Case Name: CONWED CORPORATION, a Delaware corporation, Plaintiff, v. UNION CARBIDE CHEMICALS AND PLASTICS COMPANY, INC. (f/k/a Union Carbide Corporation), a New York corporation, Defendant and Third-Party Plaintiff, v. MacArthur Company, a Minnesota corporation, Third-Party Defendant
Court: Minnesota Supreme Court
Jurisdiction: Minnesota
Decision Date: 2001-10-04
Citations: 634 N.W.2d 401
Docket Number: No. CX-00-2200
Parties: CONWED CORPORATION, a Delaware corporation, Plaintiff, v. UNION CARBIDE CHEMICALS AND PLASTICS COMPANY, INC. (f/k/a Union Carbide Corporation), a New York corporation, Defendant and Third-Party Plaintiff, v. MacArthur Company, a Minnesota corporation, Third-Party Defendant.
Judges: 
Reporter: North Western Reporter 2d
Volume: 634
Pages: 401–421

Head Matter:
CONWED CORPORATION, a Delaware corporation, Plaintiff, v. UNION CARBIDE CHEMICALS AND PLASTICS COMPANY, INC. (f/k/a Union Carbide Corporation), a New York corporation, Defendant and Third-Party Plaintiff, v. MacArthur Company, a Minnesota corporation, Third-Party Defendant.
No. CX-00-2200.
Supreme Court of Minnesota.
Oct. 4, 2001.
Stich, Angelí, Kreidler, Brownson & Bal-lou, P.A., Robert D. Brownson, Louise A. Behrendt, Kristi K. Warner, Minneapolis, Rudnick & Wolfe, Michael Goldman, Chicago, IL, for plaintiff.
Foley & Lardner, Trevor Will, Mark Velguth, Michael Rosenberg, Milwaukee, WI, Cousineau, McGuire & Anderson, Michael Barrett, James Waldhauser, Thomas Kieslbach, Minneapolis, for defendant.
Pustorino, Pederson, Tilton & Parring-ton, Jonathan P. Parrington, Minneapolis, MN, for third-party-defendant.

Opinion:
OPINION
BLATZ, Chief Justice.
The issues before this court arise from five certified questions from the United States District Court for the District of Minnesota regarding plaintiff-employer Conwed Corporation's right to bring claims against a former asbestos manufacturer under Minn.Stat. § 176.061 of the Minnesota Workers' Compensation Act. Conwed seeks to recover from Union Carbide Chemicals and Plastics Company for workers' compensation benefits paid to employees who were exposed to Union Carbide's asbestos while working in Con-wed's ceiling tile plant between 1965 and 1974. Additionally, Conwed seeks to recover amounts it may be liable to pay in the future for employees who have settled claims with Conwed but may seek additional benefits as their illnesses worsen, who are sick but have not sought workers' compensation benefits, and who have no manifested symptoms but may become sick. The certified questions ask whether Conwed may recover these amounts, whether it may prove its claims on behalf of all employees as a single claim or several categories of claims, and whether Con-wed is entitled to prejudgment interest on any amounts it recovers.
We hold that Conwed may bring subro-gation claims only on behalf of identified employees who have a compensable injury and to whom Conwed has a present duty to pay workers' compensation benefits. We also hold that Conwed is entitled to seek prejudgment interest and answer the five certified questions in accordance with these holdings.
From 1965 to July 1974, Conwed used Union Carbide's Calidria, a chrysotile asbestos fiber, to make ceiling tiles in Con-wed's Cloquet, Minnesota plant. Although Conwed also obtained asbestos fibers from other sources, an estimated 75% of the amount used during this period was Union Carbide's Calidria. In or around 1986, Conwed, which is self-insured, began receiving asbestos-related workers' compensation claims from former Cloquet-plant employees who were exposed to asbestos. By its estimate, Conwed has paid a total of about $4 million to date to approximately 278 former employees.
On June 12, 1992, Conwed filed an action in United States District Court for the District of Minnesota under Minn.Stat. § 176.061 to recover tort damages from Union Carbide. In February 1993, the case was transferred to the Eastern District of Pennsylvania for pretrial handling of nationwide asbestos litigation. The case was transferred back to Minnesota in June 2000. Discovery has been ongoing since 1992.
Conwed asserts in this action that its medical research and discovery indicate it will have to pay a great deal more in future workers' compensation benefits to many of its former employees. To support its claims, Conwed retained Dr. Philip Harber, an occupational medicine and pulmonary epidemiologist from the UCLA School of Medicine. Dr. Harber reviewed Conwed's employment records and looked at the medical records of 215 employees who had brought workers' compensation claims. He then identified approximately 1,854 employees who were exposed to asbestos at Conwed's plant for at least six months during the time Conwed used Union Carbide's Calidria. Dr. Harber projected a high occurrence of compensable disease based on exposure to airborne asbestos at one of three rates he and Con-wed deemed conservative.
