Franges v. General Motors Corp.

Levin, J.

(dissenting). The essential purpose of *624the 1952 amendment to the dual liability provision of the workers’ compensation act1 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 no-fault compensation and a tort recovery or, in contrast with other injured persons who obtain tort recoveries, that the worker would be relieved of the impact of the legal and other expenses of 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.

For over 25 years the provision of the 1952 amendment stating that the amount received by the worker is "an advance payment by the employer on account of any future payment of compensation benefits” has been understood to mean that until the advance payment is exhausted no compensation benefits are payable. As a result of today’s decision, approximately 50% of the compensation benefit becomes payable weekly during the period of the advance payment; this is the result because expenses of recovery are generally one-third or more of a tort recovery,2 and, therefore, one-half or more of the amount received by the worker. When the Legislature directed that the amount received by the worker be treated as *625an advance payment on account of "any future * * * compensation benefits [emphasis supplied]” it did not mean 50% of future payments.

I

Some workers injured in the course of employment have two possible sources of recovery, their claim for workers’ compensation benefits against the employer, and a right of action against a third party who caused or contributed to the injury.

The workers’ compensation act originally provided that the worker had the option of proceeding against the employer for compensation under the act or at law against the person who caused the injury "but not against both”. If the worker elected compensation under the act, the employer could enforce the liability of the third person.* 3

The act was amended in 1952 to provide that acceptance of compensation benefits no longer constituted an election of remedies.4 An injured *626worker could accept or seek workers’ compensation benefits and also proceed to enforce the liability of the third party.* ***5

It was provided, however, that any tort recovery would, "after deducting expenses of recovery”, first be applied to reimburse the employer for compensation benefits that had been paid to the worker "to date of recovery”.

It was further provided that the worker’s share of the recovery, the "balance” remaining after payment of the expenses of recovery and reimbursement of the employer, would be deemed an "advance payment” of future compensation benefits which would otherwise accrue, with the result that the employer is relieved of the obligation of paying such benefits. Workers’ compensation again becomes payable when the advance payment is exhausted.

The issue here concerns the further provision of the 1952 amendments that the expenses of recovery, including attorney’s fees, "shall be apportioned by the court between the parties as their interests appear at the time of said recovery (Emphasis supplied.)6

Heretofore, the employer paid expenses of recovery in the proportion of its reimbursement to the total recovery. The remainder was apportioned to the worker.

In these consolidated cases the workers claim that because the "balance” of the recovery relieves *627the employer of the obligation to make future payments of compensation benefits it should pay a higher proportion or all of the expenses.

The Court agrees, and provides for a two-step allocation. Expenses of recovery are first to be apportioned, as heretofore, as of the time of recovery, between the employer and the worker based on their respective recoveries at that time. The employer is then required to reimburse the worker weekly for expenses of recovery in respect to the compensation that but for the "advance payment” would have been payable by the employer.

II

The Court’s holding manifests a conclusion that the Legislature, when it amended the dual liability provision, intended not only to put injured workers in as good a position as would be a person so injured by a third party who had not received workers’ compensation benefits, but to put them in a far better position.

Franges was injured in a work-related accident. He received $88,437.02 in the aggregate: $27,184.03 from his employer’s insurance carrier, and $61,252.99 from the third-party tortfeasor, or $9,244.19 more than the $79,192.83 ($120,000 tort recovery less $40,807.17 legal and other expenses of recovery) he would have received had he not been injured on the job.

The Court concludes that Franges shall receive an additional $53.59 per week so that his recovery at the end of the 11-year, 17-week advance payment period is $120,000.

Compare Franges with a person injured in a similar accident who is not entitled to receive workers’ compensation benefits who recovers *628$120,000 and has legal and other expenses of recovery of $40,807.17. Such a person would receive $79,192.83 — not $88,437.02. He would not additionally receive $53.59 per week.

