Court Opinion

ID: 9791569
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:13:47.793538+00
Date Added: 2024-06-11T07:37:36.921395
License: Public Domain

ERWIN, Justice,
with whom CONNOR, Justice, joins (concurring in part, dissenting in part).
While I specifically concur with the result reached in this case, I do not agree with the conclusion that an employer’s compensation carrier does not have to pay its pro rata share of the legal costs incurred by an employee in obtaining a recovery from a third-party tort-feasor. I read ÁS 23.30.015(g) 1 to permit an injured employee to deduct the compensation carrier’s pro rata share of the litigation costs and attorneys’ fees from the sum which the, employee is required to reimburse the carrier. Any other reading of this statutory provision permits unjust enrichment of the carrier at the expense of the injured workman. My view is bolstered by the legislative history of the provision.
The Alaska Workmen’s Compensation Act was patterned after the federal Longshoremen’s and Harborworkers’ Compensation Act. It has been the state’s policy to update the Alaska act to parallel changes *45in the federal act. This makes available a substantial body of case law for use in administering our statute.2
The Longshoremen’s and Harborwork-ers’ Act does not specifically address itself to the question whether legal costs must be shared when the employer’s compensation carrier is reimbursed out of a recovery obtained by the employee from the third-party tort-feasor.3 But, in interpreting the federal act, most federal courts and the leading commentator in the field of workmen’s compensation, Professor Larson, take the position that:
If the sum recovered by the employee is more than enough to pay attorney’s fees and reimburse the [employer’s] carrier, the carrier is reimbursed in full, and, apart from special statutes on sharing attorney’s fees, is not required to share the legal expenses involved in obtaining the recovery.4
When the employee’s recovery is insuffi-' cient to both cover his legal costs and fully reimburse the employer’s carrier, however, the carrier is reimbursed out of the recovery only to the extent possible after the recovery has been diminished by the employee’s legal expenses.5 Thus, the prevailing view under the federal act is that when the recovery is insufficient to both cover the employee’s legal expenses and fully reimburse the employer’s carrier, the carrier is, in effect, forced to share in the employee’s legal expenses to the extent that the recovery is insufficient to fully reimburse it. But when the recovery is sufficient, the carrier is not required to share the employee’s legal expenses.
In 1965, House Bill 176 was submitted to the Alaska Legislature by Acting Governor Hugh J. Wade to bring the Alaska Workmen’s Compensation Act into line with the federal Longshoremen’s and Harborwork-ers’ Compensation Act. In his letter accompanying the bill, Acting Governor Wade stated:
Pursuant to State law and the Uniform Rules of the Legislature, I am submitting a bill to repeal and reenact AS 23.-30.015. This proposed legislation brings the Alaska Workmen’s Compensation Act up to date with parallel Federal Law, 33 U.S.C.A. 933, the Harborwork-ers’ and Longshoremen’s Compensation Act [ytc].6
However, a committee substitute bill introduced by the House Judiciary Committee was enacted by the legislature in lieu of House Bill 176. This substitute bill contained an entirely new section g — now AS 23.30.015(g) — which was not in the federal act:
If the employee or his representative recovers damages from the third person, the employee or representative shall promptly pay to the employer the total amounts paid by the employer under (e)(1)(A), (B) and (C) of this section, insofar as the recovery is sufficient after deducting all litigation costs and expenses. . . .7
*46It is thus clear that the committee which introduced the substitute bill and, presumably, the legislature knew that they were changing the law from that prevailing under the Longshoremen’s and Harborwork-ers’ Act. But it is unclear from the legislative history whether they were merely codifying the prevailing federal - view or were attempting to change it.
It is conceded that it is possible to read AS 23.30.015(g) to support the federal view, for the statute, when literally read, stipulates that the employee is required to reimburse the employer’s carrier only to the extent that the recovery is sufficient to do so after “deducting all litigation costs and expenses.” However, I do not believe this literal reading to be consistent with the legislative intent. If the legislature had wished to follow the federal interpretation, there would be no need to codify it. They could have safely relied upon federal case law, as they have done to elaborate upon and define other sections of the Alaska Workmen’s Compensation Act. It thus appears that if the addition of AS 23.30-015(g) is to be accorded a meaningful justification, it must be construed to reject the federal view on' sharing legal fees. However, since nothing more can be logically deduced from the legislative history of this provision, it remains to be decided whether it requires the sharing of legal expenses. In my view it does, for if any other reading is given to the provision the carrier is unjustly enriched at the injured employee’s expense.
I can perceive of no legislative goal for permitting an employer’s compensation carrier to secure a windfall profit at the employee’s expense. Compensation premiums are based on actuarial estimates of the number of accidents of each type in a given industry. They are not usually computed with any possible recovery from third-party sources in mind, because the mathematical probability of such a recovery is difficult to determine. And even when they are, the amount of estimated recovery must, of necessity, be conservative. Thus, when the carrier recovers from a third-party tort-feasor because of the employee’s suit, the recovery is in the nature of an unexpected return, for the premium paid by the employer is normally based upon a projected injury loss without regard to possible third-party claims.
If an employer or compensation carrier need not pay his pro rata share to recover this unanticipated return, the entire burden of the litigation must be borne by the employee, and the carrier takes the benefit of both the employer’s premium and the employee’s litigation effort without a corresponding detriment. In my opinion, this is in the nature of an unjust enrichment.8 In order to insure that the employer’s compensation carrier is not unjustly enriched at the expense of the employee, I would read AS 23.15.030(g) to require the proration of litigation costs and attorneys’ fees between the carrier and the employee on the basis of the ratio of the total compensation payments to the total recovery.9

