Podgurski v. OneBeacon Insurance

Opinion by CATHELL, J. This case arises out of a complaint for declaratory judgment, together with a motion for summary judgment, filed by Deborah Podgurski, appellant, against OneBeacon Insurance Company, appellee, in the Circuit Court for Frederick County. Appellant opposes appellee’s assertion that appellee was entitled to a full reimbursement of the monies it paid to appellant ¹³⁶ as workers’ compensation benefits for an injury appellant sustained when she fell during the course of her employment, where the appellant, in a separate tort action against a third party arising out of the same incident that caused her compensable injury, recovered from the third party tort-feasor money damages in excess of the amount of compensation paid to her by the employer/insurer. The case was argued before the Honorable G. Edward Dwyer, Jr. on April 17, 2002. Appellant argued that appellee had no right to reimbursement and, in the alternative, that appellee’s right to reimbursement was at least limited to the same percentage by which appellant herself was limited as to the recovery of a settlement that was reduced as a result of the bankruptcy of the third party tort-feasor whose conduct was the cause of appellant’s injuries.

Appellee argued that the plain meaning of Maryland Code (1991, 1999 Repl.Vol.) § 9-902 of the Labor and Employment Article (hereinafter, § 9-902) 1 entitled it to receive a full reimbursement for the compensation award it paid to appellant from appellant’s recovery from the third party tort-feasor. Judge Dwyer granted judgment in favor of appellee. On May 17, 2002, appellant filed a Notice of Appeal to the Court of Special Appeals. This Court, on December 11, 2002, on our own initiative, granted a writ of certiorari to undertake review of this issue before the intermediate appellate court acted.

Podgurski v. Onebeacon, 372 Md. 132 , 812 A.2d 288 (2002). Appellant presents three questions for our review: “A. Does an order of a United States Bankruptcy Court limiting a claimant’s third-party recovery likewise limit the subrogation claim of a workers’ compensation insurer under the Maryland Workers’ Compensation Law? ¹³⁷ “B. Does the ‘made whole doctrine’ apply to, and therefore limit or bar, the subrogation claim of a workers’ compensation insurer? “C. Do other equitable considerations apply to limit an insurer’s subrogation claim under the Maryland Workers’s Compensation Law?” Appellee rephrases the issue: “1. Did the Circuit Court for Frederick County err in finding that a workers’ compensation insurer is entitled to recover the full amount of its lien from any third party recovery received by the injured worker?” .While we resolve the issue, we do not specifically address each of appellant’s questions. We hold that the essential question here presented, i.e., whether under its right of subrogation outlined in § 9-902, appellee can recover the entire amount of the money it paid to appellant pursuant to a workers’ compensation claim after appellant received a greater amount from a third party tort-feasor, is directly governed by the plain meaning of § 9-902(e)(2).

As such, we hold that the Circuit Court for Frederick County was correct in its finding that under the provisions of the Maryland Workers’ Compensation Act, specifically § 9-902(e)(2), appellee, a workers’ compensation insurer, was entitled to recover the full amount of its lien from appellee’s actual recovery received from a third party tort-feasor. I. Facts The parties in the case sub judice, pursuant to Maryland Rule 8-501 (g) 2 and in lieu of filing a record extract, agreed to ¹³⁸ stipulate to a statement of facts. The undisputed facts are, in part, as follows: “On April 9, 1997, the Appellant Deborah Podgurski (‘Podgurski’) was employed as a hairstylist by Hairstylist Management Systems, Inc. (‘HMS’), which operated a hairstyling salon within the Montgomery Ward & Co., Inc. (‘Montgomery Ward’), department store located at the Frederick Towne Mall in Frederick, Maryland. While performing her normal duties, Podgurski slipped and fell on water leaking from defective plumbing on the premises and suffered from severe injuries to her knee.

