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KROEMER v. OMAHA TRACK EQUIP.

Cite as 296 Neb. 972

Norman Kroemer, appellee, v. Omaha 

Equipment, L.L.C., and The Tie Yard of

now known as Omaha Track, Inc., ap

and Ribbon Weld, LLC, app

___ N.W.2d ___

Filed June 16, 2017. No. S-16-856.

1. Statutes: Appeal and Error. Statutory interpretation presents a question of law, for which an appellate court has an obligation to reach 

an independent conclusion irrespective of the decision made by the 

court below.

2. Workers’ Compensation: Judgments: Appeal and Error. Distribution 

of the proceeds of a judgment or settlement under Neb. Rev. Stat. 

§ 48-118.04 (Reissue 2010) is left to the trial court’s discretion and 

reviewed for an abuse of that discretion.

3. Judges: Words and Phrases. A judicial abuse of discretion requires 

that the reasons or rulings of a trial judge be clearly untenable, unfairly 

depriving a litigant of a substantial right and a just result.

4. Workers’ Compensation: Subrogation. Neb. Rev. Stat. § 48-118 

(Reissue 2010) grants an employer who has paid workers’ compensation 

benefits to an employee injured as a result of the actions of a third party 

a subrogation interest against payments made by the third party.

5. Workers’ Compensation. A settlement of a third-party claim is void 

under Neb. Rev. Stat. §48-118.04(1) (Reissue 2010) unless the settlement is either agreed upon in writing by the employee and employer or 

its insurer or determined by the court to be fair and reasonable.

6. Workers’ Compensation: Insurance. In determining the fairness and 

reasonableness of a settlement of a third-party claim under the Nebraska 

Workers’ Compensation Act, a court considers liability, damages, and 

the ability of the third person and his or her liability insurance carrier to 

satisfy any judgment.

7. Workers’ Compensation: Subrogation. The policies behind the 

Nebraska Workers’ Compensation Act favor a liberal construction in 

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

08/04/2017 01:08 AM CDT
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favor of an employer’s statutory right to subrogate against culpable 

third parties.

8. Workers’ Compensation: Insurance: Case Disapproved. In re Estate 

of Evertson, 23 Neb. App. 734, 876 N.W.2d 678 (2016), is disapproved 

to the extent that the court considered payment of premiums and comparative risk in allocating none of the proceeds of a workers’ compensation settlement to the insurer.

9. Workers’ Compensation: Subrogation: Equity. Although Neb. Rev. 

Stat. § 48-118.04(2) (Reissue 2010) calls for a fair and equitable distribution, subrogation in workers’ compensation cases is based on statute, 

and not in equity.

10. Workers’ Compensation: Insurance: Equity. A distribution of the proceeds of a judgment or settlement under Neb. Rev. Stat. § 48-118.04(2) 

(Reissue 2010) must be fair and equitable to both the employee and the 

employer or its insurer.

Appeal from the District Court for Douglas County: J 

Russell Derr, Judge. Affirmed in part, and in part reverse

and remanded with direction.

Julie A. Jorgensen, of Morrow, Willnauer, Klosterman & 

Church, L.L.C., for appellant.

Ronald L. Brown, of Brown & Theis, L.L.P., for appellee 

Norman Kroemer.

Gregory F. Schreiber and Albert M. Engles, of Engles, 

Ketcham, Olson & Keith, P.C., and, on brief, Brock S.J. 

Hubert, for appellee Omaha Track Equipment, L.L.C.

Wright, Miller-Lerman, Cassel, Stacy, K

Funke, J

Cassel, J.

I. INTRODUCTION

An injured employee proposed to settle his third-party suit 

for $150,000. His employer, which had a subrogation interest 

of over $200,000, contested the settlement. The district court 

determined that the settlement was fair and reasonable but 
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allocated none of it to the employer. Because of the disputed 

litigation risk, approval of the settlement was not an abuse of 

discretion. But under our statutory scheme, the allocation of 

zero to the employer was legally untenable. We affirm in part 

and in part reverse, and remand with direction.

