Can an allocation for loss of consortium be attacked by a Maryland Workers Compensation Insurance company if it materially prejudices their ability to recover their lien or increase their holiday?
Issue- Whether Insurer suffered material prejudice as the result of the division of the proceeds from the third party settlement i.e., because the reasonable dollar value of the third-party claim was significantly greater than the amount of the actual unauthorized settlement because of the way the settlement was apportioned ie; more specifically the total settlement in the amount of $507,500.00 which was apportioned as follows: $355,000.00 payable to Plaintiff; $145,000.00 on behalf of plaintiff wife only for the loss of consortium claim. During the pendency of the third party lawsuit, a voluntary mediation occurred in order to attempt to resolve the third party case. At that mediation all parties were present including Plaintiff and his wife. Each party was represented by counsel at the mediation, including Insurance Company even though they were not parties to the suit. Counsel for the workers Compensation Insurance Company, whose appearance was not in the third party case and whose clients were not parties in the case, was invited by Plaintiff attorney for the purpose of possibly entering into a global settlement that would resolve all matters including the workers compensation case which was not part of the third party lawsuit. Eventually Insurance Counsel was advised that policy limits would likely be offered. The mediator advised Insurance Counsel that a settlement had been reached with the third party in the amount of $500,000.00. The mediator asked attorney for Insurance Company if the workers compensation carrier would be willing to waive some or all of it’s lien and to leave the case open. Cousel informed all parties he had no authority to negotiate the lien and the carrier would not negotiate the lien without a full and final settlement. The parties told Insurance Counsel who was representing, Insurance Company that he could leave since it became obvious the parties were not going to be able to work out a worker’s compensation settlement. An hour later, after attorney left the mediation, a final settlement was entered into between Plaintiff’s , and Defendants for the policy limits to be paid by Erie Insurance Exchange the insurer for the Defendant, in the amount of $500,000. Workers Compensation Insurance attorney was not advised by the mediator or any of the other parties that there were further discussions taking place with respect to the apportionment of the third party proceeds. He was assured that the lien of the Employer and Insurer would be honored. In the hour after counsel was asked to leave the mediation, as part of the settlement it was agreed without the consent of Workers Compensation Insurance attorney that the total settlement in the amount of $500,000.00 was to be apportioned as follows: $355,000.00 payable to Plaintiff from Erie Insurance Exchange; $145,000.00 from Erie Insurance Exchange on behalf of Wife only for the loss of consortium claim despite the fact the loss of consortium claim was a joint claim between husband and wife. The Workers Compensation Insurance attorney never was consulted regarding and never agreed to this apportionment. Settlement checks and releases were tendered by the third party insurance company made payable to wife & her Attorneys in the amount of $145,000.00, unto Plaintiff and his attorneys, in the amount of $355,000.00 The names of Employer and Insurer never appeared on any of the settlement checks or releases and neither Employer and Insurer nor any of their representatives endorsed the checks, signed the releases, or authorized anyone to do so.
Argument #1 Employer and Insurer have a right to argue they have been materially prejudiced by the allocation of the personal injury settlement to the loss of consortium claim.
Under the Annotated Code Of Maryland Section Md. Labor And Employment Code Ann. § 9-902 the workers’ compensation insurance company, Workers Compensation Insurance Company has a lien against any third party recovery made by Plaintiff in order to recover any benefits paid to Plaintiff under the workers compensation act. Workers Compensation Insurance Company lien interests were required under section Md. Labor And Employment Code Ann. § 9-902 to be protected by the Plaintiff and his attorney . In fact under the statute his attorney has a duty to protect Workers Compensation Insurance Company for purposes of recovery of the lien as well as to represent the Plaintiff for his individual third party claim and finally the Plaintiff and his wife jointly for their loss of consortium claim. Under the case law, due to the potential conflict, the Workers Compensation Insurance Company also may employ its own counsel to monitor the third party lawsuit.
