COURT OF APPEALS OF VIRGINIA
Present: Judges Benton, Bray and Frank
Argued at Chesapeake, Virginia
HENRY'S WRECKER SERVICE COMPANY AND
MICHIGAN MUTUAL INSURANCE COMPANY
OPINION BY
v. Record No. 0847-00-4 JUDGE RICHARD S. BRAY
MAY 1, 2001
WAYNE DAVIS SMOOT, SR.
FROM THE VIRGINIA WORKERS' COMPENSATION COMMISSION
S. Vernon Priddy III (Cecil H. Creasey, Jr.;
Sands, Anderson, Marks & Miller, on briefs),
for appellants.
Christopher P. Schewe for appellee.
Henry's Wrecker Service Company (employer) and Michigan
Mutual Insurance Company, employer's workers' compensation
insurance carrier (collectively employer), appeal the decision
of the Workers' Compensation Commission (commission) declining
jurisdiction "to order . . . Wayne D. Smoot [(claimant)] or his
counsel to reimburse [employer's] lien" on certain monies paid
claimant in settlement of a third-party tort action. Finding
the Workers' Compensation Act (Act) does not invest the
commission with jurisdiction to afford employer the requested
relief, we affirm the disputed order.
I.
The substantive facts and procedural history are not in
dispute. On March 6, 1995, claimant was injured in an
automobile accident, and employer accepted the resulting claim
as compensable under the Act. Accordingly, the commission
awarded claimant temporary total disability of $280.73 per week,
together with related medical benefits, pursuant to a memorandum
of agreement executed by the parties.
In addition to relief under the Act, claimant pursued a
third-party tort claim, retaining counsel in both Virginia and
Maryland and filing suit in the United States District Court for
the Southern District of Maryland. Once aware of the pending
tort action, employer advised claimant's counsel of "the
workers' compensation claim and [employer's] statutory
assignment and subrogation interest in the third-party
recovery." Employer, however, did not intervene in the Maryland
proceedings and continued to provide compensation benefits to
claimant pursuant to the award.
The parties stipulated that, "[o]n or about June 22, 1998,
. . . claimant . . . voluntarily settled his third-party action
. . . for the sum of $500,000," received a net recovery of
$336,672.49, released the alleged tort-feasors from further
liability, and dismissed the civil suit, "with prejudice," all
without notice to or approval of employer. Learning of the
settlement, employer terminated benefits to claimant on
September 20, 1998, after paying a total of $162,587.57 in wage
and medical benefits. Employer thereafter filed an "Application
for Hearing" with the commission, seeking
- 2 -
"Termination/Suspension of the outstanding award," a related
"credit" and an "order to claimant or claimant's counsel to pay
statutory subrogation interest to carrier." By agreement, the
parties submitted the issues to the commission upon a written
stipulation, several affidavits and related documentation and
memoranda of counsel.
On November 10, 1999, Deputy Commissioner Colville granted
employer's application to terminate the award, effective
September 20, 1998. The deputy, however, determined "the
[c]ommission [did] not have jurisdiction to order the claimant
to reimburse the carrier for the disability and medical benefits
paid through September 20, 1998." On appeal by employer, the
full commission affirmed both termination of claimant's "right
to future benefits under the Act," as a result of "his
acceptance of the settlement without the consent of the workers'
compensation carrier," and the related finding that the
commission lacked "authority to order the repayment requested by
[employer]."
Employer appeals to this Court, contending the "commission
has jurisdiction to decide issues arising under the [Act],"
including "jurisdiction to adjudicate matters concerning liens
as they affect the claimant's rights." Claimant counters that,
"since . . . [his] . . . compensation . . . award has been
terminated" and "benefits past, present or future" are no longer
in issue, "the rights of the claimant" contemplated by the Act
- 3 -
"are not at stake" and employer has received "the sole remedy"
available from the commission.
II.
"We construe the evidence in the light most favorable to
the party prevailing below," claimant in this instance. Tomlin
v. Vance Int'l, Inc., 22 Va. App. 448, 452, 470 S.E.2d 599, 601
(1996). "The commission's factual findings will not be
disturbed on appeal if supported by credible evidence." Id.
Similarly, "'[t]he construction afforded a statute by the public
officials charged with its administration and enforcement is
entitled to be given great weight by the court.'" Lynch v. Lee,
19 Va. App. 230, 232, 450 S.E.2d 391, 392 (1994) (citation
omitted). However, we are not bound by legal determinations
made by the commission, and, therefore, "'must inquire to
determine if the correct legal conclusion has been reached.'"
Uninsured Employer's Fund v. Harper, 26 Va. App. 522, 529, 495
S.E.2d 540, 543 (1998) (citation omitted).
The provisions of Code §§ 65.2-309 and -310 of the Act
underpin employer's claim to reimbursement from claimant and the
attendant assertion that the commission has jurisdiction to
grant the requested relief. Absent such "statutory provisions,
neither employer nor [its] carrier would have any right of
action against a third party or the right to share in the
proceeds of any recovery claimant might obtain." Overhead Door
- 4 -
Co. of Norfolk v. Lewis, 22 Va. App. 240, 243, 468 S.E.2d 700,
701 (1996).
