CLAIM NO. E315941
Before the Arkansas Workers’ Compensation Commission
OPINION FILED SEPTEMBER 25, 1996
Upon review before the FULL COMMISSION, Little Rock, Pulaski County, Arkansas.
Claimant represented by CURTIS E. RICKARD, Attorney at Law, Benton, Arkansas.
Respondent represented by MICHAEL A. LEBOEUF, Attorney at Law, Little Rock, Arkansas.
Decision of Administrative Law Judge: Affirmed in part; reversed in part and remanded.
[1] OPINION AND ORDER
[2] This matter comes on for review by the Full Commission from the decision of the Administrative Law Judge filed on February 1, 1995 which found in part that respondent waived their right to share in the proceeds of a civil lawsuit settlement. That portion of the Law Judge’s opinion is reversed and we find that the respondent is entitled to a portion of the funds recovered through the settlement of the third party lawsuit even though it failed to intervene in the lawsuit. In all other respects, the decision of the Administrative Law Judge is affirmed.
(a) LIABILITY UNAFFECTED.
(1) The making of a claim for compensation against any employer or carrier for the injury or death of an employee shall not affect the right of the employee, or his dependents, to make claim or maintain an action in court against any third party for the injury, but the employer or his carrier shall be entitled to reasonable notice and opportunity to join in the action. If they, or either of them, join in the action, they shall be entitled to a first lien upon two-thirds (2/3) of the net proceeds recovered in the action that remain after the payment of the reasonable costs of collection, for the payment to them of the amount paid and to be paid by them as compensation to the injured employee or his dependents.
(2) The commencement of an action by an employee or his dependents against a third party for damages by reason of an injury to which this chapter is applicable, or the adjustment of any claim, shall not affect the rights of the injured employee or his dependents to recover compensation, but any amount recovered by the injured employee or his dependents from a third party shall be applied as follows:
(A) Reasonable costs of collection shall be deducted:
(B) Then, in every case, one-third (1/3) of the remainder shall belong to the injured employee or his dependents, as the case may be:
(C) The remainder, or so much as is necessary to discharge the actual amount of the liability of the employer and the carrier: and
(D) Any excess shall belong to the injured employee or his dependents. (Emphasis added.)
(b) SUBROGATION.
(1) An employer or carrier liable for compensation under this chapter for the injury or death of an employee shall have the right to maintain an action in tort against any third party responsible for the injury or death.
(2) After reasonable notice and opportunity to be represented in the action has been given to the compensation beneficiary, the liability of the third party to the compensation beneficiary shall be determined in the action as well as the third party’s liability to the employer and carrier.
(3) After recovery shall be had against the third party, by suit or otherwise, the compensation beneficiary shall be entitled to any amount recovered over and above the amount that the employer and carrier have paid or are liable for in compensation, after deducting reasonable costs of collection. In no event shall the compensation beneficiary be entitled to less than one-third (1/3) of the amount recovered from the third party, after deducting the reasonable cost of collection.
(c) SETTLEMENT OF CLAIMS.
[5] We find the instant claim to be controlled by JamesBillington v. Smith Ford, FC Opinion, Dec. 11, 1990 (D801143). InBillington, the Full Commission addressed the issue of a respondent’s entitlement to a credit under a fact pattern very similar to the present case. There, the Full Commission determined that an employer/carrier is entitled to a credit under the formula contained in A.C.A. § 11-9-410(a)(2) where the claimant receives a settlement of a claim against a third party in tort prior to filing a workers’ compensation claim. The Commission’s analysis in Billington stated in relevant part:(1) Settlement of claims under subsections (a) and (b) of this section must have the approval of the court or of the commission, except that the distribution of that portion of the settlement which represents the compensation payable under this chapter must have the approval of the commission.
(2) Where liability is admitted to the injured employee or his dependents by the employer or carrier, no cost of collection shall be deducted from that portion of the settlement under subsections (a) or (b) of this section representing compensation, except upon direction and approval of the commission.