Workers Compensation Insurance Company lien interests are comprised of any compensation already paid or awarded and amounts paid for medical services or for any other purpose under sub-title 6 of the Workers’ Compensation Act. Examples of benefits included in the lien are temporary total, temporary partial, vocational rehab services, permanent partial and permanent total disability, and medical benefits. Labor and Employment Article Annotated Code of Maryland 9-902(e)(2). The workers’ compensation lien however is reduced depending on the facts of the case by the cost and expenses of the employee pursuing the claim as well as the pro rata share of the attorney’s fees and court costs. Labor and Employer Article of the Annotated Code of Maryland 9-902(e)(1), Aron vs. Brock, 118 Md. App. 475, 703 A.2nd 208 (1997); Collins vs. United Pacific Insurance Company, 315 Md. 141, 553 A.2nd 707 (1981)). Based upon this statute, the workers compensation insurance company must pay attorney Plaintiff counsel a prorata share of the attorney fees. If the insurance company is paying Plaintiff counsel a fee then he owes an ethical obligation to them with regard to the lien. Even if the insurance carrier hires their own attorney they still have to pay Plaintiff counsel except under unusual circumstances. Collins v. United Pacific Insurance Company 315 Md 141, 553 A 2d 707 (1989) The Court of Appeals certainly does not encourage employers or insurers to hire their own counsel indicating that in most cases it was not the intention of the legislature when creating these third party rights that there be separate attorneys for the employee and insurer. We believe the legislature contemplated that under ordinary circumstances the action would then be prosecuted to a conclusion by the claimant’s attorney and, assuming the recovery was sufficient, the insurer would recover the amount it had paid in benefits less a proportionate share of the attorney’s fees, costs and expenses. As the Court of Special Appeals pointed out in Metz, the procedure is clear when the case follows the anticipated course, and the third party claim is pursued by a single attorney. 15 Md App at 182-83, 289A.2nd 830.The questions then arise, under what circumstances will the insurer be represented in the third party action, and what effect will that representation have on the apportionment of attorney’s fees? As we have pointed out, the insurer has an absolute right to intervene in an action brought by the claimant. We hold, however, that unless the insurer is able to demonstrate that good cause existed to justify the intervention and active participation of its attorney in the action, the insurer should expect to bear the expense of its own attorney and therefore receive no credit against the statutory apportionment of the claimant’s attorney’s fees. Collins v. United Pacific Insurance Company 315 Md 141, 553 A 2d 707 (1989). In our case, the employer and insurer had no reason to believe they needed their own attorney until they were notified of the interest by Plaintiff in pursuing a universal settlement of all claims. The employer and insurer recognized Plaintiff counsel as a competent attorney and did not want to interfere with his case. Plaintiff counsel had done all that was expected of him, up to the time of the settlement conference. The Employer and Insurer had no reason to believe the parties would collude to inflate the value of the loss of consortium claim in order to defeat the calculation of the holiday. Even if the Employer and Insurer were aware of this intent to collude, they were powerless to prevent such action. If the Employer and Insurer began to disagree at the mediation, it could have jeopardized the entire settlement. Finally, the Employer and Insurer believe that the best way to address the situation was not to thwart the settlement, but was to deal with the situation at the workers compensation commission. Even when the Employer and Insurer did object to the allocation, Plaintiff counsel refused to correct it.. Plaintiff counsel criticizes defense for leaving the mediation an hour early, but forgets, he asked defense counsel to leave. In fact he never let him in on any of the mediation conversations since he kept him by himself in a conference room all day while the parties talked. “Defense Counsel was asked not to participate in any of the negotiations with respect to the third party case. He was placed in a small conference room and was asked to be available when needed to discuss resolution of the third party lien. Eventually Defense Counsel was advised by Plaintiff counsel that policy limits would likely be offered. The mediator asked Defense Counsel if the workers compensation carrier would be willing to waive some or all of it’s lien and to leave the case open. Defense Counsel informed all parties he had no authority to negotiate the lien and the carrier would not negotiate the lien without a full and final settlement. The parties told Defense Counsel that he could leave since it became obvious the parties were not going to be able to work out a worker’s compensation settlement. An hour later, after Defense Counsel left the mediation, a final settlement was entered…”
The lien is further reduced by the amount of the settlement that applies to the loss of consortium claim. Benefits that an employee recovers as a result of the third party action are not subject to a lien if they are in a category of benefits that are not covered under the workers’ compensation act. Examples of these losses include award of benefits to a husband and wife for loss of consortium. Brocker Manufacturing & Supply Company, Inc. vs. Mashburn, 17 Md. App. 327, 301 A.2nd 501 (1973); future loss of earning capacity from a second job Chesapeake Haven Land Corp vs. Litzenberg, 141 Md. App. 411, 785 A.2nd 859 (2001)
