Court Opinion

ID: 1064815
Source: CourtListenerOpinion
Date Created: 2013-10-09 19:18:58.651739+00
Date Added: 2024-06-11T12:06:54.268364
License: Public Domain

Tuesday          15th

          January, 2002.

Shannon P. Skelly and Sarah E. Skelly,
 as Beneficiaries of Michael L. Skelly, Deceased,         Appellants,

against       Record No. 2358-00-2
              Claim No. 182-60-40

Hertz Equipment Rental Corporation and
 Reliance National Indemnity Company,                     Appellees.

                     Upon a Rehearing En Banc

    Before Chief Judge Fitzpatrick, Judges Benton, Willis, Elder,
  Bray, Annunziata, Bumgardner, Frank, Humphreys, Clements and
                               Agee

              Louis D. Snesil (Louis D. Snesil,
              P.C., on brief), for appellants.

              R. Ferrell Newman (Thompson, Smithers,
              Newman, Wade & Childress, on brief),
              for appellees.

          By published opinion issued June 26, 2001, Skelly v.

Hertz Equipment Rental Corp. & Reliance Nat'l Indem. Co., 35 Va.

App. 689, 547 S.E.2d 551 (2001), a divided panel of this Court

affirmed the judgment of the Virginia Workers' Compensation

Commission.   We stayed the mandate of that decision and granted

rehearing en banc.

          Upon rehearing en banc, the stay of this Court's June

26, 2001 mandate is lifted and we affirm the judgment of the
Workers' Compensation Commission for the reasons set forth in

the majority panel decision.

____________________

Elder, J., with whom Fitzpatrick, C.J., Benton, Annunziata and
Frank,       JJ., join, dissenting.

           I would hold this case is controlled by rather than

distinguishable from Wood v. Caudle-Hyatt, Inc., 18 Va. App.
391, 444 S.E.2d 3 (1994).      Here, the claimants notified Hertz of

the proposed settlement and the date on which they hoped to

obtain court approval.      The settlement did not impair Hertz's

rights until a valid release was executed, which could not have

occurred until the claimants obtained court approval for the

settlement.     Hertz had over four weeks before the court approved

the settlement in which to act, but it failed to voice any

objections during that time.      Therefore, I respectfully dissent.

              Wood involved a claimant with asbestosis who filed a

claim for workers' compensation benefits against his employer,

Caudle-Hyatt, Inc.       Id. at 393, 444 S.E.2d at 5.   Wood

simultaneously pursued common law tort actions against various

asbestos manufacturers and negotiated settlement offers for the

tort claims.      Id.   Wood notified Caudle-Hyatt in writing by

certified mail of the terms of the settlement offers and said he

intended to accept them unless Caudle-Hyatt objected within ten

days.   Id.    Caudle-Hyatt responded that it was not liable for

Wood's asbestosis claim; it did not agree or object to the

                                    -2-
proposed tort settlement or mention any subrogation rights.       Id.

at 393-94, 444 S.E.2d at 5.    Wood then settled the tort claims

for an amount that exceeded the sum he might have received for

his ailment under the Workers' Compensation Act, exclusive of

medical expenses.     Id. at 394, 444 S.E.2d at 5.

            On appeal, we held, inter alia, that Wood's claim for

compensation and a pro rata share of attorney's fees from

Caudle-Hyatt was not barred because Wood informed Caudle-Hyatt

of the terms of the settlement and gave it an opportunity to

object or to participate in order to protect its subrogation

rights.     Id. at 398-99, 444 S.E.2d at 7-8.   In essence, we held

that Caudle-Hyatt consented to the settlement through its

inaction.

