RENDERED: OCTOBER 3, 2014; 10:00 A.M.
NOT TO BE
PUBLISHED
Commonwealth of Kentucky
Court of Appeals
ASTRA ZENECA APPELLANT
PETITION
FOR REVIEW OF A DECISION
v. OF
THE WORKERS’ COMPENSATION BOARD
ACTION
NO. WC-09-73052
ANGELA SPADY; HON. STEVEN G. BOLTON,
ADMINISTRATIVE LAW JUDGE; AND WORKERS’
COMPENSATION BOARD APPELLEES
AND NO.
2013-CA-000613-WC
ANGELA SPADY CROSS-APPELLANT
CROSS-PETITION
FOR REVIEW OF A DECISION
v. OF
THE WORKERS’ COMPENSATION BOARD
ACTION
NO. WC-09-73052
ASTRA ZENECA; HON. STEVEN G. BOLTON,
ADMINISTRATIVE LAW JUDGE; AND WORKERS’
COMPENSATION BOARD CROSS-APPELLEES
OPINION
AFFIRMING IN PART,
REVERSING IN PART,
AND REMANDING
** ** ** ** **
BEFORE: nickell, thompson, and
vanmeter, JUDGES.
NICKELL, JUDGE: Astra Zeneca petitions for review of an opinion
of the Workers’ Compensation Board (Board) affirming in part, vacating in part,
and remanding the opinion and order of the Administrative Law Judge (ALJ). Angela Spady (Spady) cross-appeals. Having reviewed the record, we affirm in part,
reverse in part, and remand for additional proceedings.
Spady began working for Astra Zeneca as a sales
representative in April 2009. On
November 5, 2009, she was involved in a motor vehicle accident in the course
and scope of her employment. As a result
of the accident, Spady sustained a right shoulder injury and developed Complex
Regional Pain Syndrome (CRPS) of the right upper and lower extremities. She also developed depression and
anxiety.
Spady applied for workers’ compensation benefits on
October 20, 2010. She also filed a civil
action in the Pike Circuit Court against a third-party tortfeasor. While her workers’ compensation claim was
pending, Spady settled her civil claim with the third-party tortfeasor. The record contains two documents regarding
the civil settlement. The settlement
agreement and release executed on June 6, 2011, reflected a settlement amount
of $850,000. A June 12, 2011, settlement
distribution form indicated attorney’s fees, expenses, and reimbursement of a
$36,686.40 long term disability (LTD) lien were deducted from settlement
proceeds of $840,000. The settlement
distribution form also indicated Spady’s insurance carrier had paid her $10,000
in personal injury protection (PIP) benefits, and that a corresponding $10,000
included in the settlement she received from the third-party tortfeasor’s
insurance carrier would be held in trust for reimbursement of the resulting PIP
lien, which she would attempt to negotiate to a lesser amount.
On July 14, 2012, the original ALJ issued an
opinion, award, and order. The ALJ
determined Spady developed CRPS and psychiatric injuries as a result of the
accident, and found her permanently totally disabled. The ALJ considered whether Astra Zeneca was
entitled to a subrogation credit from the civil settlement proceeds. Because the settlement agreement did not
apportion damages, the ALJ apportioned $840,000[1]
as follows: $336,000 to pain and
suffering; $29,854.90 to past medical expenses; $100,000 to past lost wages;
$350,000 to future lost wages; and $24,845 to future medical expenses. The ALJ found Astra Zeneca’s subrogation
claim to be $73,525.05 based on the total amount of benefits paid, including
past medical expenses and temporary total disability (TTD) benefits. The ALJ further found Spady was entitled to
deduct her civil legal fees and expenses, totaling $320,360.49, from Astra
Zeneca’s subrogation claim. Finding the
legal fees and expenses exceeded Astra Zeneca’s subrogation claim, the ALJ determined
Astra Zeneca was not entitled to any subrogation credit. The ALJ assessed interest at a rate of 12% on
past due benefits pursuant to KRS[2] 342.040(1).
The parties filed petitions for reconsideration
alleging various errors. On August 30,
2012, the subsequent ALJ issued an order on the petitions. He reduced the net settlement amount to
$803,313.60 to account for the $36,686.40 LTD lien, and corrected the amount of
past medical benefits paid to $43,940.15.
The ALJ found no error in the decision to completely offset Astra
Zeneca’s subrogation credit.