To prove that Conwed would be financially liable for virtually all of these illnesses, Conwed retained retired Minnesota Assistant Chief Administrative Law Judge Jack Wallraff as an expert witness. Having reviewed Conwed's prior workers' compensation settlements and legal precedent stemming from unrelated asbestos litigation, Judge Wallraff is prepared to testify "concerning the possibility of future monetary exposure to Conwed," and will render an opinion that Conwed will be liable for virtually all workers' compensation claims resulting from the 1965-1974 use of Union Carbide's Calidria.
In August 2000, Union Carbide made several dispositive motions, including a motion to dismiss for failure to state a claim upon which relief can be granted based on Conwed's failure to list in its complaint each individual employee for whom it seeks payment. In two partial summary judgment motions, Union Carbide sought first to "preclud[e] Conwed from seeking to recover estimates of future payments to hypothetical claimants," and second, to prevent Conwed from recovering prejudgment interest from Union Carbide. In a November 2000 hearing on the motions, Judge Donald D. Alsop of the United States District Court for the District of Minnesota orally declined to grant the motion to dismiss, but did not rule on the other motions. Instead, Judge Alsop proposed certifying questions to this court and, after obtaining the parties' input, ultimately certified the following five questions as determinative of the issues in this case and without controlling authority in Minnesota law:
1. Can an employer pursuing a claim under Minn.Stat. § 176.061, subd. 5 and subd. 7 against an alleged third party tortfeasor collect payments that the employer expects to pay in the future to employees who have filed workers' compensation claims when the employer has settled with the employees and the settlement is subject to being reopened should the employees' injuries progress beyond what was provided for in the settlement?
2. Can an employer pursuing a claim under MinnStat. § 176.061, subd. 5 and subd. 7 against an alleged third party tortfeasor collect payments that based on scientific projections the employer expects to pay in the future to known employees already exposed to a hazardous substance, when the disease resulting from such exposure is latent and the employees are not yet physically disabled making them currently eligible to file workers' compensation claims?
3. Can an employer pursuing a claim under Minn.Stat. § 176.061, subd. 5 and subd. 7 against an alleged third party tortfeasor collect payments that based on scientific projections the employer expects to pay in the future to known employees exposed to a hazardous substance when the employees are physically disabled from such exposure and currently eligible to file workers' compensation claims, but have not yet filed workers' compensation claims?
4. Does Minn.Stat. § 176.061 allow an employer to prove a claim for subro-gation against an alleged third party tortfeasor on behalf of a substantial number of employees as one claim or several categories of claims, rather than proving the claims of hundreds or thousands of employees individually, when the employees' injuries and the harms to which they were exposed were similar?
5. Does Minn.Stat. § 549.09, subd. [l](b)(l) permit an employer to collect prejudgment interest when the employer is pursuing a third party claim under Minn.Stat. § 176.061 against an alleged third party tortfeasor?
Certified questions are matters of law that we review de novo. In re Butler, 552 N.W.2d 226, 229 (Minn.1996). We have recognized that provisions of Minnesota's workers' compensation statute should not be construed in isolation, but must be considered in light of related provisions of the statute. Allstate Ins. Co. v. Eagle-Picher Indus., 410 N.W.2d 324, 327 (Minn.1987).
I.
It is useful to begin with an overview of the subrogation rights created and preserved by the Minnesota Workers' Compensation Act, which is codified at Minn. Stat. ch. 176 (2000). Under the Act, every employer is liable to pay compensation for an employee's personal injury or death arising out of and in the course of employment. Minn.Stat. § 176.021, subd. 1 (2000). The employer's liability under the Act "is exclusive and in the place of any other liability to such employee." Minn. Stat. § 176.031 (2000).
When a compensable injury is caused by a party other than the employer, the Act gives the employee a right to workers' compensation benefits from the employer while preserving the employee's common law right of action against the tortfeasor. Gleason v. Geary, 214 Minn. 499, 507, 8 N.W.2d 808, 812 (1943); Minn. Stat. § 176.061, subd. 5 (2000). Furthermore, an employer who pays workers' compensation benefits to an employee injured by a third party's negligence is ordinarily entitled to bring a subrogation action against the third party and seek reimbursement for those payments. Gleason, 214 Minn. at 507, 8 N.W.2d at 812. The applicable portion of Minn.Stat. § 176.061, subd. 5 provides:
If an injury or death for which benefits are payable is caused under circumstances which created a legal liability for damages on the part of a party other than the employer, ⅜ legal proceedings may be taken ⅜ by the employer ⅜ against the other party to recover damages .
Minnesota Statutes § 176.061, subd. 5(a) goes on to state in relevant part:
If the injured employee or the employee's dependents or any party on their behalf receives benefits from the employer or institutes proceedings to recover benefits or accepts from the employer any payment on account of the benefits, the employer is sub-rogated to the rights of the employee or the employee's dependents .