            Similarly, here, Hertz consented through inaction to

the settlement of the third-party wrongful death claim on behalf

of the claimants.    Under general principles of insurance law, an

insurer's subrogation rights are not impaired by a settlement

until a valid release has been executed by one with authority to

do so.    See 16 Lee R. Russ & Thomas F. Segalla, Couch on

Insurance 3d § 224:100 (1999); id. § 224:104 ("As with any

contract provision, there must be a meeting of the minds

concerning the terms and conditions of the applicable provision

as well as meeting all other requirements of an enforceable

contract (i.e., authority and consideration).").     Virginia's

                                  -3-
wrongful death statutes provide that a decedent's personal

representative may compromise a wrongful death claim only with

court approval.   See Code § 8.01-55.   Here, it is undisputed

that the claimants' attorney kept Hertz's attorneys apprised of

the settlement negotiations in the wrongful death suit as they

progressed.   Although the commission found that the claimants'

counsel verbally accepted a settlement offer of $725,000 on

April 22, 1997, without first obtaining Hertz's approval for

that exact figure, claimants' counsel informed Hertz's attorneys

of the verbal acceptance that same day.   The hearing required

under Code § 8.01-55 for formal approval of that settlement did

not occur until at least May 21, 1997, more than four weeks

later.   The claimants could not execute a valid release until

after they obtained judicial approval and, thus, their actions

could not have impaired Hertz's subrogation rights prior to that

time.

           During the four-week period preceding judicial

approval of the settlement, claimants' counsel provided Hertz's

counsel with a copy of the letter confirming settlement of the

third-party claim.   Claimants' counsel also wrote a separate

letter, dated May 9, 1997, directly to Hertz's counsel.     That

letter notified Hertz of the May 21, 1997 hearing at which the

claimants intended to seek approval of the third-party

settlement.   The letter also indicated the claimants' intent

                                -4-
thereafter to "turn [their] attention to the subrogation

interest of Hertz," indicating clearly that they did not intend

to abandon their claim for workers' compensation benefits.

Despite this notice, Hertz did not appear at the May 21, 1997

hearing and did not object to the settlement prior to the

court's entry of an order approving the settlement on May 27,

1997.   Although Hertz lacked standing to oppose the court's

entry of an order approving the third-party settlement, the

claimants' or personal representative's consent remained a

prerequisite to judicial approval of the settlement.   If Hertz

had communicated its objections to the claimants prior to the

hearing, entry of the court's order of approval, or the

claimants' execution of a release, the claimants could have

withdrawn their consent.

           Thus, I would hold that here, as in Wood, Hertz

consented to the settlement by its inaction, and I would reverse

and remand to the commission for further proceedings consistent

with this approach, including the mandate that the commission

address the issue raised by Hertz regarding apportionment of

attorneys' fees and costs incurred by Hertz in protecting its

interests in the third-party action.   Therefore, I dissent.

____________________

                                -5-
          This order shall be published and certified to the

Virginia Workers' Compensation Commission.

                          A Copy,

                               Teste:

                                        Cynthia L. McCoy, Clerk

                               By:

                                        Deputy Clerk

                               -6-
                    C O R R E C T E D    C O P Y

                                             Tuesday        7th

           August, 2001.

Shannon P. Skelly and Sarah E. Skelly,
 as Beneficiaries of Michael L. Skelly, Deceased,
          Appellants,

against      Record No. 2358-00-2
             Claim No. 182-60-40

Hertz Equipment Rental Corporation and
 Reliance National Indemnity Company,                       Appellees.

                 Upon a Petition for Rehearing En Banc

  Before Chief Judge Fitzpatrick, Judges Benton, Willis, Elder,
   Bray, Annunziata, Bumgardner, Frank, Humphreys, Clements and
                               Agee

           On July 10, 2001 came the appellants, by counsel, and

filed a petition praying that the Court set aside the judgment

rendered herein on June 26, 2001, and grant a rehearing en banc

thereof.

           On consideration whereof, the petition for rehearing

en banc is granted, the mandate entered herein on June 26, 2001

is stayed pending the decision of the Court en banc, and the

appeal is reinstated on the docket of this Court.