Astra Zeneca appealed to the Board, and Spady
cross-appealed. On February 8, 2013, the
Board issued an opinion affirming in part, vacating in part, and remanding. The Board affirmed the ALJ’s finding of
permanent total disability (PTD). In
evaluating Astra Zeneca’s subrogation claim, the Board calculated past benefits
paid by Astra Zeneca by multiplying the weekly benefit amount of $694.30 by the
number of weeks elapsed from the beginning of Spady’s award to the date of the civil
settlement, totaling $57,428.53. The
Board agreed with the ALJ’s holding that because the $100,000 apportioned to
past lost wages exceeded the employer’s $57,428.53 liability and this excess
was not duplicative of workers’ compensation benefits, Astra Zeneca was not
entitled to a credit for this amount. As such, the Board deducted $42,571.48 from the
available settlement proceeds as excess settlement allocation for past lost
income. The Board further held the ALJ
properly deducted Spady’s LTD and PIP reimbursement. The Board calculated the available
subrogation credit as follows:
Total settlement proceeds: $850,000.00
PIP -$10,000.00
LTD lien -$36,686.40
Pain and suffering -$336,000.00
Non-duplicative past lost
income -$42,571.48
Attorney fees -$280,000.00
Expenses -$40,360.49
Subrogation credit $104,318.63
The Board further held Astra
Zeneca was not entitled to a subrogation credit until the amount of benefits
paid equaled or exceeded $320,360.49, the amount of the attorney’s fees and
expenses incurred in the civil claim.
This appeal and cross-appeal follow.
The
function of this Court when reviewing a workers’ compensation case is to
correct the Board only when we perceive the Board has overlooked or
misconstrued controlling statutes or precedent, or has committed an error in
assessing the evidence so flagrant as to cause gross injustice. See
Western Baptist Hospital v. Kelly, 827 S.W.2d 685, 687 (Ky. 1992).
KRS 342.700(1), granting a workers' compensation insurance
provider a right of recovery against a third-party tortfeasor for liability it
incurs on behalf of an injured worker, provides, in pertinent
part, as follows:
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 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.
As an initial matter, we address a calculation
error made by the ALJ affecting the apportionment of settlement funds. Whether an ALJ’s award conforms with Chapter
342 is a question of law and can be resolved even if not properly raised on appeal. Whittaker v.
Reeder, 30 S.W.3d 138, 144-45 (Ky.
2000); Twin Resources LLC v. Workman, 394 S.W.3d 417 (Ky. App. 2013). In apportioning $840,000 in settlement
proceeds pursuant to his authority under KRS 342.325, the original ALJ incorrectly
allocated $29,854.90 to past medical
expenses. The subsequent ALJ thereafter
issued an order reflecting the correct amount of past medical expenses,
$43,940.15. However, the remaining
apportioned damages were not modified to account for the extra amount allocated
to past medical expenses. In other words, in order for
the ALJ to correctly add $14,085.25 to the apportioned medical expenses, a like
amount would necessarily have had to have been deducted from other apportioned
figures. As a result of this error,
as it stands, the
currently apportioned amounts do not equate to the $840,000 settlement
proceeds. Therefore, because of the
modification to apportioned past medical expenses, we remand this matter to the
ALJ to reapportion all elements of damages to reflect the $840,000 settlement
proceeds.
Next, both Astra Zeneca and Spady argue the Board erred in calculating past lost
wages as of the date the civil settlement agreement was signed. They argue the Board should have calculated
the amount of past lost wages as of the date the ALJ entered the original
decision awarding benefits. We agree.
When the Board addressed accrued past lost wages,
it calculated the amount of TTD and PTD benefits payable through the date of
the settlement agreement as $57,428.53. Instead,
the Board should have used the date of the ALJ’s original order as the basis
for determining past lost wages, since this was the date Astra Zeneca was actually
ordered to pay benefits. Any benefits
payable up to that date, logically, would be classified as past benefits. On July 14, 2012, the ALJ ordered Astra
Zeneca to pay Spady PTD benefits of $694.30 per week beginning November 6,
2009, continuing so long as she remained totally disabled. As such, the correct amount of past benefits
accrued to the date of the ALJ’s order was $97,301.18.[3]
Next, Astra Zeneca argues the ALJ and the Board
erred in excluding $10,000 in PIP reimbursement from the available settlement
proceeds. In reducing settlement
proceeds for PIP reimbursement, the Board held the ALJ properly excluded this
$10,000 PIP amount because Spady paid for PIP coverage and is entitled to the
benefit from this collateral source. On
appeal, Astra Zeneca argues the Board erred in excluding this amount because
there is no evidence Spady paid for the PIP insurance policy, and no evidence
the PIP carrier has taken any steps to assert a lien against Spady’s $10,000
recovery.