II. BACKGROUND

At the relevant time, Ribbon Weld, LLC, and Omaha Track 

Equipment, L.L.C. (OTE), were both wholly owned subsidiaries of The Tie Yard of Omaha, now known as Omaha Track, 

Inc. Ribbon Weld’s employees occasionally used OTE’s shop 

to service their equipment and, while doing so, used OTE’s 

tools. Norman Kroemer, a Ribbon Weld employee, sustained 

an eye injury in connection with the use of OTE’s tools at 

OTE’s shop.

Kroemer and Ribbon Weld entered into a compromise lumpsum settlement for $80,000, which the Nebraska Workers’ 

Compensation Court approved. After payment of the lump 

sum, Ribbon Weld’s subrogation interest totaled $207,555.01.

Kroemer then sued OTE, The Tie Yard of Omaha, and 

Ribbon Weld. The suit alleged negligence. Kroemer made 

Ribbon Weld a party “for the limited purpose provided by 

[Neb. Rev. Stat. §] 48-118 [(Reissue 2010)].” OTE asserted 

numerous affirmative defenses, including comparative negligence. In Ribbon Weld’s answer, it asked that any recovery by 

Kroemer be subject to its subrogation right.

Kroemer and OTE engaged in mediation to settle the thirdparty claim. Ultimately, they negotiated a compromise settlement of claims in the amount of $150,000. Although Ribbon 

Weld did not contribute or share in litigation expenses, it contested the proposed settlement. 

The district court held a settlement and allocation hearing 

under Neb. Rev. Stat. § 48-118.04 (Reissue 2010). Kroemer 

testified about the accident and injury, which occurred as he 

and a coworker endeavored to cut through a “spot-weld on 

[an] Allen wrench.” Kroemer planned to hold the Allen wrench 
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and socket with a pair of pliers as his coworker operated 

a “Milwaukee grinder with the wheel.” When Kroemer’s 

coworker started the grinder, the wheel exploded, sending 

shrapnel into Kroemer’s face and left eye. Kroemer was wearing safety glasses but not a face shield. After undergoing three 

surgeries, Kroemer ultimately sustained a 95-percent loss of 

vision in his eye. Due to the injury, Kroemer no longer physically qualified for a commercial driver’s license. He returned 

to work with Ribbon Weld, but had restrictions of light-duty 

work and no dusty conditions. Ribbon Weld subsequently 

sold its business, and Kroemer lost his employment a short 

time later.

The district court received evidence concerning the value 

of Kroemer’s case. One expert opined that “there was a very 

substantial probability (80%-90%) of a jury verdict for the 

defendants were the case to proceed to trial.” He stated that 

a jury could have easily determined that Kroemer’s comparative fault was greater than 50 percent. Another expert valued 

Kroemer’s claim in the range of $850,000 to $1,250,000, 

before consideration of comparative negligence. But he also 

opined that the settlement of $150,000 was in Kroemer’s best 

interests, due to the high probability of a jury verdict for the 

defendants. Ribbon Weld’s expert opined that it was “more 

than likely (70-80% chance) that a Plaintiff’s verdict would 

be reached,” that a jury would likely assess “contributory negligence” in the range of 25 to 35 percent, and that Kroemer 

would have likely recovered in excess of $500,000 if the case 

proceeded to trial. Ribbon Weld’s expert believed that the 

settlement was inadequate given the value of the case and that 

the settlement appeared to have been accepted with the intention of no, or very minimal, payback to Ribbon Weld of the 

subrogation amount.

The district court determined that the settlement of $150,000 

was reasonable. It made the following allocation: $94,834.27 

to Kroemer, $55,165.73 for attorney fees and expenses, and 

$0 to Ribbon Weld.
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Ribbon Weld appealed, and we granted its petition to bypass 

review by the Nebraska Court of Appeals. We subsequently 

ordered supplemental briefing, which we have considered in 

resolving this appeal.

III. ASSIGNMENTS OF ERROR

Ribbon Weld assigns that the district court erred in (1) finding the settlement to be fair and reasonable and (2) finding that 

an allocation of $0 to Ribbon Weld was fair and equitable.

