Present: All the Justices
WILLIAM E. JENEARY, ADMINISTRATOR
OF THE ESTATE OF DONALD GORDON
JENEARY, II, DECEASED
OPINION BY
v. Record No. 002550 JUSTICE LAWRENCE L. KOONTZ, JR.
September 14, 2001
COMMONWEALTH OF VIRGINIA,
THE UNINSURED EMPLOYER’S FUND,
ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK
Charles E. Poston, Judge
In this appeal, we consider whether the trial court
correctly applied Code §§ 65.2-1204 and 65.2-601.1 of the
Virginia Workers’ Compensation Act with respect to claims made
by the Uninsured Employer’s Fund and a health care provider
against the proceeds of a compromise settlement in a wrongful
death action.
BACKGROUND
The parties do not dispute the principal facts. Donald
Gordon Jeneary, II, worked as a delivery person for a restaurant
in Virginia Beach. On January 9, 1999, Jeneary was operating
his sister’s vehicle to make deliveries. On that same day,
Jonathan R. Steele was fleeing from the police in his vehicle,
driving on Shore Drive in Virginia Beach towards its
intersection with Independence Boulevard. 1 Steele drove through
a red light at the intersection, and his vehicle collided with
the vehicle driven by Jeneary. Upon the impact of the vehicles,
Jeneary was ejected from the rear driver’s side window of his
vehicle, sustaining serious injuries.
Immediately following the accident, Jeneary was transported
to Virginia Beach General Hospital (VBGH). Jeneary remained at
VBGH from January 9 to January 19, 1999, receiving surgical and
nursing care. On January 19, 1999, Jeneary died from the
injuries sustained in the collision. Jeneary’s expenses arising
from his injuries included $66,787.14 for treatment at VBGH,
$7,432.15 for medical treatment received from other health care
providers, and $14,009.35 for funeral and burial costs.
William E. Jeneary, the administrator of Jeneary’s estate
(the administrator), filed a claim against the employer on
behalf of the estate for compensation benefits with the Workers’
Compensation Commission. The restaurant, however, did not have
workers’ compensation insurance. Consequently, the
administrator asserted a claim, pursuant to Code § 65.2-1203,
against the Uninsured Employer’s Fund (the Fund) for Jeneary’s
medical and funeral expenses. The Fund contested this claim
asserting, among other things, that it was unclear whether the
1
The record does not disclose the reason why Steele was
fleeing from the police.
2
employer had a sufficient number of employees to bring it under
the requirements of the Act. 2
The Wrongful Death Action
On September 30, 1999, the administrator filed a wrongful
death action against Steele. Steele did not have automobile
liability insurance at the time of the accident. Jeneary’s
sister, however, had an automobile liability insurance policy
with State Farm Mutual Automobile Insurance Company (State Farm)
on the vehicle operated by Jeneary. The policy included
$250,000 of uninsured/underinsured motorist coverage. Jeneary
was an insured person entitled to recover under that provision
of the policy.
On September 22, 1999, Steele, apparently already aware
that the wrongful death action would be filed, had petitioned
the trial court, pursuant to Code § 8.01-424, to approve a
compromise settlement of the claim against him in the amount of
$250,000 to be paid on his behalf under State Farm’s policy
described above. In his petition, Steele requested that the
trial court allocate $88,228.64 to medical bills and funeral
costs, $98,483.01 to Jeneary’s three statutory heirs, and
2
According to the parties, on March 14, 2001, after
this appeal was awarded, the Workers’ Compensation
Commission ordered the Fund to pay the workers’
compensation claim. See Code § 65.2-1203. However, none
of the parties asserts that the Commission’s ruling affects
the issues raised in this appeal.
3
$63,288.35 to the administrator’s attorneys for fees and
expenses. The petition expressly provided that the settlement
“in no way releases Jonathan Steele from any subrogation
collection proceedings that State Farm Mutual Automobile
Insurance Company may choose to institute against Jonathan
Steele.”
On October 1, 1999, the day after the wrongful death action
was filed, the trial court entered an order consolidating that
action and Steele’s petition to approve the settlement into a
single settlement proceeding. In a separate order, the trial
court granted Steele’s petition to approve the settlement and
directed that the proceeds be disbursed as outlined in the
petition. In that order, the trial court stated that the
wrongful death action “has been settled by payment made to
William E. Jeneary, Administrator of the Estate of Donald G.