PIP is also referred to as basic reparations
benefits (BRB) and courts have used the terms interchangeably. Samons v. Kentucky Farm Bureau Mut. Ins. Co., 399 S.W.3d 425, 428 (Ky. 2013). These are “benefits
providing reimbursement for net loss suffered through injury arising out of the
operation, maintenance, or use of a motor vehicle.” KRS 304.39–020(2). Spady’s civil settlement distribution form
reads:
PIP – Gallagher Bassett Services,
Inc. $10,000.00 was paid by the PIP Carrier for excess wage loss benefits. In the Settlement Agreement, Angela Spady
agreed to be responsible for reimbursement of this PIP lien. Nationwide Agribusiness has agreed to send an
additional check in the amount of $10,000.00 which has not been received. Upon receipt of this check, it will be held
in our Trust Account pending resolution of this lien. While we will try to negotiate the amount of
this lien to a lesser amount, there is no guarantee that we will be able to do
so.
Aside from the settlement
distribution form, the record contains no additional information regarding PIP
benefits.[4] It is unknown whether Spady was ever
successful in negotiating the lien to a lesser amount.
We hold the Board erred in reducing the available
settlement proceeds by $10,000 for PIP reimbursement. In Jefferson
County Bd. of Educ. v. Cowles, 982 S.W.2d 224 (Ky. App. 1998), a workers’
compensation insurance carrier (employer) filed a claim against a third-party
tortfeasor pursuant to KRS § 342.700 seeking subrogation of benefits it paid to
the injured employee. The employee also
filed a lawsuit against the tortfeasor, and the two cases were
consolidated. The tortfeasor moved for a
$10,000 credit against the employer’s subrogation claim to account for BRB
benefits, arguing the employer should not be entitled to recover this amount
because the injured employee would not be entitled to this amount. This Court disagreed, holding the employer
was entitled to recover the first $10,000 in benefits it paid to an employee from
the third-party tortfeasor and its subrogation right should not be reduced for
BRB. Id.
at 226. Otherwise, the Court explained,
“[the employer], an innocent party, would be forced to assume that
responsibility.” Id. at 227.
Similarly, Astra Zeneca should not assume
responsibility for the PIP reimbursement by having its subrogation credit
diminished by $10,000, regardless of whether Spady has repaid or kept this
amount. A PIP carrier has a claim
for reimbursement of PIP benefits paid from the third party tortfeasor. Carta
v. Dale, 718 S.W.2d 126, 128 (Ky. 1986).
Here, the
parties in the civil case arrived at an agreement whereby the tortfeasor
assumed responsibility for the first $10,000 of benefits by designating this
amount from the settlement proceeds to be reimbursed to the PIP carrier. Reducing Astra Zeneca’s subrogation credit by
$10,000 would wrongly transfer responsibility for this amount to Astra
Zeneca.
Furthermore, while we agree with Astra Zeneca—there
is no evidence in the record of whether Spady paid for the PIP insurance policy—we
hold it does not matter who paid for the policy for purposes of evaluating
whether Astra Zeneca’s subrogation credit should be reduced for PIP. The effect of PIP, regardless of the source
of its funding, is to compensate Spady for excess wage loss benefits. Contrary to the Board’s holding, the common
law collateral source rule is superseded by the Act, which gives Astra Zeneca a
statutory right of subrogation. Krahwinkel v. Commonwealth Aluminum Corp.,
183 S.W.3d 154, 160 (Ky. 2005).
Next, Astra Zeneca argues the ALJ and Board erred
by reducing the available settlement funds by $36,686.40 due to a LTD lien. Astra Zeneca argues there was no evidence
presented regarding the LTD policy or the basis for this payment being made
from settlement proceeds. Astra Zeneca
further argues Spady will receive a double recovery if it is not allowed to
claim a credit. The only information of
record regarding this LTD lien is on the settlement distribution form indicating
total settlement proceeds were reduced by $36,686.40 due to “Met Life Recovery
– LTD Reimbursement.” It is unknown
whether this amount is being held in trust, or whether Met Life Recovery was
directly reimbursed. Regardless, we hold
the Board properly reduced Astra Zeneca’s subrogation credit for LTD
reimbursement.
