Central GMC, Inc. v. Lagana

DAVIS, Judge. Appellants Central GMC, Inc. (GMC) and Injured Workers’ Insurance Fund (IWIF) noted this timely appeal from the judgment of the Circuit Court for Prince George’s County granting appellee Debra A. Lagana’s Motion for Summary ¹⁹⁷ Judgment and denying appellants’ Cross-Motion for Summary Judgment. The genesis of the case below was a claim filed by appellee with the Maryland Workers’ Compensation Commission (Commission) seeking compensation benefits from appellants for bodily injuries sustained in a motor vehicle accident that occurred on March 1, 1993. The Commission held a hearing on April 27, 1995.

The resulting Order, dated May 9, 1995, disallowed the claim, based on a finding that appellee had made a binding election of remedies. Appellee appealed to the Circuit Court for Prince George’s County where she filed a Motion for Summary Judgment. Appellants filed a Cross-Motion for Summary Judgment. Initially, in an Order dated August 26, 1996, the trial court denied both motions without a hearing.

In response, the parties filed a Joint Motion to Vacate Order Denying Summary Judgment, which the court granted by an Order dated February 26, 1997. Eventually, the court held a hearing on the competing motions for summary judgment and, in an order dated April 18, 1997, it denied appellants’ Cross-Motion for Summary Judgment and granted appellee’s Motion for Summary Judgment. This appeal followed, in which appellants raise two questions for our review, reframed below: I. Does the unauthorized settlement of an injured employee’s claim against a third-party tort-feasor prior to the filing of a workers’ compensation claim for the same accident constitute a binding election of remedies so as to preclude the workers’ compensation claim?

II

Does the logic of Franch v. Ankney, 341 Md. 350 , 670 A.2d 951 (1996), apply only when an injured employee settles a claim against a third party after filing a workers’ compensation claim for the same accident? We answer both questions in the affirmative and reverse the judgment of the circuit court. ¹⁹⁸ FACTS On the morning of March 1, 1993, appellee sustained bodily injuries in a motor vehicle accident while in.the course of employment with appellant GMC. GMC’s workers’ compensation carrier at the time of' the accident was appellant IWIF. When the accident occurred, appellee was on her way to work in a pick-up truck owned by GMC.

GMC provided the vehicle to appellee in her position as Assistant Parts Manager for the GMC dealership. Appellee testified that the vehicle was provided “to get [her] back and forth to work as part of [her] salary.” The vehicle driven by appellee was struck from behind by a vehicle driven by Tammy Gross. Appellee’s vehicle rolled over and she sustained severe bodily injuries that ultimately resulted in the amputation of her left arm. Immediately after the accident, appellee was taken to the hospital for treatment of her injuries.

She was sedated and unconscious for an entire work week. On March 3,1993, while appellee was still unconscious, GMC submitted the Employer’s First Report of Injury, which, according to appellee, correctly stated that she was operating a company vehicle on her way to work at the time of the accident. Appellant IWIF acknowledged the Employer’s First Report of Injury by letter dated March 4, 1993. The letter indicated that appellee was entitled to receive weekly compensation benefits.

While appellee was still in the hospital, and without any action on her part, IWIF began to issue temporary total disability checks to appellee. After sending approximately seven or eight checks, IWIF sent a letter dated May 3, 1993 to GMC with a copy to appellee, advising both of them that IWIF was denying coverage for the accident. The letter stated, in part: The information received by this office indicates that while the above named was injured, it was not an accidental injury within the meaning of the Workers’ Compensation Law. The Injured Workers’ Insurance Fund cannot accept liability as the result of this incident as no compensable ¹⁹⁹ injury was sustained.

Treatment for this incident may be covered by private health insurance carriers. The letter also suggested that GMC and appellee contact the Commission “for further information and guidance” if they disagreed with IWIF’s decision. IWIF did not issue any more checks to appellee. Appellee returned all of the previously issued checks to IWIF; she had not negotiated any of them.

