CONWED CORPORATION, а Delaware corporation, Plaintiff, v. UNION CARBIDE CHEMICALS AND PLASTICS COMPANY, INC. (f/k/a Union Carbide Corporation), a New York corporation, Defendant and Third-Party Plaintiff, v. MacArthur Company, a Minnesota corporation, Third-Party Defendant.
No. CX-00-2200.
Supreme Court of Minnesota.
Oct. 4, 2001.
634 N.W.2d 401
Foley & Lardner, Trevor Will, Mark Velguth, Michael Rosenberg, Milwaukee, WI, Cousineau, McGuire & Anderson, Michael Barrett, James Waldhauser, Thomas Kieslbach, Minneapolis, for defendant.
Pustorino, Pederson, Tilton & Parrington, Jonathan P. Parrington, Minneapolis, MN, for third-party-defendant.
OPINION
BLATZ, Chief Justice.
The issues before this court arise from five certified questions from the United States District Court for the District of Minnesota regarding plaintiff-employer Conwed Corporation‘s right to bring claims against a former asbestos manufacturer under
We hold that Conwed may bring subrogation claims only on behalf of identified employees who have a compensable injury and to whom Conwed has a present duty to pay workers’ compensation benefits. We also hold that Conwed is entitled to seek prejudgment interest and answer the five certified questions in accordance with these holdings.
From 1965 to July 1974, Conwed used Union Carbide‘s Calidria, a chrysotile asbestos fiber, to make ceiling tiles in Conwed‘s Cloquet, Minnesota plant. Although Conwed also obtained asbestos fibers from other sources, an estimated 75% of the amount used during this period was Union Carbide‘s Calidria. In or around 1986, Conwed, which is self-insured, began receiving asbestos-related workers’ compensation claims from former Cloquet-plant employees who were exposed to asbestos. By its estimаte, Conwed has paid a total of about $4 million to date to approximately 278 former employees.
On June 12, 1992, Conwed filed an action in United States District Court for the District of Minnesota under
Conwed asserts in this action that its medical research and discovery indicate it will have to pay a great deal more in future workers’ compensation benefits to many of its former employees. To support its claims, Conwed retained Dr. Philip Harber, an occupational medicine and pulmonary epidemiologist from the UCLA School of Medicine. Dr. Harber reviewed Conwed‘s employment records and looked at the medical records of 215 employees who had brought workers’ compensation claims. He then identified approximately
To prove that Conwed would be financially liable for virtually all of these illnesses, Conwed retained retired Minnesota Assistant Chief Administrative Law Judge Jack Wallraff as an expert witness. Having reviewed Conwed‘s prior workers’ compensation settlements and legal precedent stemming from unrelated asbestos litigation, Judge Wallraff is prepared to testify “concerning the possibility of future monetary exposure to Conwed,” and will render an opinion that Conwed will be liable for virtually all workers’ compensation claims resulting from the 1965-1974 use of Union Carbide‘s Calidria.
In August 2000, Union Carbide made several dispositive motions, including a motion to dismiss for failure to state a claim upon which relief can be granted based on Conwed‘s failure to list in its complaint each individual employee for whom it seeks payment. In two partial summary judgment motions, Union Carbide sought first to “preclud[e] Conwed from seeking to recover estimates of future payments to hypothetical claimants,” and second, to prevent Conwed from recovering prejudgment interest from Union Carbidе. In a November 2000 hearing on the motions, Judge Donald D. Alsop of the United States District Court for the District of Minnesota orally declined to grant the motion to dismiss, but did not rule on the other motions. Instead, Judge Alsop proposed certifying questions to this court and, after obtaining the parties’ input, ultimately certified the following five questions as determinative of the issues in this case and without controlling authority in Minnesota law:2
- Can an employer pursuing a claim under
Minn. Stat. § 176.061, subd. 5 andsubd. 7 against an alleged third party tortfeasor collect payments that the employer expects to pay in the future to employees who have filed workers’ compensation claims when the employer has settled with the employees and the settlement is subject to being reopened should the employees’ injuries progress beyond what was provided for in the settlement? - Can an employer pursuing a claim under
Minn. Stat. § 176.061, subd. 5 andsubd. 7 against an alleged third party tortfeasor collect payments that based on scientific projections the employer expects to pay in the future to known employees already exposed to a hazardous substance, when the disease resulting from such exposure is latent and the employees are not yet physically disabled making them currently eligible to file workers’ compensаtion claims?
