than $30,000.00. After reviewing the
record, we conclude $26,651.16 was the proper allocation due to the ALJ’s
proportional reduction of all damages to equal $50,000.00. We note that Quillen
failed to raise any alleged error with the ALJ at the time the factual finding was
3
In Minton, Justice Cooper filed a concurring opinion noting that he did “not agree with the
unnecessary dictum that suggests that KRS 342.700(1) codifies any principle of the so-called
‘made whole’ doctrine. [ ] In fact, as we held in AIK Selective Self Insurance Fund v. Bush, 74
S.W.3d 251 (Ky.2002), the proscription against double recovery in KRS 342.700(1) precludes
application of the ‘made whole’ doctrine in the workers' compensation context. Id. at 256-57.”
Minton, 192 S.W.3d at 420 (Cooper, J., concurring).
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rendered. As the issue was not preserved for our review, we need not address it
further.
Finally, Quillen contends the Board was obligated to reduce the
subrogation credit by the difference between the lost wages found by the ALJ as
civil damages and the lost wages recoverable pursuant to his workers’
compensation award. Quillen again relies on Witt, 964 S.W.2d at 430, for the
proposition that an injured worker has the right to collect damages from the thirdparty tortfeasor “for pain and suffering as well as any amounts of other damages
that exceeded the amounts paid” by the workers’ compensation carrier. After
considering this argument, we reiterate that we are not persuaded by Quillen’s
insistence that he was entitled to be “made whole,” as Witt was expressly overruled
by Bush, supra. We find no error in the Board’s allocation of Quillen’s award.
For the reasons stated herein, the opinion of the Workers’
Compensation Board is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Frank M. Jenkins, III
Lexington, Kentucky
Timothy J. Walker
Lexington, Kentucky
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