Court Opinion

ID: 3189388
Source: CourtListenerOpinion
Date Created: 2016-03-29 14:11:23.728446+00
Date Added: 2024-06-11T14:46:52.764678
License: Public Domain

COURT OF APPEALS OF VIRGINIA

            Present: Judges Humphreys, McCullough and Senior Judge Haley
PUBLISHED

            Argued at Fredericksburg, Virginia

            NAA LAMILEY WILLIAMS
                                                                              OPINION BY
            v.     Record No. 0947-15-4                                JUDGE ROBERT J. HUMPHREYS
                                                                             MARCH 29, 2016
            CAPITAL HOSPICE AND COMPANION
             PROPERTY & CASUALTY INSURANCE COMPANY

                        FROM THE VIRGINIA WORKERS’ COMPENSATION COMMISSION

                            Jeremy Flachs (Justin Lerche; Law Offices of Jeremy Flachs, on
                            brief), for appellant.

                            Catherine A. Karczmarczyk (Ramesh Murthy; Penn, Stuart &
                            Eskridge, on brief), for appellees.

                            Amicus Curiae: Virginia Trial Lawyers Association (Craig B.
                            Davis; Stephen T. Harper; Reinhardt Harper Davis, PLC, on brief),
                            for appellant.

                   Naa Williams (“Williams”) appeals the decision of the Virginia Workers’ Compensation

            Commission (the “Commission”) denying her $1,437.31, the pro rata reduction of her

            employer’s (“Capital Hospice”) workers’ compensation insurance carrier’s (“Companion”) lien

            recovered from the negligent third party, Victoria Fire and Casualty/Nationwide (“Victoria”).

            Specifically, Williams claims the Commission erred in interpreting Code §§ 65.2-309, 65.2-311,

            and 65.2-313.

                   
                     Justice McCullough participated in the hearing and decision of this case prior to his
            investiture as a Justice of the Supreme Court of Virginia.
                                        I. BACKGROUND

       Williams was involved in an automobile accident on October 13, 2011 and sustained

injuries to her neck and back. On October 27, 2011, Williams retained counsel. That same day,

counsel for Williams sent a letter to Victoria, the insurance carrier for the negligent third party

involved in the accident, informing Victoria of its representation of Williams. Victoria

acknowledged receipt of the letter that same day. Williams’s counsel did not send a letter of

representation to her employer’s workers’ compensation carrier, Companion. Williams, without

the assistance of counsel, filed a claim for workers’ compensation benefits on November 11,

2011. On August 10, 2012, counsel for Williams filed a second claim for benefits.

       On March 23, 2012, Companion, the workers’ compensation insurance carrier for Capital

Hospice (Williams’s employer), initiated arbitration proceedings with Victoria, the insurance

carrier for the third party, seeking recovery of its workers’ compensation lien of $4,060.19. The

lien represented the payments Companion had made to or on behalf of Williams pursuant to the

Virginia Workers’ Compensation Act (“the Act”). Victoria made a request that the arbitration

proceedings be deferred to “allow more time for a settlement of the pending personal injury”

action, which was denied. On August 13, 2012, the arbitrator issued a decision ordering Victoria

to pay $4,060.19, the full lien amount, to Companion.

       On March 6, 2014, counsel for Williams filed a letter claim with the Commission

alleging she was entitled to an additional $1,353.40 to be paid by Companion, representing the

pro rata share of attorney’s fees and expenses from the $4,060.19 recovered by Companion from

Victoria through arbitration. On April 9, 2014, Williams settled her personal injury claim

against the negligent third party/Victoria for $10,000 prior to trial.

       Deputy Commissioner Tabb conducted an evidentiary hearing on July 7, 2014. In a

written opinion, Deputy Commissioner Tabb found that Williams was entitled to a payment of

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$1,437.31 because “it is required that reasonable attorney’s fees and expenses shall be

apportioned pro rata between the [employer and employee], regardless of the attorney’s degree

of involvement in the companion case.” He explained that the attorney’s fees ($3,333) and costs

($210.20) for Williams totaled $3,543.20, which was 35.4% of the $10,000 third-party recovery.

Therefore, the deputy commissioner concluded that Williams’s counsel “was entitled to the

reduced compensation lien or $1,437.31 ($4,060.19 x .354), and the employer shall owe

35.4 percent of each future entitlement, if any.”

