Great American Insurance v. Queen

Levin, J.

The issue is whether an employer’s or insurer’s right under the workers’ compensation act to be reimbursed out of any tort recovery by an employee from a third party in respect to the same injury which gave rise to the obligation to pay workers’ compensation benefits is modified by the provisions of the no-fault motor vehicle liability act.

We conclude that since the insurer in the instant case seeks reimbursement for payments which substituted for no-fault benefits otherwise payable, there is no right to reimbursement.

We do not agree with Justice Williams’ conclusion that there is "a clear and irreconcilable repugnance” between the no-fault act and the workers’ compensation act and "both acts cannot be given simultaneous effect” and that therefore the no-fault act operates to repeal the reimbursement provisions of the workers’ compensation act in all cases involving motor vehicle accidents. It is possible to give both acts simultaneous literal effect. The workers’ compensation carrier could be permitted reimbursement from "any tort recovery”, whether for economic or non-economic loss, although the employee’s right to proceed in tort is *86limited by the no-fault act.1

Nevertheless, we think it appropriate to inquire whether consideration of the legislative policies and judgments embodied in the provisions of both acts indicates a legislative intent that a workers’ compensation carrier’s reimbursement rights be modified in cases where the no-fault act is also operative.

When an employee is injured in a motor vehicle accident in the course of his employment, his entitlement to compensation for his injuries, from all sources, is governed by the workers’ compensation act and the no-fault act. His rights and entitlements under each act are affected by his being injured under circumstances which make him subject to the provisions of the other.

Under the workers’ compensation act the employee is entitled to statutory compensation and may also seek to enforce the legal liability of a third party.2 But, by operation of the no-fault act, that legal liability is limited.

Under the no-fault act he is entitled to no-fault benefits.3 But, once the liability of the no-fault insurer is determined, that liability is reduced by the amount of workers’ compensation benefits paid or payable because of the injury.4

If the legislative decision, set forth in the no-*87fault act, that no-fault insurers are entitled to reimbursement from third-party tort recoveries only to the extent recovery represents compensation for elements of loss compensated by no-fault benefits is not extended to workers’ compensation benefits which substitute for no-fault benefits, the third-party tort recovery of a person injured in a motor vehicle accident in the course of his employment would be reduced by no-fault benefits paid by the workers’ compensation carrier, while the third-party tort recovery of a person not injured in the course of his employment would not be reduced.

We are persuaded that had the Legislature considered the acts’ application to the case at bar5 — a motor vehicle accident occurring in the course of employment — it would have explicitly provided that when a workers’ compensation carrier provides benefits which would be payable by the no-fault insurer had the accident not occurred in the scope of employment but are instead payable by the workers’ compensation carrier because of the no-fault act’s mandatory set-off provision, its reimbursement rights are coextensive with those of the no-fault insurer whose liability it replaces and are *88thus limited to cases where there is tort recovery for basic economic loss.6

That conclusion does not, however, compel total nullification of the workers’ compensation carrier’s reimbursement rights in cases involving motor vehicle accidents. When the carrier pays benefits which do not substitute for no-fault benefits, because they exceed no-fault benefits in amount or duration, it should be treated like all other workers’ compensation carriers and be entitled to reimbursement out of any third-party recovery.

Allowing reimbursement for such benefits would work no discrimination against motor vehicle accident victims who happen to be injured in the course or scope of employment because reimbursement is permitted only for benefits which other motor vehicle accident victims do not receive.

I

Queen was injured in a motor vehicle accident in the course of his employment on January 12, 1976. Great American Insurance Company paid him $4,567 in workers’ compensation benefits. Queen claimed benefits from his employer’s no-fault insurer. The no-fault insurer subtracted the amounts paid under the workers’ compensation act from the benefits otherwise owing under the no-fault act.

Queen then sought to recover from the tortfeasors as permitted by § 3135 of the no-fault act. His claim was settled for $18,500. This sum was paid without notice to Great American.

Great American then brought this cause against Queen and the third-party tortfeasors claiming a lien on the settlement proceeds pursuant to § 827 *89of the workers’ compensation act. The trial judge granted summary judgment in favor of the defendants. The Court of Appeals affirmed per curiam.7

II

An employee’s common-law right to proceed in tort against persons other than his employer, or coworkers was not altered by the workers’ compensation act. An employee may sue such persons for all losses normally recoverable in tort. If he is awarded damages, the employer or workers’ compensation carrier is entitled to reimbursement for benefits paid and to a credit against future payments, without regard to whether the recovery is for the same elements of loss compensated by the benefits paid under the statute.