Under subdivision 5(a), the employer may join in a tort action brought by the employee or may bring a separate action, but as a subrogee, the employer is entitled to no greater rights than the employee-subrogor has. Kaiser v. Northern States Power Co., 353 N.W.2d 899, 903 (Minn.1984). Any action brought under subdivision 5(a), whether controlled by the employee, the employee's dependents, or the employer, is for the primary benefit of the employee or the employee's dependents. See Nyquist v. Batcher, 235 Minn. 491, 496, 51 N.W.2d 566, 570 (1952) (discussing Minn.Stat. § 176.06, subd. 2 (1952), which was repealed and replaced by Minn. Stat. § 176.061, subd. 5). If the employer-subrogee brings or continues such an action, the employer effectively "becomes a trustee for the benefit of the compensation beneficiaries as to any damages recovered in excess of the compensation liabilities and costs of collection." Id. at 499, 51 N.W.2d at 571. Damages recovered in third-party actions are distributed according to a statutory formula that allocates roughly one-third of a plaintiff-employee's tort recovery to the employee after deduction of the expenses of collection, the re-mamder to reimburse the employer for compensation paid, and any balance remaining thereafter to the employee with a credit to the employer against future compensation payable. Minn.Stat. § 176.061, subd. 6 (2000); Hodder v. Goodyear Tire & Rubber Co., 426 N.W.2d 826, 837 (Minn.1988).
In addition to its subrogation rights under subdivisions 5 and 5(a), an employer has a separate cause of action under Minn.Stat. § 176.061, subd. 7 (2000) for medical expenses and " 'other compensation payable.' " See Allstate, 410 N.W.2d at 326 (quoting Minn.Stat. § 176.061, subd. 7). Subdivision 7 states:
[T]he employer has a separate additional cause of action against the third party to recover any amounts paid for medical treatment or for other compensation payable under this section resulting from the negligence of the third party[.] * ⅜ ⅜ [T]he amount recovered by suit or otherwise as reimbursement for medical expenses or other compensa tion shall be for the benefit of the employer to the extent that the employer has paid or will be required to pay compensation or pay for medical treatment of the injured employee and does not affect the amount of periodic compensation to be paid.
Although subdivision 7 creates a separate cause of action in the employer, it does not alter "the allocation of employer and employee rights inherent in the statutory scheme of section 176.061." Hodder, 426 N.W.2d at 838. The employer's recovery is still subject to the subdivision 6 distribution formula. Hodder, 426 N.W.2d at 838.
II.
Against this backdrop, we begin with Certified Question No. 1 and determine whether Conwed may seek payment from Union Carbide for compensation that may eventually be payable to employees who have settled workers' compensation claims subject to reopening if their conditions should worsen. Union Carbide has acknowledged that "[t]o the extent there are any cases where Conwed has paid claimants but not fully settled the existing injury," Conwed can recover future "payable" benefits for those workers if Conwed can provide sufficient evidence of the benefits it will have to pay. Based on our prior case law, we conclude that this is the correct result. See Aetna Life & Cas. v. Anderson, 310 N.W.2d 91, 95 (Minn.1981) (holding that employer's insurer who provided workers' compensation benefits to employee but did not consent to employee's settlement with third-party tortfeasor may "maintain an action for payments that become payable in the future"); see also Wilken v. Int'l Harvester, 363 N.W.2d 763, 767-68 (Minn.1985) (holding that a trial court should calculate an employer's contribution due for the third party's future payments by using affidavits and other evidence to determine a lump sum amount and reduce the amount to its present value as of the date of the contribution judgment); Metro. Milk Co. v. Minneapolis St. Ry., 149 Minn. 181, 184, 183 N.W. 830, 831 (1921) ("The employer is not required to wait until all payments due to the employ[ee] or the dependent have been made and then sue at law."). Thus, to the extent Certified Question No. 1 asks whether, under Minn.Stat. § 176.061, Conwed may recover for benefits it has paid or expects to pay following settlements for existing claims based on existing illnesses that may worsen, we answer it in the affirmative.
III.
At issue in Certified Question No. 2 is whether the employer has a cause of action against the third party under Minn. Stat. § 176.061 when the employee has not manifested symptoms of asbestos-related disease. We conclude that the employer's claims against the third party are derived from the employee's compensable injury and the employer's obligation to pay workers' compensation benefits — not from the employer's assertion of future monetary exposure based on a statistical likelihood of future illness. We therefore hold that Conwed may not recover from Union Carbide for this category of employees.
