No. 15-0012 - Old Republic Insurance Co. v. O’Neal et al.
FILED
LOUGHRY, Justice, concurring, in part, and dissenting in part: June 10, 2016
released at 3:00 p.m.
RORY L. PERRY, II CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
I am in firm agreement with the majority’s decision that the trial court erred
in denying Old Republic Insurance Company’s (“Old Republic”) motion for relief under
Rule 60(b) as the record in this case suggests that the trial court and plaintiffs’ counsel took
concerted efforts to prevent Old Republic from being a party to this action until after the
issue of Old Republic’s right to statutory subrogation was resolved in a manner favorable
to plaintiffs’ counsel.1 After correctly recognizing the “culpability” of both the circuit court
and plaintiffs’ counsel, the majority then proceeded to give Old Republic a Pyrrhic victory
by affirming the trial court’s erroneous decision on the issue of statutory subrogation.
Accordingly, I concur in part, and dissent in part.
1
The majority describes at length how plaintiffs’ counsel wrongly styled a “proposed”
order that was clearly prepared and filed as a final order; how the circuit court failed to give
a courtesy call to Old Republic or to require the subject order to be re-styled as a final order
before its filing; and how these actions combined to prevent Old Republic from having
notice and a right to appeal the matters set forth in that order. But the majority stops short
of connecting the dots to paint the complete picture of the calculated efforts plaintiffs’
counsel undertook in tandem with the circuit court to gain a ruling affecting Old Republic’s
right to statutory subrogation as part of the Court’s ruling to admit Old Republic as a party
to the case. Rather than obtaining a procedural ruling limited to approving the filing of Old
Republic’s declaratory judgment claim, plaintiffs’ counsel hurriedly and covertly obtained
a ruling on the merits of the case that effectively blocked Old Republic from presenting its
arguments to the court on the issue of statutory subrogation. In burying these additional
facts under the rug, the majority has implicitly condoned improper trial tactics and failed to
voice its disapproval of what appears to be highly questionable and arguably unethical
conduct on plaintiffs’ counsel’s part.
1
In addressing the issue of subrogation, the majority correctly recognized the
trial court’s fallacious reasoning that the provisions of West Virginia Code § 23-2A-1(b)(1)
(2010) were not applicable based upon its determination that Speed Mining was a “de facto
self insured employer under the statute.”2 After correctly dismantling that erroneous “self
insured” characterization, the majority fell into the trap of misdirected arguments advanced
by the plaintiffs. By adopting the plaintiffs’ theory that the insurance deductible operated
as a bar to Old Republic’s statutory right of subrogation, the majority not only contravened
clear and unambiguous legislative intent, but it failed to give effect to the insurance policy
terms that expressly include the deductible within the insurer’s rights of subrogation.
Adding insult to injury, the majority approved the attempted and wholly improper “waiver”
of Old Republic’s rights of subrogation by Speed Mining.3 Decidedly infirm, the majority’s
reasoning crumbles upon analysis.
Beginning with the language of the statute at the center of this dispute, the first
analytical hole in the majority’s reasoning appears with the recognition that the statutory
right of subrogation is expressly linked to moneys paid out to an injured worker under the
workers’ compensation scheme. See W.Va. Code § 23-2A-1(d) (2010) (establishing
2
The record makes clear that Speed Mining was a named insured on a workers’
compensation policy issued by Old Republic.
3
Rather than an outright waiver, the trial court found an implicit one based on Speed
Mining’s failure to “expressly preserve Speed Mining’s right to be reimbursed for workers
compensation benefits paid to Mr. O’Neal should he recover monies from third-parties.”
2
mandatory statutory subrogation lien in favor of Insurance Commissioner, private carrier or
self-insured employer “upon the moneys received” when injured worker, his or her
dependents, or personal representative makes claim against third party). Noticeably absent
from the statutory right, however, is any language that seeks to limit an insurer’s
subrogation lien by the amount of any policy deductible. The clear and only statutory trigger
to entitlement to subrogation under West Virginia Code § 23-2A-1(d) is the injured worker’s
receipt of workers’ compensation benefits.