IV. STANDARD OF REVIEW

[1] Statutory interpretation presents a question of law, for 

which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the 

court below.1

[2,3] Distribution of the proceeds of a judgment or settlement under § 48-118.04 is left to the trial court’s discretion 

and reviewed for an abuse of that discretion.2 A judicial abuse 

of discretion requires that the reasons or rulings of a trial judge 

be clearly untenable, unfairly depriving a litigant of a substantial right and a just result.3

V. ANALYSIS

1. Overvie

[4,5] We first set forth two principles of law under the 

Nebraska Workers’ Compensation Act (the Act).4 First, 

§ 48-118 grants an employer who has paid workers’ compensation benefits to an employee injured as a result of the actions 

of a third party a subrogation interest against payments made 

by the third party.5 Second, a settlement of a third-party claim 

1 Estermann v. Bose, ante p. 228, 892 N.W.2d 857 (2017).

2 Burns v. Nielsen, 273 Neb. 724, 732 N.W.2d 640 (2007).

3 Id.

4 Neb. Rev. Stat. §§ 48-101 to 48-1,117 (Reissue 2010 & Cum. Supp. 2016).

5 Burns v. Nielsen, supra note 2.
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is void under § 48-118.04(1) unless the settlement is either 

agreed upon in writing by the employee and employer (or its 

insurer) or determined by the court to be fair and reasonable. 

We now turn to the assigned errors.

2. Fairness and Reasonab

of Settleme

[6] Ribbon Weld first challenges the amount of the settlement. In determining the fairness and reasonableness of a settlement of a third-party claim under the Act, the court considers “liability, damages, and the ability of the third person and 

his or her liability insurance carrier to satisfy any judgment.”6

We examine these factors in reverse order.

(a) Ability to Satisfy Judgment

The record does not contain much evidence as to OTE’s 

ability to satisfy the judgment. Kroemer testified that the 

proposed settlement of $150,000 did not reflect the limits of 

OTE’s insurance policy. Accordingly, the ability of OTE and 

its liability insurance carrier to pay was not an impediment to 

a greater settlement.

(b) Damages

The estimated damages in this case were significant. 

Kroemer sustained a 95-percent loss of vision in his left eye. 

Kroemer’s expert valued Kroemer’s claim between $850,000 

to $1,250,000. Ribbon Weld’s expert agreed with an assessment of damages set forth in a demand letter valuing the case 

at $858,989.86.

(c) Liability

Under the facts of this case, the deciding factor on the 

reasonableness of the settlement is the issue of liability. 

Kroemer’s two experts opined that there was a high probability 

6 § 48-118.04(1)(b).
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of a jury verdict in favor of OTE. Ribbon Weld’s expert, on 

the other hand, opined that it was “more than likely” a jury 

would return a verdict in Kroemer’s favor and that the jury 

would assess contributory negligence in the range of 25 to 

35 percent.

Evidence reflected negligence on Kroemer’s part. Kroemer 

planned to hold the Allen wrench with pliers because the vice 

on the table was in use. He knew that using the vice would 

have been safer, and he testified that he would not have been 

injured if a vice were used. Kroemer believed Ribbon Weld’s 

rules or regulations required use of safety glasses and a face 

shield when using a hand grinder. But he was not wearing 

a face shield. As the supervisor, it was Kroemer’s responsibility to make sure his crew wore safety glasses and a face 

shield. Kroemer testified that when a member of his crew 

used a hand grinder, a guard was required to be affixed to 

the grinder. He did not recall seeing a Ribbon Weld grinder 

without a guard. A guard protects the operator from being 

struck by flying debris generated from using the grinder. But 

the grinder selected by Kroemer’s coworker did not have 

a guard.

Other evidence lessened the effect of Kroemer’s own negligence. On an earlier occasion, an OTE shop foreman told 

Kroemer that OTE employees used the same grinder without 

a guard. That foreman also told Kroemer that they used a 

7-inch wheel on a 4-inch grinder. Although a person using a 

hand grinder should wear a face shield, Kroemer was not the 

person doing the grinding. Further, Kroemer did not select 

the grinder. And Ribbon Weld points out that a guard may 

not have prevented the injury because Kroemer was injured 

as a result of the tool’s exploding—not by any debris resulting from grinding. Kroemer testified that it was possible he 

would have been injured even if the grinder had a guard, but 

that his injury would have been less likely if the grinder had 

a guard.
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(d) Resolution

After consideration of the relevant factors, we cannot say 

that the district court abused its discretion in finding the settlement to be fair and reasonable. Although there was potential 

for a large verdict in Kroemer’s favor, he accepted a greatly 

reduced settlement due to concerns that he would receive nothing if a jury determined that his comparative negligence was 

50 percent or more. We cannot fault him for declining to take 

this gamble.

