Title: Jimmie C. Smith v. Champion Trucking Company, Inc.
Citation: N/A
Docket Number: 93S02-0906-EX-276
State: Indiana
Issuer: Indiana Supreme Court
Date: April 15, 2010

ATTORNEY FOR APPELLANT 
 
 
 
 
ATTORNEYS FOR APPELLEE 
Paul A. Brizendine 
 
 
 
 
 
Timothy W. Wiseman 
Floyds Knobs, Indiana 
 
 
 
 
 
Lynne D. Lidke 
 
 
 
 
 
 
 
 
Indianapolis, Indiana 
 
ATTORNEYS FOR AMICUS CURIAE  
 
 
 
ATTORNEYS FOR AMICUS CURIAE 
INDIANA TRIAL LAWYERS ASSOCIATION 
 
 
 
DEFENSE TRIAL COUNSEL OF INDIANA 
Trevor J. Crossen  
 
 
 
 
 
Rori L. Goldman 
Stephen M. Wagner 
 
 
 
 
 
Ty M. Craver 
Carmel, Indiana  
 
 
 
 
 
Indianapolis, Indiana 
 
 
 
 
 
 
 
 
 
James D. Johnson 
 
 
 
 
 
 
 
 
Evansville, Indiana 
______________________________________________________________________________ 
 
In the 
Indiana Supreme Court  
_________________________________ 
 
No. 93S02-0906-EX-276 
 
JIMMIE C. SMITH,  
 
 
 
 
 
Appellant (Plaintiff below), 
 
v. 
 
CHAMPION TRUCKING COMPANY, INC. 
 
 
Appellee (Defendant below). 
_________________________________ 
 
Appeal from the Worker’s Compensation Board of Indiana, Application No. C-172793 
The Honorable Linda Hamilton, Chairperson 
_________________________________ 
 
On Petition to Transfer from the Indiana Court of Appeals, No. 93A02-0808-EX-701 
_________________________________ 
 
April 15, 2010 
 
Boehm, Justice. 
 
We hold that under Indiana’s Worker’s Compensation Act, an employer’s worker’s 
compensation liability for an employee’s benefits terminates if the employee settles a claim 
against a third party for the same injury without first obtaining the employer’s consent to the 
settlement.  The Board’s decision dismissing Smith’s Application for Adjustment of Claim is 
affirmed. 
FILED
CLERK
of the supreme court,
court of appeals and
tax court
Apr 15 2010, 2:07 pm
2  
 
Facts and Procedural History 
 
In August 2003, Jimmie Smith, a truck driver employed by Champion Trucking Co., was 
injured in an Ohio accident with a third-party motorist.  Smith’s initial medical expenses in the 
amount of $4,342.42 were paid by Champion’s worker’s compensation coverage.  He continued 
to work for a year after the accident, but left Champion’s employ in August 2004.1  According to 
Smith, he continued to suffer pain related to the accident, and in January 2005 he applied for an 
adjustment of his worker’s compensation claim, asserting a permanent impairment and also 
seeking compensation for additional medical expenses.   
Meanwhile, Smith retained counsel to explore the possibility of recovering from Jeremy 
Bittner, the third party motorist.  At some point, Smith’s worker’s compensation attorney 
notified Champion of his intention to sue Bittner, and on July 6, 2005, Champion responded by 
notifying Smith’s attorney in the third-party matter that Champion was entitled to a lien on any 
settlement proceeds in the amount of Champion’s worker’s compensation payments to Smith.  
Smith settled with Bittner for $10,342 on July 22, 2005.  According to Smith, he accepted the 
settlement because, although Bittner was 95% at fault for the accident, he had only $12,000 in 
liability insurance.  The settlement agreement released Bittner from liability for the accident.  
Smith does not claim that Champion was notified of the time and place of the settlement 
negotiations, or had any role in the negotiation.  Smith’s attorney paid 75% of the medical lien 
amount ($3,256.74) to Champion and retained 25% as the attorneys’ fee authorized by the 
worker’s compensation statute.  In August 2005, less than one month after the settlement, a 
neurosurgeon evaluated Smith as having suffered a 19% potential permanent impairment, which 
would warrant approximately $26,500 in additional worker’s compensation benefits.   
Champion moved to dismiss Smith’s application for adjustment of claim, and ultimately 
the Worker’s Compensation Board ruled in July 2008 that Smith’s settlement with Bittner 
terminated Champion’s liability pursuant to an “absolute bar” provision of the statute described 
below.  The Court of Appeals reversed, holding that the provision in question did not apply to 
Smith’s claim because his worker’s compensation case had not yet been resolved.  Smith v. 
Champion Trucking Co., 901 N.E.2d 620, 624 (Ind. Ct. App. 2009).  Further, the court noted, 
                                                 