Franges has the use of $61,252.99 which if invested in United States government bonds at 8% or high-grade corporate bonds at 9 or 10% would yield an amount close to or exceeding the $104 per week. Franges’ capital can thus earn more than the $104 week compensation benefit otherwise payable to him. He retains his capital. Additionally, under the Court’s opinion, he receives $53.59 per week from his employer. At the conclusion of the 11 years, 17 weeks, he will again receive $104 per week.

Parenthetically, the $53.59 weekly partial compensation Franges will receive is considerably in excess of the maximum amount payable to an employee with dependents in 1952 when the dual liability provision was amended and the apportionment formula was established.

To be sure, the Legislature required an employer to share the expenses of recovery, $9,244.19 in Franges. It was apparently decided that the employer should absorb the expense of recovering the money actually returned to it although, as a result, it would not be fully reimbursed and the worker would receive, to that extent, more than he would have received had he not been injured on the job.

The apparent reason for not requiring a further contribution by the employer to the expenses of recovery is a legislative objective to reduce the overall cost of workers’ compensation benefits and to avoid duplicative recoveries.

The Court asks the wrong question and, for that *629reason, reaches the wrong result when it concerns itself with the "windfall” to the employer.

The saving, or "windfall”, to the employer is intended. The purpose is to reduce the employer’s cost as long as the worker receives no less than a similarly situated tort claimant who has no workers’ compensation recovery. It is, therefore, not germane that the employer receives a windfall.

Although here there are multiple sources of recovery (workers’ compensation and in tort), there is only one injury, one loss.

The tort recovery is the law’s assessment of the full value of the loss. The no-fault workers’ compensation benefits paid the injured worker are for the same loss, although in an amount lesser or greater than the value placed on the loss by jury verdict or compromise settlement.

It is a fundamental rule, a thread in the jurisprudence and statutory law, that an injured person can obtain only one recovery, however many have contributed to his loss.

Since the worker is entitled to only one recovery, however many feasors contributed to the loss, he is not disadvantaged by requiring full reimbursement of the employer.

The Legislature might, as in ordinary tort litigation, have reduced the amount of a worker’s tort recovery by the amount paid to him by his employer; it chose, rather, to require the tortfeasor to pay the full amount of the loss and the employer to be reimbursed whatever it had paid. The employer, in a sense a co-feasor who may or may not have been at fault, theretofore required to pay compensation in respect to the loss without regard to fault, was relieved of primary responsibility for the loss to the extent of the third-party recovery.

It should be of no importance to the worker *630whether it is the tortfeasor or the no-fault feasor who receives the benefit of the amount already paid him — whether the $27,184.03 reduces Franges’ tort recovery from $120,000 to $92,815.97, as it would if the employer were a co-tortfeasor, or whether, as the workers’ compensation law provides, the tortfeasor is required to pay the full amount without reduction on account of the no-fault benefits paid by the employer or contribution from it.

The Court’s statement that the Legislature did not intend that the worker "bear the full burden of recovery expenses, including a recovery that excuses a compensation insurer’s future obligation” because the worker would then "receive less than his full share of the recovery (after a reduction of a portion of the expenses)” ignores that generally, because of legal and other expenses, injured persons receive less than the full recovery, usually no more than two-thirds and often less.

It is the American rule that each litigant generally bears the bulk of his own legal expenses. Injured workers who hire lawyers to obtain workers’ compensation pay their own legal expenses.

If an injured person recovers from one tortfeasor, say the $27,184.03 that Franges received from his employer, and then $120,000 from another, either the jury or judge is required to reduce the verdict by the $27,184.03 already received. The injured person cannot offset the $27,184.03 against a $40,807.17 attorney’s fee incurred in collecting the $120,000.

The Court characterizes its approach as "a more equitable view”. The question before us is not a policy question, the choice is not ours. Our duty is to determine the legislative purpose and to implement it. It is not to choose a fair or just result but, *631rather, to implement a fair and just result chosen by the Legislature.

The Legislature is, of course, free to authorize tort recovery undiminished by workers’ compensation benefits. We see no reason to conclude that it intended to do so.