"Normally, when an employer and its insurer have paid workers' compensation to the injured employee, the employer is subrogated to the right of the employee to recover from the third-party tortfea-sors." Keenan v. Hydra-Mac, Inc., 434 N.W.2d 463, 465 (Minn.1989) (emphasis added) (citing Liberty Mut. Ins. Co. v. Nutting Truck & Caster Co., 295 Minn. 211, 215, 203 N.W.2d 542, 544 (1973)); see also Minn.Stat. § 176.061, subd. 5(a). Conwed argues that its workers' injuries occurred at the time of their last significant exposure to asbestos and that such exposure created a legal liability in Con-wed, thereby giving Conwed the present right to bring a subrogation suit against Union Carbide. We disagree.
As a general rule, an employee's cause of action for workers' compensation benefits stemming from an occupational disease does not accrue at the time of exposure, but rather when the employee suffers disablement, meaning that the employee's illness has led to a wage loss, job transfer, or permanent impairment. Still- son v. Peterson & Hede Co., 454 N.W.2d 430, 433 (Minn.1990) (wage loss); Flint v. Am. Can Co., 426 N.W.2d 190, 191 (Minn. 1988) (functional impairment); Moes v. City of St. Paul, 402 N.W.2d 520, 527 (Minn.1987) (job transfer); see also Minn. Stat. § 176.66, subd. 1 (2000) ("The disablement of an employee resulting from an occupational disease shall be regarded as a personal injury within the meaning of the workers' compensation law."). Moreover, because damage is an essential element of an employee's tort claim against a third party, the absence of a physical manifestation of illness will result in dismissal of the employee's tort action for failure to state a claim. Dalton v. Dow Chem. Co., 280 Minn. 147, 152-53, 158 N.W.2d 580, 583-84 (1968) (holding that the employee's third-party tort claim stemming from the employee's occupational disease does not accrue, and the statute of limitations does not begin to run, until the occupational disease begins to manifest itself).
Thus, the employee does not have an actionable claim against either the employer or the third party when the employee's illness has not manifested itself. Based on the fundamental principle that in a subro-gation suit the employer has no greater rights than the employee has, neither the employee's tort or workers' compensation suits nor the employer's subrogation suit have accrued where, the employee has not suffered a compensable injury, as herein described. See Metro. Transit Comm'n v. Bachman's, 311 N.W.2d 852, 854 (Minn.1981) (citing Minn.Stat. § 176.061, subd. 5 for the proposition that the employer's' right to recover is no greater than the employee's right).
Nothing in Minn.Stat. § 176.061, subd. 7 changes this basic precept that an employer's third-party claim depends on the employee's compensable injury. See 6 Arthur Larson & Lex K. Larson, Larson's Workers' Compensation Law § 116.03 (2000) ("After all, it is the employee's injury and cause of action."). Subdivision 7 is built on the initial and explicit recognition that the employer's duties are to the injured employee. See Minn.Stat. § 176.061, subd. 7. Based upon this foundation, the subdivision goes on to state that the amount the employer recovers from the third party shall be for the benefit of the employer to the extent the employer "has paid or will be required to pay compensation or pay for medical treatment of the injured, employee Id. (emphasis added). Because subdivision 7, like subdivision 5, predicates the employer's third-party claim on the employee's compensable injury, an employer may not pursue a subro-gation claim independent of that injury. We answer Certified Question No. 2 in the negative.
IV.
Certified Question No. 8 asks whether Conwed's suit against Union Carbide may predate the workers' compensation claims of former employees who have developed asbestos-related illnesses but have not yet sought workers' compensation benefits. Conwed argues that it has a presently actionable legal claim based on the language in section 176.061, subdivision 7 and this court's precedent discussing "compensation payable" in the future. See Minn. Stat. § 176.061, subd. 7 ("[T]he employer has a separate additional cause of action against the third party to recover any amounts paid for medical treatment or for other compensation payable under this section resulting from the negligence of the third party ⅜ * (Emphasis added)); Allstate, 410 N.W.2d at 327 (recognizing that section 176.061, subdivision 7, "which accords the employer a separate cause of action, also extends that action to compensation not yet payable").
As the most direct support for its argument, Conwed relies on the following language from McDonough v. Mus'ka Electric Co.:
An employer's obligation to pay benefits ⅝ exists at the time of the work-related injury, regardless of negligence. Thus, the subrogation rights also exist prior to commencement of a workers' compensation claim although most certainly there are practical difficulties in asserting a subrogation right before a worker seeks benefits.
486 N.W.2d 768, 770-71 (Minn.1992) (citation to Allstate, 410 N.W.2d at 327-28, omitted). According to Conwed, subdivision 7 allows an employer to pursue for its own benefit a subrogation action to recover damages for future monetary exposure based on the medical likelihood of disease for a "population" of workers.