           The parties shall file briefs in compliance with Rule

5A:35. The appellants shall attach as an addendum to the opening

brief upon rehearing en banc a copy of the opinion previously

                                -7-
rendered by the Court in this matter. It is further ordered that

the appellants shall file with the clerk of this Court twelve

additional copies of the appendix previously filed in this case.

                          A Copy,

                               Teste:

                                         Cynthia L. McCoy, Clerk

                               By:

                                         Deputy Clerk

                                 - 8 -
                   COURT OF APPEALS OF VIRGINIA

Present: Judges Willis, Elder and Bray
Argued at Richmond, Virginia

SHANNON P. SKELLY AND SARAH E. SKELLY,
 AS BENEFICIARIES OF MICHAEL L.
 SKELLY, DECEASED
                                                  OPINION BY
v.   Record No. 2358-00-2                JUDGE JERE M. H. WILLIS, JR.
                                                 JUNE 26, 2001
HERTZ EQUIPMENT RENTAL CORPORATION
 AND RELIANCE NATIONAL INDEMNITY COMPANY

        FROM THE VIRGINIA WORKERS' COMPENSATION COMMISSION

          Louis D. Snesil (Louis D. Snesil, P.C., on
          brief), for appellants.

          R. Ferrell Newman (Thompson, Smithers,
          Newman, Wade & Childress, on brief), for
          appellees.

     The statutory beneficiaries of Michael L. Skelly

(claimants) appeal a decision of the Workers' Compensation

Commission holding that Hertz Equipment Rental Corporation and

its insurance carrier (together Hertz) were not responsible for

the payment of attorney's fees and costs related to the

settlement of a third-party tort claim.     The claimants contend

that the commission erred in finding (1) that they settled a

third-party tort claim without Hertz's consent or knowledge, and

(2) that the settlement prejudiced Hertz's right of subrogation

against the third-party tort-feasor.     Finding no error, we

affirm the commission's decision.

                                    - 9 -
                           I.    BACKGROUND

     On appeal, we view the evidence in the light most favorable

to the party prevailing below.      See R.G. Moore Bldg. Corp. v.

Mullins, 10 Va. App. 211, 212, 390 S.E.2d 788, 788 (1990).        The

commission's factual findings will be upheld on appeal if

supported by credible evidence.      See James v. Capitol Steel

Constr. Co., 8 Va. App. 512, 515, 382 S.E.2d 487, 488 (1989).

     On October 7, 1996, Michael Skelly was killed in an

automobile accident that arose out of and in the course of his

employment by Hertz.   John Shea, an attorney with the law firm

of Marks and Harrison, was employed by the claimants to assert a

wrongful death claim and a workers' compensation claim.     There

were three potential claimants, the deceased's wife, Shannon

Skelly, and two infants, Sarah Skelly and Taunnie Skelly.        Hertz

employed the law firm of Sands, Anderson, Marks and Miller to

represent its interests.   Cecil Creasey and Michael DeCamps of

that firm represented Hertz.     Had the claimants sought it, an

award of $248,000 (500 weeks at $496 per week) plus funeral

expenses could have been entered in their favor under the

Workers' Compensation Act.      However, no award was entered.

Hertz paid no compensation.     The claimants proceeded directly

with their third-party wrongful death claim.

     Skelly's estate filed a wrongful death suit against the

driver of the other vehicle, Charles Franklin, and his employer,

Metzler Brothers, Inc.   In preparing for trial, the estate hired
                                  - 10 -
investigators, engaged in written discovery, motions and

hearings, hired experts, and conducted depositions.   Trial was

set for April 29, 1997, but on April 22, 1997, the claimants

accepted a settlement in the amount of $725,000.   Thereafter,

they sought from Hertz reimbursement of pro rata attorney's fees

and costs incurred in the third-party litigation, pursuant to

Code § 65.2-311.

     In October and November, 1996, Mr. Shea and Mr. Creasey had

several telephone conversations and corresponded by letter

regarding how to proceed with the third-party tort claim and the

workers' compensation claim.