The employee is thus permitted to rest content with a workers’ compensation award or to pursue his tort remedy and reimburse the employer or insurer for any amounts received under the workers’ compensation act. Because he need not repay more than he recovered in tort, the employee in effect recovers under the more generous of the two systems — tort or workers’ compensation — but not both. This was our holding in Pelkey v Elsea Realty & Investment Co.8

The workers’ compensation carrier argues that this case is governed by our decision in Pelkey. The circumstances which supported our rationale in Pelkey, however, and which exist in all workers’ compensation reimbursement cases except those involving motor vehicle accidents occurring after the passage of no-fault, do not obtain here. In *90Pelkey, damages recoverable in tort included compensation for all losses required to be compensated by the workers’ compensation carrier.

Pelkey was involved in a motor vehicle accident in the course of her employment with Elsea Realty. She sustained a compensable disability and received $3,364.60 in workers’ compensation. Pelkey, her husband, and the workers’ compensation carrier jointly settled their claim against the third-party tortfeasor for $10,000. $3,000 was allocated to Pelkey’s husband for loss of consortium; $3,364.60 was allocated to the workers’ compensation carrier as reimbursement and $3,635.40 was allocated to Pelkey for pain and suffering.

After settlement, Pelkey developed psychiatric complications requiring treatment and petitioned for compensation. The WCAB ruled the treatment related to the earlier injury and awarded compensation but determined that the insurer was entitled to a credit equal to Pelkey’s tort recovery less the costs of securing that recovery. Pelkey argued that tort recoveries for pain and suffering were not intended to be subject to an insurer’s lien based on compensation for economic loss.

We concluded that:

"[W]hen the Legislature stated that damages recovered by an employee from a third-party tortfeasor for 'personal injuries or death only’ could be reached by an insurer, the Legislature meant to include damages resulting from pain and suffering.”

We noted that prior to 1952 an injured employee was required to choose between the common-law tort remedy against third parties and the workers’ compensation remedy provided by statute and concluded that "[t]he right to reimbursement is justi*91fied by the abrogation of the election of remedies requirement”.

The workers’ compensation act provides a right to no-fault wage benefits, medical care, and scheduled benefits for specific losses. Where the person whose negligence caused the compensable disability is neither an employer nor a co-worker, the injured employee is also permitted to sue in tort. In such an action the employee is entitled to recover all damages normally recoverable in tort— wage loss, medical expenses, and pain and suffering. The third party’s liability is not reduced by amounts recovered under the workers’ compensation system.

In most cases, the amounts repaid to the insurer will represent payments from the third party for elements of damage already compensated by the insurer — medical expenses, wage loss, and pain and suffering in the case of an employee receiving scheduled benefits for a specific loss. In such cases the employee is merely reimbursing the insurer out of a double recovery.

Pelkey presented a different factual circumstance. There the tort liability of the third party was settled before the full extent of injury was known and the prediction of economic damages was inaccurate. The settlement awarded reimbursement for economic damages already paid by the workers’ compensation carrier; it did not anticipate that further treatment would be required. The real question in Pelkey was which party should bear the consequences of the recognized risks of the tort system which ascertains damages at the time of trial and does not permit modification thereafter.

In eliminating the requirement that the employee choose between suing the third party in *92tort and claiming benefits from the employer under the act, and in providing that the insurer is entitled to reimbursement from any tort recovery, the Legislature carried forward the policy of the earlier act that a worker injured by a third party in the course of his émployment should be permitted to recover benefits provided under the act or damages recoverable at common law, but not both. The new provisions made it possible for the employee to recover compensation under whichever scheme provided greater benefits; it was not intended to allow the employee to retain the best of both schemes.

In Pelkey we thus concluded that the insurer was entitled to reimbursement even out of that portion of the tort recovery denominated for pain and suffering. In this manner Pelkey was required to absorb the disadvantages as well as the advantages of her right to pursue a third-party tort recovery.

Pelkey holds that an employee who recovers damages in tort is not entitled to any greater compensation than a non-employee injured under similar circumstances. Thus, upon securing her third-party recovery, Pelkey was required to reimburse the insurer for amounts already paid and to grant it a credit for amounts to be paid in the future. She was left with no less than her total tort recovery since she was not required to reimburse the carrier for any amounts not actually received.