Code § 65.2-309 provides, in pertinent part, that
[a] claim against an employer under [the
Act] for injury or death benefits shall
operate as an assignment to the employer of
any right to recover damages which the
injured employee . . . may have against any
other party for such injury or death, and
such employer shall be subrogated to any
such right and may enforce, in his own name
or in the name of the injured employee,
. . . the legal liability of such other
party.
Code § 65.2-309(A); see also Code § 65.2-812. 1 Should "such
employer" elect to pursue the "legal liability" of another,
"[a]ny amount collected . . . in excess of the amount paid by
employer or for which he is liable [under the Act] shall be held
by employer for the benefit of the injured employee, . . . less
a proportionate share . . . for reasonable expenses and
attorney's fees . . . ." Code § 65.2-309(B). However, "[n]o
compromise settlement shall be made by the employer in the
exercise of such right to subrogation without the approval of
1
When any employer is insured against
liability for compensation with an insurance
carrier, and such carrier shall have paid
any compensation for which the employer is
liable or shall have assumed the liability
of the employer therefor, it shall be
subrogated to all the rights and duties of
the employer and may enforce any such rights
in its own name or in the name of the
injured employee . . . .
Code § 65.2-812.
- 5 -
the [c]ommission and the injured employee . . . ." Code
§ 65.2-309(C).
In addition to the protection assured employer by Code
§ 65.2-309, Code § 65.2-310 provides, inter alia, that
[i]n any action by an employee . . . against
any person other than the employer, the
court shall, on petition or motion of the
employer at any time prior to verdict,
ascertain the amount of compensation paid
and expenses . . . incurred by the employer
under the provisions of this title and
deduct therefrom a proportionate share of
such amounts as are paid by [employee] for
reasonable expenses and attorney's fees as
provided in § 65.2-311; and, in event of
judgment against such person other than the
employer, the court shall in its order
require that the judgment debtor pay such
compensation and expenses of the employer,
less said share of expenses and attorney's
fees, so ascertained by the court out of the
amount of the judgment, . . . and the
balance, if any, to [employee].
Code § 65.2-310. 2 Accordingly, an employer may safeguard a
statutory claim for benefits paid or anticipated under the Act
by "petition[ing] the court for a lien against the third-party
judgment in the amount of compensation and other benefits
employer has paid." Overhead Door, 29 Va. App. at 58, 509
S.E.2d at 537.
It is well established that the Act also "permits an
injured employee the right to recover from a negligent third
2
Code §§ 65.2-311 and –313 provide for the allocation
between employer and employee of reasonable costs and fees
incurred incident to a third-party recovery.
- 6 -
party full damages for injuries inflicted on him by such party."
Sheris v. Sheris, 212 Va. 825, 834, 188 S.E.2d 367, 373 (1972).
While Code § 65.2-309(C) expressly precludes settlement of a
third-party claim by an employer absent approval of both the
commission and the employee, "[a]n employee . . . is not
expressly prohibited from initiating and settling [such] claim
without the consent of employer and its insurer." Safety-Kleen
Corp. v. Van Hoy, 225 Va. 64, 70, 300 S.E.2d 750, 754 (1983).
However, a third-party settlement by an employee, undertaken
without the "knowledge and consent of employer and its insurer,"
wrongfully "impair[s]" the rights of subrogation provided
employer by the Act and, therefore, the employee "'forfeits any
right to future compensation.'" Id. (citation omitted); Green
v. Warwick Plumbing & Heating Corp., 5 Va. App. 409, 412, 364
S.E.2d 4, 6 (1988).
In Safety-Kleen, the employee, Van Hoy, like claimant, also
successfully pursued a third-party action for injuries then
subject of an award by the commission, and unilaterally released
the tort-feasor. Upon learning of the settlement, INA, the
carrier for employer Safety-Kleen, terminated benefits and
applied for a hearing before the commission "on a change in
condition." Safety-Kleen, 225 Va. at 66-67, 300 S.E.2d at 751.
In response, Van Hoy filed a motion to reinstate the award. The
commission "allowed INA credit for the net amount of the
settlement by [suspending] payments under the award . . . until
- 7 -
further payments that may be due thereunder exceed[ed]" the net
settlement. Id. However, the Supreme Court of Virginia
reversed, reasoning that Van Hoy's conduct sufficiently
prejudiced INA to justify termination of benefits. The Court
recognized "Van Hoy might thereby enjoy in part of a double
recovery, . . . retain[ing] the payments already made by INA in
addition to . . . the third-party settlement," but "express[ed]
no opinion upon this aspect of the case, for we are granting the
relief which Safety-Kleen and INA have sought." Id. at 71, 300
S.E.2d at 754.
Here, employer specifically requested the commission to
award the additional relief presaged by the Court in
Safety-Kleen, reimbursement from the employee, a remedy neither
expressly set forth in the Act nor heretofore judicially
sanctioned. Asserting the interests in such recovery created by
the Act and the commission's "jurisdiction to determine all
questions arising under 'the [Act]'" recognized in Bogle Dev.