Can an employer pursuing a claim under Minn. Stat. § 176.061, subd. 5 andsubd. 7 against an alleged third party tortfeasor collect payments that based on scientific projections the employer expects to pay in the future to known employees exposed to a hazardous substance when the employees are physically disabled from such exposure and currently eligible to file workers’ compensation claims, but have not yet filed workers’ compensation claims?- Does
Minn. Stat. § 176.061 allow an employer to prove a claim for subrogation against an alleged third party tortfeasor on behalf of a substantial number of employees as one claim or several categories of claims, rather than proving the claims of hundreds or thousands of employees individually, when the employees’ injuries and the harms to which they were exposed were similar? - Does
Minn. Stat. § 549.09, subd. [1](b)(1) permit an employer to collect prejudgment interest when the employer is pursuing a third party claim underMinn. Stat. § 176.061 against an alleged third party tortfeasor?
Certified questions are matters of law that we review de novo. In re Butler, 552 N.W.2d 226, 229 (Minn. 1996). We have recognized that provisions of Minnesota‘s workers’ compensation statute should not be construed in isolation, but must be considered in light of related provisions of the statute. Allstate Ins. Co. v. Eagle-Picher Indus., 410 N.W.2d 324, 327 (Minn. 1987).
I.
It is useful to begin with an overview of the subrogation rights created and preserved by the Minnesota Workers’ Compensation Act, which is codified at
When a compensable injury is caused by a party other than the employer, the Act gives the employee a right to workers’ compensation benefits from the employer while preserving the employee‘s common law right of action against the tortfeasor. Gleason v. Geary, 214 Minn. 499, 507, 8 N.W.2d 808, 812 (1943);
If an injury or death for which benefits are payable is caused under circumstances which created a legal liability for damages on the part of a party other than the employer, * * * legal proceedings may be taken * * * by the employer * * * against the other party to recover damages * * *.
Minnesota Statutes § 176.061, subd. 5(a) goes on to state in relevant part:
If the injured employee or the employee‘s dependents or any party on their behalf receives benefits from the employer * * * or institutes proceedings to recover benefits or accepts from the employer * * * any payment on account of the benefits, the employer * * * is subrogated to the rights of the employee or the employee‘s dependents * * *.
In addition to its subrogation rights under subdivisions 5 and 5(a), an employer has a separate cause of action under
[T]he employer * * * has a separate additional cause of action against the third party to recover any amounts paid for medical treatment or for other compensation payable under this section resulting from the negligence of the third party[.] * * * [T]he amount recovered by suit or otherwise as reimbursement for medical expenses or other compensa
tion shall be for the benefit of the employer * * * to the extent that the employer * * * has paid or will be required to pay compensation or pay for medical treatment of the injured employee and does not affect the amount of periodic compensation to be paid.
Although subdivision 7 creates a separate cause of action in the employer, it does not alter “the allocation of employer and employee rights inherent in the statutory scheme of section 176.061.” Hodder, 426 N.W.2d at 838. The employer‘s recovery is still subject to the subdivision 6 distribution formula. Hodder, 426 N.W.2d at 838.
II.