The Court does not apportion. Rather, it would charge the entire cost of recovery to the employer. It begins, as the act provides, by apportioning part of the cost to the employer and a part to the worker, but then charges the worker’s share back to the employer on an installment basis. The act simply does not provide for such a "re-apportionment”. The act provides for one apportionment and not for any reapportionment or charge-back. It contemplates that the expenses will be apportioned (divided) between the parties, not that all of the expenses will be charged to one party. It contemplates that the apportionment will be made and determined "as of the time of the recovery”, that the "balance” or "advance payment” will be determined after deducting the entire expenses of recovery, and that compensation payments will not again become payable in any form or manner until the "balance” or "advance payment” is exhausted.

Ill

The Court gives its decision prospective effect only.7 In so limiting its decision, the Court implicitly recognizes that it is declaring a new rule of law, a construction of the act inconsistent with the prior construction, and that the new construction *632may defeat the reasonable expectations of those who relied on the prior construction.

Before the 1965 amendments, which generally enlarged the level of benefits, the method of apportioning the expenses of recovery between a worker and an employer who had paid benefits had become established.8 The employer’s share of the expenses of recovery was determined as of the time of recovery based on the amount of the reimbursement to the employer at that time. The employer had no further obligation to the worker until the exhaustion of the "balance” by the accrual of workers’ compensation benefit payments otherwise due the worker.

The statute states that the court shall apportion the expenses of the recovery between the parties "as their interests appear at the time of the recovery”. As stated in the Chief Justice’s opinion in Kroll v Hyster Co, 398 Mich 281, 289; 247 NW2d 561 (1976), the "statute clearly provides” that such expenses are to be so apportioned "between the injured employee on the one hand and the employer/insurer on the other 'as their interests appear at the time of the recovery’ (emphasis supplied), i.e., without regard to whether future compensation benefits may or in fact do become payable”.

One can, indeed, characterize being relieved from future payment of compensation benefits as an "interest”. The question, however, is not whether the words can be construed to reach a result, but whether the result implements the legislative purpose.

When the act was amended in 1952 to eliminate *633the election of remedies, workers’ compensation benefits for general disability were payable for not more than 500 weeks, and for permanent and total disability for 750 weeks. The act was amended in 1965 to provide, in effect, for lifetime benefits: "Compensation shall be paid for the duration of the disability.”9

Since both the level of benefits in 1952 and the number of weeks for which they were payable were relatively small, by comparison with the benefits now payable,10 the "windfall” to the employer in being relieved of the obligation to make future payments was not a cause of concern or uneasiness.* 11

In the 1950’s and 1960’s those involved in compensation proceedings could still remember when a worker was required to elect his remedy. The accommodation reflected in the 1952 amendment allowing workers to recover compensation benefits and still seek to recover from a third party, with reimbursement to the employer, the employer bearing less than the full burden of the expenses *634of recovery and the worker bearing some of the burden, did not seem unfair, unjust or absurd.

As a result of the overall increases in workers’ compensation benefits in and since 1965 and corresponding increases in the amount of the "windfall” to the employer, the right conferred on workers by the 1952 amendments to retain the benefit of a larger tort recovery appears less significant and the saving now realized by the employer looms larger. Now that the post-1965 doughnut is so much bigger, the relatively thin 1952 doughnut is forgotten and the focus is on the hole. The focus has shifted from the disadvantage to the worker in not being able to sue a third party to what the employer saves as a result of a tort recovery.

It may be argued that the 1965 and subsequent changes in the law enlarging the level of benefits and lengthening the period during which they are payable require a change in the construction of the apportionment language to "harmonize” the 1952 amendment with the changed circumstances resulting from the 1965 and subsequent amendments.

To reach that result, one must first conclude that the Legislature intended not only to increase the level of benefits, but also intended to so reduce the amount of the employer’s reimbursement for benefits theretofore paid.

