Opinion ID: 2081336
Heading Depth: 2
Heading Rank: 2

Heading: Travelers' Action Against Jesse Jones

Text: As we have indicated, Travelers retained a right to reimbursement out of the settlement proceeds. The employer's or insurer's interest in recoupment, if the employee ultimately succeeds in recovering from the third party, is protected by a lien on the proceeds. See, e. g., Potomac Electric Power Co. v. Wynn, 120 U.S.App.D.C. 13, 16, 343 F.2d 295, 298 (1965); Morauer & Hartzell, Inc. v. Woodworth, 142 U.S.App. D.C. 40, 42, 439 F.2d 550, 552 (1970), cert. dismissed sub nom. McClanahan v. Morauer & Hartzell, Inc., 404 U.S. 16, 92 S.Ct. 170, 30 L.Ed.2d 136 (1971). By imposing an equitable lien upon the judgment or settlement, courts have sought to prevent a double recovery by the employee. See, e. g., Allen v. Texaco, Inc., supra at 982. See also S.Rep.No. 428, 86th Cong., 1st Sess. ___ (1959), reprinted in [1959] U.S.Code Cong. & Admin.News, p. 2135. Thus, the employee must reimburse the insurer to the extent of payments received. See, e. g., Oleszczuk v. Calmar S.S. Corp., 163 F.Supp. 370 (D.Md. 1958), rev'd on other grounds sub nom. Calmar S.S. Corp. v. Nacirema Operating Co., 266 F.2d 79, cert. denied, 361 U.S. 816, 80 S.Ct. 56, 4 L.Ed.2d 62 (1959) (fact that insurer's payments were made without an award did not relieve longshoremen of duty to reimburse insurer out of his recovery). The employer or his carrier, if substituted, remains liable for any amount by which the recovery falls short of the prescribed compensation. 33 U.S.C. § 933(f). Since we recognize Travelers' lien on the settlement proceeds, [7] an additional question is presented: whether the employer (carrier) was released from all liability by the unauthorized settlement, so as to require Mr. Jones to remit the full amount of compensation paid ($4,254.76). Travelers' argument that Mr. Jones should forfeit all benefits is based upon 33 U.S.C. § 933(g). [8] Section 933(g) provides for release of the employer's liability when the claim against the third party is compromised without the employer's consent. [9] If the compromise of the third party claim is less than the statutory compensation, the employer will be liable for the difference only if the settlement is made with his written approval. Thus, the Act prevents recovery by conclusively presuming prejudice to the claimant's employer, without requiring proof of actual prejudice. This is only proper, because when a claimant makes settlement of an unliquidated claim, without the employer's consent, he had undertaken to fix the amount of recovery in the action which would have inured to the employer's benefit. Bell v. O'Hearne, 284 F.2d 777, 780 (4th Cir. 1960). See also Morauer & Hartzell, Inc. v. Woodworth, supra, 142 U.S.App.D.C. at 42, 439 F.2d at 552; Marlin v. Cardillo, 68 App.D.C. 201, 95 F.2d 112 (1938). The inclusion of a statutory sanction indicates that Congress foresaw, and sought to prevent, prejudicial settlements by the employee. To this extent, the Act balances the employee's right to seek damages and the possibility of hardship to the employer and his carrier. Section 933(g) does not apply to the circumstances before us, however. Since § 933(g) excuses the employer's liability under § 933(f), [10] it has been applied primarily to actions by the employee to secure deficiency compensation from his employer ( e. g., in excess of the third party recovery). See, e. g., Chapman v. Hoage, 296 U.S. 526, 56 S.Ct. 333, 80 L.Ed. 370 (1936); Bell v. O'Hearne, supra ; Marlin v. Cardillo, supra . See also Morauer & Hartzell, Inc. v. Woodworth, supra (modification of compensation award for additional benefits barred by compromise). The limited application of § 933(g) results from its statutory evolution. Prior to the 1959 amendments, the employee was forced to elect whether to sue a third party for damages or to accept compensation. See generally Potomac Electric Power Co. v. Wynn, supra . Sections 933(f) and (g) predated the 1959 amendments and, thus, contemplated a situation where the employee elected to recover damages first. In such a case, the employee reserved the right under § 933(f) to any deficiency between the sum recovered and the amount allowable under the provisions of the Act. Where the employee elected to sue, the employer had the legal right to suspend payment of compensation begun voluntarily. See Nacirema Operating Co. v. Anduzzi, 185 F.Supp. 344 (E.D.Pa.1960). Under § 933(g), if the employee settled without the employer's consent he lost his right to any deficiency, and was left with the settlement in lieu of statutory benefits. The current statute, as worded, encompasses a person entitled to compensation. We find Sections (f) and (g) relevant to the employer's liability for further payments, not to the situation where, as here, the employee has received benefits without an award. Two factors militate in favor of this conclusion. First, the legislative history of the 1972 amendment of § 933(g) indicated the form of written approval necessary to avoid discharging the employer from further liability under the Act. H.R. Rep.No. 92-1441, 92d Cong., 2d Sess. ___ (1972), reprinted in [1972] U.S.Code Cong. & Admin.News, pp. 4698, 4709 [emphasis supplied]. Second [i]n the absence of language plainly demanding it, a construction is not to be favored which visits a forfeiture on the employee or his dependent and gives a windfall to the insurance carrier. Bell v. O'Hearne, supra at 781. We are reluctant to imply a forfeiture of benefits received, in light of the Act's intent to insure the employee's receipt of, at least, the medical benefits and compensation prescribed. See Ballwanz v. Jarka Corp. of Baltimore, 382 F.2d 433 (4th Cir. 1967). Absent a statutory consent requirement, the determinative question is whether the compromise prejudiced the employer by impairment of his subrogation rights. See, e. g. Chapman v. Hoage, supra (employee who elects to proceed against third person must prosecute claim in a manner and to an extent which will avoid prejudice to insurer's right of subrogation). [11] Section 933(g) also acknowledges that to the extent that the employee compromises his third party claim and settles for less than he would recover upon a full judicial determination, the employer is to that degree prejudiced. Morauer & Hartzell, Inc. v. Woodworth, supra, 142 U.S.App.D.C. at 42, 439 F.2d at 552. Thus, apart from the statutory provision, the same result would be reached under general suretyship principles as to the necessity for employer consent to settlement. The obligation of the workmen's compensation carrier may be discharged by release or relinquishment of the principal liability which deprives him of his right of subrogation. See Chapman v. Hoage, supra, 296 U.S. at 529, 56 S.Ct. at 334. We conclude that the failure to secure consent constitutes a defense to further liability, not a means of reneging on benefits paid, particularly where, as here, the insurer was less than vigilant in protecting its subrogation rights before settlement. The summary judgment in Jesse Jones' favor was, therefore, improperly granted.