Against this backdrop, we begin with Certified Question No. 1 and determine whether Conwed may seek payment from Union Carbide for compensation that may eventually be payable to employees who have settled workers’ compensation claims subject to reopening if their conditions should worsen.5 Union Carbide has acknowledged that “[t]o the extent there are any cases where Conwed has paid claimants but not fully settled the existing injury,” Conwed can recover future “payable” benefits for those workers if Conwed can provide sufficient evidence of the bene
At issue in Certified Question No. 2 is whether the employer has a cause of action against the third party under
“Normally, when an employer and its insurer have paid workers’ compensation to the injured employee, the employer is subrogated to the right of the employee to recover from the third-party tortfeasors.” Keenan v. Hydra-Mac, Inc., 434 N.W.2d 463, 465 (Minn. 1989) (emphasis added) (citing Liberty Mut. Ins. Co. v. Nutting Truck & Caster Co., 295 Minn. 211, 215, 203 N.W.2d 542, 544 (1973)); see also
As a general rule, an employee‘s cause of action for workers’ compensation benefits stemming from an occupational disease does not accrue at the time of exposure, but rather when the employee suffers disablement, meaning that the employee‘s illness has led to a wage loss, job transfer, or permanent impairment. Stillson v. Peterson & Hede Co., 454 N.W.2d 430, 433 (Minn. 1990) (wage loss); Flint v. Am. Can Co., 426 N.W.2d 190, 191 (Minn. 1988) (functional impairment); Moes v. City of St. Paul, 402 N.W.2d 520, 527 (Minn. 1987) (job transfer); see also
Thus, the employee does not have an actionable claim against either the employer or the third party when the employee‘s illness has not manifested itself. Based on the fundamental principle that in a subrogation suit the employer has no greater rights than the employee has, neither the employee‘s tort or workers’ compensation suits nor the employer‘s subrogation suit have accrued where the employee has not suffered a compensable injury, as herein described. See Metro. Transit Comm‘n v. Bachman‘s, 311 N.W.2d 852, 854 (Minn. 1981) (citing
Nothing in
IV.
Certified Question No. 3 asks whether Conwed‘s suit against Union Carbide may predate the workers’ compensation claims of former employees who have developed asbestos-related illnesses but have not yet sought workers’ compensation benefits. Conwed argues that it has a presently actionable legal claim based on the language in
An employer‘s obligation to pay benefits * * * exists at the time of the work-related injury, regardless of negligence. Thus, the subrogation rights also exist prior to commencement of a workers’ compensation claim although most certainly there are practical difficulties in asserting a subrogation right before a worker seeks benefits.
486 N.W.2d 768, 770-71 (Minn. 1992) (citation to Allstate, 410 N.W.2d at 327-28, omitted). According to Conwed, subdivision 7 allows an employer to pursue for its own benefit a subrogation action to recover damages for future monetary exposure based on the medical likelihood of disease for a “population” of workers.
We believe Conwed overstates the breadth of subdivision 7. We previously addressed the employer‘s independent cause of action for medical expenses under subdivision 7 in the context of the Minnesota Automobile Insurance No-Fault Act. See Travelers Ins. Co. v. Springer, 289 N.W.2d 131 (Minn. 1979). In Springer, we said that the purpose of subdivision 7 was to give the employer or the employer‘s insurer its own cause of action for medical expenses where the ordinary principles of subrogation prevented the employer from recovering these expenses because the No-Fault Act prevented the employee from recovering them. 289 N.W.2d at 133-34. Because subdivision 7 mentioned medical expenses but not compensation, a gap existed between the amount the employer paid as a result of the tortfeasor‘s negligence and the amount the employer could recover from the tortfeasor.9 Bachman‘s, 311 N.W.2d at 854.
Following our decisions in Springer and Bachman‘s, the legislature expanded subdivision 7 to cover “other compensation payable” in addition to medical expenses.
To read subdivision 7 as recommended by Conwed would not only subject third-party defendants to multiple lawsuits but also would undermine the comprehensive plan in section 176.061. As we said in Hodder:
Employers could in the future entirely bypass the subdivision 6 allocation by suing out their “separate additional” cause of action; if the subdivision 6 formula does not apply to any of the employer‘s subrogation interest, the employee would no longer be assured of at least recovering for himself one-third of the tort recovery after expenses. Nor would employers have to share equitably in the employee‘s cost of recovery. We think this result is neither desirable nor was it intended.
426 N.W.2d at 838. For these reasons, we will not give subdivision 7 the meaning Conwed suggests.
We further reject Conwed‘s argument that Allstate and McDonough require a different result. First, Allstate involved an employee who was both sick and had filed a workers’ compensation claim. 410 N.W.2d at 325. It is therefore of little help in defining whether an obligation for compensation payable exists when there is no past or present obligation to pay workers’ compensation benefits.