Co., Inc. v. Buie, 250 Va. 431, 434, 463 S.E.2d 467, 468 (1995)
rev'g 19 Va. App. 370, 451 S.E.2d 682 (1994), employer invokes
the "implied power" of the commission "to do full and complete
justice" between employer and employee. Harris v. Diamond
Constr. Co., 184 Va. 711, 720, 36 S.E.2d 573, 577 (1946). The
commission, however, guided by a prior opinion, Sicilia v. Inner
View, Ltd., 1999 WL 1442124 at **2 (VWC File No. 175-51-95 (Dec.
2, 1999)), declined to act, noting that "nothing in the Code
- 8 -
. . . provides [it] with the authority to order the repayment
requested."
In Sicilia, the commission confronted a fact pattern
substantially similar to the instant record, an employer seeking
both termination of benefits and reimbursement from an
employee's ex parte settlement of a third-party claim.
Rejecting the employer's request, the commission concluded "that
[it] does not have jurisdiction to compel disbursements of
proceeds of recovery from a third-party action. This question
must be addressed to a court of law . . . ." We agree.
As employer correctly reminds us, Buie construed "Code
§ 65.2-700 3 [to] vest[] the [c]ommission with jurisdiction to
determine all questions 'arising under' the . . . Act. This
grant of subject matter jurisdiction includes the authority
. . . to enforce its orders and to resolve coverage and payment
disputes." Buie, 250 Va. at 434, 463 S.E.2d at 468. However,
Buie also instructed that, "jurisdiction is not unlimited
. . . ." Id.
Generally, the [c]ommission's
jurisdiction is limited to those issues
which are directly or necessarily related to
the right of an employee to compensation for
a work-related injury. In many states,
including Virginia, when the rights of the
employee in a pending claim are not at
stake, the commissions disavow jurisdiction
3
"All questions arising under this title, if not settled by
agreements of the parties interested therein with the approval
of the Commission, shall be determined by the Commission, except
as otherwise herein provided." Code § 65.2-700.
- 9 -
and send the parties to the courts for
relief. 4
Hartford Fire Ins. Co. v. Tucker, 3 Va. App. 116, 120, 348
S.E.2d 416, 419 (1986); see also Buie, 250 Va. at 434, 463
S.E.2d at 468 ("when the rights of the claimant are not at
stake, the Act clearly leaves the litigants to their common law
remedies").
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. Here, however, neither a compensation right in claimant
nor a reimbursement right in employer, which arises from the
Act, is at issue. Claimant's benefits have been properly paid
and terminated, without objection, and any unresolved residual
rights of employer against him are not specifically embraced by
the Act.
Employer mistakenly relies upon the "implied power" of the
commission to do "full and complete justice" by ordering
reimbursement, at once avoiding double recovery by claimant and
safeguarding employer's interests. While the commission is
4
The "application of particular phases of . . . [workers'
compensation] law in the different states depends upon the
peculiar wording of the pertinent statutes." Feitig v.
Chalkley, 185 Va. 96, 98, 38 S.E.2d 73, 74 (1946). In contrast
to the Virginia Act, workers' compensation statutes of several
states specifically recognize a right of reimbursement in
employers from employees for a statutory share of third-party
recoveries. See, e.g., 820 Ill. Comp. Stat. 305/5(b); Indiana
Code § 22-3-2-13; Maine Statutes § 827; N.C. General Statutes
- 10 -
implicitly empowered "to protect itself and its awards from
fraud, imposition or mistake," such circumstances are neither
present nor alleged on the instant record. Harris, 184 Va. at
720, 36 S.E.2d at 577; Collins v. Dep't of Alcoholic Beverage
Control, 21 Va. App. 671, 680-81, 467 S.E.2d 279, 283, aff'd en
banc, 22 Va. App. 625, 474 S.E.2d 287 (1996). "We are unaware
of any Virginia appellate cases applying [this] doctrine . . .
to permit the commission to exercise jurisdiction or . . . grant
. . . relief never authorized by the Act, and we are unwilling
to give the doctrine such an interpretation under the facts of
this case." Overhead Door, 29 Va. App. at 61, 509 S.E.2d at
539.
Accordingly, the commission correctly determined that the
requested order of reimbursement was beyond its jurisdiction,
express or implied, and employer must look to the judiciary for
relief. 5
Affirmed.
§ 97-10.2; N.M. Stat. Ann. § 52-5-17; R.I. Gen. Laws § 28-35-58.
5
During pendency of the instant proceedings, employer
instituted a civil action against claimant in the United States
District Court for the Eastern District of Virginia, also
seeking recovery of the subject benefits. In overruling
claimant's motion to dismiss, Judge Gerald Bruce Lee, in a
well-reasoned opinion, recognized "[t]he subrogation right set
forth in the [Act] does not give [employer] . . . the right to
reimbursement from [claimant]" but "the overreaching policy
. . . of law against an injured employee being twice compensated
for the same injury" justifies judicial relief. Michigan Mut.
Ins. Co. v. Smoot, 129 F. Supp. 2d 912, 916, 918 (E.D. Va.
2000). Such litigation, therefore, was permitted to move
forward in the district court.
- 11 -