After IWIF’s denial of coverage, appellee, with the assistance of counsel, 1 pursued a personal injury tort claim against Ms. Gross, the driver of the other motor vehicle involved in the accident (the third party). Ms. Gross’s liability insurer, Nationwide Mutual Insurance Company (Nationwide), extended its full policy limits. On or about June 1, 1993, prior to filing a claim with the Commission for any benefits resulting from the accident, and without having filed a suit against the third party, appellee accepted Nationwide’s policy limits offer. After IWIF’s denial, appellee also proceeded with an under-insured motorist claim against Motors Insurance Corporation (Motors), GMC’s liability insurer.

Discovery in that action indicated that appellee’s use of the GMC vehicle was a result of it being provided as a condition of her employment. Consequently, appellee determined that IWIF’s denial of coverage was in error. Accordingly, appellee filed a claim with the Commission on October 27, 1994 seeking workers’ compensation benefits from GMC and IWIF. In response, and in contrast to its May 3, 1993 denial of coverage, IWIF conceded to the Commission that appellee’s claim was an accidental injury, causally connected to her employment.

Instead, IWIF contended, as both appellants argue now, that appellee’s settlement with Nationwide constituted a binding election of remedies that precluded appellee’s workers’ compensation claim. A commissioner disallowed appellee’s claim for compensation on May 9, 1995, ruling that she had made a binding ²⁰⁰ election of remedies. Appellee appealed to the circuit court wherein she and appellants filed competing motions for summary judgment on the issues before this Court. On April 18, 1997, relying on Franch v. Ankney, 341 Md. 350 , 670 A.2d 951 (1996), the lower court granted summary judgment in favor of appellee, denied appellants’ cross-motion for summary judgment, and remanded the matter to the Commission.

GMC and IWIF appealed from that decision. DISCUSSION We begin our discussion by setting forth the appropriate standard of review and relevant portions of Maryland’s Workers’ Compensation statute. Standard of Review The standard for appellate review of a trial court’s grant or denial of a motion for summary judgment requires us to determine whether the trial court was legally correct. Heat & Power Corp. v. Air Prods. & Chems., Inc., 320 Md. 584, 590-91 , 578 A.2d 1202 (1990); Barnett v. Sara Lee Corp., 97 Md.App. 140, 146 , 627 A.2d 86 , cert. denied, 332 Md. 702 , 632 A.2d 1207 (1993).

In so doing, we review the same material from the record and decide the same legal issues as the circuit court. Nationwide Mut. Ins. Co. v. Scherr, 101 Md.App. 690, 695 , 647 A.2d 1297 (1994), cert. denied, Scherr v. Nationwide Mut.

Ins. Co., 337 Md. 214 , 652 A.2d 670 (1995). Motions for summary judgment are governed by Maryland Rule 2-501, which provides that “[t]he court shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.” Maryland Rule 2-501(e) (1997). See also Bagwell v. Peninsula Regional Medical Ctr., 106 Md.App. 470, 488 , 665 A.2d 297 (1995), cert. denied, 341 Md. 172 , 669 A.2d 1360 (1996)(holding trial court to same requirements as Md. Rule 2-501).

In making its determination, the circuit court must view the facts and all inferences from those facts in the light most favorable ²⁰¹ to the non-moving party. Brown v. Wheeler, 109 Md.App. 710, 717 , 675 A.2d 1032 (1996). When the underlying facts are undisputed, but produce more than one permissible inference, the choice between those inferences should not be made by the court as a matter of law, but should be submitted to the trier of fact. Fenwick Motor Company v. Fenwick, 258 Md. 134, 138 , 265 A.2d 256 (1970).