Second, the language in McDonough must be taken in context. In that case, two employees suffering from occupational diseases entered Naig settlements with the third-party tortfeasor without notifying their employer‘s insurer. McDonough, 486 N.W.2d at 769. At the time the employees brought their claim against the tortfeasor, their injuries were not compensable under the Workers’ Compensation Act. McDonough, 486 N.W.2d at 770. Due to a change in the law, the employees’ workers’ compensation claims matured prior to settlement with the third party, but they neither notified their employer nor filed workers’ compensation claims against the employer until after the settlement.10 Id. Ultimately, we held that an employee with a compensable injury has a duty to notify the employer when settling a tort claim against a third party regardless of whether a workers’ compensation claim has been filed. Id. at 770-71. Even though a third-party plaintiff in a subdivision 5 action has a duty to notify a subrogee of a pending settlement prior to commencement of a claim for workers’ compensation, it does not follow that sub-
V.
Turning then to Certified Question No. 4, we are asked to determine whether ”
An action against a third-party tortfeasor may be maintained by the employee, by the employee‘s dependents in case оf death, or by the employer in its own name or in the name of the employee.
VI.
Certified Question No. 5 asks whether Conwed is entitled to prejudgment interest under
Any balance remaining shall be paid to the employee or the employee‘s dependents, and shall be a credit to the employer * * * for any benefits which the employer * * * is obligated to pay, but has not paid, and for any benefits that the employer * * * is obligated to make in the future.
There shall be no reimbursement or credit to the employer * * * for interest or penalties.
(Emphasis added.)
According to Union Carbide, the last sentence of this subdivision prevents Conwed from collecting any interest—prejudgment or otherwise—from Union Carbide. In support of this argument, Union Carbide relies on Hahn v. Tri-Line Farmers Co-op, in which the Minnesota Court of Appeals “decline[d] to overrule the trial court‘s literal interpretation of the plain language” of subdivision 6(d) and held that employers are prohibited from seeking prejudgment interest from third-party tortfeasors. 478 N.W.2d 515, 527 (Minn. App. 1991), rev. denied (Minn. Jan. 27, 1992). Union Carbide asks this court to adopt this interpretation of subdivision 6(d).
We decline to do so, as the last sentence of
Certified Question No. 5 is expressly centered on
Except as otherwise provided by contract or allowed by law, preverdict, preaward, or prereport interest shall not be awarded on the following:
(1) judgments, awards, or benefits in workers’ compensation cases, but not including third-party actions * * *
Union Carbide argues that Conwed may not recover prejudgment interest under subdivision 1(b)(1) and, in doing so, relies on the Minnesota Court of Appeals’ holding in S.B. Foot Tanning Co. v. Piotrowski that a subrogation action is not a third-party action. 554 N.W.2d 413, 420-21 (Minn. App. 1996), rev. denied (Minn. Dec. 17, 1996). In Piotrowski, the court of appeals reversed the trial court‘s award of prejudgment interest to the employer in its subrogation action against the third-party tortfeasor, concluding that:
Although the underlying action in this case is [the employee‘s] suit against a third-party tortfeasor, [the employer‘s] action to collect its subrogation interest was brought pursuant to the workers’ compensation statute. Thus,
Minn. Stat. § 549.09, subd. 1(b)(1) , applies to prohibit an award of prejudgment interest in this case.
Piotrowski, 554 N.W.2d at 421 (citation omitted). Based on this holding, Union Carbide argues that subdivision 1(b)(1) prohibits the recovery of prejudgment interest in the employer‘s subrogation action, which, unlike the employee‘s direct suit against the tortfeasor, is purely statutory, does not stem from the common law, and is not a true third-party claim.
We find nothing in section 549.09, subdivision 1(b)(1) that distinguishes between a third-party action that existed at common law and one that is a creature of statute. Subdivision 1(b)(1) deals exclusively with workers’ compensation suits; thus, according to a plain reading, the phrase “workers’ compensation actions, but not including third-party actions” refers to any third-party action that arises in the context of the workers’ compensation statute. Under
Even if the true third-party action were the employee‘s suit against the third-party tortfeasor, the employer‘s subrogation suit is also against the third party and is founded upon the employee‘s right to tort recovery from the third party. Because the employee‘s claim always provides the underpinning for the employer‘s subrogation action and because the employee is undisputedly entitled to prejudgment interest, the plain meaning of subdivision 1(b)(1) warrants the award of prejudgment interest on benefits recovered in the employer‘s subrogation action. Certified Question No. 5 is answered in the affirmative.
