Baltimore Cnty. v. Ulrich

Baltimore County, Maryland v. Charles Ulrich, No. 2541, Sept. Term 2018. Opinion by Arthur, J. WORKERS’ COMPENSATION ACT—STATUTORY LIEN ON EMPLOYEE’S RECOVERY FROM THIRD-PARTY HEALTHCARE PROVIDER If a person other than an employer is liable for a work-related injury, the employee may bring a claim under the Workers’ Compensation Act against the employer or may bring an action for damages against the third-party tortfeasor. Md. Code (1991, 2016 Repl. Vol.), § 9-901 of the Labor and Employment Article.

When an employee pursues a claim for workers’ compensation benefits and also sues the third party for damages, the employer retains a subrogation interest in the reimbursement of benefits that it paid under the Act, including medical expenses. This subrogation interest acts as a statutory lien on the employee’s recovery of damages from a third-party tortfeasor. See id. § 9-902(e). This statutory lien arises only when the employee recovers damages from a third party who is liable for the compensable injury.

A third-party healthcare provider that merely treats an employee’s work-related injury is not liable for that injury, but only for the additional harm resulting from negligent treatment. Accordingly, where an employer has paid for medical services exclusively to treat the compensable injury (not to treat the additional harm from medical negligence), the employer has no subrogation interest in the reimbursement of those medical expenses out of the damages recovered by an employee for the alleged negligent treatment. In this case, the injured employee recovered a monetary settlement in a malpractice action against the third-party healthcare providers that treated his work-related injury. The employee did not recover any sums for medical expenses in the malpractice action.

The employer was not entitled to be reimbursed for medical expenses that resulted solely from the work-related injury—expenses that the employer alone was obligated to pay and that the employee had no legal right to recover from the third-party healthcare providers. Circuit Court for Baltimore County Case No. 03-C-17-001691 REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 2541 September Term, 2018 ______________________________________ BALTIMORE COUNTY, MARYLAND v. CHARLES ULRICH ______________________________________ Nazarian, Arthur, Bair, Gary E. (Specially Assigned), JJ.* ______________________________________ Opinion by Arthur, J. ______________________________________ Filed: January 30, 2020 Pursuant to Maryland Uniform Electronic Legal Materials Act *Chief Judge Matthew J. Fader and Judge (§§ 10-1601 et seq. of the State Government Article) this document is authentic. Christopher B. Kehoe did not participate in the 2020-01-30 13:56-05:00 Court’s decision to designate this opinion for publication pursuant to Maryland Rule 8-605.1.

Suzanne C. Johnson, Clerk Baltimore County, as a self-insured employer, paid for medical services to treat an employee’s work-related injury. The employee later recovered a monetary settlement in a tort action for medical malpractice in the treatment of that injury. The County demanded reimbursement, out of the settlement proceeds, for all medical expenses that it had paid. Both the Workers’ Compensation Commission and the Circuit Court for Baltimore County determined that the County was not entitled to reimbursement for those medical expenses.

The rationale for both decisions was that the medical expenses resulted solely from the work-related injury; the medical expenses would have been incurred even if no malpractice had occurred; and, thus, the malpractice defendants had no liability to pay those medical expenses. In this appeal, Baltimore County contends that the Commission and the circuit court misconstrued the reimbursement requirement codified at Md. Code (1991, 2016 Repl. Vol.), § 9-902(e) of the Labor and Employment Article (“LE”). Because the County has failed to establish any error, we affirm the judgment upholding the Commission’s decision.

FACTUAL AND PROCEDURAL BACKGROUND A. Injury Arising out of Mr. Ulrich’s Employment with Baltimore County On June 20, 2011, Charles Ulrich suffered an accidental injury arising out of his employment as a maintenance specialist for the Baltimore County Department of Recreation and Parks. Mr. Ulrich had been lifting a heavy trash receptacle when he suddenly felt a painful “snap” near his left elbow. Later that day, Mr. Ulrich sought treatment at a facility operated by Concentra Health Services. A family practitioner diagnosed him with a strain of the left biceps and forearm.