As a result of her fall, Podgurski pursued two claims: a workers’ compensation claim against her employer, HMS, and a third party claim against Montgomery Ward. “At the time of Podgurski’s injury, General Accident Insurance Company of America (‘General Accident’) provided the workers’ compensation insurance coverage for Podgurski’s employer, HMS. Podgurski received workers’ compensation benefits in the total amount of $11,705.51, and General Accident notified Podgurski of its intent to claim a subrogation interest in any amounts recovered in her third party action against Montgomery Ward. Sometime thereafter, Appellee OneBeacon Insurance Company (‘OneBeacon’) succeeded to General Accident’s subrogation interests. “On October 5, 2001, a binding arbitration proceeding was held and an award of arbitration was issued in favor of Podgurski on her third party claim against Montgomery Ward in the amount of $90,000.00, consisting of $8,689.71 in medical expenses, $4,500.00 in lost wages, and the remainder for pain and suffering. “At all times relevant Montgomery Ward was self-insured, and prior to the arbitration of Podgurski’s claim, Montgomery Ward filed for protection under Chapter 7 of the United States Bankruptcy Code. In the administration of Montgomery Ward’s bankrupt estate, the United States Bankruptcy Court for the District of Delaware established a $650 Million insurance distribution pool out of which holders of allowed unsecured claims, such as Podgurski, could be ¹³⁹ paid.

The amount of allowed unsecured claims exceeded the available funds in the distribution pool, as a result of which all claims against the pool were reduced proportionately and Podgurski recovered only a fraction of her arbitration award. The fraction received by Podgurski was established by the bankruptcy court as 29.54% ($26,589.21) of the original $90,000.00 award. “A dispute arose between OneBeacon and Podgurski as to whether OneBeacon was entitled to recover its full lien for worker’s compensation benefits previously paid. OneBeacon asserted that the reduction of Podgurski’s award to 29.54% did not apply to its lien and, therefore, it was entitled to the original lien amount of $11,705.51, less one-third attorney’s fees, which totals $7,803.67. Podgurski claimed that OneBeacon was entitled to 29.54% of their lien, less one-third attorney’s fees, or $2,275.51. “Podgurski filed a complaint for declaratory judgment in the Circuit Court for Frederick County in order to resolve the parties’ dispute.

On April 17, 2002, a hearing was held on Podgurski’s motion for summary judgment before the Honorable G. Edward Dwyer, Jr. Judge Dwyer decided the case in favor of OneBeacon, applying the formula set forth under Maryland Labor and Employment Code Annotated, Section 9-902(e)(2), and awarded OneBeacon its full lien, after deduction of attorney’s fees, of $7,803.67.” II. Discussion A. Background Generally, the Maryland Workers’ Compensation Act (hereinafter, the Act), § 9-101 through § 9-1201 of the Labor and Employment Article of the Maryland Code, requires an employer to pay workers’ compensation benefits to an employee if that employee suffers an accidental personal injury during the course of the employee’s employment, without regard to whether the employer was at fault for the injury. See § 9-501(b). Where a third party’s actions result in the ¹⁴⁰ employee’s injury, the Act grants the employer or its insurer 3 the right to bring suit against the third party tort-feasor in an effort to recover an amount equal to the workers’ compensation benefits paid to the employee for the employee’s injury pursuant to the terms of the Act; any award over the amount previously paid by the employer must be given to the employee.

See § 9-902. For the two months following the award of workers’ compensation benefits to the employee by the State Workers’ Compensation Commission (hereinafter, Commission), the employer has the exclusive right to bring such an action against the third party. See Franch v. Ankney, 341 Md. 350, 357-58 , 670 A.2d 951, 954-55 (1996); Erie Insurance Co. v. Curtis, 330 Md. 160, 164 , 623 A.2d 184, 186 (1993). See also § 9-902(c).

