Schlichte v. Kielan

G. BARRY ANDERSON, Judge

(dissenting)

I respectfully dissent.

This case is yet another step in a long journey that began with Lambertson v. Cincinnati Corp., 312 Minn. 114, 257 N.W.2d 679 (1977).

Before discussing the present controversy over the interplay between workers’ compensation, subrogation rights, and general tort concepts, a brief history of the evolution of the caselaw may be helpful.

Prior to Lambertson, the Minnesota Supreme Court consistently disallowed contribution claims against an employer by a third-party tortfeasor, reasoning that the employer had no liability to the employee in common with the third-party tortfeasor. Id. at 687. The employer’s exclusive liability was provided in the Workers’ Compensation Act, while the third-party’s liability arose at common law.

In Lambertson, the Minnesota Supreme Court decided the employer should bear its share of the plaintiffs damages in proportion to its percentage share of fault, not to exceed its liability for workers’ compensation benefits. Id. at 689. Lambertson set forth the concept of “joint fault” in the absence of “joint liability” and held that an employer must pay its fair share of the plaintiffs damages not to exceed its total workers’ compensation liability. Id.

*189Wilken v. International Harvester Co., 363 N.W.2d 763 (Minn.1985), further clarified an employer’s obligation to pay contribution to a third-party tortfeasor. The employer’s liability for contribution was established as including workers’ compensation benefits already paid as well as benefits due and payable after judgment in the tort action. Id. at 767. The employer’s contribution liability for future workers’ compensation benefits was to be determined by reducing future workers’ compensation benefits to present value and paying that amount as contribution in a single lump-sum payment. Id. Thus, under Wilken, an employer could be required to pay contribution based on future workers’ compensation benefits that it might or might not ultimately be required to pay.

After the verdict is in, the trial court can take further evidence to aid it in calculating the amount of the contribution claim and the discount factor. Much of this evidence is of the kind, it would seem, that is best submitted by affidavit, as was done in this case.

Id. at 768.

Parallel with the Lambertson and Wilken developments, practitioners began segregating personal injury claims into sub-rogable and nonsubrogable categories. See, e.g., Naig v. Bloomington Sanitation Co., 258 N.W.2d 891, 893 (Minn.1977). A plaintiffs nonsubrogable claims could be settled with the tortfeasor in what came to be called a Naig release. Similarly, an employer could settle its subrogation claim for workers’ compensation benefits with the third-party tortfeasor; this became known as a reverse-Naig settlement. See, e.g., Sayre v. McGough Constr. Co., 580 N.W.2d 503, 504 (Minn.App.1998), review denied (Minn. Aug. 18, 1998). This type of settlement, a factor in the present case, is subject neither to the statutory allocation formula nor to the statutory collateral source deduction. Folstad v. Eder, 467 N.W.2d 608, 609 (Minn.1991).

Finally, we come to Tyroll v. Private Label Chems., Inc., 505 N.W.2d 54 (Minn.1993). Tyroll sets out the procedure for determining the amount an employer can recover in a post-Naig subrogation action following a Naig release:1 “[T]he trial court should hold a hearing to determine the amount of benefits paid and payable.” Id. at 61.

This brings us to our present controversy. In this case, a Tyroll hearing was necessary, not to determine the amount of the employer’s recovery, because the employer had already settled with the tortfea-sor, but rather to prevent a double recovery by respondent.

Stripped to its essentials, the district court in this case held that respondent’s post-verdict workers’ compensation claim was so speculative that the tortfeasor should be allowed no offset against the verdict. This holding is at odds with the special verdict and the conclusions reached by the district court based on that verdict.

Respondent’s injuries are permanent. Limitations on her ability to work are also permanent. The gravamen of the underlying personal injury case was that respondent is presently in a career where she is unable to perform most of her assigned duties. The jury agreed with this conclusion, returning a verdict for $435,000 for loss of future earning capacity. According to the jury, and confirmed by the district court in its ruling on posttrial motions, respondent has already suffered $25,000 in *190medical expenses and is likely to incur $75,000 in future medical expenses. Not only did the jury consider that respondent’s injuries are serious and her damages substantial, but also the district court noted: “based upon the evidence presented, an even higher award of damages than that awarded, could be justified.” Against this backdrop, the district court observed in the memorandum accompanying the judgment

the issue is not merely whether [respondent] will incur future damages payable under the Workers’ Compensation Act, but rather, the speculativeness of whether [respondent] has a workers’ compensation claim, whether [respondent] will pursue such a claim, whether such a claim would be entertained by the workers’ compensation court, and finally, whether [respondent] would prevail on such a claim.