He soon returned to work with restrictions on the maximum weight that he could lift or carry, but he continued to experience pain and weakness in his left arm. Five weeks after the injury, a hand specialist examined Mr. Ulrich and determined that he had suffered a complete tear of the left distal biceps tendon. Mr. Ulrich stopped working and promptly underwent surgery to repair the tendon. Mr. Ulrich filed a claim with the Workers’ Compensation Commission regarding his work-related injury.

Baltimore County, a self-insured employer, paid for the surgery and related medical services. The County also paid temporary total disability benefits for an approximately four-month period in which Mr. Ulrich was completely unable to work. Upon his return to work, Mr. Ulrich found himself unable to meet his job responsibilities, even after limiting his duties to try to avoid any heavy lifting. He retired in early 2013 and received disability retirement benefits through the Employees’ Retirement System of Baltimore County.

The Workers’ Compensation Commission later determined that, under LE § 9-610, these benefits satisfied the County’s obligation to pay additional disability compensation under the Workers’ Compensation Act. B. Mr. Ulrich’s Medical Malpractice Action In 2014, Mr. Ulrich filed a malpractice claim against Concentra. He alleged that he “experienced permanent and disabling injuries, a severe shock to his nerves and nervous system, pain, mental anguish, [and] unnecessary procedures, ha[d] been and w[ould] continue to be obligated to receive hospital and medical care, ha[d] been and 2 w[ould] continue to be prevented from engaging in his usual activities, duties and pursuits, ha[d] incurred and w[ould] continue to incur medical expenses in the future, and ha[d] otherwise been hurt, injured and damaged.” His certifying expert opined that Concentra’s employees had breached the standard of care when they failed to diagnose the ruptured tendon at the time of the initial injury. According to the expert, Mr. Ulrich suffered permanent damage to the strength and functioning of his left arm because of the misdiagnosis.

Concentra removed the action to the United States District Court for the District of Maryland, based on diversity of citizenship. Through interrogatories, Concentra asked Mr. Ulrich to “[s]tate in detail all of the injuries and damages, including but not limited to physical, mental, emotional, or financial [injuries and damages]” caused by the alleged negligence. In response, he asserted that the permanent weakness in his left arm, in combination with other ailments, left him unable to perform manual labor. He explained that he had retained an expert to calculate the loss of income resulting from his disability.

He stated that his “future medical needs [were] still being evaluated” at that time. C. Settlement of the Medical Malpractice Action The federal district court referred Mr. Ulrich’s malpractice case for a mediation session before a magistrate judge. In advance of the mediation, Mr. Ulrich’s attorney summarized the nature of his claims in a letter to the court and a settlement demand letter to opposing counsel. In both letters, Mr. Ulrich’s attorney wrote that “the standard of care requires that 3 a distal biceps tendon rupture be surgically repaired as soon as possible and no later than 4 weeks following injury because the tendon becomes entrapped in scar tissue after that time[.]” According to his attorney, a “prompt surgical repair . . . typically returns a patient to full strength and motion[,]” but a “[d]elayed repair or no repair typically results in decreased strength and endurance.” His attorney represented that an expert economist had assessed Mr. Ulrich’s “economic loss” and that Mr. Ulrich would seek non-economic damages because he “suffers daily from his weakened left arm.” His attorney specified: “No medical bills are being claimed, since Plaintiff’s claim in this case was that Mr. Ulrich needed surgery sooner – not that he didn’t need surgery.” Before the mediation, a Baltimore County claims adjuster sent Mr. Ulrich a “lien statement” documenting that, in addition to temporary total disability benefits, the County had paid $17,152.42 for medical services to treat his arm injury.

Mr. Ulrich’s attorney notified the claims adjuster that her client was not seeking to recover medical expenses in the malpractice action and that he did not intend to reimburse the County for those expenses out of the proceeds of the malpractice action. As a result of the mediation, Mr. Ulrich and Concentra reached a confidential agreement to settle the malpractice claim. After deducting attorneys’ fees and other costs of the action, the net proceeds exceeded the total amount of temporary total disability benefits and medical expenses paid by the County. In a letter informing the claims adjuster of the settlement, Mr. Ulrich’s attorney wrote: “As I had told you prior to mediation, no medical bills were claimed in the underlying tort case because Mr. Ulrich would have needed the surgery regardless of the 4 malpractice of Concentra.” To satisfy Mr. Ulrich’s statutory obligation to reimburse his employer for the “compensation already paid or awarded” (see LE § 9-902(e)), the attorney sent the County a check equal to the amount of temporary total disability benefits previously paid, minus the County’s proportionate share of attorneys’ fees and expenses incurred in the malpractice action.