When an employer fails to file within that two-month period, the employee may then bring suit against the third party tort-feasor while the employer retains a subrogation interest in the reimbursement of the workers’ compensation funds it paid pursuant to the Act, which is an interest that “acts as a ‘statutory lien’ on any recovery the employee may obtain from the third-party.” Franch, 341 Md. at 358 , 670 A.2d at 955 (citing Richard P. Gilbert & Robert L. Humphreys, Jr., Maryland Workers’ Compensation Handbook § 16.1-5, 325 (2d ed.1993, 1995 Cum.Supp.).) Section 9-902(e), in turn, directs the distribution of the award received by the employee from the third party. In Bachmann v. Glazer, 316 Md. 405, 412-13 , 559 A.2d 365, 368-69 (1989), this Court stated that: “Subrogation is founded upon the equitable powers of the court. It is intended to provide relief against loss and damage to a meritorious creditor who has paid the debt of another. Milholland v. Tiffany, 64 Md. 455, 460 , 2 A. 831 (1886)....

The rationale underlying the doctrine of subro ¹⁴¹ gation is to prevent the party primarily liable on the debt from being unjustly enriched when someone pays his debt. Security Ins. Co. v. Mangan, 250 Md. 241, 246-47 , 242 A.2d 482 (1968). See also 10 S. Williston, A Treatise on the Law of Contracts § 1265 at 845 (W. Jaeger 3d ed.1967): ‘The object of subrogation is the prevention of injustice.

It is designed to promote and to accomplish justice, and is the mode which equity adopts to compel the ultimate payment of a debt by one, who, in justice, equity, and good conscience, should pay it. It is an appropriate means of preventing unjust enrichment.... ’ “There are three separate categories of subrogation recognized in Maryland: legal subrogation, conventional subrogation, and statutory subrogation. Finance Co. of Am., 277 Md. at 182, 353 A.2d 249 .... Statutory subrogation arises by act of a legislature.” [Emphasis added.] The right of subrogation involved in the case sub judice arises from the provisions of the Workers’ Compensation Act currently codified in § 9-902, 4 and thus falls under the category of “statutory subrogation.” As such, in ascertaining whether appellee should be fully reimbursed pursuant to the provisions of § 9-902(e), we shall engage in a traditional statutory interpretative analysis of that statute.

B. Section 9-902(e)(2) This Court has long stated that “ ‘the cardinal rule [of statutory interpretation] is to ascertain and effectuate legislative intent.’ ” Liverpool v. Baltimore Diamond Ex ¹⁴² change, Inc., 369 Md. 304, 316 , 799 A.2d 1264, 1271 (2002) (quoting Mayor and City Council of Baltimore v. Chase, 360 Md. 121, 128 , 756 A.2d 987, 991 (2000))(intemal citations omitted)(alteration added); see also State v. Bell, 351 Md. 709, 717 , 720 A.2d 311, 315 (1998) (quoting Oaks v. Connors, 339 Md. 24, 35 , 660 A.2d 423, 429 (1995)). The actual language of the statute is the primary tool in first ascertaining legislative intent. Liverpool, 369 Md. at 316 , 799 A.2d at 1271 ; Chase, 360 Md. at 128 , 756 A.2d at 991 ; Marriott Employees Fed. Credit Union v. Motor Vehicle Admin., 346 Md. 437, 444-45 , 697 A.2d 455, 458 (1997); Stanford v. Maryland Police Training & Correctional Comm’n, 346 Md. 374, 380 , 697 A.2d 424, 427 (1997)(quoting Tidewater v. Mayor and City Council of Havre de Grace, 337 Md. 338, 344 , 653 A.2d 468, 472 (1995)); Coburn v. Coburn, 342 Md. 244, 256 , 674 A.2d 951, 957 (1996); Romm v. Flax, 340 Md. 690, 693 , 668 A.2d 1, 2 (1995); Oaks, 339 Md. at 35 , 660 A.2d at 429 ; Mauzy v. Hornbeck, 285 Md. 84, 92 , 400 A.2d 1091, 1096 (1979); Board of Supervisors v. Weiss, 217 Md. 133, 136 , 141 A.2d 734, 736 (1958). Furthermore, where the statutory language is plain and free from ambiguity, and expresses a definite and simple meaning, courts do not normally look beyond the words of the statute itself to determine legislative intent.