. AS 23.30.015(g) provides in part:
If the employee or his representative recovers damages from the third person, the employee or representative shall promptly pay to the employer the total amounts paid by the efnployer under (e)(1)(A), (B) and (C) of this section, insofar as the recovery is sufficient after deducting all litigation costs and expenses ....

. For example, in 1965 Acting Governor Hugh J. Wade stated in a letter to the legislature :
It is desirable to keep our law as similar to the Federal law as possible, both because it is the model for the entire Alaska Workmen’s Compensation Act, and because a substantial body of case law under the revised Federal Act has already been built up for us to rely on in administering a new AS 23.30.015 in Alaska.
1965 Journal of the Alaska House of Representatives, Supp. 13, at 242-1.

. Chouest v. A & P Boat Rentals, Inc., 472 F.2d 1026, 1030 (5th Cir.), cert. denied, 412 U.S. 949, 93 S.Ct. 3012, 37 L.Ed.2d 1002 (1973).

. 2 A. Larson, Workmen’s Compensation Law § 74.32, at 226.118 (1974) (footnote omitted). See, e. g., Ashcraft and Gerel v. Liberty Mutual Ins. Co., 120 U.S.App.D.C. 51, 343 F.2d 333 (1965).

. See Strachan Shipping Co. v. Melvin, 327 F.2d 83 (5th Cir. 1964); 2 A. Larson, Workmen’s Compensation Law § 74.32, at 226.119 (1974).

. 1965 Journal of the Alaska House of Representatives, Supp. 13, at 242-1.

. 1965 SLA, ch. 73, at 45.

. See Security Ins. Co. of Hartford v. Norris, 439 S.W.2d 68, 70 (Ky.1969); Charles Seligman Distrib. Co. v. Brown, 360 S.W.2d 509, 510-511 (Ky.1962). See also Metz v. Fireman’s Fund Ins. Co., 15 Md.App. 179, 289 A.2d 830 (1972); Banoski v. Motor Crane Service, Inc., 35 Mich.App. 487, 192 N.W.2d 555 (1971); Caruso v. Jackson Transp. Corp., 15 A.D.2d 59, 222 N.Y.S.2d 298 (1961). Compare the analogous situation of recovery by an insured where there is a sub-rogated interest. United Services Auto. Ass’n v. Hills, 172 Neb. 128, 109 N.W.2d 174, 177-178 (1961).
In the cases which hold that the subrogated property insurer is obligated to pay a fee to the insured’s attorney, who recovered damages from a third party, the courts generally rely on general equitable principles, and, in some cases, point out that the insurer did not participate in the action against the third party.
Anno., 2 A.L.R.3d 1441, 1443 (1965).

. Nothing said herein is intended to imply that a sharing of legal costs is required when the employer seeks recovery against the third-party tort-feasor.