The County declined to accept that amount and demanded that Mr. Ulrich also reimburse the County for medical expenses in the amount of $17,152.42, minus a proportionate share of fees and expenses. D. Decision of the Workers’ Compensation Commission On January 27, 2017, the Workers’ Compensation Commission held a hearing on several issues in Mr. Ulrich’s case, including his obligation to reimburse the County out of the proceeds of the malpractice settlement. Mr. Ulrich had agreed to reimburse the County for the temporary total disability benefits already paid, after a reduction for the County’s proportionate share of fees and expenses. The County contended, however, that it was also entitled to pro rata reimbursement for all amounts it had paid for medical services.

At the hearing, Mr. Ulrich’s malpractice attorney acknowledged that the complaint included allegations that Mr. Ulrich had incurred and would continue to incur medical expenses. She characterized those allegations as “boilerplate” language that she would include “at the beginning” of any malpractice case. The attorney explained that she did not ultimately seek to recover any medical expenses in the action, because she reasoned that the medical care providers could not be held liable for the costs of treating the pre- existing, work-related injury. In Mr. Ulrich’s view, the surgery would have been 5 required even if the healthcare providers had fully complied with the standard of care in all respects.

The Commissioner concluded that the County was not entitled to reimbursement for the cost of medical services necessary to treat the work-related injury. The Commissioner reasoned that the County would be entitled to reimbursement for the cost of any medical services “necessitated as a result of the medical malpractice.” The Commissioner observed, however, that the County did not offer “any evidence” that the medical expenses were “related to malpractice” as opposed to the work-related injury. On February 1, 2017, the Commission issued an order stating that Mr. Ulrich was entitled to retain all proceeds from the malpractice settlement, except that he must reimburse the County for temporary total disability benefits, after deducting a pro rata share of attorneys’ fees and costs. The order stated: “The Employer/Insurer is not entitled to reimbursement for the medical costs paid from this injury.

The treatment was necessary as a result of this injury and not as a result of the delay in treatment.” E. Judicial Review of the Commission’s Decision Baltimore County petitioned for de novo judicial review of the Commission’s decision in the Circuit Court for Baltimore County. Mr. Ulrich moved for summary judgment, contending that the County was not entitled to repayment for medical expenses out of the proceeds of the malpractice settlement. The County opposed his motion and made a cross-motion for summary judgment on the same issue. In support of his motion, Mr. Ulrich asserted that he neither recovered nor sought to recover damages for medical expenses in the third-party malpractice action. 6 According to Mr. Ulrich, the surgery was necessary only because “he had an accidental injury at work that caused a distal biceps tendon rupture.” He asserted that all of his medical expenses became necessary “from the moment he sustained that injury” and, thus, before any malpractice had occurred.

The basis of his malpractice claim, he said, was that “the treatment was delayed, causing a permanent impairment in [the] strength and function of his arm.” He maintained that he “did not and could not, legally, have recovered for the medical expenses” in the third-party malpractice case, because those expenses would have been incurred even if no malpractice had occurred. He contended that his employer could not recover through subrogation “that which wasn’t claimed or recovered in the third-party case.” In response, Baltimore County agreed that the case involved “no dispute as to material facts” and presented “purely” an issue of statutory interpretation. The County did not challenge Mr. Ulrich’s assertions that all medical expenses resulted solely from the work-related injury rather than the subsequent treatment. Instead, the County relied on its interpretation of LE § 9-902(e)(2)(ii), which generally states that if an employee recovers damages from a third-party tortfeasor who is liable for a work-related injury, the employee must reimburse the employer for “any amounts paid for medical services.” The County contended that, under the “plain and unambiguous language” of LE § 9- 902(e)(2)(ii), an employee who recovers any damages from a third-party tortfeasor must repay all amounts that an employer paid for medical services.