Whenever amendments of legislation such as the workers’ compensation act are being considered, the overall cost of the amendment package is generally a decisive factor in the ultimate determination of what is enacted. The likelihood is that it would have been pointed out that reducing reimbursement to employers to increase the amounts received by those who recover in tort might require a reduction of benefits for those who do not *635recover in tort. The conclusion would probably have been that, to avoid reduction in the level of benefits for those who do not recover in tort, there should be no further enhancement of benefits for those who do. In all events, we have no basis for concluding that the Legislature, on account of the general enlargement of benefits, intended to further enlarge the benefits payable to those who recover in tort.

IV

There is a common thread between the issue here and that presented in O’Donnell v State Farm Mutual Automobile Ins Co, 404 Mich 524; 273 NW2d 829 (1979). Workers’ compensation benefits are no-fault benefits, like the no-fault automobile benefits involved in O’Donnell.

In the instant cases, the plaintiffs seek to retain both the no-fault benefits and the tort recoveries. In O’Donnell, the plaintiffs received no-fault automobile benefits because of the death of their husband and father, and seek to avoid reduction of those benefits on account of Social Security survivors’ benefits paid because of his death.

The desire to have the best of both worlds is perfectly understandable. In many cases the benefits paid are totally inadequate as measured against the injuries suffered even if recovery is obtained under both the no-fault and the tort system. It is difficult to adequately price human suffering and injury.

At one time, the tort system was the only reparation program. A person who suffered loss or disability had no recourse other than an action in tort or to seek assistance as an indigent person *636from a charity or under early governmental relief programs.

Workers’ compensation was one of the early social welfare programs designed to meet society’s obligation to compensate persons who were the happenstance victims of an increasingly mechanized and mobile society. Many programs followed, including Social Security (not only for old age but for disability and survivors), and now mandatory automobile liability insurance with a shift from complete reliance on the tort system to no-fault benefits for work loss and medical expense and a continued right of recovery above a threshold in tort.

It is the legislative judgment that the expansion of these various social welfare programs, whether financed through specific taxes (such as Social Security), general tax revenues, or mandatory employers’ or users’ contributions in the form of insurance premiums, should be rationalized with the tort reparation system and other programs to avoid duplication and to keep the cost of reparations within limits that consumers and those who work can afford and are willing to pay for the support of those who cannot as a result of injury or other misfortune.

In an attempt to deflect the legislative effort to rationalize income maintenance payments for injured and disabled persons and survivors, and in an effort to minimize the impact on them of the substantial costs of tort recovery, those who represent their interests have sought the aid of the courts.

In Pelkey v Elsea Realty & Investment Co, 394 Mich 485; 232 NW2d 154 (1975), we rejected the contention that the employer should not be reimbursed for past compensation payments out of the *637portion of a third-party tort recovery attributable to "pain and suffering”.

In O’Donnell, we hold that the provision of the no-fault motor vehicle liability act requiring reduction of no-fault benefits by Social Security survivors’ benefits is constitutional.

Plaintiffs urge that these social programs should be liberally construed to enlarge the benefits payable to injured persons. A liberal construction, indeed, should be placed on the language of the no-fault workers’ compensation and other laws establishing entitlement so that those it was intended to benefit do benefit. It does not detract from a liberal construction of the entitlement provisions to also liberally construe the rationalization provisions so that the legislative objective of rationalization is also implemented and not defeated by the commitment which we as lawyers, trained in the tort system, have to that system, or a concern that the level of no-fault benefits inadequately compensates injured persons.

The legislative purpose, in the instant case, to rationalize governmentally required income maintenance payments with the tort system is clear and it is our duty to accept and implement that legislative judgment.

V

The legislative judgment was that a worker, such as Franges, would be entitled to the full amount of a tort recovery, less the expenses of recovery, but that he was not entitled to both workers’ compensation benefits and a tort recovery. A worker who could recover from a third party should not be disadvantaged because he received workers’ compensation benefits. He *638should be entitled to recover from the third party just as if he were not injured in the course of employment. He should not be worse off because he was eligible for workers’ compensation benefits. But it was also the Legislature’s judgment that he should not be able to obtain both. He should not be better off. He should not be able to keep both the tort recovery and his workers’ compensation benefits.