The observations of the district court do not square with reality. While some portions of the workers’ compensation claim may be so speculative that no offset should occur, what are we to make of a jury finding that future medical expenses of $75,000 are “reasonably certain” to occur? Surely an offset in some amount to prevent a double recovery is in order.2

It is equally hard to square the jury’s finding of “reasonably certain” loss-of-earning capacity of nearly a half-million dollars with the district court’s finding that all future wage loss under the Workers’ Compensation Act is “speculative.” Here, too, there is room to argue about how much of the jury finding translates into amounts recoverable under the Workers’ Compensation Act, but the conclusion that the district court reached that the amount is zero is completely unsupportable.

Workers’ compensation benefits in this case were apparently terminated by the insurer following an independent medical examination. No subsequent claim petition has been filed by the employee-respondent, who now argues that her ability to receive benefits is somehow “speculative” because she is not receiving benefits and must file a claim to receive future benefits.

This argument, while creative, falls apart upon examination. Taken to its logical conclusion, whether an employee receives a double recovery is determined not by the merits of his or her case, but rather by whether the employee has been blessed (or cursed, depending on your view), with an aggressive workers’ compensation insurer.

The district court, in its memorandum, noted as a basis for its finding of specula-tiveness that respondent’s claims are not certain and that those claims “will be defended and litigated.” This is not, and cannot be, the law in Minnesota. If Tyroll, Folstad, and related cases are to have any meaning, the right to an offset from the verdict cannot be discarded simply because the district court believes that a workers’ compensation claim is speculative or that the case will be “defended.” That rationale could be advanced to deny an offset in virtually every case. It is particularly weak in circumstances like the present controversy, where there has been a very significant recovery by the potential workers’ compensation claimant.3

*191On the facts of this case, I would reverse and remand for a new Tyroll hearing.

. Tyroll suggests that the court proceeding to establish the amount of workers’ compensation benefits paid or payable should be conducted prior to the jury trial, but, as practitioners have noted, it may make more sense to conduct that proceeding after the jury trial. If there is a defense verdict, for example, there would be little reason to conduct a posttrial hearing relative to the amount of workers’ compensation benefits. See William M. Bradt & Wilbur W. Fluegel, Third-Party Practice, in The Minnesota Workers’ Compensation Deskbook § 16.8 at 16-9-10 (Jay T. Hartman & Thomas D. Mottaz eds., 2d ed.1997).

. I reject, however, appellants' argument for a dollar-for-dollar reduction. This position is unsupported by the law and, in fact, ignores the reality that medical expenses in workers’ compensation cases are subject to significant administrative review. Minn.Stat. § 176.136, subd. 1(a) (1998), provides "[t]he commissioner shall by rule establish procedures for determining whether or not the charge for a health service is excessive.” The standard used by the commissioner may or may not bear a relationship to the standard used by the jury in arriving at future medical expenses. Thus, the district court must determine the specific amount recoverable under workers’ compensation.

. The time may have come for the supreme court to address in greater detail what is, and is not, recoverable under Tyroll. For example, Tyroll specifically recognized

retraining expenses [as] reasonable and proper payments under the Workers’ Com*191pensation Act[.] * * * [T]hese expenses, related as they are to a restoration of earning capacity, are recoverable in the subrogation action even though there is no comparable item of common law damages.

Tyroll, 505 N.W.2d at 61. But the district court in the present controversy apparently accepted the opinion of one of the expert witnesses that "retraining benefits are rarely granted.” Does this mean, despite Tyroll’s language to the contrary, that a claim for retraining benefits can now be defeated in Minnesota in a Tyroll hearing simply by testimony from an expert that in his or her experience such benefits are "rarely granted"? Similarly, the district court in this case never specifically analyzed appellants’ claim that a setoff in the amount of $13,416 would be appropriate because respondent is entitled to 26 weeks of economic recovery compensation. The supreme court has not indicated whether or not economic recovery compensation is something for which an offset may be granted.