The County argued that the statute included “no exception . . . excusing the employee from reimbursing the [employer] for amounts paid for medical services because such amounts weren’t claimed 7 as damages in the third party action.” At a hearing on the summary judgment motions, the circuit court ruled in favor of Mr. Ulrich. The court explained its decision as follows: The circumstances of this case do not fit within Labor and Employment 9- 902 which presumes that there is a third-party tortfeasor potentially liable for the workplace injury. In fact, the preamble to Labor and Employment Article 9-901 is when a person other than an employer is liable for the injury or death of a covered employee for which compensation is payable under this title. In this case there is no person other than an employer liable for the injury.

The purposes of Labor and Employment Article 9-902 are to prevent the party primarily liable from being unjustly enriched because someone else satisfies the liability and to prevent a Claimant from double dipping. Those concerns are not present here because there are discrete claims. One for the workplace injury and another one for the delayed diagnosis of the workplace injury. The traditional subrogation principles also do not apply in this case.

Medical expenses related to the treatment of the ruptured tendon were not recovered in the medical malpractice case because the tendon was already ruptured. Baltimore County is not in a position to stand in the shoes of Mr. Ulrich to recover medical expenses on the back end of a lien against the medical malpractice settlement when Mr. Ulrich would not have been entitled to those medical expenses in the medical malpractice case. The court concluded, therefore, that the County was not entitled to be reimbursed for medical expenses out of the proceeds of the third-party settlement. On September 5, 2018, the court issued an order granting Mr. Ulrich’s motion for summary judgment and denying Baltimore County’s cross-motion, for the reasons stated at the hearing.

The court granted judgment in favor of Mr. Ulrich in the judicial review action. Baltimore County noted a timely appeal from the judgment. 8 DISCUSSION In this appeal, Baltimore County contends that the decision of the Workers’ Compensation Commission and the judgment of the circuit court are “erroneous as a matter of law.” The County asserts that it is “clearly entitled” to reimbursement for medical expenses that it paid in the amount of $17,154.42, minus a proportionate share of fees and costs. The County presents a single question for review: Under LE §9-902 (e), was Baltimore County entitled, as a matter of law, to reimbursement of the funds it paid for medical expenses in Ulrich’s workers’ compensation claim out of the settlement proceeds from his medical malpractice case arising from care and treatment for the same injury? Upon judicial review of a decision of the Commission, the court must determine whether the Commission “misconstrued the law and facts applicable in the case decided.” LE § 9-745(c)(3).

In the proceeding, “the decision of the Commission is presumed to be prima facie correct[.]” LE § 9-745(b)(1). This presumption of correctness, however, does not extend to legal determinations. Montgomery Cty. v. Deibler, 423 Md. 54, 60 (2011). The court should not uphold the decision if it is premised solely upon an error of law.

See LE § 9-745(e); Pro-Football, Inc. v. McCants, 428 Md. 270, 283 (2012). On review of the grant of summary judgment in a judicial review action, the appellate court considers the same matters decided by the trial court to determine whether the ruling was legally correct. Central GMC, Inc. v. Lagana, 120 Md. App. 195, 200 (1998). Review of a ruling on cross-motions for summary judgment typically “begins with the question of whether the [c]ircuit [c]ourt, in reviewing the Commission’s decision, properly determined that there was no genuine dispute as to a material fact.” 9 Uninsured Employers’ Fund v. Danner, 388 Md. 649, 658 (2005).

Here, both parties have stated that there is no factual dispute but only a disagreement over the meaning of a statute. The proper interpretation of a statute is ordinarily a question of law. Board of Educ. of Prince George’s Cty. v. Marks-Sloan, 428 Md. 1, 18 (2012). Accordingly, because the parties appear to “‘agree on the facts, leaving the interpretation of [a statute] as the sole legal issue[,]’ the appropriate standard of review is de novo.” Richard Beavers Constr., Inc. v. Wagstaff, 236 Md. App. 1, 13 (2018) (quoting Johnson v. Mayor & City Council of Baltimore, 430 Md. 368, 376 (2013)).

The statute at issue here is the Maryland Workers’ Compensation Act, codified at Title 9 of the Labor and Employment Article of the Maryland Code. The Act benefits covered employees who suffer accidental injuries arising out of and in the course of employment, regardless of whether the employer was at fault. See LE § 9-501. To that end, the Act obligates an employer to provide medical services and treatment to an employee who is injured on the job (see LE § 9-660) and to pay compensation to an employee who is unable to work because of a compensable injury (see LE §§ 9-614 through 9-642).