Certified questions answered.
GILBERT, Justice (concurring in part and dissenting in part).
I concur with the majority opinion in regard to prejudgment interest, but I respectfully dissent from the remainder of the opinion. The practical effect of the majority opinion will prolong these proceedings and require an endless series of up to 1,639 separate subrogation claims. Each claim will be fraught with separate statute of limitation disputes and faded memories of witnesses trying to recall what happened years before. This will cause considerable strain on our judicial system and increase all parties’ costs of litigation. Since Conwed produced credible and unrefuted expert scientific testimony, as the plaintiffs did in Sentinel Management Co. v. Aetna Casualty & Surety Co., 615 N.W.2d 819 (Minn. 2000), it should be allowed to proceed now with its claims. Conwed‘s expert merely extrapolated from the number of known asbestos-related diseases currently manifested in Conwed employees to project the number of future manifestations. As in Sentinel, where the plaintiffs’ expert extrapolated from positive asbestos samples from 5 rental units in an apartment building to conclude that
The timing for these claims is especially important in this case because it appears that Union Carbide Chemicals and Plastics Company (Union Carbide) is trying to have it both ways procedurally. On the one hand, Union Carbide has pleaded the statute of limitations as an affirmative defense against Conwed‘s claim in the underlying action in U.S. District Court. In that proceeding, Union Carbide is arguing that Conwed has waited too long and its claim should be time barred. Then, in this case, to the contrary, Union Carbide is arguing that Conwed‘s subrogation claims are premature or have been brought too soon because no payments under the Workers’ Compensation Act have actually been made and some claims have not yet been filed. However, in this case, although a Frye-Mack type hearing has not yet been held, see generally Sentinel, 615 N.W.2d at 824 (describing such a test), there is credible evidence indicating that Conwed has been exposed to a potentially significant asbestos contamination related workers’ compensation liability. There is obviously a major factual dispute as to the injury and amount, but these issues would be resolved by the fact finder.
Conwed‘s evidence consists not only of expert scientific testimony, but ample evidence that other employees working in the same plant, at the same time, have developed significant compensable diseases under the Workers’ Compensation Act. Already, 215 Conwed employees have filed separate workers’ compensation claims based on diseases they contracted from the asbestos contamination in the plant where they all workеd. Conwed has paid out approximately 4 million dollars in benefits to 161 of those filing these claims. Conwed estimates that the projected damage exposure for the remaining 1,639 employees ranges between 44.3 and 71.3 million dollars.
This asbestos contamination occurred when Union Carbide allegedly sold approximately 7,300 tons of Calidria asbestos to Conwed between 1965 and July of 1974. The asbestos was incorporated by Conwed into certain ceiling tile products manufactured by Conwed. An epidemiologic study of Conwed workers completed in 1987 found that those workers demonstrated a high frequency of pulmonary abnormalities associated with asbestos exposure.5
Dr. Philip Harber, a preeminent occupational medicine and asbestos epidemiologist from UCLA School of Medicine, conducted a research project into the future health experience and workers’ compensation costs associated with the Conwed workers as a result of their exposure to Union Carbide‘s Calidria asbestos. Dr. Harber prepared a scientific projection of the future asbestos-related symptoms that will occur among the Conwed employees as a result of еxposure to Union Carbide‘s asbestos. These projections were based on the experience that had already occurred and was prepared only for those workers who had been employed for a substantial period of time while Union Carbide asbestos was supplied to Conwed. Dr. Harber then prepared annual projections, based on epidemiologic models and data, for the asbestos-related disease experience among Conwed workers from 1989 to the year 2030. As discussed earlier, this extrapolation from already existing asbestos-related disease experience to predict future experience provides adequate support for Conwed to proceed with its claims.