     On October 17, 1996, Mr. Creasey wrote:

          [Hertz], as you know, pursuant to 65.2-309,
          et seq., holds an assignment of any right to
          recover damages against the third parties
          responsible for the death of Mr. Skelly. Of
          course, [Hertz] may pursue such right in its
          own name or that of the personal
          representative. [Hertz] fully intends to
          pursue its statutory interests against the
          third parties and is presently weighing the
          options on methodology.
     On October 22, 1996, Mr. Creasey wrote Mr. Shea to advise

him that Hertz was weighing alternatives and asked for any

"thoughts on that issue."   Mr. Shea and Mr. Creasey spoke on the

telephone on October 24, 1996, and Mr. Creasey followed up that

conversation with a letter, which stated in pertinent part:

          [Hertz] has elected to exercise its right to
          pursue its own interest against the
          defendants, but we are willing to work with
          you toward a mutually agreeable recovery. I
          understand that you have filed suit against
                                 - 11 -
          the defendants in the U.S. District Court
          for the Eastern District of Virginia. Thank
          you for sending me a courtesy copy of your
          complaint. . . .
               [Hertz's] exposure in this matter is in
          excess of a quarter of a million dollars
          ($496 x 500 weeks = $248,000 plus cost of
          living, funeral, and other expenses).
          Consequently, [Hertz] does intend to pursue
          the assigned right to recover and would
          receive first dollar from such recovery. I
          only assume you expect there is a case to be
          made for recovery in excess of [Hertz's]
          exposure, and your representation is
          particularly for that purpose. As we
          discussed, there may be some problems that
          develop, but I believe we should be able to
          work them out satisfactorily toward our
          common goal. . . .
               Regardless, [Hertz] would like to
          cooperate with you in this matter. Toward
          this end, [Hertz] does not want to be
          blindsided at some point down the road with
          respect to distribution of recovery and/or
          attorneys fees. It is not [Hertz's] desire
          to interfere with your representation of
          Mrs. Skelly and the minor child(ren). . . .
          [Hertz] is glad to share the litigation
          expenses. . . . In assisting us to evaluate
          how best to effect [Hertz's] interests,
          including whether to file a separate suit,
          please let me know how you view the relative
          rights in this matter, particularly with
          respect to the distribution of any recovery
          ultimately obtained from the defendants.
     Mr. Shea testified that he read the October 17 and

October 24 letters "together to lead [him] to believe that [Mr.

Creasey] did not countenance or agree with the personal

representative's right to pursue the action which had already

been filed and that's when [he] last wrote [Mr. Creasey] . . .

and said, well, apparently good lawyers can have differences of

opinion."   According to Mr. Shea, Mr. Creasey's position

                                  - 12 -
regarding the wrongful death case was that Hertz had an

assignment of any right to recover damages against the

third-party and Hertz would "have the right to be reimbursed for

the first dollar recovered."

     On November 4, 1996, Mr. Shea wrote a letter stating:

               We have filed and will pursue to a full
          recovery the cause of action against
          Franklin and Metzler Brothers. Under these
          circumstances, the filing of any separate
          action or claim by [Hertz] . . . against
          Franklin and Metzler Brothers would be
          unauthorized and wholly unnecessary.
          Moreover, there is no need for [Hertz] or
          your firm to incur any expenses or
          attorney's fees in connection with the
          action and recovery against Franklin and
          Metzler Brothers.
               Although we appreciate your offer to
          share in the litigation expenses, the
          plaintiff and our firm will bear all
          litigation expenses necessary to pursue the
          action. Our firm will provide all attorney
          and related services necessary to recover
          this cause of action. Your client's
          subrogation rights are fully protected by
          statute. There is no need for your firm to
          provide any services or expenses of any kind
          in connection with the cause of action
          against Franklin and Metzler Brothers. . . .
               Although I will keep you informed
          regarding the progress of our action, we do
          not require a "shared endeavor" in the sense
          that you seem to mean. The Plaintiff and
          our firm will provide the expenses and
          attorney services necessary to pursue the
          plaintiff's cause of action to a full
          recovery, and will claim the right to be
          reimbursed by the employer (by deduction
          from the amount of the employer's
          subrogation rights) for the full
          proportionate share of the Plaintiff's
          expenses and attorney's fees.

