Liberty Mutual Insurance v. Fisher

PRESENT: 	All the Justices
LIBERTY MUTUAL INSURANCE COMPANY, ET AL.
v. 	Record No. 010350 	OPINION BY JUSTICE BARBARA MILANO KEENAN
January 11, 2002
DAWN M. FISHER AND JOHN M. GARLOCK,
CO-ADMINISTRATORS OF THE ESTATE OF
MARY K. PILKERTON, DECEASED.
FROM THE CIRCUIT COURT OF ALBEMARLE COUNTY
H. Selwyn Smith, Judge Designate
In this appeal, we consider whether the trial court erred
in barring an employer from recovering under a workers’
compensation lien, as part of the settlement of a third-party
wrongful death action, benefits paid to persons who did not
participate in the settlement of that wrongful death action.
In November 1993, the decedent, Mary K. Pilkerton, was
employed as a receptionist by Windham Home for Adults (Windham),
a nursing home facility. 	Elizabeth A. Bishop, an elderly
resident of Windham, tripped and fell as she walked across
railroad tracks adjoining Windham’s property. 	After being
informed that Bishop needed assistance, the decedent went to
help Bishop, who was lying on the railroad tracks. 	While the
decedent was attempting to rescue Bishop, a train struck and
killed both of them.
The decedent was survived by three children, Dawn M.
Fisher, Carolyn K. Canipe, and Kristie L. Pilkerton. 	At the
time of the decedent's death, Kristie L. Pilkerton was the

decedent's minor dependent. 	The decedent had another dependent,
Ashley N. Pilkerton, the daughter of Dawn M. Fisher, who was six
years old at the time of the decedent's death. 	The decedent had
legal custody of Ashley and provided all her monetary support.
The decedent's beneficiaries filed a claim with the
Workers' Compensation Commission requesting an award for various
benefits as a result of the decedent's accidental death.
Windham and its insurance carrier, Liberty Mutual Insurance Co.
(Liberty), stipulated that the decedent died from injuries
arising out of and in the course of her employment with Windham.
In May 1995, the Commission entered an award on behalf of
Kristie L. Pilkerton and Ashley N. Pilkerton for the payment of
weekly benefits in the amount of $379.70, to be shared equally
between them until Kristie's eighteenth birthday in December
1994. 	After Kristie's eighteenth birthday, the award provided
that Ashley would receive the full amount of $379.70 for a
maximum period of 400 weeks or until certain statutory exclusion
criteria were met. 	The Commission also awarded payment of the
decedent's funeral expenses in the amount of $1,818.92. 	The
other two daughters of the decedent, Dawn M. Fisher and Carolyn
K. Canipe, were not eligible for benefits under the Commission's
award.
In February 1997, Dawn M. Fisher and John M. Garlock, the
decedent’s brother, (collectively, the Administrators),
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qualified as co-administrators of the decedent's estate and
filed a wrongful death action in the trial court against CSX
Transportation, Inc. (CSX) and National Railroad Passenger
Corporation (Amtrak). 	In November 1999, the Administrators
filed a Petition for Approval of Settlement and Determination of
Lien in which they asked the trial court to approve a $210,500
settlement and to determine the amount of the employer's lien
for workers' compensation benefits that the employer had paid.
Liberty and Windham (collectively, Liberty) filed petitions
seeking to intervene in the wrongful death action based on Code
§§ 65.2-309 and –310. 	Code § 65.2-309 provides, in relevant
part:
A. 	A claim against an employer under this title for
injury or death benefits shall operate as an
assignment to the employer of any right to recover
damages which the injured employee, his personal
representative or other person may have against any
other party for such injury or death, and such
employer shall be subrogated to any such right and may
enforce, in his own name or in the name of the injured
employee or his personal representative, the legal
liability of such other party. 	The amount of
compensation paid by the employer or the amount of
compensation to which the injured employee or his
dependents are entitled shall not be admissible as
evidence in any action brought to recover damages.
. . . .
C. 	No compromise settlement shall be made by the
employer in the exercise of such right of subrogation
without the approval of the Commission and the injured
employee or the personal representative or dependents
of the deceased employee being first obtained.
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Code § 65.2-310 states:
In any action by an employee, his personal
representative or other person against any person
other than the employer, the court shall, on petition
or motion of the employer at any time prior to
verdict, ascertain the amount of compensation paid and
expenses for medical, surgical and hospital attention
and supplies, and funeral expenses incurred by the
employer under the provisions of this title and deduct
therefrom a proportionate share of such amounts as are
paid by the plaintiff for reasonable expenses and
attorney's fees as provided in § 65.2-311; and, in
event of judgment against such person other than the
employer, the court shall in its order require that
the judgment debtor pay such compensation and expenses
of the employer, less said share of expenses and
attorney's fees, so ascertained by the court out of
the amount of the judgment, so far as sufficient, and
the balance, if any, to the judgment creditor.