Liverpool, 369 Md. at 316-17 , 799 A.2d at 1271-72 ; Chase, 360 Md. at 128 , 756 A.2d at 991 ; Marriott Employees, 346 Md. at 445 , 697 A.2d at 458 . Appellant contends that subrogation rights granted under § 9-902 are governed by the common law principles of equity and that § 9-902 is limited by equitable factors. In addition, appellant relies on the well-settled rule that “[t]he Workmen’s Compensation Act should be construed as liberally in favor of injured employees as its provisions will permit in order to effectuate its benevolent purposes.” Bethlehem-Sparrows Point Shipyard, Inc. v. Hempfield, 206 Md. 589, 594 , 112 A.2d 488, 491 (1955)(citing Watson v. Grimm, 200 Md. 461 , 90 A.2d 180 (1952); Bethlehem-Fairfield Shipyard, Inc. v. Rosenthal, 185 Md. 416 , 45 A.2d 79 (1945))(alteration added); see also Barnes v. Ezrine Tire Co., 249 Md. 557, 561-62 , 241 A.2d 392, 395 (1968)(stating that where ambiguity is ¹⁴³ present in the text of the Act the uncertainty should be resolved in favor of the claimant). While, generally, subrogation may be founded on the equitable powers of the court, this Court does not apply a liberal construction axiom where it is in opposition to the plain meaning of a statute.

In Mayor and City Council of Baltimore v. Cassidy, 338 Md. 88, 97 , 656 A.2d 757, 761-62 (1995), when discussing this principle, we stated: “that the Workers’ Compensation Act ‘ “should be construed as liberally in favor of injured employees as its provisions will permit in order to effectuate its benevolent purposes. Any uncertainty in the law should be resolved in favor of the claimant” ’ (quoting Victor v. Proctor & Gamble Mfg. Co., 318 Md. 624, 629 , 569 A.2d 697, 700 (1990)). It is likewise well settled ... that the court may not disregard the plain meaning of the [Workers’ Compensation] Act in the name of liberal construction, (quoting C & R Contractors v. Wagner, 93 Md.App. 801, 808 , 614 A.2d 1035, 1038 (1992), cert. denied, 329 Md. 480 , 620 A.2d 350 (1993)).” [Alteration added.] See also Lombardi v. Montgomery County, 108 Md.App. 695, 703 , 673 A.2d 762, 766 (1996); Tortuga, Inc. v. Wolfensberger, 97 Md.App. 79, 83, 627 A.2d 56, 58 , cert. denied, 332 Md. 703 , 632 A.2d 1209 (1993).

Moreover, the benevolent purposes of the Act are met when a covered employee receives all the benefits to which she is entitled under the Act. They extend no further. In order to determine whether we should even address the equitable doctrines presented by appellant, we shall examine the threshold issue whether the meaning of the language of § 9-902(e)(2) is plain in directing full reimbursement to appellee, and thus determinative. If and only if § 9-902(e)(2) is ambiguous, do we, as appellant suggests, look to common law equity principles of subrogation or look to the cases in which we have upheld a liberal construction of workers’ compensation laws.

In the case sub judice, it is unnecessary for us to examine these equitable principles as we hold that the language of § 9-902(e)(2) is clear and unambiguously directs the ¹⁴⁴ appellant employee, under the circumstances here present, to fully reimburse the appellee insurer. Specifically, § 9-902(e), the relevant subsection mandating the distribution of damages recovered from the third party, states: “(e) Distribution of damages. — If the covered employee or the dependants of the covered employee recover damages, the covered employee or dependants: (1) first, may deduct the costs and expenses of the covered employee or dependants 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 (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.” [Emphasis added.] We hold that the plain language of § 9-902(e) is clear and unambiguous on its face; any argument that it is ambiguous is without merit. Once an employee recovers damages from a third party tort-feasor and deducts the proper costs and expenses, that employee shall reimburse the insurer or employer for the compensation already paid or awarded by the insurer as an award under the Act. The definitions of these italicized words from § 9-902 are patent.