                                 - 13 -
Mr. Shea stated that any attorney fees or expenses incurred by

Hertz would be wholly superfluous, duplicative, and unnecessary

to the pursuit of the action and recovery, were not requested or

authorized by his client, and would not alter the statutory

distribution of the recovery.

     On November 5, 1996, Mr. Creasey responded by letter,

reminding Mr. Shea "that [he is] not authorized to negotiate or

settle the claim against third parties."   Mr. Creasey expressed

his concern that Hertz's rights would be prejudiced if it were

not allowed to participate in the suit.

     Mr. Shea testified that, for litigation strategy purposes,

he was concerned about letting the jury know that Hertz was

involved in the case.   He did not, however, object to Hertz

intervening by a petition or motion to intervene, informing the

court of its interests under the Workers' Compensation Act.    He

stated that he "didn't want . . . [Hertz] to go find another

courthouse and file another lawsuit."   He testified further that

he told Mr. Creasey on November 8, 1996, to take whatever steps

he thought necessary, and he promised to protect Hertz's

subrogation rights in the wrongful death settlement.

     In light of the position taken by Mr. Shea, Hertz continued

to employ Mr. Creasey's law firm to protect its subrogation

interest.   Due to the strained relationship that developed

between Mr. Shea and Mr. Creasey, Michael DeCamps of Sands,

                                  - 14 -
Anderson, Marks and Miller assumed responsibility for the matter

on behalf of Hertz.

     On April 10, 1997, Mr. Shea received a settlement offer of

$200,000 from the third-party tort-feasor.   He replied on

April 13, 1997, demanding $1,375,000.   Mr. Shea testified that

he tried to keep Mr. DeCamps informed of the settlement

negotiations.   On April 14, 1997, he wrote Mr. DeCamps, stating:

          Obviously, time is going to be of the
          essence. Therefore, I am trying to keep you
          and Hertz advised as carefully as I can of
          the settlement negotiations. Although it is
          not clear to me under the law whether or not
          I need Hertz's permission to settle a
          wrongful death action when no benefits have
          been paid, I certainly anticipate seeking
          that permission and hope you will keep Hertz
          advised so that a quick decision can be made
          in the event that a favorable offer is
          extended.
     An April 22, 1997 letter from Mr. Shea to Taunnie Skelly's

attorney stated that his client would instruct him to accept an

offer of $700,000.    In this letter, Mr. Shea noted that he

understood from Mr. DeCamps that "Hertz's only reservation about

agreeing to this settlement was the uncertainty that surrounds

their subrogation interest as it relates to Taunnie."    That same

day, April 22, 1997, Mr. Shea accepted the third-party

tort-feasor's offer of $725,000.   A copy of Mr. Shea's letter

accepting settlement was sent to Mr. DeCamps.

     According to Mr. Shea, Mr. DeCamps was satisfied with any

settlement because negotiations had gone beyond the $250,000

                                   - 15 -
lien of Hertz.   However, Mr. Shea did not seek Mr. DeCamps'

permission to settle the third-party claim.   Mr. Shea testified:

          We [Mr. Shea and Mr. DeCamps] talked in
          terms of where we were and if Hertz had any
          questions about it, and as I've indicated,
          [he] was like, well, I mean, you're so far
          beyond two fifty, I don't know what
          reservation they could have, but if there's
          any, you know, anything comes up, I will let
          you know, and he never got back to me. . . .
          And then [the third-party tort-feasor] went
          to seven twenty-five and having told them
          that I was right around seven hundred and I
          called my client back and she said, please
          take it, and I took it.
     On May 9, 1997, Mr. Shea wrote Mr. Creasey, confirming that

other counsel was now representing Shannon and Sarah Skelly

individually.    This letter also reminded Mr. Creasey about an

upcoming hearing "regarding the status of Taunnie L. Skelly as a

statutory beneficiary in the wrongful death case."    The letter

further stated that it was his hope that they would "be able to

seek Court approval of the wrongful death action at that time,

and that [they could] then turn [their] attention to the

subrogation interest of [Hertz]."

