Case Name: FEDERATED MUTUAL INSURANCE COMPANY v. Kevin Darrin McNEAL
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 2006-11-30
Citations: 943 So. 2d 658
Docket Number: No. 2004-CA-02450-SCT
Parties: FEDERATED MUTUAL INSURANCE COMPANY v. Kevin Darrin McNEAL.
Judges: SMITH, C.J., WALLER AND COBB, P.JJ., AND CARLSON, J., CONCUR. DIAZ, J., DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY EASLEY, GRAVES AND RANDOLPH, JJ.
Reporter: Southern Reporter, Second Series
Volume: 943
Pages: 658–665

Head Matter:
FEDERATED MUTUAL INSURANCE COMPANY v. Kevin Darrin McNEAL.
No. 2004-CA-02450-SCT.
Supreme Court of Mississippi.
Nov. 30, 2006.
William Bienville Skipper, attorney for appellant.
Robert G. Germany, Eugene Coursey Tullos, Mark K. Tullos, Jackson, attorneys for appellee.

Opinion:
ON MOTION FOR REHEARING
DICKINSON, Justice,
for the Court.
¶ 1. The appellee's motion for rehearing is denied. The previous opinion is withdrawn, and these opinions are substituted therefor.
¶2. After collecting benefits from his employer's workers' compensation insurer, an injured employee filed suit against an allegedly negligent third party. When the suit was settled, the insurer requested reimbursement for workers' compensation benefits paid to the employee, but the circuit court, citing the "made whole" doctrine, refused to order the repayment. Claiming an absolute statutory right to reimbursement, the insurer filed this appeal without first formally seeking intervention in the case. The questions presented are whether the insurer is properly before this Court and, if so, whether the judicially-created "made whole" doctrine preempts Miss.Code Ann. Section 71-3-71 (Rev.2000), which grants to a workers' compensation insurer a lien against any amount recovered by an employee from a third party.
BACKGROUND FACTS AND PROCEEDINGS
¶ 3. Kevin Darrin McNeal was injured while delivering fuel to a customer of his employer, John Weatherford, Inc., who maintained a workers' compensation insurance policy with Federated Mutual Insurance Company ("Federated"). McNeal applied for and was paid workers' compensation benefits.
¶ 4. McNeal filed a complaint in the Circuit Court of Smith County, Mississippi, against Navistar International Truck and Engines Corp. ABA Corporation, and Waters International Trucks, Inc., alleging these defendants negligently caused the accident that led to his injuries. A Smith County jury assessed McNeal's total damages at.$2,250,000.00 against Nav-istar International Truck and Engines Corporation, ABA Corporation, and Waters International Trucks, Inc. The jury also found McNeal to be twenty-five percent at fault, and a judgment was entered in McNeal's favor for $1,687,500.00.
¶ 5. The defendants appealed to this Court, but the parties reached a settlement before the conclusion of the appeal. After being informed of the settlement, this Court remanded the matter to the Smith County Circuit Court. In its order approving the third-party settlement, the circuit court noted that McNeal disputed Federated's entitlement to a workers' compensation subrogation lien and directed the parties to deposit the disputed portion of the settlement funds in an interest bearing account maintained by McNeal's attorney.
¶ 6. Federated, who had never formally sought intervention in the case and was not a party, filed a Motion to Compel Compliance with Section 71-3-71 requesting the circuit court order McNeal to reimburse it for all workers' compensation benefits paid to him. The circuit court denied Federated's motion, holding that the "made whole" doctrine announced in Hare v. State, 733 So.2d 277 (Miss.1999), applied to workers' compensation subrogation liens. The circuit court further held that McNeal had not been made whole by the amount he received in settlement and that, until he was made whole, Federated was not entitled to repayment of its lien. Upon learning its motion was denied, Federated perfected an appeal to this Court.
