Case Name: MARYLAND CASUALTY COMPANY, Petitioner, v. Gladys A. SMITH et al., Respondents
Court: Florida Supreme Court
Jurisdiction: Florida
Decision Date: 1973-01-17
Citations: 272 So. 2d 517
Docket Number: No. 41275
Parties: MARYLAND CASUALTY COMPANY, Petitioner, v. Gladys A. SMITH et al., Respondents.
Judges: ROBERTS, BOYD and McCAIN, JJ„ concur.
Reporter: Southern Reporter, Second Series
Volume: 272
Pages: 517–523

Head Matter:
MARYLAND CASUALTY COMPANY, Petitioner, v. Gladys A. SMITH et al., Respondents.
No. 41275.
Supreme Court of Florida.
Jan. 17, 1973.
Knight, Peters, Hoeveler, Pickle, Nie-moeller & Flynn, Miami, for petitioner.
Peter S. Schwedock, of Pelzner & Schwedock, Miami, for respondents.

Opinion:
CARLTON, Chief Justice.
Certiorari was granted in this cause to resolve a conflict between the decision of the District Court below, reported at 247 So.2d 526 (3rd D.C.A., Fla.1971); Bituminous Cas. Corp. v. Florida Power & Light Co., 190 So.2d 426 (4th D.C.A., Fla.1966), and Dickerson v. Orange State Oil Co., 123 So.2d 562 (2nd D.C.A.Fla.1960). The issue in conflict is whether or not under Fla.Stat. § 440.39, F.S.A., settlement without notice by an employee, injured by a third party tort feasor, bars a suit in the second year by an employer, and limits the recovery of the employer to an equitable distribution of the settlement.
On March 27, 1968, Gutierrez, an employee covered by workmen's compensation, was injured in an automobile collision by Smith, a third party tort feasor. In the ultimate, Maryland Casualty, the compensation carrier, was liable to Gutierrez for $4,300.00 in compensation benefits. Maryland notified Smith and her liability insurer, of its subrogation rights. Gutierrez did not file suit against Smith within the first year, but May 23, 1969 (within the second year), Smith's insurer settled the accident claim with Gutierrez for $9,305.00. As part of the settlement transaction, Gutierrez accepted responsibility for indemnification of Maryland's compensation benefits claim.
Maryland received no notice of the settlement. On March 17, 1970, it filed a second year action against Smith and her carrier under Fla.Stat. § 440.39(4) (a), F.S.A., not on the tort claim, but instead solely for recovery of its compensation liability. Smith's insurer then filed a third party claim against Gutierrez for indemnification of its ultimate liability to Maryland. Gutierrez did not dispute his liability to Smith's insurer, but he argued that Maryland was entitled only to an equitable distribution out of the settlement. The trial court agreed with Gutierrez that: (1) he had to indemnify Smith's insurer in accord with the settlement agreement; (2) the indemnification was limited to a pro rata share of the settlement based on an equitable distribution. In essence, the trial court held that Maryland was not entitled to a full reimbursement under Fla.Stat. § 440.-39(4) (a), F.S.A., because a settlement had been reached prior to the filing of suit by Maryland, even though Maryland was not so informed. The compensation carrier was awarded $840.00 as its pro rata share of the equitable distribution of the settlement.
On Maryland's appeal, the District Court affirmed, holding in part:
"The employee's claim against the tort-feasors having been settled where no action had been filed on the tort claim by the workmen's compensation insurance carrier under subsection 4 of § 440.39 Fla.Stat., F.S.A., the settlement falls under the provisions of paragraph (b) of subsection 3 of § 440.39 which, with the aid of subparagraph (a) thereof to which reference is there made, provides for the compensation carrier to receive a pro rata share of the settlement amount based on equitable distribution. The trial court properly interpreted the stat ute in that respect, and the ruling thereon was eminently correct. See Zurich Insurance Company v. Renton, Fla.App.1966, 189 So.2d 492."