     At the settlement hearing, the judge approved the

settlement and asked for briefs on the only issue left to be

settled, whether Taunnie Skelly should share in the

distribution.    An agreement was reached on that issue and a

December 23, 1997 order distributed the settlement money.

     Mr. Creasey testified that he and Mr. Shea disagreed about

"the extent of Hertz's rights with respect to the assignment of

                                    - 16 -
the right to recover against a third party."   According to Mr.

Creasey, he "specifically asked [Mr. Shea if] . . . he [was] in

the position or was he willing to assume the representation of

[Hertz] at the time against the third parties and his response

was an unequivocal no."

     Mr. DeCamps testified that he attended depositions,

participated in consultation with expert witnesses and offered

some suggestions regarding their direction, reviewed

correspondence and pleadings, offered suggestions about the

direction of the case, and provided an "in" for Mr. Shea to get

information from Hertz.   He acknowledged that Mr. Shea apprised

him of the ongoing negotiations and that he and Mr. Shea had two

conversations on April 22, 1997.   He testified that, during

those conversations, Mr. Shea asked him to "get in touch with

Hertz to see if they would be on watch so to speak for whatever

number they ultimately arrived at so that they could bless it or

not bless it."   He testified that he tried to contact Hertz but

no one with settlement authority was available that day.

Therefore, he stated that he and Mr. Creasey called Mr. Shea to

tell him that Hertz could not approve a settlement that day and

that Mr. Shea told them at that time that an offer of $725,000

had been made and accepted.   Mr. DeCamps denied that he told Mr.

Shea that he would tell him if Hertz objected to the settlement.

     The deputy commissioner held that Hertz had not consented

to the third-party settlement, that the parties had no agreement
                                 - 17 -
regarding attorney's fees, that "the claimants had 'one full

recovery' and were not entitled to any additional benefits under

the Workers' Compensation Act, and, further, that the settlement

of the third-party claim without the consent of [Hertz],

prejudiced [Hertz], and as a result thereof, the claimant is

barred from benefits."    The full commission affirmed.   The

record supports those findings.

                  II.    HERTZ'S SUBROGATION RIGHT

     An employee injured in the course of employment by a

negligent third party may pursue a common law remedy against the

tort-feasor and a claim for compensation benefits under the

Workers' Compensation Act, but may obtain only one full recovery

for the injury.   Noblin v. Randolph Corp., 180 Va. 345, 358-59,

23 S.E.2d 209, 214 (1942).

          If the employee pursues both remedies, at
          such time that the employee makes a claim
          for workers' compensation benefits, the
          "claim . . . shall operate as an assignment
          to the employer of any right to recover
          damages," and the employer "shall be
          subrogated to [the right to recover damages]
          in his own name or in the name of the
          injured employee."
Wood v. Caudle-Hyatt, Inc., 18 Va. App. 391, 395-96, 444 S.E.2d
3, 6 (1994) (quoting Code § 65.2-309(A)).    "[T]he employee may

not pursue his common law remedy in such a manner or settle his

claim to the prejudice of the employer's subrogation right and

thereafter continue to receive workers' compensation benefits."

Id. at 397, 444 S.E.2d at 7 (citations omitted).

                                   - 18 -
          The employee necessarily prejudices his
          employer's subrogation rights and, thus, is
          barred from obtaining or continuing to
          receive benefits under a workers'
          compensation award when an employee settles
          a third-party tort claim without notice, or
          without making a claim for workers'
          compensation benefits, or without obtaining
          the consent of the employer.
Id. (citation omitted).