Similarly glossed over by the majority in mistakenly viewing this matter under
principles of common law subrogation is the fact that section 1(b)(1) frames the right of
statutory subrogation based on “indemnity and medical benefits paid as of the date of the
recovery.” W.Va. Code § 23-2A-1(b)(1); Reliance Ins. Co. v. Hibdon, 333 S.W.3d 364, 374
(Tex. App. 2011) (“Statutory subrogation is governed by the terms of the statute under
which it is claimed.”). As in section 1(d), the key is the fact of payment but there is no
restriction with regard to whether the insurer who issued the policy pursuant to which the
injured worker is receiving workers’ compensation benefits paid those benefits directly or
indirectly in the event the moneys were subject to a deductible. The reason for this is
obvious. “The purpose of subrogation is ‘to compel the ultimate payment of a debt by one
who, in justice, equity, and good conscience, should pay it.’” Bush v. Richardson, 199
W.Va. 374, 378, 484 S.E.2d 490, 494 (1997) (internal citation omitted). What the
3
Legislature has designed is a statutory mechanism to compel a third party who contributed
to or caused a worker’s injury to reimburse the insurance company or self-insured employer
for the benefits this state requires the employer to remit to an injured worker.
Where the circuit court erred in its reasoning, and the majority in adopting that
skewed reasoning, was to view the statutory right of subrogation as flowing from “a party’s
payment of benefits to the injured worker.” By construing statutory subrogation in this
fashion, the circuit court imposed a nonexistent qualification to the right of subrogation that
the Legislature established solely in favor of an insurance company, or an employer in the
instance of self-insurance. By engrafting an exception to the insurer’s subrogation lien
because the benefits paid fell within the insurance policy deductible, the circuit court
impermissibly altered the statutory scheme. Previously, this Court was quick to recognize
that the statutory nature of our workers’ compensation system requires both deference and
judicial restraint. See Cart v. Gen. Electric Co., 203 W.Va. 59, 506 S.E.2d 96 (1998). In
refusing to limit a self-insured employer’s right to statutory subrogation based on the
employer’s alleged commission of negligence, this Court expressly declined the plaintiff’s
invitation to “expand upon the Legislative language and judicially create ‘standards to
address this situation.’” Id. at 63 n.8, 506 S.E.2d at 100 n.8. Explaining our refusal “to
legislate from the bench,” we observed: “[I]t is not the proper function of the judicial
branch to supply legislative omissions from a statute in an attempt to make it conform to
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some presumed intention of the Legislature not expressed in statutory language.” Id.;
accord Henry v. Benyo, 203 W.Va. 172, 181, 506 S.E.2d 615, 624 (1998) (“As a Court
charged with reviewing and interpreting the will of the Legislature, we are constrained to
abide by its mandates and to refrain from creating ‘judicial legislation.’”); Nat’l Fruit
Product Co. v B&O RR Co., 174 W.Va. 759, 765, 329 S.E.2d 125, 132 (1985) (“We have
traditionally stated that our workers’ compensation system is entirely a statutory creature and
for this reason we feel that judicial intrusion into the statutory framework, particularly on
so complex an issue [subrogation], is unwarranted.”) (footnote omitted); see generally 2A
Arthur Lawson, The Law of Workmen’s Compensation § 74.31(b) (1996) (examining
workers’ compensation statutes and commenting that “[r]eimbursement of the compensation
payor according to the terms of the statute is mandatory, and cannot be modified by courts”).
That the circuit court erred in applying common law notions of subrogation
is demonstrated by this Court’s recognition in Bush that “the legislature expressly modified
the usual, ordinary meaning of subrogation as it is used in that Code [W.Va. Code § 23-2A
1] section by making the made-whole rule inapplicable.” Syl. Pt, 4, in part, 199 W.Va. at
375, 484 S.E.2d at 491. Further addressing the legislative eradication of the made-whole
rule, we stated:
While this result seems to be patently unfair and to contravene
simple logic, this outcome is indeed the one prescribed by the
Legislature. Though equity dictates an injured employee should
be permitted to obtain recoveries from varying sources to be
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“made whole” after his/her work-related accident, the
Legislature has determined the right of the Commissioner [now
also private carrier or self-insured employer] to recover sums it
has expended as workers’ compensation to be greater.
Benyo, 203 W.Va. at 181, 506 S.E.2d at 624. With its decision to apply “the ordinary
meaning of the term ‘subrogation,’ whereby a subrogee is entitled ‘to collect that which he
has advanced,’” the circuit court patently ignored the legislative decision to give the insurer
or self-insured employer a subrogation lien dependent solely on the injured worker’s receipt
of benefits. Wise or not, that was the Legislature’s decision as the language of West
Virginia Code § 23-2A-1(b)(1) and 1(d) make clear.
Having demonstrated that both the circuit court and the majority evaded the
unmistakably clear directive of the Legislature by extinguishing a subrogation lien based on
an insurance deductible, that error is further magnified by examining the insurance contract.