Jeneary, II, deceased, by State Farm Mutual Automobile Insurance
Company.” The trial court directed that the $88,228.64
allocated for medical and funeral expenses be placed in escrow
with the administrator’s attorneys. 3
3
Although the record is not clear, it appears that all the
proceeds from the settlement were placed in escrow with the
administrator’s attorneys and that no funds were distributed to
the heirs or the attorneys at the time of the trial court’s
order granting Steele’s petition.
4
The Fund’s Lien
On November 1, 1999, the administrator filed a motion in
the trial court seeking a determination of the Fund’s lien, if
any, against the settlement proceeds obtained in the wrongful
death action for any workers’ compensation benefits paid by the
Fund. 4 On December 1, 1999, the Fund filed a brief asserting
that it had a lien against the settlement proceeds pursuant to
Code § 65.2-1204. The Fund, recognizing that this was an issue
of first impression, asserted that under this statute, the Fund
is “subrogated to any right to recover damages” which the
injured employee or his estate might have against “any other
party” in order to recoup payments made by the Fund when an
employer has not complied with the Act. Thus, the Fund
contended that the settlement of the claim against Steele with
the proceeds of State Farm’s uninsured motorist coverage arose
from a “right to recover damages” from an “other party.”
In a responding brief filed December 6, 1999, the
administrator asserted that the settlement proceeds were not
paid by an “other party,” but as the result of a private
contract of insurance. Thus, he contended that the Fund was not
entitled to subrogate these specific settlement proceeds.
4
For reasons not clear in the record, a second copy of the
motion was filed on November 30, 1999.
5
On March 3, 2000, the trial court issued a letter opinion
recognizing the Fund’s right to a lien. The trial court
reasoned that State Farm was an “other party” contemplated under
Code § 65.2-1204 because “State Farm certainly took part in this
case” by paying the settlement proceeds “for injuries caused by
[Steele’s] negligence.” The trial court held that Code § 65.2-
309.1, which expressly limits an employer’s right of subrogation
against proceeds recovered by an injured employee pursuant to
the uninsured motorist provisions of a policy of motor vehicle
insurance carried by and at the expense of the employer, did not
apply to the lien asserted by the Fund under Code § 65.2-1204.
By order entered on May 19, 2000, the trial court ruled that the
Fund had a valid lien against the settlement proceeds pending
the outcome of the underlying workers’ compensation benefits
claim.
VBGH’s Petition for Distribution of Funds
On January 12, 2000, VBGH filed a petition to intervene in
the settlement proceeding. VBGH sought to be paid $66,787.14,
the amount of the settlement funds apportioned to the hospital
in the trial court’s October 1, 1999 order. On April 16, 2000,
the trial court granted VBGH leave to intervene and ordered that
the settlement funds continued to be held in escrow pending
further order of the court.
6
On May 25, 2000, VBGH filed a motion for distribution of
all the funds apportioned to the creditors of Jeneary’s estate
for medical and funeral expenses. At a July 31, 2000 hearing,
the administrator requested that the trial court stay VBGH’s
motion for distribution, asserting that Code § 65.2-601.1
prohibited all health care providers from instituting any debt
collection proceedings pending resolution of the workers’
compensation claim. VBGH contended that the list of prohibited
debt collection activities under Code § 65.2-601.1(B) was
exclusive and was limited to extra-legal methods of collecting
the debt. Thus, VBGH contended that its intervention in the
settlement proceeding did not amount to “debt collection
activities” under Code § 65.2-601.1. The trial court agreed
with VBGH’s contentions and ruled that this statute was
inapplicable to this case.
Immediately following the hearing, the trial court entered
an order directing the payment of $88,228.64 from the settlement
funds held in escrow to the creditors of Jeneary’s estate,
including $66,787.14 to VBGH. The order expressly incorporated
the trial court’s prior ruling that Code § 65.2-601.1 did not
prevent VBGH’s intervention in the settlement proceedings or bar
its motion for distribution of the settlement proceeds.
Additionally, the order incorporated the May 19, 2000 order
imposing a statutory lien in favor of the Fund on the remaining
7
settlement funds. 5 We awarded the administrator of Jeneary’s
estate this appeal.
DISCUSSION
In previous decisions involving application of the Workers’
Compensation Act, we have said that “[w]hile we must construe
this remedial act broadly to afford coverage for the employee,
we are constrained by the Act itself and its intent.” Snead v.