Liberty asked the trial court to determine the total amount
of compensation benefits and recoverable expenses incurred by
Liberty and, after deducting reasonable attorney's fees for the
Administrators' attorney, to order CSX and Amtrak to pay to
Liberty all compensation benefits and expenses previously
incurred by Liberty on the decedent’s behalf. 	In its petition,
Liberty stated that it had paid a total of $123,484.32,
including $1,818.13 in funeral expenses and $121,666.19 in
indemnity benefits, to the decedent's dependents.
In June 2000, the trial court held a hearing on the
Administrators' settlement petition. 	On the date of the
hearing, Fisher, as the mother and legal guardian of Ashley N.
Pilkerton, and Garlock, as Ashley's trustee, filed a waiver
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renouncing Ashley's right to receive any proceeds from the
wrongful death settlement. 	On June 28, 2000, the trial court
approved the settlement petition and entered a final order
disbursing the settlement proceeds.
The trial court's disbursal of the settlement proceeds
included $10,538.50 "to Liberty Mutual for reimbursement of its
lien for worker[s'] compensation payments made to Kristie Lynn
Pilkerton," and $1,818.13 to Liberty for its payment of the
decedent's funeral expenses. 	However, the court denied payment
to Liberty for compensation benefits in the amount of
$111,824.66 paid to Ashley N. Pilkerton, because Ashley had
renounced her right to receive funds from the wrongful death
settlement.
The trial court relied in its ruling on the decision in ACB
Trucking, Inc. v. Griffin, 5 Va. App. 542, 365 S.E.2d 334
(1988), an appeal from the Workers' Compensation Commission that
addressed benefits recoverable under the Workers' Compensation
Act by an injured worker's dependents. 	There, the Court of
Appeals stated:
When an estate's beneficiaries have received a third
party recovery, the carrier's right to subrogation
operates in relation to each beneficiary in an
individual manner. 	The carrier may assert its right
to subrogation on behalf of each individual only to
the extent that individual has recovered money in the
third party settlement. . . . 	When a beneficiary has
received less under the settlement than he is entitled
to receive under the Workers' Compensation Act, the
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employer may assert its subrogation rights up to the
amount of money received by the beneficiary in the
settlement.
Id. at 548, 365 S.E.2d at 338.
Liberty filed a Petition for Reconsideration, which the
trial court denied. 	Liberty appeals from the trial court's
judgment.
Liberty argues that the trial court erred in barring
Liberty from recovering under its statutory lien the amount of
compensation paid to a beneficiary who did not receive payment
in the wrongful death settlement. 	Liberty contends that the
employer's lien created by Code § 65.2-309 attaches regardless
of the identity of a plaintiff or the plaintiff's status as a
participant in the settlement of a third-party action. 	Liberty
also asserts that Code §§ 65.2-309 and -310 do not provide a
trial court any discretion to reduce or deny recovery of damages
under an employer's lien.
In response, the Administrators argue that Code § 65.2-309
authorizes an employer to recover damages for benefits paid only
when the employer independently prosecutes an action against a
third-party tortfeasor and recovers damages against that
tortfeasor. 	The Administrators contend that because Code
§ 65.2-310 does not address the settlement of an action brought
by an employee or her personal representative, the employer's
lien does not attach to amounts recovered in such a settlement,
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but attaches only against a judgment rendered against a third
party after a trial. 	We disagree with the Administrators'
arguments.
We consider Code §§ 65.2-309 and –310 in a manner that
harmonizes and gives effect to each statute. 	See City of
Virginia Beach v. Siebert, 253 Va. 250, 252, 483 S.E.2d 214, 216
(1997); First Va. Bank v. O'Leary, 251 Va. 308, 312, 467 S.E.2d
775, 777 (1996). 	Under Code § 65.2-309, once a workers'
compensation claim is made, an employer has a right "to
enforce," in its own name or in the name of the injured employee
or her personal representative, the legal liability of a third
party. 	Code § 65.2-309; see Safety-Kleen Corp. v. Van Hoy, 225
Va. 64, 67-68, 300 S.E.2d 750, 752 (1983); Sheris v. Sheris Co.,
212 Va. 825, 834, 188 S.E.2d 367, 373 (1972); Feitig v.
Chalkley, 185 Va. 96, 101, 38 S.E.2d 73, 75 (1946). 	Code
§ 65.2-812 provides that an employer's insurance carrier is
subrogated to all rights and duties of the employer when the
insurance carrier has assumed the employer's liability or has
paid compensation for which the employer is liable. 	See Safety-
Kleen, 225 Va. at 68, 300 S.E.2d at 752.