Application of Pelkey to this case would require that to the extent Queen recovers outside the workers’ compensation system he be permitted to retain no further compensation than that received *93by a motor vehicle accident victim not injured in the course of his employment.9

Ill

The no-fault act creates entitlement to statutory benefits and additionally abrogates common-law tort liability for below threshold non-economic loss and, in most cases, economic loss compensated by no-fault benefits.

No-fault benefits consist of medical expenses unlimited in amount and duration and work loss or survivor’s benefits for three years. These compensate purely economic elements of damage. Persons severely injured may sue the third-party tortfeasor for work loss exceeding that compensated by the no-fault carrier, for non-economic loss where injury is severe, and for basic economic loss if the driver is denied tort immunity under the act.

The no-fault insurer’s right to reimbursement out of tort recoveries from third parties is governed by § 3116 of the no-fault act and this Court’s decision in Workman.10 The right to reimbursement extends only to those atypical cases where *94tort recovery is permitted for elements of damage compensated by no-fault benefits; there is no right to reimbursement unless there is duplicate recovery.11

The no-fault act also provides that in determining the amount owed by a no-fault insurer, "Benefits provided or required to be provided under the laws of any state * * * shall be subtracted from the personal protection insurance benefits otherwise payable for the injury”.12 In Mathis (see fn 4), we determined that workers’ compensation benefits are required to be set off under this provision.

IV

Had the Legislature intended that a worker injured in a motor vehicle accident receive only the compensation received by other workers incurring similar disabilities in accidents not involving motor vehicles, it could have so provided by excluding persons injured in the course of their employment from the no-fault act. In Mathis, we held that workers’ compensation is not the employee’s exclusive remedy against his employer and that the employer’s no-fault carrier is also liable for benefits under the no-fault act.

The decision to accord workers benefits under *95the no-fault act was made in the context of their common-law rights being limited under the no-fault act as are the rights of other motor vehicle accident victims. Employees, like all others, are not permitted to sue for below-threshold economic or non-economic damages.

Thus, we are presented with a legislative judgment that persons injured in motor vehicle accidents in the course of their employment should receive the compensation and have the limited right to tort recovery of other motor vehicle accident victims.

Permitting employees to receive full no-fault benefits is one thing, but permitting such recovery in addition to workers’ compensation benefits would be quite another. The Legislature therefore provided that workers’ compensation benefits are to be subtracted from no-fault benefits otherwise payable. The provision which requires this subtraction applies to all benefits paid under state or federal law and expresses a legislative decision to forbid double recovery under government programs and to allocate the cost of providing the minimum level of benefits mandated by the no-fault act as much as possible to other sources. The provision requiring set-off appears to be directed to the allocation of costs between insurance systems and the avoidance of double recovery and does not appear to be intended to provide motor vehicle accident victims injured in the course of their employment with less compensation than motor vehicle accident victims not so injured.

The Legislature provided that no-fault insurers are entitled to reimbursement from third-party tort recoveries only to the extent recovery represents compensation for elements of loss compensated by no-fault benefits. The Legislature’s deci*96sion to deny reimbursement rights unless there is double recovery expresses a judgment that tort recovery for non-economic loss and excess economic loss should not be reduced by no-fault economic loss benefits. If that decision is not extended to workers’ compensation benefits which substitute for no-fault benefits, the third-party tort recovery of a person injured in a motor vehicle accident in the course of his employment would be reduced by so much of the no-fault benefits "otherwise payable” as are paid by the workers’ compensation carrier, while the third-party tort recovery of a person not injured in the course of his employment would not be reduced.

We are persuaded that the Legislature intended that persons injured in motor vehicle accidents in the course of their employment be entitled to the same compensation received by all other motor vehicle accident victims and that workers’ compensation benefits be subtracted from no-fault benefits to prevent double recovery and to allocate costs to the other benefit systems, and that the Legislature did not intend that the third-party recovery of a person injured in the course of his employment be subject to greater subrogation claims in favor of insurers simply because a portion of the benefits otherwise payable under the allowable expense, work loss, and survivor’s loss sections are paid by a different source pursuant to the section requiring subtraction of benefits provided under state law.

Our decision in Pelkey requires that the employee who is permitted to sue a third party in tort be permitted to receive no more than one who is injured under similar circumstances but not in the course of his employment. It is fully consistent with that holding to conclude that the workers’ *97compensation carrier’s right to reimbursement for benefits which substitute for no-fault benefits is governed by § 3116 of the no-fault act.