Harbaugh, 241 Va. 524, 527, 404 S.E.2d 53, 55 (1991); see also
Baggett & Meador Cos. v. Dillon, 219 Va. 633, 637, 248 S.E.2d
819, 822 (1979). Furthermore, “[w]e must take the statute as we
find it, gather the legislative intent from the words used and
give effect to the purposes thus ascertained.” Van Geuder v.
Commonwealth, 192 Va. 548, 554, 65 S.E.2d 565, 568 (1951).
These principles guide our analysis of the issues in this case.
5
This order further provided that it constituted “a final
disposition of all issues before” the trial court and purported
to remove the cause from the docket. It is apparent on the
record, however, that at the time this order was entered, the
administrator’s claim remained pending before the Workers’
Compensation Commission. Accordingly, there had been no final
resolution of whether, and in what amount, the Fund’s lien would
reduce the settlement proceeds and, thus, require alteration of
the apportionment previously made. However, because the trial
court was “exercis[ing] . . . its chancery power under [Code
§ 8.01-424 and] the circumstances of this case,” see Parrish v.
Jessee, 250 Va. 514, 524, 464 S.E.2d 141, 147 (1995), the
matters to be resolved in this appeal are subject to
interlocutory review under Code § 8.01-670(B).
8
The Fund’s Lien
The administrator contends that the trial court erred in
ruling that the Fund’s lien under Code § 65.2-1204 is not
limited by Code § 65.2-309.1. The thrust of the administrator’s
contention is that when, pursuant to Code § 65.2-1203, the Fund
pays compensation benefits to an injured employee, it “steps
into the shoes” of the employee’s employer and, thus, its
subrogation rights under Code § 65.2-1204 are identical with
those of the employer and are similarly limited by Code § 65.2-
309.1. We disagree.
In Horne v. Superior Life Insurance Co., 203 Va. 282, 123
S.E.2d 401 (1962), we construed former Code § 65-38, the
predecessor statute to current Code § 65.2-309, as not
permitting an employer to subrogate a claim for uninsured
motorist coverage on a private policy of insurance maintained by
the injured employee’s wife. 203 Va. at 286, 123 S.E.2d at 404.
Former Code § 65-38 provided that the payment of a workers’
compensation claim by an employer would “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.” (Emphasis added). We observed that “[i]n the
absence of a statutory provision giving the employer or its
compensation carrier a right of subrogation against an insurer
of the employee under the uninsured motorist provision of a
9
liability policy, such a right does not exist.” Horne, 203 Va.
at 286, 123 S.E.2d at 404. We held that Code § 65-38 did not
give that right and that the insurer of the injured employee was
not “‘any other party’ within the contemplation of the statute.”
Id. Thereafter, in the subsequent revision of the Workers’
Compensation Act, the legislature enacted Code § 65.2-309.1
which expressly grants the employer the right of subrogation
against proceeds recovered by the injured employee under the
uninsured motorist coverage of a policy of insurance provided
and paid for by the employer.
By contrast, Code § 65.2-1204, which defines the Fund’s
right of subrogation, makes no reference to claims arising from
uninsured motorist coverage. Code § 65.2-1204 provides:
The Commission shall, upon payment of a claim
from the Uninsured Employer’s Fund, be subrogated to
any right to recover damages which the injured
employee or his personal representative or any other
person may have against his employer or any other
party for such injury or death.
The language of this statute neither expressly nor by
implication places the Fund in the same position as an employer.
Rather, when the Fund is ordered to pay compensation benefits,
its right of subrogation extends to claims the employee may have
against “the employer or any other party.” (Emphasis added).
In this context, the Fund correctly asserts that it is not “an
insurance program for an uninsured employer.” Accordingly, we
10
hold that the trial court did not err in ruling that Code
§ 65.2-309.1 is inapplicable to the Fund’s subrogation rights
under Code § 65.2-1204.
However, this determination does not resolve the question
whether the Fund has a lien on the settlement proceeds of a
wrongful death action filed against the tortfeasor where those
proceeds are derived from uninsured motorist coverage in a
private insurance policy maintained by the injured employee or a
third-party. Rather, our analysis here turns on whether State
Farm was an “other party” to the wrongful death action against
Steele or the settlement proceeding as contemplated by the
phrase “any other party” in Code § 65.2-1204.
