NO. 07-00-508- CV IN THE COU RT OF APP EALS FOR THE SEVENT H DISTRICT OF TEXAS

AT AMA RILLO PANE L C OCTOBER 9, 2001

______________________________ TEXAS WORKERS’ COMPENSATION

INSURANCE FUND,

Appellant
v. SUSA NNAH K NIGHT, HOUSTON R . EWING, AND SUSANA M ALDONA DO, Appellees

_________________________________ FROM THE 47 TH DISTRICT COURT OF POTTER COUN TY; NO. 87,104-A; HON. DAVID L. GLEASON, PRESIDING

_______________________________ Before QUINN, REAVIS, and JOHNSON, JJ. The Texas W orkers’ Compensation Insur ance Fund, (the Fund) appeals an order denying its sub rog atio n rig htscon cer ning fun ds p aid into the court registry by Sa feguard Insurance Com pany (S afeguard ). Through its sole issue, the Fund contends that the trial court err ed in denying its "claims for subroga tion interest against the [uninsured m otorist] proceeds based on its previous paym ent of com pensation to and m edical benefits on2

be half of [Susannah] Knight, [Susana] M aldonado, and [Houston R.] Ew ing." W e agre e and reverse the apportionm ent order exec uted by the trial court. Backgr ound I n March o f 19 99, Hou sto n E w ing ( Ew ing)w as d rivin g a vehic le ow ned by his
em ployer, Sterling Cleaning Services, while in the course of his em ploym ent. P asseng ers in the vehicle included Susannah Knight (Knight) and Susa na Ma ldonado (M aldonado). The Sterling vehicle was involved in an accident with anoth er vehicle driven by Geraldo Sandoval (Sandoval). It w as later determ ined that Sandoval was intoxicated at the time of the accident and that he had no l iabi lity i nsurance . S ter lin g had purchased uninsured/underinsured motorist insurance f rom S afeguard. Su itwas filed by Knigh t against, i niti ally, the Royal Insur ance Company. However, itwas later determ ined that the p ro per party was Safeg uard and the plead ings were amend ed to reflect sam e. The Fund intervene d in the law suit along w ith Mid-C entury Insurance Com pany of Texas , Knight’s uninsured/underinsured m otorist carrier. The Fund reli ed on a provi sion in the Texas Labor Code which provi des for workers’
com pen sation c arrier s subrogati on rights when an i nsured recover s from a third party. Safeguard, because it wa s unable to determ ine who w as entitled to the pro cee ds, paid $480,952.10 into the re gistry of the court. During the pende ncy of the suit, K night, Maldonado and Ewing rece ived ben efit s from the Fu nd in excess of $1 23,00 0. An apportionment

hearing was held w herein the Fund requested that it be reim bursed the
amoun tthat had been expended in benefits paid to and on behalf of Knight, Maldonado3

and Ew ing. The trial court rendered a judgm ent effectively denying the Fund’s subrogation claim.1 The stat ute in quest io n i s §417 .00 1 of the Tex as Lab or C ode. It rea ds: If a b en efit is

claim ed by an injured em ployee or a legal benef iciary of the empl oyee, the insurance carrier i s subrogated to the rights ofthe injured em ployee and may enf orce the liability of the third party in the nam e of the i njured empl oyee or the legal benef iciary . If the recovery is for an amount greater t han that paid or assumed by the insurance carrier t o the employee

or t he leg al b en eficia ry, the ins ura nce

carrie r s ha ll: 1) reim burse itself and pay the c osts from t he amount recov ered; and 2) pay the remai nder of the am ount recovere d to the injur ed employee or t he legal beneficiary.

4 Analysis Th e Fund argues that the trial court erred in denying it its statutory subroga tio n rights. 1 Tha t is , th e Fu nd a llege dly was ent itled to an amount of the Safeguard fun ds equal to the com pensation benefits paid Maldonado, Ew ing, and Knight. We agree. In Employer’s C

asualty Company v. Dyess, 95 7 S. W .2 d 8 84 (T ex. App. – Am arillo 1997, pet. denie d), we were asked to “address the subro gation ri ghts of a workers’
com pensation carrier as they m ight app lyto the em ployer’s uninsured m otorist coverage.” Upon addressin g that questi on, we held that the worker’s co mpens ation carrier had a statutoryright of subrogation agains t the proceeds paya ble via the uninsur ed motorist poli cy. Id. at 889-9 00. That holding hassince be en adopted by ou r breth ren in Texas Worker’s Comp. Ins. Fac. v. Aetna C as. & Suret

y Co. , 994 S.W.2d 923 (Tex. App–Hous ton [1 stDist.] 1999, no pet.). Thus, our own preced ent entitled the Fund to recovery. B y not according it same, the trial court erred. Neverthele ss, Knightargues that we shou ld “re-exam ine” our decision in Dyess