The employer’s statutory obligations serve as a substitute for the employer’s common-law liability to pay damages when an employee is injured or disabled because of the employer’s negligence. See LE § 9-509. “The Act, however, neither excuses third[ ]parties from their own negligence nor limits their liability.” Great Atl. & Pac. Tea Co., Inc. v. Imbraguglio, 346 Md. 573, 583 (1997). The General Assembly consistently has preserved the right to sue a third party 10 “[i]f a compensable injury . . . ‘was caused under circumstances creating a legal liability in some person other than the employer to pay damages[.]’” Board of Educ. of Prince George’s Cty. v. Marks-Sloan, 428 Md. at 38 (quoting Clough & Molloy, Inc. v. Shilling, 149 Md. 189, 195 (1925)). “‘[T]he basic concept underlying third party actions is the simple moral idea that the ultimate loss from wrongdoing should fall upon the wrongdoer.’” Id.

(quoting 2 Arthur Larson, Workers’ Compensation Law § 71.10, at 165 (1997)). “‘[I]t is elementary that if a stranger’s negligence was the cause of injury to claimant in the course of employment, the stranger should not be in any degree absolved of his normal obligation to pay damages for such an injury.’” Great Atl. & Pac. Tea Co., Inc. v. Imbraguglio, 346 Md. at 583 n.4 (quoting 2A Arthur Larson, The Law of Workmen’s Compensation § 71.10 (1996)). The basic statutory framework to enforce third-party liability for compensable injuries has existed for nearly a century. See Podgurski v. OneBeacon Ins.

Co., 374 Md. 133 , 145-47 & nn.6-7 (2003). The Act establishes a “two-pronged authorization” to sue a third party after an employee receives workers’ compensation benefits. Hubbard v. Livingston Fire Prot., Inc., 289 Md. 581, 585 (1981) (discussing former Md. Code, Art. 101, § 58). For two months after an award or payment of compensation, the employer has the “exclusive right” to bring suit “to recover from a third party who causes an injury to its employee any workers’ compensation which the employer has been required to pay to its employee because of that injury.” Anne Arundel Cty. v. McCormick, 323 Md. 688, 692 (1991).

Thereafter, the employer and employee share a concurrent right to sue the third party. Id. 11 A “claim of the employer against the third party is by way of subrogation to the rights of the injured worker[.]” Smith v. Bethlehem Steel Corp., 303 Md. 213, 222 (1985). Subrogation “is generally defined [as] ‘the substitution of one person in the place of another, whether as a creditor or as the possessor of any other rightful claim.’” Strong v. Prince George’s Cty., 77 Md. App. 177, 181 (1988) (quoting Government Emps. Ins.

Co. v. Taylor, 270 Md. 11, 21 (1973)). “‘The statute does not create the right of action, but merely creates or preserves the right of subrogation for the benefit of the employer and employee as their interests may appear.’” Smith v. Bethlehem Steel Corp., 303 Md. at 222 (quoting Johnson v. Miles, 188 Md. 455, 460 (1947)). This “right of subrogation against a third party responsible for the employee’s injury exists apart from the Act; but the Act creates a method for enforcing it.” Saadeh v. Saadeh, Inc., 150 Md. App. 305, 314 (2003) (citing Western Maryland Ry. Co. v. Employers’ Liab. Assur.

Corp., 163 Md. 97, 102 (1932)).1 After the two-month period in which the employer has the exclusive right to sue, the Act “allows an injured employee . . . to institute a tort action against a third party tortfeasor who caused the injury.” Board of Educ. of Prince George’s Cty. v. Marks- Sloan, 428 Md. at 33. When the employee sues the third party, “the employer retains a subrogation interest in the reimbursement of the workers’ compensation funds it paid 1 In an action to enforce the employer’s subrogation rights, the employer must prove “that the injuries suffered by its employee were the result of the tort-feasor’s negligence.” Strong v. Prince George’s Cty., 77 Md. App. at 183 . “‘In that suit the measure of damages is the same as if the [employee] had proceeded against [the tort- feasor] in the first place.’” Id. at 182 (quoting Maryland Cas. Co. v. Union Bridge Elec. Mfg.