We believe Conwed overstates the breadth of subdivision 7. We previously addressed the employer's independent cause of action for medical expenses under subdivision 7 in the context of the Minnesota Automobile Insurance No-Fault Act. See Travelers Ins. Co. v. Springer, 289 N.W.2d 131 (Minn.1979). In Springer, we said that the purpose of subdivision 7 was to give the employer or the employer's insurer its own cause of action for medical expenses where the ordinary principles of subrogation prevented the employer from recovering these expenses because the No-Fault Act prevented the employee
from recovering them. 289 N.W.2d at 133-34. Because subdivision 7 mentioned medical expenses but not compensation, a gap existed between the amount the employer paid as a result of the tortfeasor's negligence and the amount the employer could recover from the tortfeasor. Bachman's, 311 N.W.2d at 854.
Following our decisions in Springer and Bachman's, the legislature expanded subdivision 7 to cover "other compensation payable" in addition to medical expenses. Act of June 7, 1983, ch. 290, § 35, 1983 Minn. Laws 1310, 1334-35. "By this amendment, the legislature meant to extend Springer to insure the employer's right to recover nonmedical compensatory benefits as well as medical expenses in instances where the employee's right to recover tort damages is barred by the no-fault act." Hodder, 426 N.W.2d at 838 (citing Allstate, 410 N.W.2d at 326, 327). In other words, the primary function of subdivision 7 is to provide an employer a separate cause of action for medical expenses, wage loss benefits paid in lieu of no-fault benefits, and wage loss benefits paid "even though the employee may be barred from pursuing his own cause of action because [of] a failure to meet one of the threshold limitations of the No-Fault Act." Minnesota Workers' Compensation Deskbook § 16.5B (Jay T. Hartman & Thomas D. Mottaz, eds., Minn. CLE 2d ed.1997). To date, we have not extended subdivision 7 to an action not involving the No-Fault Act.
Furthermore, "section 176.061, taken as a whole, presents a comprehensive plan for asserting the claims of both employer and employee against third parties and for distributing any sums recovered." Allstate, 410 N.W.2d at 327. According to Professor Larson, an effective subrogation provision accomplishes such a comprehensive plan and results in "the third party paying what it would normally pay if no compensation question were involved; the employer and carrier 'coming out even' by being reimbursed for their compensation expenditure; and the employee getting any excess of the damage recovery over compensation." Larson & Larson, supra, § 116.02. "[B]oth the employee and the carrier have to be afforded a fair opportunity to press the damage suit," but employees may need a "little special solicitude" to ensure that they act on their rights; therefore, a good statute provides "an incentive to sue the third party, and particularly to strive for the fullest possible damage recovery." Id.
To read subdivision 7 as recommended by Conwed would not only subject third-party defendants to multiple lawsuits but also would undermine the comprehensive plan in section 176.061. As we said in Rodder:
Employers could in the future entirely bypass the subdivision 6 allocation by suing out their "separate additional" cause of action; if the subdivision 6 formula does not apply to any of the employer's subrogation interest, the employee would no longer be assured of at least recovering for himself one-third of the tort recovery after expenses. Nor would employers have to share equitably in the employee's cost of recovery. We think this result is neither desirable nor was it intended.
426 N.W.2d at 838. For these reasons, we will not give subdivision 7 the meaning Conwed suggests.
We further reject Conwed's argument that Allstate and McDonough require a different result. First, Allstate involved an employee who was both sick and had filed a workers' compensation claim. 410 N.W.2d at 325. It is therefore of little help in defining whether an obligation for compensation payable exists when there is no past or present obligation to pay workers' compensation benefits.
Second, the language in McDonough must be taken in context. In that case, two employees suffering from occupational diseases entered Naig settlements with the third-party tortfeasor without notifying their employer's insurer. McDonough, 486 N.W.2d at 769. At the time the employees brought their claim against the tortfeasor, their injuries were not compen-sable under the Workers' Compensation Act. McDonough, 486 N.W.2d at 770. Due to a change in the law, the employees' workers' compensation claims matured prior to settlement with the third party, but they neither notified their employer nor filed workers' compensation claims against the employer until after the settlement. Id. Ultimately, we held that an employee with a compensable injury has a duty to notify the employer when settling a tort claim against a third party regardless of whether a workers' compensation claim has been filed. Id. at 770-71. Even though a third-party plaintiff in a subdivision 5 action has a duty to notify a subrogee of a pending settlement prior to commencement of a claim for workers' compensation, it does not follow that sub division 7 permits an employer-plaintiff to sever what would otherwise be a subdivision 5 subrogation interest and bypass the subdivision 6 allocation. Thus, we hold that the language and history of subdivision 7 warrant answering Certified Question No. 3 in the negative to the extent it asks whether Conwed may recover from Union Carbide for workers' compensation benefits Conwed has no present duty to pay to injured employees.
V.