3. Allocation

Settlement Proc

Ribbon Weld argues that the district court abused its discretion in allocating none of the proceeds of Kroemer’s $150,000 

settlement to Ribbon Weld. We observe at the outset that 

Ribbon Weld does not contend the court abused its discretion in awarding $55,165.73 for attorney fees and expenses. 

At the hearing, Ribbon Weld’s counsel stated that “whatever 

the settlement level is, we do believe that it was obtained by 

[Kroemer’s counsel], and attorney fees and costs are simply 

not an issue in this case.” Thus, our review in this case focuses 

on the allocation of $94,834.27 to Kroemer and of $0 to 

Ribbon Weld.

(a) Overview

When an employee injured as a result of a third person’s tortious conduct receives compensation from his or her 

employer and from the tort-feasor, an issue arises as to how to 

divide any proceeds obtained from the third party. “The obvious disposition of the matter is to give the employer so much 

of the negligence recovery as is necessary to reimburse it for 

its compensation outlay, and to give the employee the excess.”7

7 10 Arthur Larson et al., Larson’s Workers’ Compensation Law § 110.02 at 

110-3 (2016).
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Doing so prevents a double recovery by the employee. “Under 

most subrogation statutes the payor of compensation gets 

reimbursement for the amount of its expenditure as a first 

claim upon the proceeds of the third-party recovery, and the 

employee gets the excess.”8 But since 1994, our Legislature 

has rejected that approach. Our statute clearly mandates that 

proceeds in excess of the employer’s subrogation interest must 

be paid forthwith to the employee.9 But how the remaining 

proceeds should be divided does not automatically allocate first 

claim to the employer.

At least two states have statutes that reject the employerfirst approach and yet provide for a fully or partially guaranteed allocation to the employee. Wisconsin mandates that 

after deducting the reasonable cost of collection, the injured 

employee receives, at a minimum, one-third of the amount 

recovered.10 In Georgia, a statute provides that an employer or 

insurer may recover on its subrogation lien only “if the injured 

employee has been fully and completely compensated, taking 

into consideration both the benefits received under this chapter 

and the amount of the recovery in the third-party claim, for all 

economic and noneconomic losses incurred as a result of the 

injury.”11 We have described the latter concept as the “made 

whole” doctrine.12

Nebraska’s current statute rejects both the “first claim” and 

the “made whole” doctrines. Under § 48-118.04(2), the trial 

court is required to “order a fair and equitable distribution of 

the proceeds of any judgment or settlement.” The distribution 

is left to the court’s discretion and “simply requires the court 

to determine a reasonable division of the proceeds among the 

8 Id., § 117.01[1] at 117-2.

9 See § 48-118.

10 See Wis. Stat. Ann. § 102.29(1)(b) (West Cum. Supp. 2016).

11 Ga. Code Ann. § 34-9-11.1(b) (2008).

12 See Turco v. Schuning, 271 Neb. 770, 716 N.W.2d 415 (2006).
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parties.”13 Prior to a 1994 amendment to § 48-118,14 “employers 

and insurers were subrogated ‘dollar for dollar’ in any recovery 

against a third-party tort-feasor.”15 But through the amendment, employers and insurers were “subrogated for the amount 

judicially determined to be a fair and equitable division of the 

settlement under the circumstances.”16 We have determined that 

“[t]here is no indication, either in the statutory language or the 

legislative history, that § 48-118.04 was intended to infringe 

on the right of subrogation guaranteed by § 48-118 beyond the 

extent necessary to effectuate a reasonable settlement.”17 We 

have also stated that a fair and equitable distribution does not 

require that an employee be “made whole” or that tort proceeds 

be split proportionately.18

(b) Bacon v. DBI/SALA

[7] We discussed the purposes of the Act vis-a-vis workers’ compensation subrogation in Bacon v. DBI/SALA.