The Fund asserts that the phrase “any other party,” as used
in Code § 65.2-1204, must be read more expansively than the
identical language from former Code § 65-38 that we construed in
Horne. The Fund contends that this is so because, in defining
the subrogation rights of the Fund under the Act, the
legislature did not include a provision similar to Code § 65.2-
309.1 to limit the Fund’s right of subrogation with respect to
uninsured motorist coverage. In essence, the Fund’s contention
is that without an express limitation in Code § 65.2-1204, the
legislature necessarily intended to modify our holding in Horne
in the context of the Fund’s subrogation rights.
11
The Fund further contends that because it does not serve as
an insurance program for employers that fail to provide workers’
compensation benefits but, rather, acts as a safety net to
provide compensation to injured employees entitled to benefits
under the Act, public policy favors an expansive reading of Code
§ 65.2-1204 to permit the Fund to assert a lien against any
right of recovery such an employee or his estate might have for
his injuries to prevent “a double recovery” by the injured
employee or his estate. Thus, in the present case, the Fund
asserts that the trial court correctly determined that State
Farm was an “other party” as contemplated by Code § 65.2-1204
because Jeneary’s estate had a claim against State Farm arising
out of the same injuries for which the Fund might have to pay
compensation.
The trial court reasoned that State Farm was an “other
party” within the meaning of Code § 65.2-1204 because “State
Farm certainly took part in this case.” In reaching this
conclusion, the trial court relied on a definition of the term
“party” as meaning “ ‘a person concerned or having or taking
part in any affair, matter, transaction or proceeding,
considered individually.’ ” Although the trial court ascribes
this definition to Black’s Law Dictionary, the current edition
of that resource does not contain that definition. Rather, in
this context, the definition that would apply is “[o]ne by or
12
against whom a lawsuit is brought .”
Black’s Law Dictionary 1144 (7th Ed. 1999). An earlier edition
does contain the definition quoted by the trial court; however,
that definition is further modified by the notation that
“ ‘[p]arty’ is a technical word having a precise meaning in
legal parlance,” which is to describe the actual parties to the
suit. Blacks Law Dictionary 1010 (5th Ed. 1979). The notation
makes the further distinction that “others who may be affected
by the suit, indirectly or consequently, are persons interested,
but not parties.” Id.
The language of Code § 65.2-1204 with regard to the Fund’s
rights of subrogation is identical in all material respects to
the language in former Code § 65-38, currently Code § 65.2-309,
which we interpreted in Horne as excluding as “any other party”
an insurer providing uninsured motorist coverage to an injured
employee through a private insurance contract. We are of
opinion that it is significant that the legislature, in light of
our holding in Horne, did not expressly provide the right of the
Fund to be subrogated to claims against insurance policies
providing injured employees with uninsured motorist coverage.
Clearly, if the legislature intended to do so, it would readily
have used language similar to that found in Code § 65.2-309.1 to
expressly provide this right of subrogation to the Fund as it
has for employers. The legislature may choose to provide such a
13
right to the Fund; this Court, however, must find that right in
the express language of the statute. Moreover, since our
decision in Horne, we have consistently held that an insurer
providing uninsured motorist coverage is not a party to the
underlying tort action upon which its liability may ultimately
be predicated.
In Doe v. Brown, 203 Va. 508, 125 S.E.2d 159 (1962), we
held that a claim against an uninsured tortfeasor “is not an
action arising ex contractu to recover against the insurance
company on its [uninsured motorist] endorsement. The insurance
company is not a named party defendant and judgment cannot be
entered against it.” Id. at 515, 125 S.E.2d at 164; accord
Nationwide Mutual Insurance Co. v. Hylton, 260 Va. 56, 61, 530
S.E.2d 421, 423 (2000); Rogers v. Danko, 204 Va. 140, 143, 129
S.E.2d 828, 830 (1963). Instead, the claim “is an action ex
delicto, since the cause of action arises out of a tort.” Doe,
203 Va. at 515, 125 S.E.2d at 164. Thus, in this case, State
Farm was not a party to the administrator’s wrongful death
action and, therefore, was not an “other party” as contemplated
by Code § 65.2-1204.
Similarly, State Farm’s payment of the settlement proceeds
was not sufficient to make it a party to Steele’s petition for
approval of the settlement under Code § 8.01-424. Although the
petition makes reference to State Farm’s subrogation interests,
14
the payment of the settlement proceeds on Steele’s behalf merely
fulfilled a contractual obligation to Jeneary as an insured
under the policy State Farm issued to Jeneary’s sister. State
Farm’s obvious insistence that its subrogation rights be
preserved in the settlement did not result in State Farm
becoming a “party” to the settlement. Those rights flowed from
the insurance contract.