DISCUSSION
¶ 7. On appeal, Federated raises only the question of "[w]hether the lower Court erred in holding the equitable 'made whole' doctrine applies to statutory workers' compensation subrogation liens, despite the clear language of Miss.Code Ann. § 71-3-71."
I. Mississippi Workers' Compensation Act
¶ 8. The Mississippi Workers' Compensation Act grants to a workers' compensation insurer the statutory right to reimbursement of benefits paid an injured worker in the event the worker recovers from a responsible third party. The pertinent portion of the statute provides:
[A]ny amount recovered by the injured employee or his dependents (or legal representative) from a third party shall be applied as follows: reasonable costs of collection as approved and allowed by the court in which such action is pending, or by the commission of this state in case of settlement without suit, shall be deducted; the remainder, or so much thereof as is necessary, shall be used to discharge the legal liability of the employer or insurer; and any excess shall belong to the injured employee or his dependents.
Miss.Code Ann. § 71-3-71 (Rev.2000) (emphasis added).
¶ 9. Thus, the statute unambiguously provides that, after deducting the costs of collection and attorneys' fees, any recovery from a third party (whether by award or through settlement) must be applied first to repay the workers' compensation insurer for benefits it paid the claimant. This Court, stating the statute must be strictly interpreted according to its mandatory language, has uniformly and consistently applied the statute and required reimbursement. See, e.g., Miss. Power Co. v. Jones, 369 So.2d 1381, 1387 (Miss.1979) ("The statute is plain and unambiguous."); Litton Sys., Inc. v. Murphree, 301 So.2d 850, 852-53 (Miss.1974) (statute means "exactly what it says; that is, that the employer and insurer are entitled to recover compensation paid."); Merchants Co. v. Hutchinson, 199 So.2d 813, 815 (Miss.1967) ("Mississippi law is clear and unambiguous on the procedure to be followed by the employer or its insurer in intervening or joining in the cause of action. It is equally clear and unambiguous in setting forth the mandatory distribution to be made of any amount recovered.").
¶ 10. Clearly, the requirements for application of Section 71-3-71 are met by the facts of this case: Federated paid workers' compensation benefits to McNeal pursuant to the Mississippi workers' compensation statutes, and McNeal recovered money from the third-party defendants. Thus, the money recovered by McNeal from the defendants, after deducting collection and attorneys' fees, must next be used to reimburse the workers' compensation provider. Therefore, McNeal is statutorily required to reimburse Federated for the workers' compensation benefits it paid him.
II. The "Made Whole" Doctrine
¶ 11. In refusing to order the reimbursement, the circuit court relied on this Court's decision in Hare, 733 So.2d at 279, wherein Hare was insured by both a health insurance policy and an uninsured motorist policy. Hare suffered injuries in an automobile accident and collected approximately $6,000 in medical benefits from his health insurance policy, which included the following subrogation language: "[t]he plan shall be subrogated and shall succeed to the right of the Employee . to recovery against any person, organization or other carrier." Id. Thereafter, Hare settled with his uninsured motorist carrier for $10,000, and the health insurance carrier sought reimbursement pursuant to its subrogation agreement. Id.
¶ 12. In Hare, this Court engaged in a detailed analysis of the "made whole" rule, defining it as "the general principle that an insurer is not entitled to equitable subro-gation until the insured has been fully compensated." Id. at 281. This decision was based on equitable common law principles which supported the conclusion that until the insured had been fully compensated — or made whole — no double recovery would occur. Id. at 284. This Court further stated, "the general intent of sub-rogation (and the stated intent of [Hare's health insurance policy]) is to prevent a double recovery by the insured." Id. at 285. Finally, this Court noted that the "made whole" rule "is not to be overridden by contract language, because the intent of subrogation is to prevent a double recovery by the insured...." Id. at 284. Thus, because this Court found that Hare had not been fully compensated for his injuries, the health insurance carrier was not allowed to enforce its otherwise valid and enforceable contractual right of subrogation. Id.