Now that we have established that a worker’s compensation insurance company has a lien to recover any benefits paid against proceeds from the third party settlement subject to certain exceptions (loss of consortium and attorney fees and costs), the hard work begins, to calculate what part of the settlement is available to satisfy the lien and what is the effect against future workers compensation benefits of any monies recovered by the employee from the third party case, over and above the lien. “Once proceeds from a third party settlement and their apportionment are either agreed upon between employee and insurance carrier or some sort of a judicial determination as to the apportionment is made either by a verdict or by the Workers Compensation Commission after a hearing, then and only then can the appropriate amount be set for which the insurers lien attaches. Maryland Workers Compensation treatise by Clifford Sobin Section 20.6 entitled INJURY CAUSED BY NEGLIGENCE AND INTENTIONAL ACTS pages 677-678. The next step would be to reimburse the insurer for its lien and then determine any future credit or holiday the insurer receives. “Future payments by the employer/insurer are suspended resulting in a holiday for the workers compensation insurance company (meaning no obligation to pay benefits) until such time that the amount received by the injured employee from the negligent third party is exceeded by the benefits to which the injured employee would have entitled to in the absence of the third party liability. At that point of time the employer/insurer shall recommence the payment of benefits provided in article 101.”(Holiday ends) Brocker Manufacturing and Supply Company, Inc. vs. Mashburn, 17 Md. App. 327, 339, 301 A.2nd 50, 507 (1973) see treatise MARYLAND WORKERS’ COMPENSATION § 20:7Effect of the Employee’s Receipt of Funds from a Third party in Excess of the Lien by Clifford Sobin page 681
When proceeds from a third party settlement and their apportionment are not agreed upon between employee and insurance carrier or no judicial determination as to the apportionment is made either by a verdict or by the Workers Compensation Commission after a hearing, then a dispute arises between employee and insurance carrier as to the appropriate amount be allocated to the loss of consortium claim for which the insurers lien attaches. Maryland Workers Compensation treatise by Clifford Sobin Section 20.6 entitled INJURY CAUSED BY NEGLIGENCE AND INTENTIONAL ACTS pages 677-678. There are circumstances where the employee has prejudiced the right of the workers compensation insurance company from either receiving full repayment of their lien or from maximizing the amount of the holiday. While it may seem that the worker’s compensation insurance company and the employer and insurer would have identical interests in successfully pursuing a third party claim, those interests quickly diverge once a settlement is in hand. Because the worker’s compensation insurance company receives a holiday from paying benefits, for every dollar the claimant nets from a third party settlement, there are conflicting interests. Obviously, there is a huge incentive for John and Linda Criswell to apportion a substantial portion of any settlement to a loss of consortium claim in order to avoid the lien and payment holiday. Alternatively, there is a corresponding desire on behalf of the Plaintiff Old Republic General Insurance Company to have no money attributed to loss of consortium in order to recover the lien and maximize the payment holiday. A division of the proceeds of a third party settlement by an agreement only between the third party tort feasor and the plaintiff in a third party lawsuit without the consent of the workers compensation insurer should not be binding on the workers compensation insurer. The third party tortfeasor has no reason to care about the apportionment of the proceeds. To bind the workers compensation insurer to the division of the proceeds of a third party settlement by an agreement only between the third party tort feasor and the plaintiff in a third party lawsuit without the consent of the workers compensation insurer would defeat the purpose of the legislature in providing a lien in the first place. Maryland Workers Compensation treatise by Clifford Sobin Section 20.6 entitled INJURY CAUSED BY NEGLIGENCE AND INTENTIONAL ACTS pages 677-678.
A remedy to this problem was provided in Ankney v Franch .If a worker’s compensation insurance company feels their interests were not adequately represented by the employee and his attorney in the third party settlement, they may argue that they have been prejudiced and attempt to increase the lien and holiday over and above the net proceeds the claimant cleared as part of the third party settlement. Ankney v Franch, 103 Md. App. 83, 652 A.2nd 1138 (1995)
When an employee settles a third party claim after the worker’s compensation claim is filed but the settlement is without the consent of the Workers Compensation insurer the employee may be risking nonpayment of some or all future worker’s compensation benefits. The Court of Special Appeals held in Ankney v Franch, 103 Md. App. 83, 652 A.2nd 1138 (1995), judgment reversed on other grounds, 341 Md. 350, 678. 2.nd 951 (1966) that an unauthorized settlement doesn’t terminate the employees right to pursue workers’ compensation however in Ankney the Court stated that if an employer/self-insured can establish that the reasonable dollar value of the third party claim is greater than the amount of the settlement then . . . in a case in which material prejudice is shown, an employer is also entitled to a credit for the amount of the prejudice. The employee’s claim may not be abated on account of the prejudice unless the amount of the unauthorized settlement against the third party, plus the amount of any prejudice shown is equal to or greater than the compensation awarded. Ankney v Franch, 103 Md. App. 83, 652 A.2nd 1138 (1995) Also see treatise MARYLAND WORKERS’ COMPENSATION § 20:7by Clifford Sobin page 686.
The controversy at this time arises out of, not the amount of the third party settlement, but the apportionment of the settlement money offered in the third party case.
The Plaintiff contend that the apportionment of $355,000.00 payable to Plaintiff; $145,000.00 on behalf of wife only for the loss of consortium claim was fair and appropriate.