     In Wood, the employee promptly, by certified mail, notified

the employer of the terms of the proposed third-party

settlement, which was in excess of his potential workers'

compensation benefits, and requested the employer's consent or

objection within ten days.   Id. at 398, 444 S.E.2d at 7.    We

held that the employer was thus afforded an opportunity to

object and to protect its subrogation rights, and was not

prejudiced by the settlement.   See id.

     Here, Hertz was neither told of, nor given the opportunity

to object to, the settlement offer prior to its acceptance by

the claimants.   Unlike the situation in Wood, the claimants'

unauthorized settlement of their third-party claim prejudiced

Hertz by depriving it of the opportunity to protect and assert

its subrogation rights against the third-party tort-feasor.       See

Safety-Kleen Corp. v. Van Hoy, 225 Va. 64, 69, 300 S.E.2d 750,

753 (1983); Green v. Warwick Plumbing & Heating Corp., 5 Va.

App. 409, 412, 364 S.E.2d 4, 6 (1988).

     Relying on Wood, the dissent asserts that "Hertz consented

through inaction to the settlement of the third-party wrongful

                                  - 19 -
death claim . . . ."   That was the situation in Wood.    In that

case, the employer was informed in advance of the settlement to

be made and was told that unless it objected, the settlement

would be undertaken.   The situation in this case is just the

opposite.   While Hertz was told that settlement negotiations

were in progress, it was not informed of the settlement until

the settlement agreement had been made.     Thus, unlike the

situation in Wood, Hertz was never given the opportunity to

forestall the settlement.   The settlement was presented to it

initially as a fait accompli which, subject to court approval,

was binding.

     The dissent further contends that Hertz had a full

opportunity to oppose the settlement at the approval hearing

before the trial court.   This contention overlooks the purpose

and character of that hearing.   Because a wrongful death action

is brought by a personal representative on behalf of statutory

beneficiaries, court approval is required to ensure that the

rights and interests of those beneficiaries are protected.

Hertz was not a party whose interests were subject to protection

by the trial court.    It was not represented by the personal

representative.   Indeed, the personal representative's counsel

expressly refused to represent Hertz.   Hertz was left to pursue

its own rights as an independent party.     Its exclusion from

settlement negotiations forestalled its ability pro tanto to

                                   - 20 -
enforce its rights.   The approval hearing before the trial court

could in no way reverse that exclusion.

     The claimants argue that Safety-Kleen and Green do not

control decision in this case.   They argue that because the

third-party settlement exceeded Hertz's maximum potential

liability, the settlement effectively insulated Hertz from any

liability under the Act and, thus, effected no prejudice.   The

commission addressed this contention.   The commission, citing

Stone v. George W. Helme Co., 184 Va. 1051, 1059-60, 37 S.E.2d
70, 73-74, (1946), held that the extinguishment of the

third-party claim prejudiced per se Hertz's right of

subrogation.   It further held that variation in the amount of

the third-party settlement would affect Hertz's potential

fractional liability for fees and costs, and that Hertz,

therefore, had an interest in the amount of the third-party

settlement and the right to participate in its determination.

The commission concluded:

          [Mr. Shea], by his decision, did not
          represent [Hertz's] interests in the
          third-party claim. The claimants did not
          advise [Hertz] of the settlement offer nor
          obtain its consent. These actions impaired
          [Hertz's] right of subrogation and
          foreclosed the possibility that [Hertz]
          could lessen its obligation by negotiating a
          higher settlement. The claimants' right to
          compensation, in this case the reimbursement
          of attorney's fees and costs, is barred.
We approve that rationale.

                                  - 21 -
     The claimants never pursued their rights under the Workers'

Compensation Act.   They proceeded directly with their

third-party wrongful death suit, excluding Hertz from

participation in that suit or in its settlement.   They sought

and received no intervening benefits under the Workers'

Compensation Act.   Thus, they rejected their rights under the

Act and proceeded directly and independently to a full recovery

at law.

     The judgment of the commission is affirmed.

                                                   Affirmed.