[6] Clearly, under our ruling in Billington, the respondent in the present case is entitled to a credit under the formula contained in A.C.A. § 11-9-410(a)(2). The statute protects the rights of an employee to pursue third party claims by assuring that the employee does not forfeit their right to workers’ compensation benefits by pursuing such claims. Additionally, the statute protects the payor of workers’ compensation by providing for reimbursement to the payor of a portion of the benefits paid to the employer from any recovery received from a third party. Thus, the statutory purpose of A.C.A. § 11-9-410 is to protect the rights of both the employee and the employer, or the employer’s workers’ compensation carrier, to assert claims and to maintain actions against third parties who are actually responsible for the death or injury of an employee. [7] The Administrative Law Judge relies upon John Garner Meatsv. Ault, 38 Ark. App. 111, 828 S.W.2d 866 (1992). However, JohnGarner Meats is distinguishable from the case at bar. In JohnGarner Meats, claimant had filed a worker’s compensation claim and the employer-carrier had paid benefits. The Court of Appeals specifically notes that “[h]is (claimant’s) claim was accepted as compensable and benefits were paid accordingly.” (Emphasis added.) Id. at 112. In this case claimant did not file his workers’ compensation claim until July 12, 1994, after filing and settling the third party civil suit. We find that claimant sustained a compensable injury. That and other findings of the Law Judge have not been challenged on appeal. For the reasons discussed herein, respondent is entitled to a credit for their statutory portion of the proceeds received by claimant from the third party civil suit. The record indicates that the claimant’s attorney received a portion of the settlement proceeds recovery as his fee. As a result, the net amount which the claimant actually received must be determined before a final order can be filed which establishes the credit to which respondent is entitled according to the formula set forth in A.C.A. §11-9-410(a)(2). Therefore, we must remand this portion of the case to the Administrative Law Judge so that the proper amount of credit may be determined. Therefore, the Administrative Law Judge’s opinion is affirmed in part and reversed in part and remanded to the Law Judge with direction to determine the amount of credit which shall be applied toward the award pursuant to the provision of A.C.A. § 11-9-410(a)(2) and to take such evidence as may be necessary, to enter findings of fact, and to enter an opinion and order in accordance with the statute and the findings and directives of this opinion and order. [8] IT IS SO ORDERED.The statutory scheme of § 11-9-410 contemplates three potential situations. Subsection (a)(1) provides that the making of a workers’ compensation claim shall not affect the right of the employee to assert a claim or maintain an action against a third party. Therefore, subsection (a)(1) contemplates situations where the workers’ compensation claim is filed before
assertion of a third party claim. Second, subsection (a)(2) provides that commencement of an action or assertion of a third party claim by the employee will not affect the right of the employee to receive workers’ compensation benefits. Read in conjunction with the rights provided in subsection (a)(1), the only logical interpretation of subsection (a)(2), which adds to and is consistent with subsection (a)(1), is that it applies to situations where the workers’ compensation claim is filed after the assertion of the third party claim, such as in the case presently before the Commission. This interpretation is supported by the Arkansas Supreme Court’s analysis of the statute in [Hartford Insurance Group v. Carter, 251 Ark. 680, 473 S.W.2d 918 (1971)] where the Court stated that “subsection (a)(2) recognizes that an employee can make . . . an adjustment before filing a Workmen’s Compensation claim by providing a procedure for the application of the proceeds thereof between the employee and the employer when a claim is filed.” Id. Although not applicable to the present case, the third potential situation involves the failure of the employee to assert a third party claim and subsection (b) addresses this possibility by establishing a procedure to allow the employer/carrier to initiate a claim against the third party. Regardless of which sequence of events actually occurs, each subsection provides a formula for distribution of any proceeds received by a third party so that the employee will receive one-third of the net proceeds and the compensation payor will receive two-thirds of the net proceeds, up to the amount of the payor’s actual liability, with the employee receiving any excess.
The case presently before the Commission falls under the situation contemplated by subsection (a)(2) since the claimant asserted his claim against the third party prior to filing his workers’ compensation claim. This subsection dispels the contention raised by the Claimant since it contemplates the exact sequence of events which occurred in this case. As a result of this subsection, the timing of the third party claim in relation to the workers’ compensation claim does not affect the Respondents’ right to a credit for a portion of the amount received by the Claimant from the third party in settlement of his claim.
JAMES W. DANIEL, Chairman ALICE L. HOLCOMB, Commissioner
[9] Commissioner Humphrey dissents.[10] DISSENTING OPINION
[11] I must respectfully dissent from the opinion of the majority finding that the employer is entitled to a credit or lien against the proceeds of a third-party settlement.