V

Our conclusion is not based on a constitutional right to be made whole or to retain damages recovered in tort unless there has been a double recovery. The constitutionality of the legislative scheme which allows reimbursement of the workers’ compensation carrier for economic benefits from tort recoveries for pain and suffering was upheld in Pelkey and I adhere to the view expressed in my opinion in Workman that such reimbursement schemes are rational and constitutional.

Rather, our conclusion is based on a perception that the Legislature intended the workers’ compensation carrier to substitute for the no-fault insurer to the extent that workers’ compensation benefits substitute for no-fault benefits otherwise payable. Thus, the payment of workers’ compensation benefits which do not substitute for no-fault benefits, because they exceed no-fault benefits in amount or duration, gives rise to a right to reimbursement from third-party tort recoveries in the same manner as the payment of workers’ compensation benefits for non-motor vehicle related injuries.

In this case, the carrier seeks reimbursement for medical treatment which would be compensable under the no-fault act — there is no right to reimbursement for such payments.

Coleman, C.J., and Kavanagh and Fitzgerald, JJ., concurred with Levin, J.

Queen’s claim that the no-fault act repealed the reimbursement provision of the Worker’s Disability Compensation Act is based on a conflict or repugnancy between an earlier and later act.

The insurer points out that the reimbursement provision of the Worker’s Disability Compensation Act was amended and re-enacted by the Legislature in the same session that the no-fault act was enacted. 1972 PA 285, 1972 PA 294.

MCL 418.827; MSA 17.237(827).

MCL 500.3135; MSA 24.13135.

Mathis v Interstate Motor Freight System, 408 Mich 164; 289 NW2d 708 (1980); MCL 500.3109; MSA 24.13109.

"We seek to ascertain and give effect to the intention of the Legislature. Grand Rapids v Crocker, 219 Mich 178, 182 [189 NW 221] (1922). But, as Karl Llewellyn observed, only infrequently 'a legislative intent with some concrete reality can be uncovered in circumstance or legislative history. For the rest, the court’s work is not to ñnd, any more than it is with case law. It is to do, responsibly, fittingly, intelligently, with and within the given frame.’ (Emphasis by author.) Llewellyn, The Common Law Tradition, Deciding Appeals, p 382. Much the same point was made in language quoted approvingly in Wyandotte Savings Bank v State Banking Comm’r, [347 Mich 33], pp 40-41 [78 NW2d 612 (1956)]: '" 'the intention is to be taken or presumed, according to what is consonant to reason and good discretion.’ ” ’ 1 Kent’s Commentaries (14th ed), p 462.” People v McFarlin, 389 Mich 557, 564-565; 208 NW2d 504; 64 ALR3d 1274 (1973).

Here, as in McFarlin, the constructional issue concerns the interrelationship of legislative acts.

MCL 500.3116; MSA 24.13116.

Great American Ins Co v Queen, 86 Mich App 362; 272 NW2d 659 (1978).

Pelkey v Elsea Realty & Investment Co, 394 Mich 485; 232 NW2d 154 (1975).

"The essential purpose of the 1952 amendment to the dual liability provision of the workers’ compensation act [1952 PA 155] was to enable workers who had received no-fault compensation under that act to obtain the benefit of a larger amount recoverable in tort from a third party at fault. It was not intended that the worker would receive both the no-fault compensation and a tort recovery * * *.

"The purpose was to put the worker in as good a position as. a person injured under similar circumstances who is not entitled to workers’ compensation, not to put him in a considerably better position. It was sought to accomplish that purpose in a manner which would tend to reduce the overall cost of workers’ compensation and avoid duplicative recoveries.” Franges v General Motors Corp, 404 Mich 590, 623-624; 274 NW2d 392 (1979) (opinion of Levin, J.) (emphasis in original).

Workman v Detroit Automobile Inter-Insurance Exchange, 404 Mich 477; 274 NW2d 373 (1979).

Section 3H6 of the no-fault act provides in part:

"A subtraction from or reimbursement for personal protection insurance benefits paid or payable under this chapter shall be made only if recovery is realized upon a tort claim arising from an accident occurring outside this state, a tort claim brought within this state against the owner or operator of a motor vehicle with respect to which the security required by section 3101(3) and (4) was not in effect, or a tort claim brought within this state based on intentionally caused harm to persons or property, and shall be made only to the extent that the recovery realized by the claimant is for damages for which the claimant has received or would otherwise be entitled to receive personal protection insurance benefits.” MCL 500.3116(2); MSA 24.13116(2).

MCL 500.3109; MSA 24.13109.