Turning then to Certified Question No. 4, we are asked to determine whether "Minn.Stat. § 176.061 allow[s] an employer to prove a claim for subrogation against an alleged third party tortfeasor on behalf of a substantial number of employees as one claim or several categories of claims, rather than proving the claims of hundreds or thousands of employees individually, when the employees' injuries and the harms to which they were exposed were similar." As framed, this question appears to ask about the proper way to handle Conwed's claims and Union Carbide's defenses, and is a question of trial management best left to the trial judge. To the extent this question asks whether Conwed must make employee-specific claims, we answer in the affirmative.
An action against a third-party tortfeasor may be maintained by the employee, by the employee's dependents in case of death, or by the employer in its own name or in the name of the employee. Minn.Stat. § 176.061, subd. 5(a). Should the court deem it advisable, either the employer or employee may intervene in the other's action for the purpose of protecting their respective interests, and either may continue an action not diligently prosecuted by the other. Id. As previously indicated, "the right to proceed against a third party which is preserved for the employe[e], or for his dependents, is for the primary benefit of such employe[e] or his dependents," and the plaintiff-employer holds any recovery as a trustee for the compensation beneficiaries. Nyquist, 235 Minn. at 498, 51 N.W.2d at 571. As a practical matter, then, Con-wed's employees need to be identified so that the employees may have notice and an opportunity to intervene, and so that damages recovered, if any, may be distributed according to the statutory formula. Accordingly, we answer Certified Question No. 4 by leaving the federal court to divide the employees into reasonably related groups if it so chooses, but requiring Conwed to identify the employees within each group in order to state an actionable claim.
VI.
Certified Question No. 5 asks whether Conwed is entitled to prejudg ment interest under Minn.Stat. § 549.09, subd. 1(b)(1) (2000) in its subrogation action against Union Carbide. Although this certified question references only Minn. Stat. § 549.09, Union Carbide first relies on Minn.Stat. § 176.061, subd. 6(d) for the proposition that an employer that has paid workers' compensation benefits is not entitled to prejudgment interest from the third-party tortfeasor. Section 176.061, subdivision 6 sets forth in subsections (a) through (d) the scheme for allocating damages due from a third-party tortfeasor. Specifically, Minn.Stat. § 176.061, subd. 6(d) states:
Any balance remaining shall be paid to the employee or the employee's dependents, and shall be a credit to the employer for any benefits which the employer ⅞ is obligated to pay, but has not paid, and for any benefits that the employer ⅞ is obligated to make in the future.
There shall be no reimbursement or credit to the employer for interest or penalties.
(Emphasis added.)
According to Union Carbide, the last sentence of this subdivision prevents Con-wed from collecting any interest — prejudgment or otherwise — from Union Carbide. In support of this argument, Union Carbide relies on Hahn v. Tri-Line Farmers Co-op, in which the Minnesota Court of Appeals "decline[d] to overrule the trial court's literal interpretation of the plain language" of subdivision 6(d) and held that employers are prohibited from seeking prejudgment interest from third-party tortfeasors. 478 N.W.2d 515, 527 (Minn.App.1991), rev. denied (Minn. Jan. 27, 1992). Union Carbide asks this court to adopt this interpretation of subdivision 6(d).
We decline to do so, as the last sentence of Minn.Stat. § 176.061, subd. 6(d) must be read in the proper context. All of subdivision 6 refers to the allocation of the damage award; it is unlikely that the last sentence of the last subdivision inexplicably turns to providing instruction on the calculation of the damage award. Moreover, the first sentence of subdivision 6(d) states that the remainder of a damage award must be paid to the employee subject to a credit to the employer for benefits owed but not paid. It follows that the second sentence bans credits or reimbursement, and therefore a reduction in the employee's allocation, for interest or penalties the employer must pay because of its own fault. Consequently, we conclude that Minn.Stat. § 176.061, subd. 6(d) is irrelevant to the prejudgment interest question.
Certified Question No. 5 is expressly centered on Minn.Stat. § 549.09, subd. 1(b), which reads:
Except as otherwise provided by contract or allowed by law, preverdict, pre-award, or prereport interest shall not be awarded on the following:
(1) judgments, awards, or benefits in workers' compensation cases, but not including third-party actions * ⅜ *.
Union Carbide argues that Conwed may not recover, prejudgment interest under subdivision 1(b)(1) and, in doing so, relies on the Minnesota Court of Appeals' holding in S.B. Foot Tanning Co. v. Piotrowski that a subrogation action is not a third-party action. 554 N.W.2d 413, 420-21 (Minn.App.), rev. denied (Minn. Dec. 17, 1996). In Piotrowski, the court of appeals reversed the trial court's award of prejudgment interest to the employer in its subrogation action against the third-party tortfeasor, concluding that:
Although the underlying action in this case is [the employee's] suit against a third-party tortfeasor, [the employer's] action to collect its subrogation interest was brought pursuant to the workers' compensation statute. Thus, Minn.Stat. § 549.09, subd. 1(b)(1), applies to prohibit an award of prejudgment interest in this case.
