Court Opinion

ID: 9723409
Source: CourtListenerOpinion
Date Created: 2023-08-26 10:13:53.953348+00
Date Added: 2024-06-11T18:24:48.553103
License: Public Domain

Kavanagh, C. J.
Leslie Kroll wras injured while operating a forklift truck during the course of his employment with Superior Sliding Door Frame Company. He commenced an action against Hyster Company, the manufacturer of the forklift truck. Louise Kroll, his wife, joined in the action seeking damages for loss of her husband’s services, society, advice and affection. Liberty Mutual Insurance Company, the workmen’s compensation insurer for Kroll’s employer, intervened.
The jury returned a verdict for Leslie Kroll in the amount of $175,000 and for Louise Kroll in the amount of $50,000. The judgment was satisfied.
A post-judgment hearing was held before the circuit court to apportion the costs of Leslie Kroll’s recovery between Kroll and the insurer and to determine what amount the insurer was to receive as reimbursement for compensation benefits it had paid and what amount was to be paid to Kroll.
Kroll’s attorney did most of the legal work in *286the lawsuit. The insurer’s attorney did some preparation and was present throughout the trial.
Section 827 of the Workmen’s Compensation Act of 1969, MCLA 418.827; MSA 17.237(827), sets forth the procedure to be followed in third-party workmen’s compensation actions. Subsections 5 and 6 prescribe how the recovery is to be divided.
"(5) * * * 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.”
The judgment entered by the circuit court directed that $32,337.39 be paid to the insurer to reimburse it for compensation benefits it had paid Kroll, with the proviso that the insurer shall pay Kroll’s lawyer one-third of said sum, i.e., $10,779.13, "as the proportionate share of the plaintiffs attorney fees”. The judgment provides that the amount received by Kroll as his share of the recovery is "a credit against” future compensation and medical expenses which the insurer is obliged to pay under the Workmen’s Compensation Act and that since the insurer "shall hereafter receive the benefit” of the amount paid Kroll, it *287shall pay Kroll, monthly, one-third of any compensation or medical or other expenses compensable under the Workmen’s Compensation Act which the insurer, but for the third-party recovery, would be obligated to pay until such time as the amount of the credit against future compensation and benefits has been consumed.
The Court of Appeals held that the circuit court erred in failing to award compensation to the attorney for the insurer and remanded this case to the circuit court for a hearing to determine the value of the services rendered by the insurer’s attorney. The Court of Appeals did not address the question whether the circuit court properly required the insurer to pay Kroll one-third of any compensation or other benefits the insurer would be obliged to pay but for the third-party recovery and resulting "advance payment”.
We affirm the Court of Appeals and additionally conclude that the circuit court erred in requiring the insurer to pay Kroll amounts in respect to attorney fees periodically as the insurer realizes the benefit of the advance payment resulting from the third-party recovery.
In Banoski v Moto-Crane Service, Inc, 35 Mich App 487; 192 NW2d 555 (1971), the majority, relying on Potter v Vetor, 355 Mich 328; 94 NW2d 832 (1959), held that the insurer had to pay its share of the plaintiffs attorney fees, but also held that the insurer was not entitled to reimbursement of its attorney fees because its attorney did not assist in preparing or trying the case. Justice Levin, who was on the panel in Banoski, dissented, saying that it was the trial court’s responsibility to determine what constitutes a reasonable expenditure for attorney fees and then divide that figure between the attorney for the insurer and *288the attorney for the employee. Justice Levin maintained that complete denial of any share to a party’s attorney would have only been supported by a showing that that attorney’s services were not necessary to the adequate representation of his client.
In the instant case the Court of Appeals panel adopted Justice Levin’s reasoning. We also find Justice Levin’s reasoning to be persuasive. On remand the circuit court shall determine what constitutes a reasonable expenditure for attorney fees for counsel for Kroll and counsel for the insurer and shall, as the statute provides, "divide” that amount among counsel for Kroll and counsel for the insurer.
Injured workmen who obtain third-party recoveries argue that the employer or his insurance carrier may obtain the benefit of the entire third-party recovery either in the form of reimbursement for benefits paid to the date of recovery or as an "advance payment” on account of any future compensation benefits and contend that the employer/insurer should accordingly pay the expenses of recovery allocable to the "advance payment”: In this case the circuit court accepted that argument in part by requiring the insurer to reimburse Kroll periodically, as benefits would have become due but for the advance payment, for one-third of such benefits in respect of "plaintiffs attorney fees”.
The statute provides that "[ejxpenses of recovery shall be apportioned by the court between the parties as their interests appear at the time of the recovery”. The "expenses of recovery” are "the reasonable expenditures, including attorney fees, incurred in effecting recovery”.
The third-party recovery is a benefit to the *289employer/insurer and to the injured employee. After deducting the expenses of recovery, the recovery first reimburses the employer/insurer for benefits already paid. The balance is paid to the employee — an immediate benefit to the employee. That balance is also treated as an advance payment by the employer on account of future compensation benefits — a potential benefit to the employer and his insurance carrier. Whether the employer/insurer in fact realizes a benefit depends on whether future compensation benefits are payable; recovery from disability, death, or termination of dependency status may result in termination of the employer/insurer’s obligation.
Since the amount paid to the injured employee (and the amount of the advance payment) are reduced by the expenses of recovery, in a sense the employee and the employer/insurer both, at the same time, "pay” the expenses of recovery.
We have considered the decisions of the Court of Appeals and of courts in other jurisdictions construing other statutes and have concluded that the expenses of recovery are to be apportioned, as our statute clearly provides, between the injured employee on the one hand and the employer/insurer on the other "as their interests appear at the time of the recovery” (emphasis supplied), i.e., without regard to whether future compensation benefits may or in fact do become payable.
We remand to the circuit court for determination of a reasonable attorney fee and for division of that amount between counsel representing the parties. The provision in the judgment ordering the insurer to pay Kroll periodically amounts in respect of the attorney fee allocable to future compensation benefits is deleted.
The insurer shall pay that portion of the ex*290penses of recovery which bears the same relationship to the total expenses as the amount of the reimbursement for benefits previously paid (before reduction on account of such portion) bears to the amount of the recovery (before reduction on account of such expenses).
Affirmed. No costs as neither party prevailed in full.
Levin, J., concurred with Kavanagh, C. J.
Fitzgerald, Lindemer, and Ryan, JJ., took no part in the decision of this case.