1 The parties dispute whether Smith quit or was fired.   
3  
 
Champion was aware of both the settlement negotiations before they were concluded and also 
the pending application for adjustment of claim and Champion was therefore free to challenge 
the amount received from Bittner as inadequate, but failed to do so.  Id. at 623.  We granted 
transfer. 
Standard of Review 
The Board’s factual findings are to be affirmed if they are supported by substantial 
evidence.  Walker v. State, 694 N.E.2d 258, 266 (Ind. 1998).  “To the extent the issue involves a 
conclusion of law based on undisputed facts, it is reviewed de novo.”  DePuy, Inc. v. Farmer, 
847 N.E.2d 160, 164 (Ind. 2006).  Here, the Board’s ruling rested largely on undisputed facts and 
the question is one of statutory interpretation to be reviewed de novo.  Porter Dev., LLC v. First 
Nat’l Bank of Valparaiso, 866 N.E.2d 775, 778 (Ind. 2007).   
Settlements with Third Parties Under Indiana’s Worker’s Compensation Act 
Section 13 of Indiana’s Worker’s Compensation Act (WCA), titled “Claims Against 
Third Persons; Subrogation; Procedures,” contains a number of potentially relevant provisions.2  
Smith argues that none of the provisions of Section 13 bars his claim.  Champion responds that 
this case is governed by language from Paragraph 1, which provides that if an injured employee 
has received worker’s compensation and later settles a claim against a responsible third party, 
“then from the amount received by the employee,” the employer is to be reimbursed for its 
expenditures, “and the liability of the employer or the employer’s compensation insurance carrier 
to pay further compensation or other expenses shall thereupon terminate.”  Ind. Code § 22-3-2-
13 (2004) (emphasis added).  Paragraph 2 has a similar provision applicable to settlements made 
before any worker’s compensation has been paid.3   
Smith’s contention presents a pure question of statutory interpretation.  “When faced with 
a question of statutory interpretation, we first examine whether the language of the statute is 
                                                 
2 These provisions inexplicably consist of one section covering three printed pages of the Indiana Code, and 
containing nine lengthy unnumbered paragraphs, each consisting of several unnumbered sentences.  For 
convenience, we refer to the nine unnumbered paragraphs as if they bore numbers. 
3 Smith correctly asserts that the Board erroneously relied on Paragraph 2 in denying his claim.  Paragraph 2 is 
inapplicable here, because it deals only with situations where the employee, “not having received compensation,” 
settles with a third party.  In that event, Paragraph 2 provides that the employer “shall have no liability” to pay 
worker’s compensation benefits to an employee who has settled with a third party.  I.C. § 22-3-2-13.  It is 
undisputed that Smith received over $4,000 in worker’s compensation benefits before settling with Bittner. 
4  
 
clear and unambiguous. . . . The statute itself is the best evidence of legislative intent. . . . We 
construe statutes only where there is some ambiguity which requires construction.”  State v. 
American Family Voices, Inc., 898 N.E.2d 293, 297 (Ind. 2008).  Therefore, we look first to the 
language of the statute to determine whether Champion is liable for additional worker’s 
compensation benefits after Smith’s settlement with Bittner.  We conclude that precedent and the 
statute itself dictate that the “absolute bar” language of the statute is unambiguous and that it 
protects Champion from further worker’s compensation liability. 
A long line of Indiana decisions supports the proposition that an employer’s worker’s 
compensation liability terminates when the injured employee settles with a third-party tortfeasor 
without first obtaining the employer’s consent.4  See Koughn v. Utrad Indust., Inc., 150 Ind. 
App. 110, 275 N.E.2d 572 (1971) (original Indiana case holding that termination language in 
WCA meant that employer’s worker’s compensation liability ceased after employee settled with 
third party); Waldridge v. Futurex Indust., Inc., 714 N.E.2d 783, 786 (Ind. Ct. App. 1999), trans. 
denied (employee injured by exposure to chemicals settled with manufacturer of one chemical; 
court held that this settlement barred employee’s worker’s compensation liability under Section 
13); Carrier Agency, Inc. v. Top Quality Bldg. Prods., Inc., 519 N.E.2d 739, 743 (Ind. Ct. App. 
1998), trans. denied; McCammon v. Youngstown Sheet and Tube Co., 426 N.E.2d 1360, 1363 
(Ind. Ct. App. 1981) (“Clearly the statute provides that if an action is brought by an injured 
employee against a third party and a settlement is made, the liability of the employer or 
employer's compensation carrier to pay further compensation terminates.”).   
Smith argues that these “absolute bar” provisions apply only when the amount received 
from the third party exceeds the total worker’s compensation claim.  He bases this argument in 
part on the italicized language quoted above, claiming without further explanation that it implies 
that the third party damages exceed the worker’s compensation claim, and only in that 
circumstance does the employer’s liability terminate.  The directive to reimburse the employer 
“from” the settlement proceeds suggests an assumption that the settlement amount exceeds the 
                                                 