Accordingly, we hold that the Fund was not entitled to a
lien against the proceeds of the settlement paid by State Farm
to Jeneary’s estate because State Farm was not “any other party”
as contemplated by Code § 65.2-1204, and the trial court erred
in imposing such a lien.
VBGH’s Claim
Next, we consider whether the trial court erred by refusing
to stay VBGH’s motion for distribution of the settlement
proceeds to the creditors of Jeneary’s estate pending resolution
of the underlying workers’ compensation claim. Code § 65.2-
601.1 provides that:
A. Whenever an employee makes a claim pursuant to
§ 65.2-601, all health care providers, as defined in
§ 8.01-581.1, shall refrain from all debt collection
activities relating to medical treatment received by the
employee in connection with such claim until after an award
is made on the employee’s claim pursuant to § 65.2-704.
The statute of limitations for the collection of such debt
shall be tolled during the period in which the applicable
health care provider is required to refrain from debt
collection activities hereunder.
15
B. For the purpose of this section, “debt collection
activities” means repeatedly calling or writing to the
employee and threatening either to turn the matter over to
a debt collection agency or to an attorney for collection,
enforcement or filing of other process. The term shall not
include routine billing or inquiries about the status of
the claim.
VBGH, as it did in the trial court, again asserts that
intervening in a settlement proceeding does not constitute “debt
collection activities” as defined by Code § 65.2-601.1(B). The
administrator responds that Code § 65.2-601.1(A) prohibits “all
debt collection activities,” including the filing of any legal
process to collect the debt.
“A statute is not to be construed by singling out a
particular phrase; every part is presumed to have some effect
and is not to be disregarded unless absolutely necessary.”
Commonwealth v. Zamani, 256 Va. 391, 395, 507 S.E.2d 608, 609
(1998); accord Melanson v. Commonwealth, 261 Va. 178, 183, 539
S.E.2d 433, 435 (2001). The definition of “debt collection
activities” in Code § 65.2-601.1(B), standing alone, may appear
to limit the prohibited activity to the use of “strong-arm” or
threatening extra-legal methods to collect the debt. If this
were so, however, the tolling provision of subsection A would
confer an unnecessary benefit on a health care provider by
extending the statute of limitations for filing an action to
collect the debt without a corresponding benefit to the employee
to stay the collection of the debt until the underlying workers’
16
compensation claim is resolved. Moreover, if VBGH’s
interpretation of “debt collection activities” were correct,
then a health care provider could proceed to file an action to
collect the debt even though it could not otherwise contact the
employee to make efforts to collect the debt or advise the
employee that it was turning the matter over “to an attorney for
collection, enforcement or filing of other legal process.”
We may reject a literal construction of a statute that
“would involve a manifest absurdity.” Watkins v. Hall, 161 Va.
924, 930, 172 S.E. 445, 447 (1934); accord Davis v. Tazewell
Place Associates, 254 Va. 257, 260, 492 S.E.2d 162, 164 (1997).
Clearly, if Code § 65.2-601.1 were to be interpreted as VBGH
suggests, the result would be manifestly absurd.
We hold that Code § 65.2-601.1 prohibits all debt
collection activities, other than “routine billing [and]
inquiries about the status of the claim,” instituted by a health
care provider prior to the resolution of an employee’s workers’
compensation claim, including the filing of any legal process to
collect the debt. Accordingly, the trial court erred in failing
to grant the administrator’s motion to stay VBGH’s efforts to
force distribution of the settlement proceeds to the estate’s
creditors and in ordering that distribution. 6
6
The record does not reflect that VBGH obtained authority
from the other creditors to act on their behalf and none of the
17
CONCLUSION
For these reasons, we will reverse the judgment of the
trial court permitting the Fund to assert a lien against the
settlement proceeds, vacate the order directing the distribution
of the settlement proceeds to the estate’s creditors, and remand
the case for further proceedings consistent with the views
expressed in this opinion including the imposition of a stay on
VBGH’s debt collection activities.
Reversed and remanded.
other creditors sought to intervene or appear in the settlement
proceeding or in this appeal. Accordingly, we express no
opinion on whether the creditors who provided funeral and burial
services were “health care providers” and, thus, would also be
barred from seeking a distribution of the settlement proceeds to
satisfy their claims against the estate.
18
Jeneary v. Commonwealth
Court: Supreme Court of Virginia
Date filed: 2001-09-14
Citations: 551 S.E.2d 321, 262 Va. 418
Copy Citations