In American
Standard v. Boyd, 873 S.W.2d 822 (Ky. 1994), our Supreme Court held an
employer’s entitlement to workers’ compensation credit for an award of LTD
pension benefits depends upon proof of several factors, “including, but not
limited to, unilateral funding by the employer, duration and conditions of plan
coverage, and whether the plan contains its own internal off-set
provisions.” Id. at 823. As the purpose
for allowing workers’ compensation credit is to avoid double recovery, the Supreme
Court held it is fundamental to have a finding that the plan in question
actually fulfills the same purpose as workers’ compensation benefits. Id. The party asserting entitlement to a credit
is responsible for putting forward evidence to support its position. Id.
In the instant matter, Spady concedes the LTD
policy through Met Life Recovery was funded by the employer. However, Spady argues Astra Zeneca never put
forth evidence or sought credit for the LTD payments while the workers’
compensation claim was in litigation, and allowing Astra Zeneca a subrogation
credit for funds Spady did not keep would create an unfair windfall. We agree, and hold Astra Zeneca is not
entitled to credit for the LTD payments.
Although it is unclear from the record whether the
LTD carrier has been reimbursed for the benefits, these funds were withheld
from the settlement proceeds. If Astra
Zeneca wanted credit for these funds, it should have put forth evidence
addressing the factors discussed in American
Standard. As there is no evidence in
the record regarding the terms and conditions relative to the LTD benefits, it
is impossible to determine whether the plan fulfills the same purpose as
workers’ compensation benefits.
Therefore, we hold the Board properly reduced the available settlement
funds by $36,686.40.
Next, Astra Zeneca argues statutory interest on
past due benefits assessed by the ALJ should be included in calculating its
subrogation credit. We disagree. Astra Zeneca cites no authority in support of
its argument that interest payments are entitled to subrogation credit. KRS 342.700(1) grants a subrogation right for compensation payable by an employer, but an interest payment
is not compensation. Rather, interest
would be an avoidable penalty assessed only if Astra Zeneca failed to pay
timely benefits. As such, Astra Zeneca
is not entitled to a subrogation credit for interest payments.
Astra Zeneca argues the Board erred in reducing
the available settlement proceeds by $42,571.48 for non-duplicative past lost
income. Astra Zeneca claims the
available proceeds should not be reduced for past lost income because Spady is
not entitled to be “made whole.” In
addition, Astra Zeneca argues any excess amount allocated to past lost wages should
be credited to future lost income because the ALJ’s award of future benefits
will exceed the amount allocated to future lost wages, $350,000.
Because we are remanding this matter for the ALJ to
reapportion the settlement proceeds, we decline to address Astra Zeneca’s
arguments regarding an excess allocation for past lost wages. After the ALJ recalculates past lost wages,
there may be no excess, rendering this issue moot.
Lastly, in her cross-appeal, Spady argues the
Board erred by failing to find the subrogation credit completely offset by
legal fees and expenses pursuant to KRS 342.700(1). Spady claims since the total benefits subject
to subrogation due at the time of the ALJ’s decision is less than the total
legal fees and expenses of $320,360.15, Astra Zeneca is not entitled to any subrogation
credit. We disagree.
Spady’s argument in favor of completely offsetting
legal fees and expenses ignores the fact that Astra Zeneca is entitled to credit
for the payment of future lost wages and medical expenses. Astra Zeneca may, in the future, pay benefits
in excess of Spady’s legal fees and expenses.
We hold the Board properly accounted for attorney’s fees and
expenses—$320,360.49 in total—by deducting this amount of available settlement
funds. Further, the Board properly
accounted for the continuing payment of future lost wages and medical expenses
by holding Astra Zeneca was not entitled to a subrogation credit until the
amount of benefits paid equals or exceeds Spady’s attorney’s fees and expenses.
The opinion of the Board is affirmed in part,
vacated in part, and remanded for further proceedings consistent with this Opinion.
ALL CONCUR.
BRIEFS FOR APPELLANT/CROSS- APPELLEE, ASTRA
ZENECA: Joel W. Aubrey E. Shane Branham Lexington, Kentucky |
BRIEF FOR APPELLEE/CROSS- APPELLANT, ANGELA
SPADY: Bobby Rowe Prestonsburg, Kentucky |
[1] The ALJ excluded $10,000 for PIP reimbursement, although he did not specify he was doing so in the order.
[2] Kentucky Revised Statutes.
[3] One hundred and forty and one-seventh weeks elapsed from November 6, 2009, to July 14, 2012.
[4] Based
on the information on the form, it appears Spady’s PIP carrier paid $10,000 to
Spady and asserted a lien. $10,000 from
the tortfeasor’s settlement was to be held in trust pending resolution of the
lien.