                                  - 22 -
Elder, J., dissenting.

        I would hold this case is controlled by rather than

distinguishable from Wood v. Caudle-Hyatt, Inc., 18 Va. App.
391, 444 S.E.2d 3 (1994).      Here, the claimants notified Hertz of

the proposed settlement and the date on which they hoped to

obtain court approval.      Hertz had over four weeks in which to

act but failed to voice any objections during that time.

Therefore, I respectfully dissent.

        Wood involved a claimant with asbestosis who filed a claim

for workers' compensation benefits against his employer,

Caudle-Hyatt, Inc.       Id. at 393, 444 S.E.2d at 5.   Wood

simultaneously pursued common law tort actions against various

asbestos manufacturers and negotiated settlement offers for the

tort claims.      Id.   Wood notified Caudle-Hyatt in writing by

certified mail of the terms of the settlement offers and said he

intended to accept them unless Caudle-Hyatt objected within ten

days.     Id.   Caudle-Hyatt responded that it was not liable for

Wood's asbestosis claim; it did not agree or object to the

proposed tort settlement or mention any subrogation rights.         Id.

at 393-94, 444 S.E.2d at 5.      Wood then settled the tort claims

for an amount that exceeded the sum he might have received for

his ailment under the Workers' Compensation Act, exclusive of

medical expenses.       Id. at 394, 444 S.E.2d at 5.

        On appeal, we held, inter alia, that Wood's claim for

compensation and a pro rata share of attorney's fees from
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Caudle-Hyatt was not barred because Wood informed Caudle-Hyatt

of the terms of the settlement and gave it an opportunity to

object or to participate in order to protect its subrogation

rights.     Id. at 398-99, 444 S.E.2d at 7-8.   In essence, we held

that Caudle-Hyatt consented to the settlement through its

inaction.

       Similarly, here, Hertz consented through inaction to the

settlement of the third-party wrongful death claim on behalf of

the claimants.    Virginia's wrongful death statutes provide that

a decedent's personal representative may compromise a wrongful

death claim only with court approval.     See Code § 8.01-55.   It

is undisputed that the claimants' attorney kept Hertz's

attorneys apprised of the settlement negotiations in the

wrongful death suit as they progressed.    Although the commission

found that the claimants' counsel verbally accepted a settlement

offer of $725,000 on April 22, 1997, without first obtaining

Hertz's approval for that exact figure, claimants' counsel

informed Hertz's attorneys of the verbal acceptance that same

day.   The hearing required under Code § 8.01-55 for formal

approval of that settlement did not occur until at least May 21,

1997, more than four weeks later.

       During that four-week period, claimants' counsel provided

Hertz's counsel with a copy of the letter confirming settlement

of the third-party claim.    Claimants' counsel also wrote a

separate letter, dated May 9, 1997, directly to Hertz's counsel.
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That letter notified Hertz of the May 21, 1997 hearing at which

the claimants intended to seek approval of the third-party

settlement.    The letter also indicated the claimants' intent

thereafter to "turn [their] attention to the subrogation

interest of Hertz," indicating clearly that they did not intend

to abandon their claim for workers' compensation benefits.

Despite this notice, Hertz did not appear at the May 21, 1997

hearing and did not object to the settlement prior to the

court's entry of an order approving the settlement on May 27,

1997.    Although Hertz lacked standing to oppose the court's

entry of an order approving the third-party settlement, the

claimants' or personal representative's consent remained a

prerequisite to judicial approval of the settlement.    If Hertz

had communicated its objections to the claimants prior to the

hearing or entry of the court's order of approval, the claimants

could have withdrawn their consent.

        Thus, I would hold that here, as in Wood, Hertz consented

to the settlement by its inaction, and I would reverse and

remand to the commission for further proceedings consistent with

this approach, including the mandate that the commission address

the issue raised by Hertz regarding apportionment of attorneys'

fees and costs incurred by Hertz in protecting its interests in

the third-party action.    Therefore, I dissent.

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