Subdivision 6 further reinforces the right to a separate cause of action against the other party that an employer has. It provides a distribution formula for reimbursement of costs of collection including payment of attorney fees; for one-third of the remainder to be paid to the injured employee without being subject to any right of subrogation; for reimbursement of the employer, out of the balance remaining, in an amount equal to all benefits paid under this chapter or on behalf of the employee or the employee‘s dependents by the employer; and for the remaining balances to be paid to the employee or employee‘s dependents. Id., subd. 6. After the costs of collection, the employees receive all the proceeds, with the emplоyer gaining a credit for any workers’ compensation benefits it is obligated to pay, but has not paid, and for any benefits that the employer or the special compensation fund is obligated to make in the future. Id. Importantly, subdivision 6(b) provided payment of one-third of the remainder to an injured employee “without being subject to any right of subrogation.” Id., subd. 6(b). This language is another significant legislative indicator of an employer‘s right of action irrespective of subrogation.
Similarly, subdivision 7 grants an employer “a separate additional cause of action against the third party” relating to medical treatment for the direct benefit of the employer “to the extent that the employer or the special compensation fund has paid or will be required to pay compensation or pay for medical treatment of the injured employee * * *.” Id., subd 7. (emphasis added). This element (“will be required to pay“) is a factual matter traditionally left to the sound discretion of a fact finder, not an appellate court.
The Hodder case cited by the majority in relation to subdivision 7 is nondispositive, and the reference to the subdivision 6 distribution formula supports Conwed‘s claim rather than eliminates it. The majority cites Hodder v. Goodyear Tire & Rubber Co., 426 N.W.2d 826 (Minn. 1988), to the extent that an employer‘s recovery is still subject to the subdivision 6 distribution formula. However, immediately following that proposition, we held in Hodder that “[i]n those instances where the employee does not or cannot maintain a third-party action, subdivision 7 continues to give the employer, as in Springer, the right to recover its benefits paid and payable.” Hodder, 426 N.W.2d at 838 (citing Travelers Ins. Co. v. Springer, 289 N.W.2d 131 (Minn. 1979)).
As in any litigation involving proof of causation and the prediction of future damages, there are always difficulties of proof, and both parties face some risk. Conwed‘s risk may be that a judgment now would be less than its ultimate exposure, and then it would have no further subrogation right in indemnification claims. A fact finder may not believe the experts based on the fact that a large number of employees have not yet filed claims or manifested symptoms of asbestos-related diseases. Credibility of experts will no doubt affect the ultimate outcome. Union Carbide could put forth strong arguments that may tend to diminish or eliminate Conwed‘s claims in the eyes of a jury. Union Carbide‘s risk is that they are assessed a damage amount that exceeds what Conwed will actually pay out. Maybe Conwed decided to proceed now, being mindful of these risks but desiring to seek a resolution of its claim while memories are still fresh. Union Carbide obviously desires to defer not only a decision, but the requirement of making a payment now, and would rather divide the claims into a series of separate subrogation and indemnity claims. Neither option is perfect, but a jury and trial court are better equipped to weigh and consider these countervailing facts, arguments, and probabilities.
We have previously decided how an employer‘s future workers’ compensation contribution can be determined. It is to be reduced to its present value as of the date of the contribution judgment in the tort action and the contribution claim is to be paid in a single, lump sum payment. Wilken v. International Harvester Co., 363 N.W.2d 763, 767 (Minn. 1985). In so deciding, we emphasized the advantages of a final one-time resolution of the contribution claim at the time of the judgment and noted that these kinds of contribution claims should not linger on for the lifetime of the employee. Id. We also responded to the inherent difficulty of proof by stating that “[t]he contribution award, like the tort verdict, necessarily involves approximations based on reasonable assumptions. True, the employee next year may die or recover, but these uncertainties do not prevеnt the measurement of a lump sum verdict against the third-party tortfeasor.” Id. at 767-68. As we suggested in Wilken, special interrogatories could be submitted to the jury for a separate finding on liability, causation, and damages. Id. at 768. Then the court could apply an appropriate discount factor, by affidavit, to determine a present value of this claim. Id.
Accordingly, the certified questions should be answered in the affirmative. We should recommend that the U.S. District Court hold a Frye-Mack hearing on this state law question and determine