Court Opinion

ID: 9583359
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:37:56.577234+00
Date Added: 2024-06-11T13:38:58.558301
License: Public Domain

BOSSON, Judge (concurring in part and dissenting in part) 1. I concur in that part of the majority opinion which affirms the decision of the workers’ compensation judge (WCJ) to apply Montoya v. AKAL Security, Inc., 114 N.M. 354, 838 P.2d 971 (1992), retroactively. I also agree with the disposition of the preservation issue. However, because I disagree with the majority’s application of Montoya to this case, I dissent from Section 11(B) of the opinion. In my view, this Court misapplies Montoya to arrive at an inequitable result. 2. In Montoya, our Supreme Court held that settlement of a tort claim against a third party would not automatically terminate workers’ compensation benefits, overruling the rule of election imposed in Castro v. Bass, 74 N.M. 254, 392 P.2d 668 (1964). Montoya, 114 N.M. at 357, 838 P.2d at 974. See generally Vickie R. Wilcox, WORKERS’ COMPENSATION LAW — Pursuing the “Benevolent Purpose” of New Mexico’s Workers’ Compensation Statute as a Reimbursement Statute: Montoya v. AKAL Security, Inc., 24 N.M. L.Rev. 577 (1994). Given the small amount of the settlement ($7500 total damages for a severe assault), the Court in Montoya was not asked to apportion proceeds between the worker and the employer. The worker focused on reinstating her workers’ compensation coverage. Montoya, 114 N.M. at 355, 838 P.2d at 972. The employer was not concerned about an incidental reimbursement from proceeds but rather that a low settlement had unfairly compromised its only hope for full reimbursement.1  3. The Supreme Court answered both concerns. Henceforth, settlement of a claim against a third party would not necessarily terminate workers’ compensation coverage; it would only create a rebuttable presumption to that effect. Montoya, 114 N.M. at 358, 838 P.2d at 975. Additionally, the employer would be afforded an opportunity to challenge the reasonableness of the settlement. Id. If it were found to be unreasonably low, the WCJ could adjust the employer’s right of reimbursement and fashion a credit in the employer’s favor. Id. The Court did not discuss what would happen with settlement proceeds because it was not an issue in Montoya. 4. The case before us raises that very issue. Employer does not challenge the fairness or the amount of the settlement as Montoya permits. The workers’ compensation benefits do not automatically terminate, again as Montoya provides. The question left unanswered is what happens to the proceeds. The issue before us is whether the WCJ erred in allocating the proceeds of a tort settlement between Employer and Worker. We should resolve this question by applying the equitable principles of Montoya in a manner consistent with that opinion. 5. The facts of this ease illustrate the problem. Of $140,000 recovered in the tort settlement, Worker paid $47,530 for attorney fees and related costs. Worker owes another $15,221 for medical bills not covered by workers’ compensation. From the balance (approximately $77,000), City seeks reimbursement for all the benefits it has paid out as well as a credit for any benefits it may owe in the future, less City’s proportionate share of attorney’s fees and costs. See Transport Indem. Co. v. Garcia, 89 N.M. 342, 552 P.2d 473 (Ct.App.), cert. denied, 90 N.M. 9, 558 P.2d 621 (1976). Under the facts of this case, the reimbursement may well equal or exceed all that is left of the tort settlement. Yet, Worker suffered substantial, lasting injuries (e.g., lost wages, lost earning capacity, pain and suffering), some of which are not compensated at all under workers’ compensation benefits or only partially so. If the City takes the entire tort settlement, Worker will be left with no compensation for these additional injuries. Only the City and Worker’s own attorney would benefit from the settlement. Worker gains nothing for her efforts in pursuing the third-party litigation.2  6. There may be occasions which justify full reimbursement for employer. An example would be when a modest workers’ compensation benefit is dwarfed by a substantial tort recovery. Even if the employer received total reimbursement in that hypothetical case, the worker would still be left with a substantial sum. But the same result does not necessarily follow when worker receives an amount in the tort settlement which is less than the total compensation benefits paid out, and yet the worker suffers a substantial, uncompensated injury of a continuing nature. Total reimbursement to the employer, leaving nothing for the worker, then becomes an “[injequitable allocation of responsibility,” contrary to Montoya. I do not believe Montoya requires such a result. 