        Companion requested a review of the deputy commissioner’s opinion by the

Commission. On May 21, 2015, the Commission issued its opinion, which reversed the deputy

commissioner. The Commission found that Companion was permitted under the Act to resolve

its subrogation lien with the negligent third party without first obtaining approval of the

Commission and claimant pursuant to Code § 65.2-309(A) and (C). Additionally, the

Commission noted that the employer has a statutory right to recover its lien and explained, “[w]e

can glean nothing from the statutory language which evidences the legislature’s intention to

grant the claimant a right superior to that of the employer’s, to recover money owed [to] the

employer.” Further, the Commission held that Code §§ 65.2-309, 65.2-311, and 65.2-313 did

not require that Williams receive $1,437.31 from Companion’s recovery of its workers’

compensation lien. Finally, the Commission found no merit to Williams’s argument that

Companion’s recovery of its lien prejudiced her ability to secure a favorable settlement in her

tort action against the third party.

                                          II. ANALYSIS

        In her appeal, Williams asserts that the Commission erred in interpreting Code

§§ 65.2-309, 65.2-311, and 65.2-313. “An issue of statutory interpretation is a pure question of

                                                -3-
law which we review de novo.” Ford Motor Co. v. Gordon, 281 Va. 543, 549, 708 S.E.2d 846,

850 (2011). With regard to issues of statutory construction,

               [a]lthough “the practical construction given to a statute by public
               officials charged with its enforcement is entitled to great weight by
               the courts and in doubtful cases will be regarded as decisive,”
               Southern Spring Bed Co. v. State Corp. Comm’n, 205 Va. 272,
               275, 136 S.E.2d 900, 902 (1964), “when an issue involves a pure
               question of statutory interpretation, that issue does not invoke the
               agency’s specialized competence but is a question of law to be
               decided by the courts.” Alliance to Save the Mattaponi v.
               Commonwealth, 270 Va. 423, 442, 621 S.E.2d 78, 88 (2005).

Commonwealth v. Barker, 275 Va. 529, 536, 659 S.E.2d 502, 505 (2008).

                           A. The Application of Code § 65.2-309(C)

       Williams’s first assignment of error claims the Commission erred in holding that

Companion could resolve its subrogation lien with the third party without first obtaining

approval of the Commission and the claimant pursuant to Code § 65.2-309(C).

       Code § 65.2-309(C) provides:

               No compromise settlement shall be made by the employer in the
               exercise of such right of subrogation without the approval of the
               Commission and the injured employee or the personal
               representative or dependents of the deceased employee being first
               obtained.

       In determining that Companion was not required to obtain approval from the Commission

and Williams before arbitrating its claim with Victoria, the Commission interpreted Code

§ 65.2-309(C) “as contemplating the exercise of the employer’s right of subrogation by

prosecuting the tort case against the negligent third party,” and therefore concluded that Code

§ 65.2-309(C) does not apply to “an action by an employer against the third party solely to

recover its lien.” We agree with the Commission regarding the legislative purpose behind Code

§ 65.2-309(C), when, as here, the recovery of such a lien has no impact upon a claimant’s tort

case against the negligent third party. In this case, the arbitration Companion initiated against

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Victoria was for the sole purpose of seeking reimbursement for its lien and did not in any way

implicate the rights of Williams. Further, contrary to her bare assertions, Williams enjoys no

interest in Companion’s workers’ compensation lien.

       Code § 65.2-309(A) provides:

               A claim against an employer under this title for injury,
               occupational disease, or death benefits shall create a lien on behalf
               of the employer against any verdict or settlement arising from any
               right to recover damages which the injured employee, his personal
               representative or other person may have against any other party for
               such injury, occupational disease, or death, and such employer also
               shall be subrogated to any such right and may enforce, in his own
               name or in the name of the injured employee or his personal
               representative, the legal liability of such other party. The amount
               of compensation paid by the employer or the amount of
               compensation to which the injured employee or his dependents are
               entitled shall not be admissible as evidence in any action brought
               to recover damages.

Thus, pursuant to Code § 65.2-309(A), the employer/insurer is subrogated to an employee’s

rights against a third party responsible for the injuries giving rise to the payment of

compensation. “The purpose of the statute is to reimburse an employer who is compelled to pay

compensation as a result of the negligence of a third party and to prevent an employee from

obtaining a double recovery of funds.” Tomlin v. Vance Int’l, 22 Va. App. 448, 452, 470 S.E.2d
599, 601 (1996). “The only restriction that Code § 65.2-309 imposes on the employer’s lien

rights is set forth in Code § 65.2-309(C), which takes effect when those lien rights are asserted in

a compromise settlement arising from an action that the employer has initiated against a third

party.” Liberty Mut. Ins. Co. v. Fisher, 263 Va. 78, 85, 557 S.E.2d 209, 212 (2002).

