Court Opinion

ID: 4648550
Source: CourtListenerOpinion
Date Created: 2020-12-31 21:02:48.102864+00
Date Added: 2024-06-11T08:01:15.509104
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

KIM JOHNSON,                         )
                                     )
            Employee-Appellant,      )
                                     )      C.A. No. N19A-12-010 ALR
            v.                       )
                                     )
STATE OF DELAWARE,                   )
                                     )
            Employer-Appellee.       )

                          Submitted: October 15, 2020
                          Decided: December 31, 2020

                 On Appeal from the Industrial Accident Board
                                AFFIRMED

                         MEMORANDUM OPINION

Matthew M. Bartkowski, Esquire, Bifferato Gentilotti, LLC, Attorney for
Employee-Appellant
John J. Klusman, Jr., Esquire, Jocelyn N. Pugh, Esquire, Tybout, Redfearn & Pell,
Attorneys for Employer-Appellee

Rocanelli, J.
      This matter is before the Court on an appeal from a decision of the Industrial

Accident Board (the “Board”) concerning the proper calculation for reimbursement

of a worker’s compensation lien after a third party tort suit is resolved. In this case,

the lien amount was greater than the amount recovered from the third party. For the

reasons stated herein, this Court concludes that the Board correctly ruled that the

worker’s compensation lien should be reduced by the entire amount of the recovery,

including the full expenses paid in attorneys’ fees and costs to achieve the recovery

of policy limits.

                                     Background

      Kim Johnson (“Johnson”) was employed by the State of Delaware as a DART

bus driver. Johnson was injured when another driver struck the bus Johnson was

driving. Consistent with the worker’s compensation no-fault scheme, Johnson

received worker’s compensation for her work-related injury. The total amount she

received in worker’s compensation was $109,923.37. Johnson pursued a tort claim

against the driver who was responsible for the accident that resulted in Johnson’s

injuries. That lawsuit was settled for the other driver’s policy limits of $100,000.00.

The attorneys’ fees and costs totaled $40,045.52 to achieve the recovery of policy

limits from the other driver.

                                           1
                                   Board Decision

      The Board concluded that the employer and its worker’s compensation

carrier1 are responsible for the entirety of fees and costs of $40,045.52 to achieve the

recovery; that Employer should receive balance of the recovery in the amount of

$59,954.48; and that Employer’s worker’s compensation lien is thereby reduced by

$100,000.00 for a remaining lien balance of $9,923.27.2 According to the Board,

this apportionment is mandated by the statute,3 consistent with case law,4 and is an

equitable result.5

                                 Standard of Review

      This matter involves a legal determination by the Board. In considering an

appeal from a Board decision, this Court reviews the Board’s legal determinations

de novo, which “requires the Court to determine whether the Board erred in

formulating or applying legal principles.”6

1
   The State of Delaware and its worker’s compensation carrier are referenced
hereinafter as “Employer.”
2
  Johnson v. State, No. 1465010 (Del. I.A.B. Dec. 23, 2019).
3
  Reimbursement of a workers’ compensation lien from a third party settlement
recovery is addressed in 19 Del. C. 2363(e). Apportionment of the expenses of
recovery is addressed in 19 Del. C. 2363(f).
4
  Keeler v. Hartford Mut. Ins. Co., 672 A.2d 1012 (1996) is the controlling decision.
5
  The Delaware Supreme Court consistently emphasizes that the calculation of
recovery of a worker’s compensation lien and apportionment of recovery expenses
must be equitable. See id. at 1016.
6
  Estate of Fawcett v. Verizon Del. Inc., 2007 WL 2142849, at *5 (Del. Super. July
25, 2007); see Hudson v. State Farm, 569 A.2d 1168, 1170 (Del. 1990).
                                          2
                                      Discussion

      The Board correctly applies the priority of recovery for reimbursement of a

worker’s compensation lien from third party recovery,7 as well as the calculation of

apportionment of the reasonable expenditures.8            The goal of the worker’s

compensation statute is to provide a no-fault scheme for prompt payment of medical

expenses and lost wages associated with work-related injuries.9 The statute provides

7
  Pursuant to 19 Del. C. § 2363(e):
      In an action to enforce the liability of a third party, the plaintiff may
      recover any amount which the employee or the employee’s dependents
      or personal representative would be entitled to recover in an action in
      tort. Any recover against the third party for damages resulting from
      personal injuries or death only, after deducting expenses of recovery,
      shall first reimburse the employer or its workers’ compensation
      insurance carrier for any amounts paid or payable under the Workers’
      Compensation Act to date of recovery, and the balance shall forthwith
      be paid to the employee or the employee’s dependents or personal
      representative and shall be treated as an advance payment by the
      employer on account of any future payment of compensation benefits,
      . . . reimbursement shall be had only from the third party liability insurer
      and shall be limited to the maximum amounts of the third party’s
      liability insurance coverage available for the injured party, after the
      injured party’s claim has been settled or otherwise resolved.
19 Del. C. § 2363(e) (emphasis added).
8
  Pursuant to 19 Del C. § 2363(f):
      Expenses of recovery shall be the reasonable expenditures, including
      attorney fees, incurred in effecting such recovery. Attorney fees, unless
      otherwise agreed upon, shall be divided among the attorneys for the
      plaintiff as directed by the court. The expenses of recovery above
      mentioned shall be apportioned by the court between the parties as their
      interests appear at the time of said recovery.
19 Del C. § 2363(f).
9
  Moss Rehab v. White, 692 A.2d 902, 909 n.12 (Del. 1997).
                                           3
that the employer has an automatic lien against any third party recovery.10 Because