4 We refer to “the employer” because that is the situation in the case before us.  The WCA in many places uses 
language that expressly includes the employer’s worker’s compensation carrier in some provisions applicable to the 
employer.  For readability we omit these references to the carrier here with no implication that the provisions do not 
also apply to carriers. 
5  
 
worker’s compensation benefit, but the unequivocal bar language is in no way qualified by that 
requirement. 
The cases cited above discussing the effect of a settlement do not specifically address 
whether the worker’s compensation claim was greater or less than the settlement received from 
the third party.  In DePuy, Inc. v. Farmer, 847 N.E.2d 160 (Ind. 2007), we addressed the effect of 
a settlement of a worker’s claim against a fellow employee for an intentional tort.  Because the 
claim was against a fellow employee, Section 13 did not apply and the case was governed by 
common law principles.  Smith argues, however, that dicta from our opinion in DePuy mandates 
that Paragraph 1 of Section 13 applies only when the amount of the settlement is greater than the 
anticipated worker’s compensation claim.  To the contrary, in DePuy, we indicated our 
understanding of this general rule and its application in Indiana:  “[w]e assume without deciding 
that . . . this rule [that settlement with a third party bars a worker’s compensation claim], 
announced over thirty years ago as a matter of statutory interpretation, remains the law as to 
claims against third parties.”  Id. at 168.  We also noted that in each of these cases the amount of 
the third-party settlement might be greater than the worker’s compensation benefit.  We 
identified the issue Smith raises but expressly did not resolve it:  “[w]hether [this] rule  applies 
where the settlement is obtained before a worker’s compensation award has been resolved, and is 
in an amount less than the anticipated worker’s compensation benefit is an open question that we 
need not resolve here.”  Id. 
Although we noted the unresolved issue in DePuy, we also found a general consensus 
that the employee’s settlement with a third party without the employer’s consent terminates the 
employer’s worker’s compensation liability.  Id.  “[I]f an employee settles a third-party claim 
without the employer’s consent, the employee forfeits any right to future compensation.”  6 
Larson’s Workers’ Compensation Law § 116.07[2] (2009).  Because the settlement with a third 
party terminates the employer’s opportunity to recover its expenses from the party responsible 
for the employee’s injuries, these absolute bar provisions are designed to prevent employees 
from settling with third parties without the employer’s consent.  We have previously noted that 
the twin purposes of Section 13 are protecting the employer by providing it with subrogation 
rights, and preventing double recovery by the employee.  Koval v. Simon Telelect, Inc., 693 
N.E.2d 1299, 1309 (Ind. 1998).  In particular, the purpose of the termination provision is to 
prevent employees from signing away the rights of employers.  Ansert Mech. Contractors, Inc. v. 
6  
 