Although a divergent view is expressed in Bituminous and Dickerson, supra, we agree with the holding of the District Court. The dissimilar interpretations offered by cases involving settlement without notice can be directly assigned to the inartful draftsmanship exhibited in Fla.Stat. § 440.39, F.S.A. Recently, in Aetna Cas. & Sur. Co. v. Bortz, 227 So.2d 108 (Fla.1972), we reexamined this section of the Workmen's Compensation Chapter from the perspective of its historical development. Two conclusions from the research engendered by that case are pertinent here.
First, the right of employers to subrogation for compensation benefits has traditionally been conceived as a statutory, and not an inherent, right. Second, subro-gation rights have shifted in thrust over the past thirty-five years (first enacted as Section 39, Chapter 17481, Laws of 1935) from a scheme giving an advantage to the employer to one giving an advantage to the employee. An examination of the revision of the section will show this to be an objective perception, although it is clear that the Legislature is attempting to achieve a balance of the respective interests.
Fla.Stat. § 440.39, F.S.A., now allows the employee to file or settle in the first year under subsection (3) (a) ; in this event, the employer is entitled to an equitable distribution. If suit has not been filed, and no settlement has been negotiated in the first year, subsection (4) (a) permits the employer to file suit or institute a settlement. Since the language of (4) (a) stresses "may", it is assumed that the Legislature intended that the rights of the employer and employee are concurrent in the second year until one or the other acts first. Jersey Ins. Co. of New York v. Cuttriss, 220 So.2d 15 (3rd D.C.A.Fla.1969); Home Indemnity Co. v. McAdams, 139 So.2d 433 (3rd D.C.A.Fla.1962); Zurich Ins. Co. v. Renton, 189 So.2d 492 (2nd D.C.A.Fla.1966). If the employer fails to act in the second year, subsection' (4) (b) provides that equitable distribution shall again apply.
Fla.Stat. § 440.39, F.S.A., provides in (3) (a) that an employer "may file notice of payment of compensation," and also that notice of suit is to be filed, but it is silent as to notice of settlement.' When subsection (3) (b) was added, it did not require a notice of settlement. The Bituminous and Dickerson cases, supra, suggest that an employer is entitled to notice so that the terms of the settlement can be approved, but the employer's consent is not suggested by the statutory language in (3)(b). The employer is entitled only to subrogation of the settlement, not to dictate the terms of the settlement. Note that subsection (5) provides that when the employer has control of the claim, no settlement can be reached except upon agreement with the employee.
It follows then that, • as the statute is currently drafted, an employee is free to settle with or without notice since settlement need not be by consent of the employer. However, this freedom is not without limitation. Failure to inform the carrier may be a factor in determining equitable distribution where the employer has expended time and expenses preparing for a second-year suit without notice of settlement. It may also be a factor where it appears that the employee and the third party have joined in a bad faith effort to lessen the employer's potential recovery. Additionally, the trial court should consider whether the employer's participation in the settlement, had he received notice, might have improved the ultimate settlement decided upon even though the employer could not dictate the settlement terms.
If under these and related equitable factors, it is decided that the settlement sum would have been increased had the employer been given notice, or that the employer's expenditures would have been reduced, then to that extent the employer would be entitled to a greater share of the recovery in accord with equitable principles. Under the facts of this case and the record before us, we see nothing to suggest that the trial court did not take these factors into consideration.
As to the equitable distribution, we note, in passing, a further point. Maryland's suit was specifically limited to its compensation liability. Had it been successful in proceeding with its suit, it would not have been seeking the tort recovery available to Gutierrez; it would have been seeking only a recovery limited to its own liability. This was an inequitable gesture in light of the fact that the employer's or carrier's suit in the second year is intended to be a vehicle for full recovery of tort damages for the employee, with the employer or the carrier being allowed to retain therefrom only its compensation liability. When Maryland filed its suit, it had no notice that there had been a settlement.
There being no error apparent in the decision under review, the writ heretofore issued should be discharged.
It is so ordered.
ROBERTS, BOYD and McCAIN, JJ" concur.
ERVIN, J., dissenting with opinion.
. The term "employer" is used throughout and should be considered as including the employer's compensation carrier where applicable.