The Legislature provided no room or circumstance for instituting a limitation or exception permitting, once third party reimbursement is obtained, a reduction or total bar of the reimbursement amount. The Legislature did not elaborate on the damage recovery clause by adding terms such as “sufficient” or “total” to describe the type of damages eligible. It simply stated that once damages are recovered by the employee, reimbursement of “the compensation already paid or awarded” by the insurer is required; there is nothing more. Once money damages are deemed to have been recovered by the employee, the statute mandates repayment of the compensation already paid or ¹⁴⁵ awarded by the insurer.

The Legislature, similarly placed no limitations on the amount that is to be recovered by the employer. Appellee in the case sub judice has already paid $11,705.51 to appellant as compensation under the Act and appellant has actually recovered more than that amount, specifically $26,589.21; appellee is entitled to be reimbursed for the entire $11,705.51. 5 Appellant’s arguments rest on the premise that the theoretical total amount awarded by the arbitration body (or judgment, if the third party case had proceed to trial instead of arbitration) is the amount that will make the injured employee whole. This, however, while it may be time, ignores the clear language of the statute which rests on whether the employee actually recovers damages at all, not on whether the employee recovers all of her possible damages from the third party tortfeasor. In essence the two important figures on which the statute relies are the amount of damages recovered by the employee and the amount of compensation paid by the employer pursuant to the Commission’s decision.

The damages awarded, but not recovered, from the third party do not factor into this equation. Once the employee has received an amount of damages in excess of the award paid by the employer, then the employer is entitled to full compensation, as clearly stated in § 9-902(e). When an employee chooses to avail themselves of the compensation available to them under the statute, their obligation to reimburse the employee/insurer is controlled by the statute. The history of § 9-902 additionally supports such an interpretation, as the relevant language has undergone little substantive change since the 1920s. 6 Section 9-902 was derived from Article 101 § 58 of the former 1957 Maryland Code and ¹⁴⁶ was codified without substantive change into its current incarnation in 1991.

See 1991 Md. Laws. Chap. 8; 1991 Md. Laws. Chap. 21. Page 976 of the revisor’s notes of Chapter 8 of the Laws of Maryland of 1991, referring to the current language of § 9-902, stated: “This section is new language derived without substantive change from the second and third clauses of the first sentence, and the first through fifth clauses of the second sentence, and the first clause of the third sentence of former Art. 101, § 58.” The Legislature originally enacted this portion of the Act under Chapter 800 of the 1914 Laws of Maryland.

That enactment forced employees to choose between filing suit against a third party tort-feasor and filing a claim under the Act; the employee could do one or the other, but not both. See Hubbard v. Livingston Fire Protection, Inc., 289 Md. 581, 587-88 , 426 A.2d 901, 904-05 (1981). The original statute authorized only the employer/insurer to sue third party tortfeasors after workers’ compensation benefits were paid to the employee. In essence, employers/insurers were given the right to recover fully for sums they paid for injuries that were due to the fault of another.

The Legislature enacted Chapter 456 of the Laws of 1920 and Chapter 303 of the Laws of 1922, ¹⁴⁷ respectively, which first allowed an employee to both claim workers’ compensation under the Act and to bring suit against a third party tort-feasor. These amendments are the basis for what is now § 9-902. Since the inception of the 1920 and 1922 amendments, although this portion of the Act has been amended several times, there have been only three major substantive amendments, none of which have a bearing on the outcome in this case. 7 This history and relative stability of the language granting subrogation rights to an employer under this act are supportive of our plain language analysis in the case at bar. First, as previously mentioned, the Legislature originally made the employee choose between exercising the right to sue the third party or the right to file a claim under the Act, only to later amend the statute so that the employer has the exclusive right to file the action against the third party tortfeasor for two months after compensation is awarded to the employee.

The employer was guaranteed recovery of its payment before the