Missouri: Court Takes Away a Subrogation Credit

The Commission went too far to resolve a subrogation dispute after a  third party settlement and violated due process of the claimant’s spouse when she was not a party to the comp claim.  Graham v.  Latco Contractors, 2015 MO App. Lexis 379 (lexis.com), 2015 MO App. Lexis 379 (Lexis Advance) (April 7, 2015)

Mr. Graham persuaded the Commission that he had been permanently and totally disabled since 2000 as a result of building and maintaining chicken houses and being exposed to chemicals and excrement ammonia during an employment of about 5 years.  He developed “twitchy” airways and sensitivity to common smells.  Claimant testified that he built a new house in Piedmont, Missouri where he could stay in a “control” room in the basement watching television.  His wife testified that the repeated exposures caused her new husband’s mental condition to deteriorate, that he has poor anger management skills, and that when she married him he was “good looking” and now he had gained a lot of weight and lost his teeth.  Claimant and his wife were paid together on a single check third party settlement.

The employer paid more than $50,000 in benefits and was found liable for permanent total weekly benefits. Accrued PTD benefits at the time of the award was nearly $225,000.  The comp carrier, Legion, went into insolvency in 2003 and the case went to the guarantee fund (MIGA).  The comp award was issued in 2013.  The ALJ found the employer was entitled to a credit based on a 287.150.3 (lexis.com), 287.150.3 (Lexis Advance) subrogation lien as a result of a third party settlement with Tyson Foods and the carrier would not be required to pay future installment  PTD benefits for several years after the award because of the size of the third party settlement.  Cf. Huff v. Jones Financial, 2014 MO WCLR Lexis 24 (lexis.com), 2014 MO WCLR Lexis 24 (Lexis Advance) (allowing a credit on future installments).  The Commission affirmed the conclusion of law that the entire settlement was subject to subrogation.  The civil suit asserted loss of consortium which was not subject to subrogation.  The commission noted that there was no allocation and there was “nothing more than unilateral assertion by the employee's attorney.”  2014 MO WCLR Lexis 52 (lexis.com), 2014 MO WCLR Lexis 52 (Lexis Advance).  The Commission affirmed, relying upon Ryder Integrated Logistics Inc. v. Royse, 125 F. Supp. 2d 375 (lexis.com), 125 F. Supp. 2d 375 (Lexis Advance) (E.D. Mo. 2000) which found no spousal portion of the settlement when the settlement contained no allocation.

The court found the employee’s argument persuasive.  Legion cannot assert an interest in the entire net recovery in the third party case because the finding was unconstitutional.  The court of appeals found that “It would be a violation of due process to permit the Commission to affect Wife’s rights and interests in a proceeding to which she is not, and cannot be made, a party” and reversed the Commission’s adjudication of the subrogation dispute.  The court notes other circuit court remedies had been available such as intervening in the third party suit, filing a separate suit, or seeking a declaratory judgment.  Doss v. Howell-Oregon Electric, 158 S.W.3d 778 (lexis.com), 158 S.W.3d 778 (Lexis Advance) (Mo. App. 1995).  Equally important, though, the court finds Legion cannot assert any interest based on the subrogation statute because it has no standing after it went into liquidation. MIGA provides limited recovery and has caps on recovery of claims.  §375.775 (lexis.com), §375.775 (Lexis Advance). MIGA has about $28 million in reserves last year to cover all claims of numerous work comp carriers that have gone into liquidation.   The court found MIGA was not a proper party to the claim and it was error for the Commission adjudicate its interests.

Source: Martin Klug, Huck, Howe & Tobin. Read Martin Klug’s Mo. Workers’ Comp Alerts.

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