19 We 

explained that “the beneficent purposes of the Act concern 

the employee’s ability to promptly obtain workers’ compensation benefits—not the employee’s ability to additionally retain 

recovery against negligent third parties in tort actions.”20 We 

found “no reason to conclude that the beneficent purposes 

of the Act require us to narrowly interpret the employer’s 

statutory subrogation rights.”21 Rather, we determined that “the 

13 See Burns v. Nielsen, supra note 2, 273 Neb. at 735, 732 N.W.2d at 650.

14 See 1994 Neb. Laws, L.B. 594.

15 Turney v. Werner Enters., 260 Neb. 440, 446, 618 N.W.2d 437, 441 

(2000).

16 Id. at 446, 618 N.W.2d at 442.

17 Burns v. Nielsen, supra note 2, 273 Neb. at 732, 732 N.W.2d at 648.

18 See Turco v. Schuning, supra note 12.

19 Bacon v. DBI/SALA, 284 Neb. 579, 822 N.W.2d 14 (2012).

20 Id. at 588, 822 N.W.2d at 24.

21 Id.
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policies behind the Act favor a liberal construction in favor of 

the employer’s statutory right to subrogate against culpable 

third parties.”22 In an effort to balance the rights of injured 

employees against the costs to employers, most workers’ compensation acts “liberally allow employers to shift liability onto 

third parties whenever possible.”23 We iterated that “§ 48-118 

was enacted ‘for the benefit of the employer’”24 and that 

where a third party negligently causes the employee’s injury, 

“‘employers who are required to compensate employees for 

injuries are intentionally granted a measure of relief equivalent 

to the compensation paid and the expenses incurred.’”25

(c) In re Estate of Evertson

Recently, the Court of Appeals affirmed an allocation of 

zero to a workers’ compensation carrier in In re Estate of 

Evertson.

26 In that case, the carrier claimed a subrogation interest in the entire $250,000 settlement allocated to the victim’s 

surviving spouse. The county court found that a fair and equitable distribution was for the spouse to receive $207,416.69, 

for the attorneys to receive $42,583.31, and for the carrier to 

receive nothing.

In affirming the county court’s distribution, the Court of 

Appeals set out the factors considered by the county court. 

The Court of Appeals noted that the county court considered 

the victim’s lengthy marriage and “factors such as that [the 

workers’ compensation carrier] had charged and received the 

necessary premiums to provide workers’ compensation coverage . . . and that under all the circumstances, [the workers’ compensation carrier’s] financial risk was minimal and 

22 Id.

23 Id.

24 Id.

25 Id.

26 In re Estate of Evertson, 23 Neb. App. 734, 876 N.W.2d 678 (2016), 

vacated on other grounds 295 Neb. 301, 889 N.W.2d 73.
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insurance companies are in the business of assuming risk.”27

The Court of Appeals disagreed with the carrier’s “assessment 

that the county court was considering an equitable assessment 

in considering there was no evidence that [the workers’ compensation carrier] helped finance the settlement.”28 Instead, 

the Court of Appeals stated that “the county court’s language 

indicates that the court was considering that [the workers’ 

compensation carrier] did not expend any funds in securing the 

settlement.”29 Ultimately, the Court of Appeals could not say 

that the county court abused its discretion in distributing the 

settlement proceeds.

We granted further review in In re Estate of Evertson. But 

because we determined that the county court lacked subject 

matter jurisdiction to hear and decide the subrogation matter, 

we did not reach the merits of the appeal—which included the 

carrier’s assignment that the Court of Appeals erred in affirming a distribution that was not fair and equitable.30

In the instant case, the district court clearly relied on the 

Court of Appeals’ decision in In re Estate of Evertson in making its distribution. After reciting the above-quoted language 

from In re Estate of Evertson, the court stated that it considered 

the nature of Kroemer’s loss, the substantial damages he suffered, the insurer’s charging and receiving a premium of nearly 

$175,000 for the insurance coverage, and the “comparative 

risk to the insurance carrier versus Kroemer.” But neither the 

district court in the instant case nor the Court of Appeals in 

In re Estate of Evertson considered the effect of our decision 

in Bacon.

The reasoning in In re Estate of Evertson is flawed for 

several reasons. First, the payment of premiums for workers’ 

27 Id. at 741, 876 N.W.2d at 684.

28 Id.

29 Id.

30 See In re Estate of Evertson, 295 Neb. 301, 889 N.W.2d 73 (2016).
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compensation coverage is not an appropriate factor to consider in distributing proceeds recovered from a third party. 