The Workers Compensation Insurance Company contends that all of the $507,500.00 should have been payable to Plaintiff individually except $25,000.00 should have been apportioned to wife only for the loss of consortium claim. The Workers Compensation Insurance Company contends that the $500,000.00 settlement was inadequate compared to the real value of the claim of Plaintiff alone. In addition the value apportioned for the loss of consortium claim of wife was grossly excessive. Finally if the case was settled based upon a compromise due to liability or proof problems or the lack of enough insurance, the apportionment of the settlement funds should be based upon a formula that also weighs the value of the claim of Plaintiff individually against the value of the loss of consortium claim. The Employer and Insurer argue that while at the time of the settlement discussions the worker’s compensation lien was only $261, 463.43 the Plaintiff had not yet applied for a permanent disability award as provided by the Maryland Workers Compensation Statute. The Plaintiff contends that Plaintiff will seek a permanent disability award of serious disability which could potentially be worth an additional $211,788.00 in benefits. In addition under the Maryland Worker’s Compensation Statute Plaintiff is entitled to causally related medical expenses for the rest of his life. Therefore the Defendant workers compensation insurance carrier total exposure including past, present and future could well exceed the $500,000.00 amount that the third party case was settled for. Workers Compensation Insurance Company assert that since the worker’s compensation case over the period of Plaintiff lifetime could potentially have a cost well in excess of the settlement of $500,000.00 in the third party claim, then almost all of the settlement money except the sum of $25,000.00 should have been allocated to Plaintiff for his personal injury claim alone. Any allocation for loss of consortium to wife over $25,000.00 was inappropriate and has prejudiced the insurer and employer and therefore they are entitled to a credit for the amount of the prejudice.
Defense Counsel in his brief asserts the apportionment of the proceeds is clearly appropriate. His support for this argument is two fold. First he champions the opinion of the mediator Judge Platt who gives the opinion that it was more than appropriate for 30% of the settlement be allocated for the loss of consortium. However, Judge Platt gives no basis for said opinion other than his vast years of experience. His affidavit makes no mention of what documents or evidence he either read or heard. Secondly, he champions his own efforts to bring the case toward settlement despite all of the problems with the case, including low impact, preexisting conditions, and low policy limits etc. Defense Counsel fails to take into consideration while these factors obviously affect the whole value of the case, these problems have to also be taken into consideration when apportioning the settlement received among the parties as was suggested in the Paul Bekman affidavit.
Defense Counsel retained attorney Paul Bekman, a pre-eminent attorney who has represented plaintiffs for more than 42 years, who receive serious personal injuries or die in personal injury claims and or work related injuries to evaluate the value of the underlying tort claims of both Plaintiff individually as well as well as the joint claim of Plaintiff and his wife loss of consortium claim. In arriving at his opinions he was asked to consider the effects on his evaluation, such factors as medical expenses past and future, lost wages in the past as well as loss of earning capacity in the future, pain and suffering, loss of consortium, property damage, liability disputes, jurisdiction of the tort case, insurance coverage, collectability of defendants in excess of insurance coverage, and any other relevant facts he deemed appropriate. Based upon that review he submitted Bekman affidavit which is attached to this motion and incorporated hereto. In the most relevant parts of the affidavit he concludes that the allocation of the settlement was unreasonable, not supported by the facts, or by the law. He concludes that Plaintiff’s individual personal injury claim was valued at $2,000,000.00, the same number requested in the ad damnum clause in the third party complaint. Finally, he concludes based upon this settlement of $500,000.00, the loss of consortium claim should be valued at $25,000.00.
At this stage, it does not matter whether Judge Platt is correct or Mr. Bekman is correct. On the employer and insurer have raised the issue and presented credible evidence to support their contention, then the only issues becomes, does Maryland law allow you to assert this claim in a loss of consortium case and what forum is this dispute resolved. Since the employer and insurer have now asserted that the allocation for the loss of consortium claim has resulted in a material prejudice to the employer and insurer, the next question is whether Maryland case law allows you to assert this defense in a loss of consortium question.
While Ankney v Franch, 103 Md. App. 83, 652 A.2nd 1138 (1995) stands for the proposition if an employer/self-insured can establish that the reasonable dollar value of the third party claim is greater than the amount of the settlement then . . . in a case in which material prejudice is shown, an employer is also entitled to a credit for the amount of the prejudice, there has only been one case decided by Maryland appellate courts on the issue of whether a worker’s compensation insurer can contest the apportionment of a third party settlement between the injuries for the injured employee and the loss of consortium claim. In Brocker Manufacturing and Supply Company v. Mashburn 17 Md App 327, 301A2d 501 (1973), the Court of Special Appeals found the Employer and insurer had agreed to the settlement including the apportionment of damages and the allocation to the loss of consortium when they signed the release and settlement check. The third party settlement provided for two separate settlements. One settlement was for $100,000.00 dollars to the injured employee and another settlement to the wife for $140,000.00. Both the workers compensation insurer’s name as well as the injured party name appeared on the release in that case and both parties signed the release given to the injured employee as part of the third party case. Apparently separate drafts may have been issued by the third party defendant, one for the claim of the injured worker party as well as one for the wife and her loss of consortium claim. The workers compensation insurers name was on the draft to the injured worker and the draft was delivered to the workers compensation insurer who ultimately made the distributions to the injured worker’s third party lawyer after deducting the workers compensation lien from the $100,000.00 dollar check. The Court of Special Appeals held that under the special circumstances of that case the employer and insurer could not make a claim to any money apportioned for loss of consortium. The Court ruled because the workers compensation