Under the governing policy, Old Republic expressly preserved unto itself the right “to
recover all advances and payments, including those within the Deductible Amount(s) from
anyone liable for the injury.” To avoid having to deal with this fully enforceable provision,
the majority turns to the language in the settlement agreement between Speed Mining and
the third-party Baughan defendants whereby Speed Mining agreed not to pursue any further
recovery relating to the incident. Because Speed Mining relinquished its “right” to seek
reimbursement for any moneys expended in payment of the deductible amount of Mr.
O’Neal’s workers’ compensation claim, the majority facilely concludes that Speed Mining
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effectively waived any right–including that of Old Republic–to recover the workers’
compensation benefits paid out to Mr. O’Neal as of the time of the settlement. What the
majority overlooks is that Speed Mining had no statutory right of subrogation to waive. By
law, only Old Republic had the right to seek statutory subrogation. See W.Va. Code § 23
2A-1(b)(1); see also Argonaut Ins. Co. v. Baker, 87 S.W.3d 526, 532 (Tex. 2002)
(Hankinson, J., dissenting) (recognizing that employer “does not have any subrogation
interest under the express terms of the Labor Code”). Thus, to place any analytical credence
on the language of the settlement agreement, and to call it the “Achilles’ heal of Old
Republic’s argument” is woefully short-sighted. It is axiomatic that one party cannot give
up that which does not belong to him. Because the right of statutory subrogation did not
belong to Speed Mining, the settlement agreement, to which Old Republic was not a party,
cannot be relied upon as a basis to deny Old Republic a right to seek statutory subrogation.4
The language preserving Old Republic’s right to recover all advancements and
payments, including the deductible, was clearly placed in the insurance contract to reinforce
its statutory right of subrogation. By including a subrogation lien for insurers or self-insured
employers, the Legislature sought to control losses and costs and to preclude a “double
4
The majority set up its own house of cards in recognizing that, but for the insured’s
release of its right to reimbursement or its subrogation claim, the terms of the insurance
contract typically control and could permit an insurer to enforce its subrogation lien,
notwithstanding the existence of a deductible. See Old Republic Ins. Co. v. O’Neal, No. 15
0012, __ W.Va. __, __ n.29, __ S.E.2d __, __ n.29 (W.Va. June 10, 2016).
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recovery” type situation, as a means of establishing a sustainable, workers’ compensation
system. See Robin Jean Davis & Louis J. Palmer, Jr., Workers’ Compensation Litigation in
West Virginia: Assessing the Impact of the Rule of Liberality and the Need for Fiscal
Reform, 107 W.Va. L. Rev. 43, 78-79 (2004). In providing for that right of subrogation, the
Legislature intentionally omitted any exception for amounts paid within the insurance policy
deductible. The majority’s decision to sanction a judicial alteration of the subrogation
statute to impose such an exception was misguided. As this Court recognized in Bush, “the
right to subrogation, . . . and what form it will take are matters properly left for the
legislature to determine.” 199 W.Va. at 376, 484 S.E.2d at 492. The form by which our
Legislature set up the statutory right of subrogation, as we explained in Bush, was to limit
the subrogation lien to the benefits paid as of the date of recovery and to further limit the
recovery to fifty percent of the amount received from the third party. See id. Under our
workers’ compensation schema, there are no additional limits placed on a subrogation lien.
That our Legislature views the statutory right of subrogation as deserving of
enforcement is clear. Included in the subrogation statute is a steep penalty for failing to
protect the statutory right:
If the injured worker obtains a recovery from a third party and
the injured worker, personal representative or the injured
worker’s attorney fails to protect the statutory right of
subrogation created herein, the injured worker, personal
representative and the injured worker’s attorney shall lose the
right to retain attorney fees and costs out of the subrogation
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amount. In addition, such failure creates a cause of action for
the Insurance Commissioner, private carrier or self-insured
employer, whichever is applicable, against the injured worker,
personal representative and the injured worker’s attorney for the
amount of the full subrogation amount and the reasonable fees
and costs associated with any such cause of action.
W.Va. Code § 23-2A-1(e). Given the tactics employed by plaintiffs’ counsel to obtain the
circuit court’s ruling before Old Republic could even present its position,5 this case smacks
of subterfuge and suggests that the underlying objective was to obliterate Old Republic’s
statutorily-created right of subrogation. In affirming the circuit court’s erroneous decision
on the issue of statutory subrogation, the majority arguably aided what certainly looks like
an end run around these penalty provisions.
Accordingly, I respectfully concur, in part, and dissent, in part.
5
See supra note 1.
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