The amount paid by the employer, which in tort litigation would have reduced the amount payable by the third party, should instead be paid to the employer to reduce the overall cost of workers’ compensation, and at the same time to eliminate duplicative recovery by the worker. Since this cofeasor, in contrast with co-tortfeasors generally, receives in hand the return of the money which he had paid, he should, to that extent, contribute to the cost of recovery. The determination of the amount to be contributed by the employer to the expenses of recovery was to be made as of the time of recovery based on the employer’s reimbursement at that time, and it was not contemplated that any contribution to the expenses of recovery would become payable by reason of the saving to the employer as a result of being relieved of future compensation payments.

We would reverse in each of these consolidated cases and remand for further proceedings consistent with this opinion.

Coleman, J., concurred with Levin, J.

1952 PA 155, amending 1948 CL 413.15, reenacted by 1969 PA 317; MCL 418.827; MSA 17.237(827).

See GCR 1963, 928.2(2).

1912 (1st Ex Sess) PA 10, part III, § 15; 1915 CL 5468; 1929 CL 8454; 1948 CL 413.15.

The pertinent provisions of the statute are:

"(5) In an action to enforce the liability of a third party, the plaintiff may recover any amount which the employee or his dependents or personal representative would be entitled to recover in an action in tort. Any recovery against the third party for damages resulting from personal injuries or death only, after deducting expenses of recovery, shall first reimburse the employer or carrier for any amounts paid or payable under this act to date of recovery and the balance shall forthwith be paid to the employee or his dependents or personal representative and shall be treated as an advance payment by the employer on account of any future payments of compensation benefits.

"(6) Expenses of recovery shall be the reasonable expenditures, including attorney fees, incurred in effecting recovery. Attorney fees, unless otherwise agreed upon, shall be divided among the attorneys for the plaintiff as directed by the court. Expenses of recovery shall be apportioned by the court between the parties as their interests appear at the time of the recovery.” MCL 418.827; MSA 17.237(827).

The quoted language is from the Workers’ Disability Compensation Act of 1969, 1969 PA 317, effective December 31, 1969. In at least one *626of the three consolidated cases the applicable act is the original workers’ compensation act, 1912 (1st Ex Sess) PA 10, as amended, the pertinent provision of which was 1948 CL 413.15 as amended by 1952 PA 155. The provisions quoted above as (5) and (6) are the same language (except for style changes) as the 1952 amendment to that act.

If the injured employee does not commence an action within one year of the injury, the employer may do so.

See fn 1, supra.

The Court states: "This opinion and its apportionment formulae are to be applied prospectively. Only those cases pending on appeal in which this issue has been specifically raised are subject to this determination.”

See Horsey v Stone & Webster Engineering Corp, 162 F Supp 649 (WD Mich, 1958).

1965 PA 44, amending 1948 CL 412.9 and 412.10.

In 1952 the amount payable to an injured employee without dependents could not exceed $28 per week. The 1965 act increased this to $58 per week and provided for annual increases to $61 in 1966, and to $64 in 1967. The time within which benefits were payable was increased from 500 weeks to the duration of the disability. The benefits payable to persons with five or more dependents was increased from $38 in 1952 to $93 as of 1967. Similar changes were made in the minimum benefits payable.

Subsequently, the Legislature required that the maximum weekly rate be adjusted annually to reflect changes in the average weekly wage in covered employment. See 1969 PA 317, § 355; MCL 418.355; MSA 17.237(355).

If 5 years had elapsed until the recovery and the employee had thus received benefits for 260 weeks and had three dependents, the amount saved by the employer as a result of advance payment could not exceed $8,160 over the remaining 240 weeks of the 500-week maximum general disability period. If expenses of recovery were 40%, the most in additional legal expense that could be charged to the employer would be $3,264.