carrier participated in the settlement and signed a settlement check and settlement release in the third party case with their name on it that they had agreed to the apportionment. The Court held that the workers compensation insurance company should have objected when the release and draft and settlement was presented and not after the release was signed and the settlement check was deposited. The Brocker court stated “An employee’s receipt of third party funds in excess of the employer/insurer lien doesn’t totally extinguish the right of the employee to claim additional workers’ compensation benefits. Instead the amount the employee receives operates as a credit against any future worker’s compensation benefits that may be payable.” Labor and Employment Article of the Annotated Code of Maryland 9-903. Brocker Manufacturing and Supply Company, Inc. vs. Mashburn, 17 Md. App. 327, 301 A. 2nd 501 The Brocker court stated “It is obvious that, under the circumstances of this case, Mrs. Mashburn was not entitled to proceed against her husband’s employer under the Workmen’s Compensation Act for recovery for loss of consortium. Although the Workmen’s Compensation Act provides a right of subrogation to an employer and insurer, § 58, Cogley v. Schnaper and Koren Construction Co., 14 Md. App. 322, 286 A.2d 819 (1972), there must be some act performed or committed by, for, or against the subrogee that gives rise to the right to subrogate. In the instant case the appellants (workers compensation insurance company) did not, nor were they legally obligated to, pay any sum to Mrs. Mashburn. We perceive no act performed or committed by Mrs. Mashburn that would justify the appellants’ (workers compensation insurance company) being subrogated to any of her claim against Mrs. Vallone. It is difficult to follow the appellants’ reasoning that they should be allowed to present testimony in order to show in some vague way that they are entitled to participate in the proceeds recovered by Mrs. Mashburn. Appellants attempt to imply that the amount paid to Mashburn was insufficient and disproportionate to his injuries and that the amount received by Mrs. Mashburn was in excess of a reasonable sum for loss of consortium. Appellants, we observe, joined in the release of Mashburn’s claim against the third party tortfeasor and knew, or should have known, that Mrs. Mashburn did not execute that release individually, but only in her capacity as guardian of her husband. The Circuit Court of Baltimore City approved the settlement. After the amount of the wife’s individual recovery had been called to the attention of the Chancellor, he investigated and again approved the guardian’s settlement nunc pro tunc. We know of no theory of law, nor have we been referred to any by appellants, that would justify this Court’s authorizing appellants to conduct a “fishing expedition” into the circumstances surrounding Mrs. Mashburn’s individual settlement…We hold that the trial judge properly refused to consider appellants’ assertion of a right to share in the monies recovered by Mrs. Mashburn in her derivative action.”
The facts of our case are different than the facts in Brocker Manufacturing and Supply Company v. Mashburn 17 Md App 327, 301A2d 501 (1973). While the Brocker case said there was no legal theory justifying a fishing expedition under the facts of the Brocker case, it also suggested a theory that may be available under other factual scenarios.The following language in Brocker Manufacturing is key, “Although the Workmen’s Compensation Act provides a right of subrogation to an employer and insurer, § 58, Cogley v. Schnaper and Koren Construction Co., 14 Md. App. 322, 286 A.2d 819 (1972), there must be some act performed or committed by, for, or against the subrogee that gives rise to the right to subrogate.” In our case, there are acts performed by wife and Plaintiff by and through their attorney against the subrogee employer that create the right to the subrogee Workers Compensation Insurance Company to contest the allocation. Plaintiff and wife who were both represented by the same attorney, agreed to over value the loss of consortium claim and undervalue the personal injury claim of Plaintiff as a percentage of the entire settlement in order to minimize the insurance company holiday from paying future benefits for Plaintiff’s workers compensation claim. In our case the employer and insurer are not attacking the adequacy of the settlement as a whole. The attack is based upon the argument that because of the improper weight given to the loss of consortium claim, the portion of the settlement apportioned to Plaintiffis inadequate. The apportionment was solely within the control of Plaintiff and his counsel. Since Plaintiff and his wife are married and living together, they have no other reason to care, how the benefits are apportioned except to maximize their ultimate recovery in both the third party case as well as the workers compensation case. By colluding with the third party insurance company to value the loss of consortium claim at a value out of proportion to the total third party claim, the intent is obviously to defeat the legislative intent by providing for a double recovery and defeating the lien and the holiday. Any allocation for loss of consortium to wife and or Plaintiff was inappropriate and has prejudiced the insurer and therefore they are entitled to a credit for the amount of the prejudice. The third party counsel does not have any incentive to act as a check and balance on the allocation because once the parties agree to a number the allocation is irrelevant to him since all defense counsel cares about is getting a signed release for the benefit of the third party tortfeasor. If in fact the attorney for the third party tortfeasor objected to the allocation, the case may not have settled which would not have been in his client’s best interests. Whether all of the money or none of the money or any amount in between is allocated to the loss of consortium, matters not to the third party defendant since once he gets the signed release by both Plaintiff and wife, and pays the money he has no further legal obligation. Plaintiff’s who are still married and still live together have only one united interest which is to maximize the amount of money they receive from a combination of the third party case as well as the husband’s workers compensation case. Mr. Bekman’s affidavit as our expert clearly outlines the real value of the loss of consortium case in relation to the husband’s personal injury claim when put in context with the amount of money available in the third party case. Assuming Mr. Bekman is correct that the wife’s consortium claim under these circumstances was $25,000.00, than the only explanation for the $145,000.00 allocation was to avoid the workers compensation holiday. This assertion is re-enforced by the way the settlement was apportioned and the checks were requested to be issued. Based upon all of the above, the Brocker Manufacturing case requirement that there must be some act performed or committed by, for, or against the subrogee that gives rise to the right to subrogate has been met.