7. Interpreting NMSA 1978, Section 52-5-17 (Repl.Pamp.1991) (effective until Jan. 1, 1991) of the Workers’ Compensation Act, Montoya states that the “broader objective of the statute is to achieve an equitable distribution of the risk of loss.” Montoya, 114 N.M. at 357, 838 P.2d at 974. The Court also speaks of the “purpose of Section 52-5-17 [being] equitable allocation of responsibility.” Id. 8. Section 52-5-17 specifically permits third-party claims. Both the worker and the employer stand to benefit financially when worker sues a third party for contribution. Professor Larson has spoken about third-party claims as follows: The concept underlying third party actions is the moral idea that the ultimate loss from wrongdoing should fall upon the wrongdoer. As mentioned at the close of the preceding chapter, every mature loss-adjusting mechanism must look in two directions: it must make the injured person whole, and it must also seek out the true wrongdoer whenever possible. While compensation law, in its social legislation aspect, is almost entirely preoccupied with the former function, it is not so devoid of moral content as to overlook the latter. It should never be forgotten that the distortions of our old-fashioned fault concepts that have been thought advisable for reasons of social policy are exclusively limited to providing an assured recovery for the injured person; they have never gone on— once the injured person was made whole— to change the rules on how the ultimate burden was borne. 2A Arthur Larson, The Law of Workmen’s Compensation § 71.10, at 14-1 (1993). 9. Employers and workers are less likely to achieve these goals with a system that works at cross-purposes. Conflict and inconsistency abound when workers get nothing for their efforts. Creating a disincentive for workers to proceed frustrates the employer’s own interest in third-party recovery. This result cannot be what the legislature had in mind in crafting Section 52-5-17, nor can it be what our Supreme Court had in mind in Montoya. The principle of “equitable allocation of the risk of loss” must mean, at the very least, that settlement proceeds should be allocated equitably with an eye toward satisfying, not frustrating, the mutual interests of worker and employer. See Larson, swpra, § 74.31(a) n. 25, n. 25.1, at 14-485 to 14-488 (setting forth statutes and case law in other states which provide worker a financial incentive to bring the third-party tort suit). As Professor Larson states: [A] good statute must recognize as a fact of life that the injured employee may need a little special solicitude to ensure that he adequately looks after his own rights.... In many situations, it is important for the statute to contain not merely an opportunity but an incentive to sue the third party, and particularly to strive for the fullest possible damage recovery. Larson, supra, § 74.16(a), at 14r403. 10.The Montoya Court acknowledged that the statute “evinces a legislative intention to prevent windfall recoveries to injured workers.” Montoya, 114 N.M. at 357, 838 P.2d at 974. However, as the Court pointed out, this concern is dealt with by the terms of the statute, by giving employer a right to reimbursement for benefits paid under the statute. Id. Thus, the Court opined that “the broader objective of the statute is to achieve an equitable distribution of the risk of loss.” Id. The Court noted that with the adoption of comparative fault and the abrogation of joint and several liability in the early 1980s, it is no longer accurate to say that recovery from one third-party tortfeasor makes a worker financially whole. Id. In fact, other parties may have been responsible for the injuries, or the employer and the worker may have been partially at fault. Id. Thus, the Court rejected the fiction that a worker has been made financially whole when the worker has received less than the compensation and related benefits to which entitled under the Act. If there is a problem with a satisfaction of the third-party claim, it does not go to double recovery. Rather, it goes to the amount of reimbursement or credit to which the employer is entitled. Id. at 358, 838 P.2d at 975. 11. In Montoya, the Supreme Court observed that an employer’s liability would be reduced by the amount of the settlement, unless employer could show that the amount was not a reasonable settlement based on either the proportionate fault of the third party or on other factors that make a settlement unreasonable. Id. The important point, in my view, is that the opinion specifically contemplates the possibility that the WCJ will order something other than a dollar-for-dollar setoff for employer, and I interpret that to be either up or down depending on equitable considerations. 12. The process of examining the real impact of the settlement begins when there is an initial showing that worker’s net recovery (after fees and litigation costs) is less than employer’s total claim for reimbursement. That showing was made in this case. If the City felt the settlement was unreasonably low, then under Montoya it could have asked the WCJ for an equitable adjustment. The City did not do so. The Worker should be able to request an adjustment the other way and did so in this case. Montoya requires the WCJ to consider both the proportionate fault of the tortfeasor and the reasonableness of the settlement in determining the extent to which employer will be reimbursed. 