Opinion ID: 2131797
Heading Depth: 1
Heading Rank: 2

Heading: the right of the insurer's attorney to be compensated from the employee's recovery

Text: Section 827 of the Worker's Disability Compensation Act of 1969, MCLA 418.827; MSA 17.237(827), establishes the guidelines for dividing the recovery in a third-party workmen's compensation action as follows: (5) In an action to enforce the liability of a third party, the plaintiff may recover any amount which the employee or his dependents or personal representative would be entitled to recover in an action in tort. Any recovery against the third party for damages resulting from personal injuries or death only, after deducting expenses of recovery, shall first reimburse the employer or carrier for any amounts paid or payable under this act to date of recovery and the balance shall forthwith be paid to the employee or his dependents or personal representative and shall be treated as an advance payment by the employer on account of any future payments of compensation benefits. (6) Expenses of recovery shall be the reasonable expenditures, including attorney fees, incurred in effecting recovery. Attorney fees, unless otherwise agreed upon, shall be divided among the attorneys for the plaintiff as directed by the court. Expenses of recovery shall be apportioned by the court between the parties as their interests appear at the time of the recovery. We think it clear that these provisions allow for the compensation of the insurer's attorney from the employee's recovery where he has contributed to the preparation and trying of the suit. Under subsection (6), the expenses of recovery are to be shared by the insurer and the employee, and these expenses include attorney fees. It is well settled that the fees of the employee's attorney are expenses of recovery which must be shared by both the insurer and the employee. Potter v Vetor, 355 Mich 328; 94 NW2d 832 (1959); Horsey v Stone & Webster Engineering Corp, 162 F Supp 649 (WD Mich, 1958); Banoski v Moto-Crane, Inc, 35 Mich App 487; 192 NW2d 555 (1971). The Court of Appeals in this case has simply concluded, in concurrence with then Judge LEVIN'S dissenting opinion in Banoski, supra, that where the insurer's attorney has participated in preparing and trying the suit, his or her compensation is also an expense of recovery which must be shared by the insurer and the employee. We agree. As stated in Banoski's dissenting opinion: Manifestly, [the insurer] had a substantial interest in the outcome of the action commenced by the [employee] and was entitled to be represented by counsel. It was not obliged to rely on the [employee's] lawyer to represent its interests. From [the insurer's] point of view, the fees paid to its lawyer are an expense of recovery. 35 Mich App 487, 497. The conclusion that the Legislature intended to include the fees of the insurer's attorney as an expense of recovery is buttressed by the fact that subsection (6) directs that the attorney fees be divided between the employee's attorney and the insurer's attorney. Potter v Vetor, supra, p 332. In the instant case, the trial court did not take into account the value of the services of the insurer's attorney in dividing the recovery. Therefore, the Court of Appeals properly remanded to the trial court for a determination of the value of the services of the insurer's attorney. We affirm the Court of Appeals on this issue.