Unlike the situation in the Brocker Manufacturing case, the apportionment of the settlement proceeds between the injuries to Plaintiff individually and wife for loss of consortium agreed to by all parties in the third party case except the workers compensation insurance company as part of a mediation that led to a voluntary settlement, rather than a jury verdict should not be binding in the workers compensation case. “An award based upon a jury verdict provides no basis for an employer/insurer to challenge the amount provided for loss of consortium. Alternatively if the matter is settled without a verdict, the employer/insurer has a right to challenge the amount designated for loss of consortium if the employer/insurer has not approved this settlement.” Maryland Workers Compensation treatise by Clifford Sobin Section 20.6 entitled INJURY CAUSED BY NEGLIGENCE AND INTENTIONAL Acts pages 677-678. Mr. Sobin recognizes that there is an incentive for the claimant to apportion as much as possible to the loss of consortium claim in order to minimize the amount he needs to repay the insurance company for its lien as well as to avoid the future benefits holiday. However doing so avoids the legislature’s intention to reimburse the insurer under Labor and Employment article section9-902. The purpose of that statute is to reimburse the insurer and to avoid a double recovery by the claimant. “When sections 9-902 and 9-903 of the Labor and Employment Article of the Maryland Code are read together, the legislative intent is clear. The employer and insurer are reimbursed fully for the benefits and medical services provided and the third-party claimant may keep the balance. The reimbursement requirement precludes `double dipping’ by the claimant and preserves his right to reopen his case after the third-party recovery is depleted.” [Alterations added.][Emphasis added.]” Podgurski v One Beacon Insurance Co 374 Md 133, 821 A. 2d 400 (2003)Brethren Mutual Insurance Co. V. Kenneth Suchoza. 212 Md. App. 43 66 A.3d 1073, Ankney v. Franch 103 Md App 83 (1995) (2013) In Chesapeake Haven Land Corporation v. Litzenberg 141 Md App 411, 785A2d 859(2001), the court of appeals stated, “In our view, the legislative intent in the adoption of LE §§ 9-901 through 903 is best expressed by Professor Larsen in Vol. 2, sec. 71.20, Worker’s Compensation Commission, stating: It is equally elementary that the claimant should not be allowed to keep the entire amount both of his [workers compensation]award and his common law damage recovery. The obvious disposition of the matter is to give the employer so much of the negligence recovery as necessary to reimburse him for his compensation outlay, and give the employee the excess. This is fair to everyone concerned: the employer, who, in a fault sense, is neutral, comes out even….When sections 9-902 and 9-903 of Md.Code LE Art. are read together, the legislative intent is clear. The employer and insurer are reimbursed fully for the benefits and medical services provided and the third-party claimant may keep the balance. The reimbursement requirement precludes “double dipping” by the claimant and preserves his right to reopen his case after the third-party recovery is depleted. In Aetna Casualty & Surety Co v. Gilreath 625 SW2nd 269(1981) the Supreme Court of Tennessee also quotes Professor Larsen, “The theory of third party actions and employers subrogation in compensation law has been succinctly stated by Professor Larson as follows:§ 71.10 Reaching the ultimate wrongdoer “The concept underlying third party actions is the moral idea that the ultimate loss from wrongdoing should fall upon the wrongdoer… .[I]n compensation law, social policy has dispensed with fault concepts to the extent necessary to ensure an automatic recovery by the injured workman but the disregard of fault goes no further than to accomplish that object, and, with payment of the workman assured, the quest of the law for the actual wrongdoer may proceed in the usual way. So, it is elementary that if a stranger’s negligence was the cause of injury to claimant in the course of employment, the stranger should not be in any degree absolved of his normal obligation to pay damages for such an injury.§ 71.20 Avoiding double recovery. It is equally elementary that the claimant should not be allowed to keep the entire amount both of his compensation award and of his common-law damage recovery. The obvious disposition of the matter is to give the employer so much of the negligence recovery as is necessary to reimburse him for his compensation outlay, and to give the employee the excess. This is fair to everyone concerned: the employer, who, in a fault sense, is neutral, comes out even; the third person pays exactly the damages he would normally pay, which is correct, since to reduce his burden because of the relation between the employer and the employee would be a windfall to him which he has done nothing to deserve; and the employee gets a fuller reimbursement for actual damages sustained than is possible under the compensation system alone.” Larson’s Workmen’s Compensation Law, §§ 71.10-71.20 (1976). In our case, the Creswell’s by their inappropriate apportionment for the loss of consortium claim are double dipping. Based upon the reasoning above, Mr. Creswell by colluding with the third party insurance company as well as his wife Mary Creswell to value the loss of consortium claim at a value out of proportion to the total third party claim, intended to defeat the legislative intent to reimburse the insurer and to avoid a double recovery by the claimant by providing for a double recovery under the guise of a loss of consortium claim and defeat insurers lien or mitigate insurer’s payment holiday.