Suits Against Third-Party Tort-feasors under Maryland’s Workers’ Compensation Statute With the standard of review firmly in place, we now set forth, in relevant part, Md.Code (1991 RepLVol.), Labor and Employment (LE), §§ 9-901, 9-902, and 9-903 (portion of Maryland’s workers’ compensation statute that governs actions against third-party tort-feasors). We cite to these sections throughout our discussion because the language of the statute and the intent of its drafters are key to our analysis. § 9-901. Choice of proceeding against third party or employer. 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, the covered employee or, in case of death, the personal representative or dependents of 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 or death or, in case of joint tort[-]feasors, against each joint tort[-]feasor. § 9-902.

Action against party after award or payment of compensation. (a) Action by self-insured employer, insurer, or fund. — If a claim is filed and compensation is awarded or paid under this title, a self-insured employer, an insurer, the Subsequent Injury Fund, or the Uninsured Employers’ Fund may bring an action for damages against the third party who is liable for the injury or death of the covered employee. ²⁰² (b) Recovery of damages exceeding compensation and other payments. — If the self-insured employer, insurer, Subsequent Injury Fund, or Uninsured Employers’ Fund 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 self-insured employer, insurer, Subsequent Injury fund, or Uninsured Employers’ Fund 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 or, in case of death, the dependents of the covered employee. (c) Action by covered employee or dependents. — If the self-insured employer, insurer, Subsequent Injury Fund, or Uninsured Employers’ Fund does not bring an action against the third party within 2 months after the Commission makes an award, the covered employee or, in the case of death, the dependents of the covered employee may bring an action for damages against the third party. (d) Limitations period. — The period of limitations for the right of action of a covered employee or the dependents of the covered employee against the third party does not begin to run until 2 months after the first award of compensation made to the covered employee or the dependents under the title.

(e) Distribution of damages. — If the covered employee or the dependents of the covered employee recover damages, the covered employee or dependents: (1) first, may deduct the costs and expenses of the covered employee or dependents for the action; (2) next, shall reimburse the self-insured employer, insurer, Subsequent Injury Fund, or Uninsured Employers’ Fund for: (i) the compensation already paid or awarded; and ²⁰³ (ii) any amounts paid for medical services, funeral expenses, or any other purpose under Subtitle 6 of this title; and (3) finally, may keep the balance of the damages recovered. § 9-903. Effect of receipt of amount in action. (a) In general. — Except as provided in subsection (b) of this section, if a covered employee or the dependents of a covered employee receive an amount in an action: (1) the amount is in place of any award that otherwise could be made under this title; and (2) the case is finally closed and settled. (b) Exception. — If the amount of damages received by the covered employee or the dependents of the covered employee is less than the amount that the covered employee or dependents would otherwise be entitled to receive under this title, the covered employee or dependents may reopen the claim for compensation to recover the difference between: (1) the amount of damages received by the covered employee or dependents; and (2) the full amount of compensation that otherwise would be payable under this title.

I Appellants argue that the trial court erred in granting summary judgment in favor of appellee by misconstruing and misapplying the applicable workers’ compensation law regarding the election of remedies and the impairment of subrogation interests as those subjects apply to actions against third parties. Specifically, appellants aver that the plain and unambiguous language of LE § 9-901 requires that an injured employee elect whether to pursue a tort remedy against a third party or to pursue a workers’ compensation remedy against the employer. Appellants argue that Franch is distin ²⁰⁴ guishable from the case at bar because, in Franch , the unauthorized settlement of the third-party suit came after the workers’ compensation claim was filed. In the instant case, the third-party suit was settled before the filing of the workers’ compensation claim.

Appellants contend, therefore, that Franch did not address election of remedies but, rather, it discussed the impairment of subrogation interests. Consequently, appellants conclude that the trial court’s reliance on Franch was misplaced. By contrast, appellee claims that the express language of LE § 9-903 provides a mechanism for recovery by an injured worker from both the worker’s employer and a third-party tort-feasor. Appellee asserts that the statutory basis for such recovery is LE § 9-901, which, as appellants assert, provides for recovery from either the employer or the tort-feasor.