. Thisis so because we supposedly fa iled to abide by Members Mutual Insurance Company5

v. Hermann Hospital, 665 S.W.2d 325 (Tex. 1984). Hermann Hospi tal is quite inapposite, however. This is so for the sim ple reason that the statuteapplicable in Hermann ex pre ssl y prohibited the hospital from claiming a lien on proceeds from any insurance policy issued in favor of the inj ured party, including an uninsured motorist policy. Id. at 326-27. No such statutoryprohibition li mitsthe subrogation rights of the Fund viz-a -v iz the uninsur ed poli cy at bar. So too does Knight conten d that despite any statutory right of

subrogation the Fund may hav e, the t ri al court, through its equitable powers, w as authorized to apportion the proceeds as it saw f

it. W e again disagree for several reasons. First, the casesrelied upon by Knight, i.e., Ortiz v. Great Southern Fi

re & Casualt

y Insurance Co. , 597 S.W.2d 342 (T ex. 1980), Oss v. United Service Auto Assn ., 807 F. 2d 457 (5 th Cir. 1987), and Es p a r za v. Scott &

White Heal

th Plan , 9 09 S.W .2 d 5 48 (T ex. App. – Aus tin 1995), involved subrogation rights arising un der eq uity or contract, not stat ute. Second, t he statute applicable at bar clearly states that the carrier “shall[] reimburse itself and pay the costs from the am ount recovered . . . and [] pay the remainder . . . to the inj ured em ployee. . . .” T EX . L ABOR C ODE A NN . §417.001(b)(1) & (2) (em phasis added). In short, and as noted in Texas Wo rk er s’ C om pe ns at ion In s. Fu nd v. T ra vis , 912 S .W

. 2d 895 (Te x. A pp. – For t W orth 1995, no writ), “a workers’ com pensation carrier is entitled to recover one hundred percentof com pensation paid to an insured em pl oyee as a result of th e employee’s
recover y. . . . ” Id. at 897. Furtherm ore, the “workers’ com pensation claimant has noright to any fun ds .

. . unt il the workers’ com pensation carrier receives its paym entin full.” Id

.6

at897-98. Given these circum stance s, the trial court could not invoke its e quitable pow ers and, thereby, deny the Fund subrogation. Lastly, Knight argues that the trial court did not err because once Knight recovered from a third party, the Fund w ould “suspend paym ent of anyadditional benefits until what moniesshe receiveshas bee n ex hauste d in the pa ym ent of f uture exp en se s. ” Ag ai n, we disagree. Section 417.002 of the La bor Code provides: (a) The net am ount recovered by a c laimant in a third-party action shall b e used to rei mburse the ins urance carrier for benefits, incl udin g m edical benefi ts, that have been paid for the compensable injury. (b) Any a m ount re cover ed that exceeds the am ount of the reimbursem entrequired under Subsection (a) shall be treated as an adv ance against future benefits, including medical benefits, that the claiman t is entitled to rec eive u nde r th is subtitle. (c) If the advance under Subsection (b) is adequate to cover all fu tur e benefits, the insurance carrier is not required to re su me the paym ent of benefits. If theadvance is insufficient, the insurance carrier

sha ll resum e the paym ent of benefits when the a dvance is exhausted. T EX . L AB . C ODE A NN . §417.002(a)-(c) (Vernon Supp. 2001). From t his, we see t hat the Legislature intended that the com pensation carrier was to be reimburs ed first. Then, its dutyto pay w

ould go into stasis until the excess or rem ainder of the proceeds fromthe uninsured mo torist policy was consum ed bythe com pensation claimant. A t that point, the carrier ’s obligation to pay would resum e. In short, the compen sat i on claimant is not7

entitled to all the proceeds simply becaus e he or she m ay incur expenses exceeding the limits of the uninsured m otorists policy. Ac cor ding ly, thetria l court’s app ort ionm ent ord er isrev ers ed, and thecau se is remanded for further pr oceeding s.

Brian Quinn Justice Publish.