       Code § 65.2-310 protects the employer when the employee sues a third party:

               In any action by an employee, his personal representative or other
               person against any person other than the employer, the court shall,
               after reasonable notice to the parties and the employer, ascertain
               the amount of compensation paid and expenses for medical,
               surgical and hospital attention and supplies, and funeral expenses
               incurred by the employer under the provisions of this title and
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               deduct therefrom a proportionate share of such amounts as are paid
               by the plaintiff for reasonable expenses and attorney’s fees as
               provided in § 65.2-311 . . . .

In short, “Code § 65.2-310 operates to protect an employer’s lien in an action brought by an

employee or her personal representative against a third party.” Liberty Mut., 263 Va. at 84, 557

S.E.2d at 212. Notably, “[t]he language of Code § 65.2-310 does not limit the lien rights created

by Code § 65.2-309 when a compromise settlement is reached in a third-party action brought by

an injured employee or her personal representative.” Id. at 85, 557 S.E.2d at 212. Therefore,

“the language of Code §§ 65.2-309 and -310, considered together, permits an employer to assert

its statutory lien against any recovery obtained in an action brought against a third party liable

for the employee’s injury or death.” Id.

       With this background in mind, we conclude that Code § 65.2-309(C) cannot apply to an

action by an employer for the sole purpose of recovering its lien because interpreting the code

section otherwise would be inconsistent with the overall statutory scheme. Code §§ 65.2-309

and 65.2-310 must be considered in a manner that harmonizes them and also gives effect to each

section of the Act. See id. “The purpose and effect of the [Act] are to control and regulate the

relations between the employer and the employee.” Hartford Fire Ins. Co. v. Tucker, 3 Va. App.
116, 120, 348 S.E.2d 416, 418 (1986). The requirements of Code § 65.2-309(C) cannot apply to

an action between an employer and third party solely to recover its statutory lien because such

action does not involve the employee or her rights under the Act, and thus, is not within the

jurisdiction of the Commission.

       Generally, the jurisdiction of the Commission is “limited to those issues which are

directly or necessarily related to the right of an employee to compensation for a work-related

injury.” Henry’s Wrecker Serv. Co. v. Smoot, 35 Va. App. 365, 373, 545 S.E.2d 551, 555 (2001).

“[W]hen the rights of the employee in a pending claim are not at stake, the commission[ ]

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disavow[s] jurisdiction and send[s] the parties to the courts for relief.” Id. “Thus, the

commission is empowered to decide matters between the employer and employee affecting

compensation rights and directly related interests of the employee that spring from the Act.” Id.

“Questions between the insurer and the employer or another insurer do not ‘arise under’ the Act

except insofar as they affect the rights of an injured employee.” Hartford Fire, 3 Va. App. at 121,

348 S.E.2d at 419.

       Accordingly, Code § 65.2-309(C) necessarily contemplates a situation where the employer

exercised its right of subrogation by prosecuting a tort case against a third party. In that scenario,

Williams’s rights would be implicated, and the Commission’s jurisdiction would be triggered to

protect Williams’s interests. The requirements of Code § 65.2-309(C) would serve to protect

Williams from an unreasonably reduced settlement which may satisfy the employer’s lien, but

would fail to compensate Williams for her injuries caused by the third party.1 Thus, the

Commission would have jurisdiction to protect Williams’s rights. Here, however, neither

Williams’s compensation rights under the Act, nor her unresolved claims against the negligent

third party were at issue in the arbitration. In fact, Williams continued to pursue her personal

injury claim against the negligent third party and ultimately settled that claim for $10,000.

Therefore, the Commission did not have jurisdiction over Companion’s reimbursement claim

against Victoria.

       Williams contends that she has an interest in Companion’s lien because she could have

negotiated a lien reduction with some of her medical providers. However, Williams is unable to

       1
          We note that there is no statutory requirement that notice of the employer’s intention to
exercise its right of subrogation be provided to the employee, except insofar as Code
§ 65.2-309(C) requires the approval of the Commission and the injured employee before
reaching a compromise settlement. This omission further demonstrates that Code § 65.2-309(C)
necessarily applies only to actions by the employer that directly implicate the employee’s
interests.
                                                 -7-
point to any legal authority that suggests she has a legal right to do so. The Act certainly does

not contain any language suggesting an employee’s opportunity to negotiate a lien reduction

would trump Companion’s express statutory right to subrogation. Second, despite Williams’s

claim, the Act does not provide a claimant with a superior right to prosecute a third-party claim

to recover the employer’s lien, as Williams suggests. The language of Code §§ 65.2-309 and

65.2-310 clearly provides the employer with an equal right to prosecute a third-party claim. As

the Commission noted, we also could “glean nothing from the statutory language which

evidences the legislature’s intention to grant the claimant a right superior to that of the

employer’s, to recover money owed to the employer.” The Commission further explained,

“[w]hile it may be the rare case that an employee and employer independently pursue their

respective claims against a negligent third party, nothing in the Act prohibits such an approach

. . . [and] there are valid reasons an employer may elect to protect and prosecute its own claim.”