¶ 13. Federated's subrogation rights do not spring from a contractual agreement as in Hare, but rather are conferred by Section 71-3-71. As the Court of Appeals stated in Mississippi Food & Fuel Workers' Compensation Trust v. Tackett, 778 So.2d 136, 143 (Miss.Ct.App.2000), a workers' compensation insurer's right of reimbursement "exists by virtue of statute and must rise or fall strictly as a matter of statutory interpretation." In reversing and rendering a chancery court's order denying a workers' compensation insurer its right of reimbursement, the Court of Appeals noted, "[a] chancellor, despite his broad equitable powers, is not free to disregard the clear guidance of a pertinent statute simply because he concludes that it would be unfair on the particular facts of the case to apply the statute according to its terms." Id.
¶ 14. Thus, we find the circuit court erred when it applied the equitable "made whole" doctrine to the statutory right of subrogation provided in Section 71-3-71. The Mississippi Workers' Compensation Act unambiguously provides the method for distributing proceeds when, as here, an injured employee recovers from a third party.
¶ 15. The circuit court's reliance on an unpublished opinion from the Hinds County Circuit Court was error. First, our trial courts are not free to decide issues according to authority found in unpub lished circuit court opinions. Additionally, the Arkansas case cited by the Hinds County Circuit Court is inapposite. In Jaynes, the Arkansas Supreme Court applied the "made whole" doctrine to an Arkansas workers' compensation subrogation lien statute which had previously been found vague and ambiguous. 33 S.W.3d at 165. The Arkansas statute entitled the compensation carrier to a first lien on only two-thirds of the net proceeds recovered in a third-party action. Id. The statute required one-third of the remainder of the proceeds go to the injured employee. Id. Considering the depth and breadth of Mississippi precedent on this question, reliance on a foreign jurisdiction's interpretation of its own markedly different subro-gation statute is unnecessary.
¶ 16. Thus, in the case before us today, Federated is entitled to satisfaction of its workers' compensation subrogation lien in the amount of $66,412.10.
III. Federated's Failure to Intervene
¶ 17. Relying only on its statutory right of subrogation, Federated appealed the circuit court's decision denying its motion for subrogation. Federated admits it did not formally pursue intervention pursuant to Rule 24 of the Mississippi Rules of Civil Procedure but, instead, filed a motion for enforcement of its lien. Federated pointed out in oral argument that our case law has not required a workers' compensation insurer to intervene or join in an employee's third-party suit in order to as-serf its statutory lien. Indeed, Federated is correct, as this Court has never required the insurance carrier to join or intervene in an employee's third-party litigation to validate or enforce its subrogated claim to the proceeds recovered in that litigation. See, e.g., Sneed v. Verdun, 611 So.2d 947, 948 (Miss.1992); Kidwell v. Gulf, Mobile & Ohio R.R., 251 Miss. 152, 168 So.2d 735, 736 (1964). However, the question before us today is different. The issue is not whether Federated is entitled to subrogation without intervention, but rather whether Federated may appeal the circuit court's decision without intervention.
¶ 18. Although Mississippi lacks relevant precedent on this subject, we find the Fifth Circuit's approach to appeals by non-parties who did not intervene to be well-reasoned and instructive. In SEC v. Forex Asset Management LLC, 242 F.3d 325, 328-29 (5th Cir.2001), the Fifth Circuit examined whether investors could appeal a district court's order approving a Receiver's distribution plan when the investors were not parties named in the SEC's complaint and never sought to intervene under Rule 24 of the Federal Rules of Civil Procedure. Acknowledging the general rule that non-parties lack standing to appeal, the Court applied a three-part test to determine whether the investors, as non-parties, could nonetheless appeal the district court's order. Id. at 329. Under this test, a court inquires whether "the non-part[y] actually participated in the proceedings below, the equities weigh in favor of hearing the appeal, and the non-part[y] ha[s] a personal stake in the outcome." Id. (Citations omitted). Finding the investors satisfied each prong of the three-part test, the Fifth Circuit determined the investors had standing to appeal. Id. at 330. However, the Fifth Circuit cautioned, and we agree, "that this decision does not indicate that parties will be given a free pass to avoid complying with the rules of intervention." Id.