Ansert, 690 N.E.2d 305, 307 (Ind. Ct. App. 1997).  Most recently, in Doerr v. Lancer Transport 
Services, 868 N.E.2d 890 (Ind. Ct. App. 2007), trans. denied, the Court of Appeals cited this 
consideration in upholding the absolute bar.  Because the worker had not yet received worker’s 
compensation benefits, the absolute bar provision in Paragraph 2 of Section 13 applied.  
However, the court articulated the reasoning behind the absolute bar provisions in both 
Paragraphs 1 and 2: 
Our interpretation of Section 13, as a whole, is the legislature was attempting to 
protect simultaneously the financial interests of both the employee and employer.  
Permitting an employee to obtain a “quick and cheap” settlement with the third-
party tortfeasor, and then requiring an employer to exchange unlimited benefits 
for whatever miniscule settlement the employee might enter, does not protect the 
financial interests of the employer. 
Id. at 893.   
This reasoning applies equally to Paragraphs 1 and 2 (i.e., whether the employee has or 
has not already received some benefits).  More importantly for our purposes, the reason for the 
bar applies with greater force where the settlement is for less than the anticipated benefits.  In 
this case, any addition or shortfall in the settlement amount will merely augment or reduce the 
amount of the employer’s lien.  Because the settlement releases the third party, ultimately the 
employer’s money via the statutory lien, not the employee’s, is at stake in the settlement 
negotiations.  Other courts under similar benefit programs have reached the same conclusion.  
See Villanueva v. CNA Ins. Cos., 868 F.2d 684, 687–688 (5th Cir. 1989) (holding that the 
Federal Longshore and Harbor Workers’ Compensation Act (LHWCA) barred further worker’s 
compensation liability after employee settled with third party whether the settlement amount was 
greater or less than the anticipated worker’s compensation claim); Petroleum Helicopters, Inc. v. 
Collier, 784 F.2d 644, 647 (5th Cir. 1986) (employee barred from seeking further compensation 
under the LHWCA after settling with third party for amount less than anticipated worker’s 
compensation claim without obtaining consent of employer); see also Estate of Cowart v. 
Nicklos Drilling Co., 505 U.S. 469, 483 (1992) (under the LHWCA employee’s spouse forfeited 
right to compensation after settling with third party without obtaining employer’s consent); 
Colbert v. District of Columbia Dept. of Employment Servs., 933 A.2d 817, 822 (D.C. Ct. App. 
7  
 
2007) (injured employee’s agreement to binding arbitration constituted prohibited compromise 
within the meaning of local worker’s compensation statute, and employee was not entitled to 
further worker’s compensation benefits from her employer after agreeing to compromise).   
We are mindful that the WCA is to be “construed to effectuate its humane purposes and 
doubts in the application of terms are to be resolved in favor of the employee.”  Christopher R. 
Brown, D.D.S., Inc. v. Decatur County Mem’l Hosp., 892 N.E.2d 642, 649 (Ind. 2008).  The 
result in this case is harsh, because failure to engage Champion in the settlement process with 
Bittner reduces Smith’s potential worker’s compensation benefits.  But by settling without 
Champion’s consent, Smith foreclosed Champion’s ability to recover from Bittner.  And Smith 
proceeded to consummate the settlement in the face of a long line of cases holding that his 
course of action could produce a forfeiture of claims to additional compensation.   
Despite its unfortunate result in this case, we think the language of both Paragraph 1 and 
Paragraph 2 of Section 13 of the WCA unequivocally impose a bright line rule that settlement 
with a third party without the employer’s consent bars a worker’s compensation claim.  
Moreover, there are important reasons for the statutory scheme to insist that the employee obtain 
the employer’s consent before settling with a third party.  First, this rule eliminates satellite 
litigation over the adequacy of the settlement.  Second, notice and consent to settlement will not 
often be a burdensome requirement.  Although it may complicate and delay settlement 
negotiations in some circumstances, in many the practical limits of recovery will be evaluated 
equally by both employee and employer.  Third, Paragraph 9 of Section 13 includes a provision 
that settlements made without the written consent of the employer are “invalid” unless the 
employer is “indemnified or protected by court order.”  The clear implication is that the 
employer’s written consent to a third-party settlement will constitute a waiver of the absolute bar 
provisions of Section 13.  Any other reading would preclude the employer, the employee, and the 
third party from voluntarily entering into an arrangement that is in the interests of all parties.   
Finally, where the third party recovery is less than compensation benefits, it is not 
obvious why pursuing a third party claim is in the employee’s interest.  The employee’s attorney, 
however, may have an incentive to pursue it.  Section 13 provides a claimant’s attorney with a 
higher percentage of the recovery for pursuing third party claims than is allowed by statute for 
8  
 