Counsel for the Plaintiff’s cite Chesapeake Haven Land Corporation v. Litzenberg 141 Md App 411, 785A2d 859(2001) as support for their position that employer and insurer have no right to argue prejudice due to the allocation made for the loss of consortium. In the Chesapeake Haven case the allocation was made by a jury after a trial. Maryland requires juries to allocate their verdicts before they arrive at one number. In that case the insurer asserted that their lien applied to the award made for future economic loss award for damages to his self-employment business, unrelated to his Chesapeake Haven employment, and not compensated for by any past or future workers’ compensation award. The Court of Special Appeals rejected that argument because after a fully contested trial, with no possibility for collusion, the jury determined the value of the economic loss for his second job and the court was not going to question the province of the jury. If the parties in Chesapeake Haven had settled the case without a trial under circumstances similar to this case, the Employer and Insurer believe the decision of the Court of Special Appeals may have been different. Although the Chesapeake Haven case cited favorably the findings in the Brocker case including the rejection of insurers attempt to claim a subrogation interest in the loss of consortium claim it also repeated the other language quoted above in Brocker, “Although the Workmen’s Compensation Act provides a right of subrogation to an employer and insurer § 58, Cogley v. Schnaper and Koren Construction Co., 14 Md.App. 322, 286 A.2d 819 (1972), there must be some act performed or committed by, for, or against the subrogee that gives rise to the right to subrogate.” As previously discussed above we have some act committed by both John and Linda Criswell against Hewlett Packard Company and Insurer, Old Republic General Insurance Company , that gives rise to the right of Hewlett Packard Company and Insurer, Old Republic General Insurance Company to claim a subrogation right against the loss of consortium claim.
ISSUE #2 If material prejudice is alleged, what forum is used to resolve the amount of the material prejudice and the effect on the holiday?
Once the employer and Insurer raise the issue of inadequate settlement or prejudice, the issue needs to be litigated in a forum other than as part of the third party case unless the parties were able to agree on the issue as part of the third party case. The Court of Special Appeals has designated that those issues preliminarily be addressed by the Workers Compensation Commission. In Ankney v. Franch 103 Md App 83 (1995) the Maryland Court of Special Appeals later reversed on other grounds by the Court of Appeals 341 Md 350 (1996), outlined that the Workers Compensation Commission was to hear the issues of prejudice and inadequate settlement and outlined a procedure to be used by the Workers Compensation Commission. In Ankey the parties were fighting about the value of the third party case. The Court of Special Appeals remanded the case back to the Workers Compensation Commission to make the necessary determinations and gave some guidance on how to do so. “A hypothetical based on the case before us illustrates these principles. The amount of Ankney’s unauthorized settlement with Beerfoot was $6,500. Absent a showing that Aetna suffered material prejudice, the case would not be treated differently than one involving an authorized settlement, and the consequences of Ankney’s settlement would be governed by the terms of LE §§ 9-902 and 9-903. If the Commission found that the reasonable value of Ankney’s claim against Beerfoot was $50,000, then the amount of prejudice suffered would be $43,500, and Aetna would be entitled to a credit for that amount as well. Assuming, arguendo, Ankney had already received $40,000 in her malpractice claim against Paavola, Aetna would be entitled to a credit of $6,500 [the unauthorized settlement], $43,500 [the prejudice resulting from the unauthorized settlement], and $40,000 [the hypothetical figure assigned to her settlement against Paavola] or a credit in the amount of $90,000. Aetna would still be required to pay Ankney benefits otherwise due whether by way of a lump-sum amount in excess of the $90,000 credited to Aetna or future payments under the Commission’s award in excess of $90,000. At the point in time when Ankney would have received benefits equal to the $90,000 credited to Aetna, she would be entitled to have her future benefits resume. On the other hand, if the amount credited to Aetna was exceeded by a lump-sum award or if the payments to Ankney under the award never became equal to or greater than the credits to which Aetna was entitled, Ankney’s benefits would, in effect, be terminated, subject to reopening under LE § 9-736. Ankney’s claim would only be closed in the manner described by LE § 9-903 in a case where the credits exceed a lump-sum payment, or, in Ankney’s case, actuarially, the future benefits could never exceed the credits due Aetna. We recognize that our decision here calls for the Workers’ Compensation Commission to delve into issues that it heretofore has not been required to resolve. Any result other than our decision herein would be incompatible with the legislative purpose embodied in the Act.”