¶ 19. Looking to the first requirement of whether Federated actually participated in the proceedings below, the circuit court and all parties to the litigation accepted Federated as having intervened in the proceedings. No objection was ever raised to Federated's active participation. As to the second condition — weighing the equities of hearing the appeal — we again find in favor of Federated. The circuit court's improper imposition of the "made whole" doctrine substantially affects Federated's statutory subrogation rights. As previously discussed, the application of Section 71-3-71 clearly requires McNeal to reimburse Federated for the workers' compensation benefits paid out on his behalf in the amount of $66,412.10. Finally, the repayment of money owed to it under Section 71-3-71 gives Federated a personal stake in the outcome, satisfying the third requirement for non-party standing.
¶ 20. Although the formal procedural requirements of Rule 24 were not met, no objection was raised to either Federated's participation in the trial court or its pursuit of this appeal. Additionally, Federated satisfies the test for non-party standing to appeal under Forex. However, we stress that the better practice for insurers who anticipate the possible need for judicial assistance in enforcing their liens is to file a formal intervention in accordance with the provisions of Rule 24 of the Mississippi Rules of Civil Procedure.
CONCLUSION
¶21. For the reasons stated, we reverse the trial court's refusal to order payment to Federated based upon the "made whole" rule, and we remand this case for further proceedings consistent with this opinion.
¶ 22. REVERSED AND REMANDED.
SMITH, C.J., WALLER AND COBB, P.JJ., AND CARLSON, J., CONCUR. DIAZ, J., DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY EASLEY, GRAVES AND RANDOLPH, JJ.
. Under the "made whole" doctrine, a plaintiff must be made whole, that is, recover all damages, before an insurer is allowed to enforce its contractual right to subrogation.
. In denying this motion, the circuit court relied on an unpublished opinion from the Hinds County Circuit Court, which cited an Arkansas Supreme Court case, General Accident Insurance Co. of America v. Jaynes, 343 Ark. 143, 33 S.W.3d 161 (2000).
. We also recently declined to apply the "made whole" rule to an Uninsured Motorist/Under Insured Motorist case. See United Servs. Auto. Ass'n v. Stewart, 919 So.2d 24, 30 (Miss.2005).
. The circuit court cited the unpublished Hinds County Circuit Court opinion of Mississippi Insurance Guaranty Ass'n v. Brewer. On July 26, 2005, the Mississippi Court of Appeals issued its decision in Mississippi Insurance Guaranty Ass'n v. Brewer, 922 So.2d 807 (Miss.Ct.App.2005). One assignment of error in Brewer was the trial court's ruling that the "made whole" doctrine applied to workers' compensation subrogation liens. Id. at 812. In reversing the trial court, the Court of Appeals held that the workers' compensation insurer "ha[s] a statutory right of subrogation for monies paid to" the claimant. Id. at 813. Therefore, the circuit court's reliance on the unpublished circuit court opinion in denying Federated's subrogation reimbursement was misplaced.
. The dissent correctly points out that Federated failed to strictly comply with the mandates of Rule 24. If this case involved Federated's failure to comply with statutory requirements, the dissent's arguments would be well-taken. However, strict compliance with procedural rules is capable of being waived. See Young v. Huron Smith Oil Co., 564 So.2d 36, 39 (Miss.1990) (party waived issue of compliance with the service requirements of M.R.C.P. 4). In this case, no party ever raised the issue of Federated's formal intervention, and the matter only arose in response to a question posed to counsel at oral argument.
. Rule 24 of the Federal Rules of Civil Procedure and Rule 24 of the Mississippi Rules of Civil Procedure use virtually the same language to describe the requirements for intervention of right and permissive intervention. Both Rules also require the same intervention procedure.