       Moreover, there was no “compromise settlement” in this case, as contemplated by Code

§ 65.2-309(C).

                 When the language of a statute is unambiguous, we are bound by
                 the plain meaning of that language. Furthermore, we must give
                 effect to the legislature’s intention as expressed by the language
                 used unless a literal interpretation of the language would result in a
                 manifest absurdity. If a statute is subject to more than one
                 interpretation, we must apply the interpretation that will carry out
                 the legislative intent behind the statute.

Ford Motor Co., 281 Va. at 549, 708 S.E.2d at 850 (quoting Conyers v. Martial Arts World of

Richmond, Inc., 273 Va. 96, 104, 639 S.E.2d 174, 178 (2007)).

       The plain meaning of a “compromise” is “the result or embodiment of concession or

adjustment.” Webster’s Third New International Dictionary 469 (1993). “Settlement” means

“satisfaction of a claim by agreement often with less than full payment.” Id. at 2079. See also:

Compromise Settlement, Black’s Law Dictionary (10th ed. 2014) (defining “compromise

                                                  -8-
settlement” as “an agreement between two or more persons to settle matters in dispute between

them; an agreement for the settlement of a real or supposed claim in which each party surrenders

something in concession to the other”). On the other hand, “arbitration” is defined as “the

hearing and determination of a case between parties in controversy by a person or persons

chosen by the parties or appointed under statutory authority instead of by a judicial tribunal

provided by law.” Webster’s, supra, at 110.

       In this case, Companion and Victoria voluntarily participated in an arbitration, which

ultimately resulted in the arbitrator issuing a decision that was binding on the parties.

Companion was awarded one hundred percent of its claimed damages, which represented its total

workers’ compensation lien of $4,060.19. As such, although both parties agreed to submit the

claim to arbitration for resolution, there was no negotiation or concessions on the part of

Companion to resolve the claim. Further, the parties did not reach an agreement; instead, the

arbitrator issued a binding decision and Victoria was ordered to compensate Companion the

exact amount of its lien. Accordingly, we hold that the decision of the arbitrator ordering

Victoria to reimburse Companion for its workers’ compensation lien was not a “compromise

settlement” within the meaning of Code § 65.2-309(C).

       Therefore, consistent with the Act’s statutory scheme, we hold that the Commission did

not err in finding that Code § 65.2-309(C) is limited to actions in which the employer is

exercising its right of subrogation by prosecuting a tort case against a third party.

                               B. Pro Rata Reduction of $1,427.31

       Williams’s second assignment of error contends that the Commission erred in holding

that Code §§ 65.2-309, 65.2-311, and 65.2-313 did not require Companion to pay Williams

$1,437.31, the pro rata reduction of Companion’s workers’ compensation lien.

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       Code § 65.2-311 provides:

               in any action, or claim for damages, by an employee, his personal
               representative or other person against any person other than the
               employer, and in any such action brought, or claim asserted, by the
               employer under his right of subrogation provided for in § 65.2-309,
               if a recovery is effected, either by judgment or voluntary
               settlement, the reasonable expenses and reasonable attorney’s fees
               of such claimants shall be apportioned pro rata between the
               employer and the employee, his personal representative or other
               person, as their respective interests may appear.

       Code § 65.2-313 states:

               in any action brought, or claim asserted, by the employer under his
               right of subrogation provided for in § 65.2-309, if a recovery is
               effected, the employer shall pay to the employee a percentage of
               each further entitlement as it is submitted equal to the ratio the
               total attorney’s fees and costs bear to the total third-party recovery
               until such time as the accrued post-recovery entitlement equals that
               sum which is the difference between the gross recovery and the
               employer’s compensation lien.

       Pursuant to Code § 65.2-311, “[a] claimant is not required to bear the full financial

burden of recovering common law tort damages which benefit the employer.” Wood v. Caudle-

Hyatt, Inc., 18 Va. App. 391, 399, 444 S.E.2d 3, 8 (1994). The requirement of Code §§ 65.2-311

and 65.2-313 that the employer pay its pro rata share of reasonable expenses and attorney’s fees

prevents a situation where “the employer would be relieved of a substantial obligation as a result

of [the employee’s] efforts without being required to compensate [the employee]” for its share of

legal costs and expenses. Circuit City Stores v. Bower, 243 Va. 183, 187, 413 S.E.2d 55, 57

(1992). Thus, Code § 65.2-311 requires an employer who benefits from an employee’s third

party settlement by recouping its payment of workers’ compensation benefits to pay its pro rata

share of claimant’s reasonable expenses and attorney’s fees in effecting the recovery.