pursuing a worker’s compensation claim.5  This consideration may be inapplicable in this case, 
where different attorneys handled the third party and worker’s compensation issues, but it 
supports the statutory choice of requiring the employer’s consent across the broad range of cases.   
The cases cited by Smith in support of his claim are not inconsistent with our holding 
today.  See Roberts v. ACandS Inc., 806 N.E.2d 1, 6 (Ind. Ct. App. 2004) (where there is no 
evidence that the settlement with the third party has been paid or made final in any way, the 
employee’s worker’s compensation claim is not barred by the Occupational Diseases Act); 
Ansert, 690 N.E.2d at 307 (payment by third party that did not release third party from liability 
did not constitute settlement within the meaning of Section 13 termination provisions); Calvary 
Temple Church, Inc. v. Paino, 555 N.E.2d 190, 193 (Ind. Ct. App. 1990), abrogated on other 
grounds by Brown, 892 N.E.2d 642 (employee’s settlement with third party occurred after the 
employer had already agreed to pay full worker’s compensation claim); see also Barrett v. City 
of Brazil, 919 N.E.2d 1176 (Ind. Ct. App. 2010) (settlement with third party motorist for full 
amount of insurance limits treated as final judgment within the meaning of Paragraph 3 of 
Section 13 and therefore settlement did not terminate employer’s worker’s compensation 
liability). 
Smith also contends that footnote 4 in the Doerr opinion mandates that Paragraph 1 of 
Section 13 is inapplicable to his claim.  We disagree.  The cited footnote merely points out that if 
the third party’s liability is greater than the worker’s compensation liability, the employee is 
permitted to keep the excess after reimbursing the employer for its worker’s compensation 
outlay.  Doerr, 868 N.E.2d at 893 n.4.   
The Court of Appeals suggested that Champion could have challenged the settlement 
amount as “inadequate.”  Smith, 901 N.E.2d at 623.  It is not clear how that challenge could have 
been mounted before the settlement was finalized given that Champion was not notified of the 
                                                 
5 I.C. § 22-3-1-4(d) provides that attorneys who represent employees in a successful worker’s 
compensation claim shall receive 20% of the first $50,000 of recovery; 15% of the recovery over $50,000, 
and 10% of the value of various medical expenses.  On the other hand, Paragraph 8 of Section 13 provides 
that attorneys representing employees in third-party claims will receive:  
a fee of . . . 25% , if collected without suit, of the amount of benefits actually repaid after 
the expenses and costs in connection with the third party claim have been deducted 
therefrom, and a fee of . . . 33 1/3%, if collected with suit. 
I.C. § 22-3-2-13. 
9  
 
substance or terms of the settlement negotiations.  And once the settlement was reached, it 
released Bittner.  Indiana courts have not invoked Paragraph 9 to invalidate settlements made 
between employees and third-party tortfeasors without the employer’s consent.  Doerr recently 
reaffirmed that rule.  Doerr, 868 N.E.2d at 894.  For at least twenty years the Court of Appeals 
has held that if an employee settles with a third party without first obtaining employer’s consent, 
the employer’s sole avenue for reimbursement of worker’s compensation payments is through 
the employee, and the employer may not continue to pursue the third party.  State v. Mileff, 520 
N.E.2d 123 (Ind. Ct. App. 1988).  Although some other jurisdictions do not adhere to the same 
interpretation of similar provisions,6 the Court of Appeals, citing the interest of finality from the 
point of view of the third party, has long held that once an employee releases the third party from 
liability related to the injury-causing accident, the employer may not continue to pursue the third 
party.  Given this longstanding precedent on an issue of statutory interpretation, we believe it is 
up to the legislature to implement any change.  DePuy, 847 N.E.2d at 168; Fraley v. Minger, 829 
N.E.2d 476, 492 (Ind. 2005).   
Conclusion 
 
The finding of the Full Worker’s Compensation Board dismissing Smith’s Application 
for Adjustment of Claim is affirmed.   
Shepard, C.J., and Sullivan and Rucker, JJ., concur.   
Dickson, J., concurs in result. 
 
 
 
                                                 
6 In Insurance Company of North America v. Andrew, 564 N.E.2d 939 (Ill. Ct. App. 1990), the court interpreted a 
similar provision as preserving the employer’s right to a private cause of action against the third party.  See also 
Henning v. Wineman, 306 N.W.2d 550, 553–54 (Minn. 1981) (settlement between employee and third party, 
without consent of employer or employer’s insurer, does not bar subsequent suit by employer or insurer against third 
party).