Title: Travelers Insurance Co. v. Henry

State: vermont

Issuer: Vermont Supreme Court

Document:

Travelers Insurance Co. v. Henry (2004-174); 178 Vt. 287; 882 A.2d 1133

2005 VT 68

[Filed 24-Jun-2005]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.

                                 2005 VT 68

                                No. 2004-174

  Travelers Insurance Company	                 Supreme Court

                                                 Original Jurisdiction
       v.	

  John P. Henry	                                 February Term, 2005

  Stephen D. Ellis and Jennifer K. Moore of Kiel Ellis & Boxer, Springfield,
    for  Plaintiff-Counter-Defendant-Appellant.

  Craig Weatherly of Gravel and Shea, Burlington, for
    Defendant-Counter-Claimant-Appellee.

  PRESENT:  Reiber, C.J., Dooley, Johnson and Skoglund, JJ., and 
            Allen, C.J. (Ret.), Specially Assigned

        
       ¶  1.  REIBER, J.   In this appeal, we are asked by the United States
  Court of Appeals for the Second Circuit to answer the following certified
  question: under 21 V.S.A. § 624(e), does a workers' compensation carrier
  have a right to reimbursement from, or a future credit against, 
  underinsured/uninsured (UIM) benefits recovered by an injured employee
  under an automobile liability policy that was purchased by his employer?
  (FN1)   As discussed below, we conclude that under the plain language of 21
  V.S.A. § 624(e), a workers' compensation carrier does not have a right to
  be reimbursed out of such proceeds, nor to have the balance of the proceeds
  treated as a credit against future payment of benefits, except to prevent a
  double recovery.  The question of whether an employee has received a double
  recovery can be answered only after the nature and extent of the injured
  employee's damages has been determined.  When this determination has been
  made, the extent of a workers' compensation carrier's right to
  reimbursement or to a credit against future payments can be ascertained.  

       ¶  2.  The underlying facts are undisputed.  In December 1999,
  defendant John Henry was  seriously injured in a two-car automobile
  accident that occurred during the course of his employment.  The driver of
  the second car, Kristy Herrick, was solely responsible for the accident. 
  Henry received workers' compensation benefits from plaintiff Travelers
  Insurance Company, his employer's workers' compensation carrier.  He also
  recovered $100,000 in damages from Herrick's personal liability insurer,
  the limit of the policy.  After deducting the costs of recovery (including
  attorney's fees), $66,060.75 of this money was paid to Travelers
  ($56,004.42 for a lien and $10,103.83 as an advance payment of permanency
  benefits not yet paid).  Henry also sought to recover under the UIM
  provisions of two automobile liability policies:  one that he had purchased
  himself, which had a policy limit of $100,000, and one that had been
  purchased by his employer, and issued by Travelers, with a policy limit of
  $400,000.  
   
       ¶  3.  In August 2001, Travelers filed a declaratory judgment action
  in the United States District Court for the District of Vermont seeking a
  declaration that pursuant to 21 V.S.A. § 624(e),  it was entitled to
  reimbursement from all of the UIM proceeds that Henry recovered.  According
  to Travelers, Henry's recovery of UIM proceeds in addition to his receipt
  of workers' compensation benefits constituted a "double recovery" within
  the meaning of 21 V.S.A. § 624(e).  Thus, Travelers sought reimbursement
  out of the UIM proceeds for the workers' compensation benefits that it had
  paid up to the date of recovery, as well as a credit toward any future
  benefits that it would be obligated to pay. (FN2)  

       ¶  4.  In an April 2002 entry order, the district court granted
  partial summary judgment to Henry, concluding that under 21 V.S.A. §
  624(e), Travelers had a right to reimbursement out of the UIM proceeds only
  to the extent that Henry had received a double recovery.  The court
  explained that the question of whether Henry had received a double recovery
  could not be decided until all potential coverage had been determined and
  the nature and extent of Henry's damages had been considered.  In its
  order, the court also granted Henry's request to join his personal
  automobile liability insurer as a party and add a counterclaim against both
  UIM carriers for the benefits allegedly due under the policies.  The
  parties then stipulated, solely for the purpose of determining their
  respective rights with respect to the UIM proceeds, that Henry's "total
  damages" were the sum of the available UIM coverage ($500,000) and the
  total amount of workers' compensation benefits paid through the date of the
  court's final judgment order. (FN3) 
                                     
       ¶  5.  In late 2003, the court granted judgment in Henry's favor,
  dismissing Travelers' complaint and awarding Henry $500,000 in UIM
  proceeds.  The court found that the plain language of 21 V.S.A. § 624(e)
  protected two types of recoveries from the reimbursement rights of workers'
  compensation insurers: (1) payments from privately purchased plans
  (including UIM coverage) and (2) payments from any other first party plan. 
  Because the UIM policy purchased on Henry's behalf by his employer was a
  first party insurance policy, the court concluded that Henry was not
  obligated to reimburse Travelers out of the UIM proceeds.  Travelers
  appealed to the Second Circuit, which certified the questions at issue in
  this appeal.

       ¶  6.  We begin with an overview of the reimbursement statute. 
  Generally speaking, 21 V.S.A. § 624 allows an injured employee to pursue a
  cause of action against a third party where the injury for which workers'
  compensation is payable "was caused under circumstances creating a legal
  liability to pay the resulting damages in some person other than the
  employer . . . ."  Id. § 624(a).  If an injured employee recovers damages
  from a liable third party, the employer or workers' compensation carrier is
  generally entitled to reimbursement for the workers' compensation benefits
  that it has paid.  Id. § 624(e).  Ideally, the statute operates to provide
  a fair result for all parties:  

    [T]he insurance carrier, representing the employer, comes out
    even, being without fault or injury; the third party wrongdoer
    pays exactly the damages he would have paid without any workers'
    compensation law; the attorney is reimbursed for services
    rendered, and the employee-in addition to what he has already
    received in compensation benefits-is entitled to the remainder.  

  St. Paul Fire & Marine Ins. Co. v. Surdam, 156 Vt. 585, 590, 595 A.2d 264,
  266 (1991) (quotation  omitted); see also, 6 A. Larson, Larson's Workers'
  Compensation Law § 110.02 (2004). 

       ¶  7.  Prior to its amendment in 1999, 21 V.S.A. § 624(e) provided:  

    In an action to enforce the liability of a third party, the
    injured employee may recover any amount which the employee or the
    employee's personal representative would be entitled to recover in
    a civil action.  Any recovery against the third party for damages
    resulting from personal injuries or death only, after deducting
    expenses of recovery, shall first reimburse the employer or its
    workers' compensation insurance carrier for any amounts paid or
    payable under this chapter to date of recovery, and the balance
    shall forthwith be paid to the employee or the employee's
    dependents or personal representative and shall be treated as an
    advance payment by the employer on account of any future payment
    of compensation benefits.  

  In Travelers Cos. v. Liberty Mutual Ins. Co., 164 Vt. 368, 372-73,