       Code §§ 65.2-311 and 65.2-313 do not apply to this case because Companion did not

benefit from a third-party settlement secured by Williams. Instead, Companion exercised its

own statutory right to subrogation and received full compensation for its workers’ compensation
                                               - 10 -
lien, without any assistance or involvement of Williams or her counsel. Further, as discussed

above, the arbitration between Companion and Victoria did not implicate any of Williams’s

rights under the Act or her right to pursue her own third-party claim. This holding is consistent

with existing case law which has held that employers are required to pay their pro rata share of

expenses when they benefit from third-party actions prosecuted by employees. See e.g. Circuit

City, 243 Va. at 187-89, 413 S.E.2d at 57-58 (holding employer was responsible for its pro rata

share of fees and costs because employee had instituted the action, paid all expenses and secured

a settlement, which benefited the employer); Wood, 18 Va. App. at 400, 444 S.E.2d at 9

(concluding the employer received “substantial benefit from [employee’s] settlement of his

third-party tort claim” and thus was liable to the employee for its “pro rata share of reasonable

expenses and attorney’s fees”).

       To hold otherwise would be inconsistent with the statutory scheme and bestow an

additional benefit upon the employee for an action pursued entirely by the employer pursuant to

its right of subrogation, which did not implicate any of Williams’s rights. Therefore, we hold

that the commission did not err in finding that Williams was not entitled to $1,437.31 from

Companion’s recovery of its workers’ compensation lien.

                          C. Prejudice to Williams’s Third-Party Claim

       Williams’s third assignment of error asserts that she was prejudiced by Companion’s

arbitration with Victoria. Specifically, Williams claims that the arbitration had a detrimental

effect on Williams’s ability to settle her own personal injury claim against Victoria because she

received less from her settlement than if Victoria had not paid Companion its workers’

compensation lien.

       First, the amount of compensation paid by Victoria to Companion for the workers’

compensation lien is not admissible in evidence in Williams’s personal injury suit. See Code

                                               - 11 -
§ 65.2-309(A) (“The amount of compensation paid by the employer or the amount of

compensation to which the injured employee or his dependents are entitled shall not be

admissible as evidence in any action brought to recover damages.”). Moreover, Victoria, as the

third party, is not permitted to defend Williams’s personal injury claim on the basis that Williams

had been compensated for her lost wages or that her medical expenses were paid pursuant to the

Act. See e.g. Acordia of Va. Ins. Agency v. Genito Glenn, L.P., 263 Va. 377, 387, 560 S.E.2d
246, 251 (2002); Acuar v. Letourneau, 260 Va. 180, 188, 531 S.E.2d 316, 320 (2000); Schickling

v. Aspinall, 235 Va. 472, 474, 369 S.E.2d 172, 174 (1988). Finally, Williams did settle her

personal injury claim with Victoria before trial for $10,000, a greater amount than her claimed

medical bills of $6,906. We agree with the Commission’s finding:

               Like any litigant, the claimant is at liberty to prosecute her claim,
               introduce her medical bills and lost wages as damages, and gamble
               on receipt of a satisfactory verdict. If she does not desire to take
               that gamble, then like any litigant, she is left with the option of
               attempting settlement. The claimant’s prospects of securing a
               sufficient recovery, whether by trial or settlement, are not
               prejudiced by the employer’s direct recovery of its lien.

Accordingly, we hold that Companion’s exercise of its statutory right of subrogation through

arbitration did not prejudice Williams’s right to pursue her own personal injury claim.

                                       III. CONCLUSION

       Consistent with the Act’s statutory scheme, we hold that the Commission did not err in

finding that Code § 65.2-309(C) is limited to actions in which the employer is exercising its right

of subrogation by prosecuting a tort case against a third party. Further, we hold that Williams is

not entitled to $1,437.31 from Companion’s recovery of its workers’ compensation lien because

Companion did not receive the benefit of its lien as a result of a third-party settlement secured by

Williams. Finally, Companion’s exercise of its statutory right of subrogation through arbitration

                                               - 12 -
did not prejudice Williams’s right to pursue her own personal injury claim. Therefore, we affirm

the Commission’s decision.

                                                                                      Affirmed.

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