an employer is required to pay benefits for work-related injuries even when the

employer is not at fault for those injuries, the worker’s compensation statute

provides that recovery can be sought from a third party when the third party is

actually at fault for the work-related injury.11 Either the injured worker can pursue

recovery from a third party or, if the injured worker does not do so within a specified

period of time,12 then the employer may file suit on behalf of the injured worker to

recover its lien.13 Regardless of whether the employer or the injured worker initiates

claims against the third party, the statute prohibits double recovery by the injured

worker,14 mandates how any recovery is divided15 and also directs how expenses are

apportioned.16

      According to the worker’s compensation statute, first, from the amount

recovered from a third party, attorneys’ fees and costs are deducted. Second, the

10
   See 19 Del C. § 2363.
11
   19 Del C. § 2363(a).
12
    Requiring the employee (or the employee’s dependents or their personal
representative) to commence an action within 120 days after the occurrence of the
personal injury. 19 Del C. § 2363(a).
13
   19 Del C. § 2363(a).
14
   See Bell Atl.-Del., Inc. v. Saporito, 875 A.2d 620, 624 (Del. 2005) (“[D]ouble
recovery is not only an inequitable result, it contravenes both the text of and policy
behind Delaware’s insurance and labor statutes.”); see also 19 Del C. § 2363.
15
   19 Del C. § 2363(e).
16
   19 Del C. § 2363(f).
                                          4
worker’s compensation lien is paid in full. The third calculation is apportionment

of financial responsibility for the reasonable expenditures of recovery.

        Where, as here, the total lien ($109,923.37) is in excess of the amount

recovered ($100,000.00), the entirety of the reasonable expenditures ($40,045.52)

are charged against Employer’s lien. Employer’s lien is reduced by the full amount

of third-party recovery including the cost of that recovery.        Proportionately,

Employer is responsible for the entire cost of reasonable expenditures because

Employer received the entire benefit of the policy limits. Employer’s lien is not

reduced only by the amount Employer actually receives. By “charging” Employer’s

lien for the full amount of reasonable expenditures, Johnson does not bear any of the

costs of litigation. This is fair because Johnson has not achieved any recovery from

the third party, which is the required result because an injured worker is prohibited

from double recovery.

        This result is consistent with the controlling decisional law. In Keeler v

Harford Mutual Insurance Co.,17 an injured employee received workers’

compensation benefits and subsequently filed a third-party action. The employee

recovered a judgment against the third party. A dispute arose concerning whether

the workers’ compensation carrier was entitled to reimbursement for amounts it paid

to the injured employee without sharing in the costs of the litigation. Overruling a

17
     672 A.2d 1012 (1996).
                                          5
previous decision,18 the Keeler Court held that “the language of 19 Del. C. § 2363

requires that the insurance carrier pay a share of the costs of litigation proportionate

to the amount of its recovery.”19 The Court explained that “not requiring workers’

compensation carriers to bear part of the cost of third party tort litigation where

recovery results in reimbursement of benefits is inequitable and contrary to the

language of the statute.”20 Thus, the workers’ compensation carrier was required to

share in the cost of the litigation, and the carrier’s reimbursement amount was net of

counsel fees.

      The Board’s conclusion here is consistent with the holding in Keeler. By

reducing Employer’s lien by the full amount of the $100,000.00 recovered,

Employer effectively paid for all the expenses of recovery of Employer’s lien. On

the other hand, if Employer’s lien was reduced only by the amount actually paid out

to Employer ($59,954.48), then Johnson, the injured worker, effectively would have

assumed the cost of the third-party litigation. Such a result would be contrary to

statute and controlling decisional law, as well as inequitable. Accordingly, the

18
   In Keeler, the Delaware Supreme Court overruled Cannon v. Container Corp. of
Am., 282 A.2d 614 (Del. 1971), which “failed to give any significance to the
language in § 2363(e) and (f) which requires apportionment of costs between insurer
and employee.” Keeler, 672 A.2d at 1017.
19
   Keeler, 672 A.2d at 1013.
20
   Id. at 1014. Reading Section 2363(e) and (f) together indicates that the insurer is
to be reimbursed “after deducting expenses of recovery.” Id. at 1016; see 19 Del. C.
§ 2363.
                                         6
Board correctly assigned the priority of recovery and properly calculated

apportionment of the reasonable expenditures to achieve recovery from the third

party.

                                      Conclusion

         The Board correctly concluded that Employer’s worker’s compensation lien

should be reduced by the entire amount of the recovery, including the reasonable

expenses of recovery, leaving Employer with an outstanding worker’s compensation

lien of $9,923.27. Furthermore, the Board properly declined to assign any financial

responsibility for the third-party litigation to the injured worker. Finally, the injured

worker did not receive double recovery. Therefore, for the reasons stated herein, the

well-reasoned decision of the Industrial Accident Board is affirmed because the

Board properly applied the correct legal principles.

         NOW, THEREFORE, this 31st day of December, 2020, the decision of the

Industrial Accident Board is AFFIRMED.

         IT IS SO ORDERED.

                                         Andrea L. Rocanelli
                                         ______________________________
                                         The Honorable Andrea L. Rocanelli

                                           7