Code § 65.2-310 operates to protect an employer's lien in
an action brought by an employee or her personal representative
against a third party. 	See Circuit City Stores, Inc. v. Bower,
243 Va. 183, 188, 413 S.E.2d 55, 57 (1992). 	At any time before
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a verdict is reached in an action, an employer may petition the
court under Code § 65.2-310 to ascertain the amount of its lien
and deduct from that amount certain fees and expenses incurred
by the plaintiff. 	Code § 65.2-310 further directs that if a
judgment is obtained in an action, the court shall order the
judgment debtor to reimburse the employer this sum from the
amount of the judgment. 	See Safety-Kleen, 225 Va. at 68, 300
S.E.2d at 752-53.
We conclude that the language of Code §§ 65.2-309 and –310,
considered together, permits an employer to assert its statutory
lien against any recovery obtained in an action brought against
a third party liable for the employee’s injury or death.
Code § 65.2-309(A) assigns to the employer "any right to recover
damages which the injured employee, his personal representative
or other person may have against any other party for such injury
or death . . . ." 	(Emphasis added.)
The only restriction that Code § 65.2-309 imposes on the
employer’s lien rights is set forth in Code § 65.2-309(C), which
takes effect when those lien rights are asserted in a compromise
settlement arising from an action that the employer has
initiated against a third party. 	This statutory provision
directs that in such circumstances, settlements reached by an
employer will be subject to the approval of the Workers'
Compensation Commission and the injured employee, her personal
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representative, or the dependents of the deceased employee. 	Id.
Apart from this restriction, Code § 65.2-309 does not otherwise
restrict an employer’s right to recover damages in a compromise
settlement under the employer's statutory right of subrogation.
The language of Code § 65.2-310 does not limit the lien
rights created by Code § 65.2-309 when a compromise settlement
is reached in a third-party action brought by an injured
employee or her personal representative. 	The trial court’s duty
to compute the amount that an employer may recover under its
lien is not limited to actions in which a verdict is reached and
a judgment is obtained. 	See Circuit City, 243 Va. at 188, 413
S.E.2d at 57. 	Code § 65.2-310 directs the trial court to make
this computation at the employer’s request in “any action”
against a third party brought by an employee or her personal
representative. 	In the event that a judgment is obtained
against a third party, the employer is further protected by the
statute’s requirement that the court order the judgment debtor
to pay the amount of the employer’s lien, minus certain fees and
expenses, from the amount of the judgment. 	Therefore, we
conclude that an employer’s lien rights created by Code § 65.2-
309 may be enforced in any action against a negligent third
party that is resolved by a compromise settlement, irrespective
of whether the action is initiated by an employer, its employee,
or the employee’s personal representative.
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The contrary interpretation advanced by the Administrators
would permit a trial court to refuse enforcement of a lien
created by Code § 65.2-309 when a compromise settlement is
reached in an action brought by an employee or her personal
representative against a third party. 	We reject this
interpretation because the language employed by the General
Assembly in Code 	§§ 65.2-309 and -310 evidences no such intent.
The Administrators' interpretation also would improperly allow
employees who settle their claims against third parties to
shield their recovery from an employer's lien. 	Such a result
would directly conflict with the established principle that an
employee may not prosecute an action against a negligent third
party to the prejudice of an employer's lien rights. 	See Stone
v. George W. Helme Co., 184 Va. 1051, 1058-59, 37 S.E.2d 70, 73
(1946); Skelly v. Hertz Equip. Rental Corp., 35 Va. App. 689,
698, 547 S.E.2d 551, 555-56 (2001).
Based on our holding, we also disagree with the statutory
interpretation rendered by the Court of Appeals in ACB Trucking.
The language of Code §§ 65.2-309 and –310 does not restrict an
employer's right to obtain reimbursement of benefits paid to the
amount that an individual beneficiary has recovered in a third-
party action. 	In the absence of statutory language to that
effect, there is no basis for placing such limits on an
employer's right of recovery under the statutory lien created by
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Code § 65.2-309. 	Thus, to the extent that the holding in ACB
Trucking is inconsistent with the holding we express here, we
overrule that portion of the Court of Appeals' decision.
Finally, we find no merit in the Administrators' argument
that a trial court has discretion under the Virginia Wrongful
Death Act, Code §§ 8.01-50 through –56, to determine whether an
employer may obtain recovery under its lien created by Code
§ 65.2-309. 	The language of Code §§ 65.2-309 and –310 does not
permit any such restriction to be placed on the amount that an
employer may recover under its statutory lien. 	In addition, no
provision in the Wrongful Death Act gives a trial court the
discretion to impose limits on the amount of the employer’s lien
created by Code § 65.2-309.
For these reasons, we will reverse the trial court's
judgment and remand the case for proceedings consistent with the
principles set forth in this opinion.
Reversed and remanded.
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