“The . . . Act requires, with few exceptions, that every 

employer carry workers’ compensation insurance.”31 Thus, an 

employer (or its insurer) should not be stripped of its statutory subrogation right for obtaining such insurance.

Second, the comparative risk between an insurance company and employee is likewise an inappropriate factor. Every 

insurance company is in the business of assuming risk. 

Consideration of this factor would nearly always elevate the 

employee’s right to the proceeds over that of the employer or 

its insurer.

Third, in making a distribution of the recovery, consideration of an employer’s or its insurer’s participation in obtaining the settlement is suspect. The statutes give the employer 

or its insurer the option to actively prosecute its subrogation 

claim or to allow the employee to prosecute the claim and then 

obtain a portion of the recovery and share in the expenses.32

An employer’s (or its insurer’s) right to reimbursement is preserved even if it selects the latter option.

Fourth, the county court and Court of Appeals gave short 

shrift to the right of the employer or its insurer to recover 

on its subrogation interest. We have stated that § 48-118 

“encourag[es] prompt payment of benefits, even when a 

third party is liable for the injury, by providing an employer 

or insurer with the means to recover at least a portion of 

its payout.”33 The lower courts in In re Estate of Evertson

did not allow the insurer to recover any of its payout. 

Frankly, it is difficult to imagine a situation in which an 

allocation of $0 to an employer or insurer with a sizable 

31 Travelers Indemnity Co. v. International Nutrition, 273 Neb. 943, 945, 734 

N.W.2d 719, 722 (2007).

32 See, generally, §§ 48-118 to 48-118.03 (Reissue 2010).

33 Burns v. Nielsen, supra note 2, 273 Neb. at 733, 732 N.W.2d at 649.
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subrogation interest would be a fair and equitable distribution 

of proceeds.

[8] We disapprove the Court of Appeals’ decision in In re 

Estate of Evertson34 to the extent that the court considered 

payment of premiums and comparative risk in allocating none 

of the proceeds of the settlement to the insurer.

(d) Distribution in Instant Case

[9] The district court’s distribution in this case ignored 

Ribbon Weld’s statutory right to subrogation. Under § 48-118, 

Ribbon Weld is entitled to “reimbursement, under the right 

of subrogation, of any compensation paid.” Instead, the court 

allocated nothing to Ribbon Weld. Although the court did not 

explicitly use “made whole” language, it essentially applied a 

“made whole” formulation when it denied Ribbon Weld any 

recovery. We have found error when a trial court concluded 

that the worker had to be “made whole” before the subrogated 

compensation carrier was entitled to any portion of the settlement.35 And although the statute calls for a “fair and equitable 

distribution,”36 subrogation in workers’ compensation cases is 

based on statute, and not in equity.37

[10] The district court appeared to focus on a distribution 

that would be equitable only to Kroemer. But the distribution must be “fair and equitable”38 to both the employee and 

the employer or its insurer. Although Kroemer’s damages 

may have been worth over $800,000, Ribbon Weld paid over 

$200,000 in workers’ compensation benefits to Kroemer for 

an accident for which OTE was liable. Ribbon Weld was 

34 In re Estate of Evertson, supra note 26.

35 See Turco v. Schuning, supra note 12. See, also, Sterner v. American Fam. 

Ins. Co., 19 Neb. App. 339, 805 N.W.2d 696 (2011).

36 § 48-118.04(2).

37 See Burns v. Nielsen, supra note 2.

38 § 48-118.04(2).
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entitled to some portion of Kroemer’s settlement with OTE. 

The court’s denial of the same was untenable and must be 

reversed. But we review a district court’s allocation for abuse 

of discretion, and thus, it is not for us to dictate a fair and 

equitable distribution in the first instance.

VI. CONCLUSION

Under the circumstances, the district court did not abuse 

its discretion in determining that the amount of Kroemer’s 

settlement with OTE was fair and reasonable. We affirm that 

part of the court’s order. But we conclude that the district 

court did abuse its discretion in not allocating any of the 

settlement proceeds to Ribbon Weld. Accordingly, we reverse 

that portion of the court’s order and remand the cause to the 

district court with direction to make a fair and equitable distribution between Kroemer and Ribbon Weld of the remaining 

$94,834.27 of the settlement proceeds.

 Affirmed in part, and in part rev

and remanded with direct

Heavican, C.J., not participati