Contrary to appellants’ restrictive view of LE § 9-901, however, appellee contends that the two avenues are not mutually exclusive. Appellee also relies on case law that holds that simply bringing suit against a third-party tort-feasor before filing a claim under the workers’ compensation statute does not constitute a binding election barring the claim for compensation. Appellee misses the point. The pivotal question in this case is whether reaching an unauthorized, settlement in an action against a third party before the filing of a workers’ compensation claim constitutes a binding election of remedies.

We hold that it does. Agreeing with the gravamen of appellants’ thesis, we explain. The purpose of workers’ compensation statutes is to insure that employees who are injured while performing activities that benefit their employer will be compensated without regard to the fault of the employer. The employee, therefore, would not be left without a remedy when injured through no fault of the employer.

The employer benefits by avoiding the disruption of business by burdensome lawsuits. A clearly stated policy of workers’ compensation statutes, including Maryland’s statute, LE § 9-901 et seq., is “to carry out a beneficent purpose and to vest liberally in employees, injured ²⁰⁵ during or in the course of their employment, benefits pursuant to a preset schedule according to the degree and duration of physical impairment.” Ankney v. Franch (Ankney), 103 Md.App. 83, 91 , 652 A.2d 1138 (1995), rev’d on other grounds, Franch v. Ankney (Franch), 341 Md. 350 , 670 A.2d 951 (1996). The benevolent objective of workers’ compensation statutes is the polar principle in determining the rights of the parties. Ankney presented the issue of how to achieve the beneficent purpose of the Maryland statute without impinging upon an employer’s right to be reimbursed by a third party who has caused injury.

Although reversing on other grounds in Franck, the Court of Appeals affirmed our reasoning on the issue. As noted by the trial court here, however, the instant case “is one step beyond Franck (Ankney).” In Ankney, the injured claimant negotiated an unauthorized settlement after filing a workers’ compensation claim and receiving workers’ compensation benefits. We held that the termination of an employee’s benefits by the Commission without any showing that the employer’s insurer had suffered material prejudice as a result of the employee’s settlement with a third party was plainly inconsistent with the legislative intent underlying LE § 9-903, as well as the broader statutory goal of providing full compensation for injured employees. Ankney, 103 Md.App. at 109-10 , 652 A.2d 1138 , rev’d on other grounds, 341 Md. 350 , 670 A.2d 951 (1996).

We held further that, in cases when material prejudice to an employer because of an employee’s unauthorized settlement with a third party is shown, the employer is entitled to a credit for the amount of the prejudice. Id. The employee’s claim may not be abated on account of the prejudice unless the amount of the unauthorized settlement, plus the amount of any prejudice shown, is equal to or greater than the compensation awarded. Id.

Additionally, we stated that, when the employer cannot show prejudice because of an employee’s unauthorized settlement, the proceeds of the unauthorized settlement must be distributed according to the terms of the workers’ compensation statutes. Specifically, the employer would be entitled to ²⁰⁶ reimbursement from the proceeds, and the claim would not be terminated or suspended if the sum of the credits to the employer is less than the compensation that the employee would otherwise be entitled to receive. To supplement our analysis, we include the Court of Appeals’s summary of the relevant workers’ compensation law from Franch : Under the Maryland Workers’ Compensation Act, an employer is generally required to pay workers’ compensation benefits to an employee who suffers an accidental personal injury in the course of employment, regardless of whether the employer is at fault for the injury. Where, as here, the employee’s injury resulted from the tortious conduct of a third-party [sic], the statute grants the employer the right to sue the third-party [sic] to recover an amount equal to the benefits the employer has been required to pay the employee because of injury.

The employer has the exclusive right to pursue a cause of action against the third-party tort[-]feasor for two months. Thereafter, the employee also has the right to bring an action against the third-party [sic], but the employer retains subrogation rights in the employee’s claim. The employer’s subrogation interest in the third-party claim acts as a “statutory hen” on any recovery the employee may obtain from the third party. In other words, if the employee recovers