Piotrowski, 554 N.W.2d at 421 (citation omitted). Based on this holding, Union Carbide argues that subdivision 1(b)(1) prohibits the recovery of prejudgment interest in the employer's subrogation action, which, unlike the employee's direct suit against the tortfeasor, is purely statutory, does not stem from the common law, and is not a true third-party claim.
We find nothing in section 549.09, subdivision 1(b)(1) that distinguishes between a third-party action that existed at common law and one that is a creature of statute. Subdivision 1(b)(1) deals exclusively with workers' compensation suits; thus, according to a plain reading, the phrase "workers' compensation actions, but not including third-party actions" refers to any third-party action that arises in the context of the workers' compensation statute. Under Minn.Stat. § 176.061, subds. 5, 6, and 7, either an employee or an employer may bring a tort action against a third party, and both the employee's direct action and the employer's subrogation action are to some extent controlled by the workers' compensation statute. See, e.g., Minn. Stat. § 176.061, subd. 6 (allocating damage awards between the employee and employer for third-party tort actions brought by either the employee or employer).
Even if the true third-party action were the employee's suit against the third-party tortfeasor, the employer's subrogation suit is also against the third party and is founded upon the employee's right to tort recovery from the third party. Because the employee's claim always provides the underpinning for the employer's subrogation action and because the employee is undis-putedly entitled to prejudgment interest, the plain meaning of subdivision 1(b)(1) warrants the award of prejudgment interest on benefits recovered in the employer's subrogation action. Certified Question No. 5 is answered in the affirmative.
Certified questions answered.
. Dr. Harber projected the effects of asbestos exposure at rates of 1 fiber greater than 5 microns in length per cubic centimeter (f/cc) of air, 5 f/cc of air, and 10 f/cc of air, as compared to previous testing completed by Conwed and Union Carbide generally showing higher rates of asbestos levels. In Union Carbide laboratory tests, average airborne asbestos dust levels ranged from 12.9 f/cc of air to 43.4 f/cc of air. In the only testing done in the Cloquet plant, Union Carbide's tests showed a range of 1.9 f/cc of air to 5.5 1/cc of air. Studies in other plants and laboratories showed a range of 3.3 fee of air to 83.8 f/cc of air, depending on the site and testing methods used.
. These questions are restated verbatim from the certification order but have been renumbered pursuant to this court's power under Minn.Stat. § 480.065, subd. 4 (2000).
. Unlike Minn.Stat. § 176.061, subd. 5(a), subdivision 5(b) gives the employer the right to bring suit on its own behalf for the recovery of an increase in workers' compensation premiums and does not require the employer to allocate a portion of the recovery to the employee. See Minn.Stat. § 176.061, subds. 5(b), 6 (2000). Neither party mentions workers' compensation premiums or subdivision 5(b) in its briefs, but each focuses instead on the fact that "Conwed's claims against Union Carbide are claims for subrogation under the Minnesota Workers' Compensation Act ⅜ " xhus, to the extent Conwed, which is self-insured and does not pay workers' compensation premiums, brought this suit under subdivision 5, its subrogation action is based on the employee's suit brought under clause (a). Furthermore, there is nothing in the record regarding a charge to Conwed's earnings based on liability for future damages. For these reasons, we reject the dissent's reasoning based on subdivision 5(b) and Con-wed's potential charge to earnings.
. Application of the distribution formula may be avoided in two situations: First, where the employee, after notice to the employer, settles with the defendant tortfeasor for items of damage not subject to the employer's subro-gation right, the "employee waives his statutory right to one-third of the employer's net recovery from the third-party." Naig v. Bloomington Sanitation, 258 N.W.2d 891, 894 (Minn.1977). Second, in a "reverse-Naig," where the employer settles the subrogation claim with the third party prior to the commencement of trial in the employee's direct tort suit, the employer "waives any rights it might have to the employee's subsequent recovery, specifically, the right to claim a portion of the employee's recovery as a credit against future compensation payable." Folstad v. Eder, 467 N.W.2d 608, 612 (Minn.1991).
. Prior to 1992, Minn.Stat. § 176.461 (1990) provided that a settlement award could be vacated "for cause" and our case law identified "cause" as fraud, mistake, newly discovered evidence, or substantial change in the employee's condition. See, e.g., Krebsbach v. Lake Lillian Coop. Creamery Ass'n, 350 N.W.2d 349, 353 (Minn.1984). As amended in 1992, the section now says that "cause" is limited to: "(1) a mutual mistake of fact; (2) newly discovered evidence; (3) fraud; or (4) a substantial change in medical condition since the time of the award that was clearly not anticipated and could not reasonably have been anticipated at the time of the award." Act of April 28, 1992, ch. 510, art. 2, § 11, 1992 Minn. Laws 589, 603, codified at Minn. Stat. § 176.461 (2000). The law in effect at the time of settlement governs. Franke v. Fabcon, Inc., 509 N.W.2d 373, 377 (Minn.1993).