13. Proportionate fault is one appropriate consideration. On the one hand, if the entire injury were 100% the fault of one third-party and worker secures a reasonable settlement, then employer can make a strong case for 100% reimbursement pí its benefits. On the other hand, if the settlement represents only 20% of the fault and the remainder of the responsibility lies with the worker or with absent tortfeasors, one can question the fairness of allowing employer a full recovery at the expense of the worker. The question then becomes whether this could be an “equitable distribution of the risk of loss.” Reimbursement to employer for what amounts to the worker’s own percentage of the fault would seem to be a windfall, because, by statute, the employer is to indemnify worker even when worker causes the injury. Equity would seem to limit employer’s reimbursement to the same percentage which represents the fault of others, apart from the worker or the employer. See NMSA 1978, § 52-1-10.1 (Repl.Pamp.1991); cf. Taylor v. Delgamo Transp., Inc., 100 N.M. 138, 667 P.2d 445 (1983) (Payne, Chief Justice, and Sosa, Senior Justice, dissenting). 14. This interpretation of Montoya is also consistent with precedent in the area of equitable subrogation. Even a fully subrogated healthcare provider can be subject to equitable limits in seeking reimbursement from proceeds of a third-party tort settlement. White v. Sutherland, 92 N.M. 187, 192, 585 P.2d 331, 336 (Ct.App.) (Wood, C.J.), cert. denied, 92 N.M. 79, 582 P.2d 1292 (1978). In White, the tort settlement was low (only 10% of the victim’s total damages) and the healthcare expenses were high. Id. at 189, 585 P.2d at 333. Under the circumstances, it would not have been fair for the healthcare provider to receive full reimbursement. Id. at 191, 585 P.2d at 335. Therefore, this Court limited the subrogated recovery to 10% of the healthcare benefits paid out. Id. at 192, 585 P.2d at 336. As an analogy, equitable subrogation permits us to search for a fair way out of an inequitable and self-defeating situation. The intent of Section 52-5-17 has been described in certain contexts as a subrogation statute. See Castro, 74 N.M. at 261, 392 P.2d at 674 (Noble, J., dissenting). 15. We should interpret this statute in light of changing tort law to achieve its overall purpose. When faced with illogical and onerous results, stemming from ambiguous statutory language written in an era preceding comparative fault, we should not feel intimidated from reasonable efforts to mitigate such a result. See State ex rel. Helman v. Gallegos, 117 N.M. 346, 348, 871 P.2d 1352, 1354 (1994). We should interpret Section 52-5-17 in light of the equitable principles set forth in Montoya. Employer and Worker must share in the allocation of proceeds. Based on the foregoing analysis, I think that the WCJ correctly interpreted Section 52-5-17 and Montoya to require the equitable allocation of settlement proceeds between the City and Worker. 16. After the fairness of the settlement amount was contested by Worker in her closing statement and in her requested findings of fact and conclusions of law, the WCJ determined total loss, including all claims for back wages, medical benefits, pain and suffering, and other tort damages. Comparing the actual settlement ($140,000) with the total loss ($367,000), the WCJ concluded that Worker was only compensated for 38% of her total damages. Then, following the analogy of equitable subrogation and White, the WCJ limited the City’s recovery to a 38% reimbursement from the tort settlement. 17. There are other equitable ways of apportioning risk and reward. The WCJ could have determined the percentages of fault in the third party and Worker and limited the City’s reimbursement to that percentage representing third-party responsibility for Worker’s damages. Under Montoya, the WCJ is already required to make these assessments in determining whether a third-party settlement is a reasonable compromise of the third-party liability. This method has much to commend it. 18. However, the particular method of equitable allocation is less important than its exercise. In my view, that task should be left to the WCJ, subject to this Court’s review. Montoya does not dictate the choice; Montoya dictates that there be a choice. I would affirm the WCJ for the manner in which he made that choice, seeking to bring sense and harmony to a chaotic situation. 19. For the foregoing reasons, being in the minority on this issue, I respectfully dissent.  . Taking judicial notice of this Court's own files, it is noteworthy that at the time Ms. Montoya settled with the third party for only $7500, she had received $88,000 in compensation benefits. The low settlement eliminated any realistic hope of reimbursement for those benefits.   . There is an indication in the record that Worker may have received almost $149,000 by July 9, 1995, based on an ongoing order of temporary total disability benefits dating from July 9, 1987. This includes $24,969.13 in medical expenses paid by Employer. The compensation order awarded temporary total disability until further order of the court and nothing in the record or the briefs indicates that the compensation order has been modified or superseded. However, there is another reference in the record that the claim is for $52,163. Either way, the majority opinion will leave Worker with little or nothing for having undertaken the risk and the labor of the third-party tort litigation.