While the Ackney Court outlines the problem and gives the Workers Compensation Commission the authority to resolve the dispute, it does not detail how this determination regarding the value of the loss of consortium is to be made. One can presume that testimony from the parties involved as well as the experts would be necessary but what else. In Maryland Workers Compensation treatise by Clifford Sobin Section 20.6 entitled INJURY CAUSED BY NEGLIGENCE AND INTENTIONAL Acts pages 677-678 the author makes reference to factors that he feels are important for the commission or reviewing court to look at although he cites no authority for his assertions. Factors the author believes are relevant when determining the appropriateness of a loss of consortium allocation of a settlement are:
1. “the proportion of the loss of consortium settlement compared to the over¬all settlement;
2. whether a lawsuit was filed on behalf of the spouse or settlement demand made for loss of consortium;
3. the overall amount of recovery assigned to the loss of consortium claim;
4. whether the amount of recovery for the employee is sufficient to repay the lien of the employer/insurer as it existed on the date of settlement plus any benefits that were previously awarded, but not yet paid;
5. the difficulty and cost of proving the employee’s damage versus loss of consortium;
6. the third-party defendant’s ability (usually insurance coverage) to pay the full value of the employee’s claim.
None of the criteria listed above are dispositive of the issue. Since many fact patterns have their own nuances, it is difficult for the author to provide a rule for what is an appropriate division. At pages 677-678”
The case of Diamond v. Diamond 298 Md 24, 467A.2d 510 (1983) a divorce case is instructive. In Diamond husband and wife had sued for the personal injuries of Husband and a second count for loss of consortium. The case was settled with no apportionment between the two claims. A settlement check was issued payable to husband and wife and the attorney. Shortly after receipt of the check, an attachment was filed on the attorney by a judgment creditor of the husband only. The Court of Appeals held there was no intent to create a tenant’s by the entireties in the settlement proceeds so some portion of the check would be attachable by the judgment creditor. The next question the Court of Appeals had to address was the Circuit Court method of dividing which funds belonged to each spouse since the parties did not apportion the amount when they settled the case. The Court of Appeals affirmed the trial courts method of apportioning the settlement proceeds between husband and wife. [ most likely the parties did not present experts or have all of the discovery we have from the Criswell third party case]The trial court considered two factors. The first factor was a comparison of the amount asked for in each count of the complaint and converting that it to a percentage and then multiplying that percentage against the total recovery. The second factor the court looked at was the fact that the adjustor handling the case for the third party defendant in the case put little or no value into the loss of consortium claim when he valued the case. The Court of Appeals stated, “We agree with the Court of Special Appeals that the apportionment of the circuit court was not clearly erroneous. The trial court found that the ad damnum clause conveys the value placed on each claim by the Diamonds themselves and their attorneys. The ad damnum is two million dollars ($2,000,000.00) for Mr. Diamond’s individual claim and only $85,000.00 for the joint claim for the loss of consortium. Scaled down to the total amount of the final settlement (Thirty Thousand Six Hundred Dollars ($30,600.00), the relative values for the claims, as established by Mr. Diamond and his wife, are approximately: Twenty-Nine Thousand Three Hundred Dollars ($29,300.00) for Mr. Diamond’s individual claim for damages; One Thousand Three Hundred Dollars ($1,300.00) for the joint claim of husband and wife for lost consortium. In fact, this apportionment was rather generous considering that the claims representative for Fireman’s Fund, Michael Barnaba, answered in his deposition that he did not consider any factors other than Willard’s disability and loss of wages in authorizing the settlement amount: Q [Mr. Gladstone, Lois’ attorney] — * * * What, if any, considerations were given by you, sir, in making your offer of settlement to the claim of loss of consortium of Mr. and Mrs. Diamond? A I would have to say none. Q Did you have any discussions, sir, with Mr. Leech insofar as the value of the loss of consortium claim or offering anything for the loss of consortium claim. A None whatsoever.”
The Diamond case reasoning suggests factors the court in our case might look at ( most likely when there are no experts) when deciding whether the apportionment in our case of the loss of consortium claim was prejudicial to the workers compensation insurance carrier. In addition to a comparison of the ad damnum clauses in the complaint, the court can look at the value placed by the third party adjustor on the loss of consortium, and the value placed by third party counsel for the defendant on the loss of consortium claim , the pretrial settlement statements filed by the parties, demand letters filed by plaintiffs’ counsel, answers to interrogatories outlining plaintiffs damages, amount of time spent at settlement conference outlining the facts of the loss of consortium vs. the injuries to the husband and the depositions given as part of the third party case of husband and wife as to testimony they gave on the damages issue.