. There is some dispute between the parties as to whether Certified Question No. 1 addresses final settlements that may be "reopened" because the employee has developed a wholly new illness — if, for example, an employee has fully settled a claim for mesothelio-ma but later also develops lung cancer from the same exposure. Union Carbide asserts that Conwed cannot seek payment for such unknown injuries because the damages to the employee would be purely speculative. Con-wed claims that the damages are not speculative because the research of its medical experts accurately predicts what injuries will occur and at what rate. This argument between the parties can be reduced to whether Conwed may collect payments based on scientific projections regarding the likelihood of its employees developing illnesses in the future and actually bringing claims for new compensation. These issues are addressed in response to Certified Question Nos. 2 and 3.
. Consequently, the dissent's reliance on our decision in Sentinel Management Co. v. Aetna Casualty & Surety Co., 615 N.W.2d 819 (Minn.2000), is unfounded. Sentinel did not involve subrogation or the Workers' Compensation Act, but was instead about the present direct physical loss to the insureds' buildings as a result of past asbestos contamination. 615 N.W.2d at 822.
. Despite the dissent's conclusion that Minn. Stat. § 176.061 allows an employer to "directly maintain" its own action independent of its employees, Conwed has specifically acknowledged that it "does not press innovative 'direct claims,' but relies upon well-established subrogation law in the workers' compensation context." We are mindful of the dissent's concerns about situations in which an employer may be left with an inadequate remedy and the strain a multiplicity of lawsuits would have on our judicial resources, but judicial recognition of an independent cause of action for a charge to earnings is neither supported by the record nor the statutory scheme and would not obviate the specter of 1,639 separate lawsuits. Con-wed's intent is to either settle or try its claim according to Tyroll v. Private Label Chemicals, Inc., 505 N.W.2d 54 (Minn.1993), which allegedly supports Conwed's intent to leave the employees to bring their own claims. However, Tyroll involved issues relating to an employer's subrogation action after the employee had made a pretrial Naig settlement. Tyroll, 505 N.W.2d at 56. Tyroll therefore does not support judicial recognition of a separate cause of action in the employer for damages occasioned by the third party. Moreover, recognition of such a cause of action raises questions about the source and nature of the third-party's separate duty to the employer and, if grounded in negligence, the presence of fault in the respective parties. See, e.g., Hartford Accident & Indem. Co. v. Oceancarrier, 799 F.2d 1093, 1096 (5th Cir.1986) (discussing the material differences between the employer's direct and derivative actions against the third-party tortfeasor). The claim Conwed pursues here is predicated on a breach of duty Union Carbide allegedly owed to Conwed's employees, not to Conwed itself.
. As we explained in Bachman's:
Under the "uniform system" of workers' compensation and no-fault insurance, the payment of workers' compensation benefits is primary. Thus, when an employee receives benefits under workers' compensation and no-fault, the no-fault benefits must be reduced by the amount of workers' compensation benefits paid. Because the no-fault act requires that workers' compensation benefits be deducted from any of the employee's recovery, [the] employee could not have recovered nonmedical temporary total disability benefit payments from [the third party]. Since [the employer] is entitled to no greater rights than its employee, it follows that [the employer's] claim for reimbursement of its disability benefit payments was properly dismissed.
311 N.W.2d at 854-55 (internal citations omitted).
. It was not disputed that the employees' injuries were sufficient to sustain such a claim after the law changed so long as the failure to give the employer notice of the settlement did not bar the claim. McDonough, 486 N.W.2d at 770.
. Although Conwed claims that it has the present ability to identify each employee, it argues that requiring the parties to follow this course will waste judicial resources and require the continual relitigation of claims long after memories have faded and witnesses have died. Union Carbide conceded at oral argument, however, that its own conduct may not need to be litigated repeatedly, and points out that Conwed has been incurring workers' compensation claims at an average of only about three per year since December 1996. In addition, we have not said that Conwed must wait to bring future claims against Union Carbide until it has actually paid all the money due to former employees who have sought workers' compensation benefits. If the parties go to trial, Conwed may, subject to the federal court's discretion, group its claims and seek subrogation recovery from Union Carbide however early and often it deems necessary to minimize the onus of litigation, so long as it only seeks recovery relating to employees who became disabled as a result of an occupational disease arising out of and in the course of their employment with Conwed. See Minn.Stat. § 176.021, subd. 1.
. Such interest and penalties might include additional compensation paid to the employee as a penalty for inexcusable delay in the payment of benefits, Minn.Stat. § 176.225, subd. 5 (2000) or for interest paid to another employer or insurer in a dispute over liability, Minn.Stat. § 176.191, subd. 3 (2000).