Co., 145 Md. 644, 650 (1924)). 12 pursuant to the Act[.]” Podgurski v. OneBeacon Ins. Co., 374 Md. at 140 . “The employer’s subrogation interest in the third-party claim acts as a ‘statutory lien’ on any recovery the employee may obtain from the third[ ]party.” Franch v. Ankney, 341 Md. 350, 358 (1996) (quoting Richard P. Gilbert & Robert L. Humphreys, Jr., Maryland Workers’ Compensation Handbook § 16.1-5, at 325 (2d ed. 1993, 1995 Cum. Supp.)). An employer that recovers damages from a third party “is required to pay to the claimant any ‘excess’ recovery” over the amounts that the employer paid in benefits.

Collins v. United Pac. Ins. Co., 315 Md. 141, 145 (1989). Similarly, an employee who recovers damages “must first satisfy the subrogated interest of the [employer] out of the proceeds of any settlement or judgment” before keeping the balance.

Id. This distribution ensures “that a neutral party, the employer, is not made to pay for damages caused by the actual at-fault party.” Podgurski v. OneBeacon Ins. Co., 374 Md. at 147 - 48. At the same time, this distribution “prevent[s] the injured employee from ‘receiving a windfall recovery from both sources for the same damages.’” Ross v. Agurs & Progressive Cas.

Ins. Co., 214 Md. App. 152, 159 (2013) (quoting Parry v. Allstate Ins. Co., 408 Md. 130, 136 (2009)). At present, Subtitle 9 of Title 9 of the Labor and Employment Article governs the “Liability of Third Parties” for compensable injuries.2 Section 9-901 generally “grants 2 LE § 9-902 authorizes suits against a third party by a self-insured employer, a workers’ compensation insurer, the Subsequent Injury Fund, or the Uninsured Employers’ Fund.

Because Baltimore County is a self-insured employer, this discussion is limited to the rights and obligations of injured employees and self-insured employers. If an employee’s death is compensable under the Act, LE §§ 9-901 and 9-902 also authorize suits by the personal representative or dependents of a covered employee. 13 persons injured on the job a choice of remedies when their injury is caused by a third party who is not their employer.” Parry v. Allstate Ins. Co., 408 Md. at 136 . It states, in pertinent part: “When a person other than an employer is liable for the injury . . . of a covered employee for which compensation is payable under this title, the covered employee . . . may: (1) file a claim for compensation against the employer under this title; or (2) bring an action for damages against the person liable for the injury[.]” LE § 9-901.

Next, the Act grants an employer that has paid compensation the right “to sue a third party whose tortious conduct cause[d] an employee’s injuries[.]” Chaney Enters. Ltd. P’ship v. Windsor, 158 Md. App. 1, 18 (2004). “If a claim is filed and compensation is awarded or paid under this title,” the employer “may bring an action for damages against the third party who is liable for the injury . . . of the covered employee.” LE § 9- 902(a). If the employer “recovers damages exceeding the amount of compensation paid or awarded and the amount of payments for medical services, funeral expenses, or any other purpose under Subtitle 6 of this title,” the employer “shall: (1) deduct from the excess amount its costs and expenses for the action; and (2) pay the balance of the excess amount to the covered employee[.]” LE § 9-902(b). The Act then defines the conditions under which the employee may sue the third- party tortfeasor.

LE § 9-902(c) provides, in pertinent part, that if the employer “does not bring an action against the third party within 2 months after the Commission makes an award, the covered employee . . . may bring an action for damages against the third party.” LE § 9-902(d) tolls the running of unexpired period of limitations on the employee’s right of action against the third party during the two-month period when the 14 employer has the exclusive right to sue the third party. See Hayes v. Wang, 107 Md. App. 598, 600 (1996); see also Smith v. Bethlehem Steel Corp., 303 Md. at 216-17 . Subsection (e) directs the distribution of damages recovered by an employee from a third-party tortfeasor. LE § 9-902(e) states, in pertinent part: (e) If the covered employee . . . recover[s] damages, the covered employee ...: (1) first, may deduct the costs and