{1} This ease requires us to revisit a provision of the Workers’ Compensation Act, NMSA 1978, § 52-5-17 (1987), and our decision in Montoya v. ARAL Security,
I. Facts and Proceedings
{2} Connie Gutierrez (Worker) was employed as a plumbing inspector for the City of Albuquerque (Employer) until she was injured on July 9,1987. On that day she was inspecting a construction site and fell over materials left at the site by Thermal Control, Inc. She received workers’ compensation disability and medical benefits totaling $52,-163.37 from Employer from July 1987 through September 1992. In April 1990, Worker filed a workers’ compensation claim contesting the amount of her entitlement, and thereafter filed a third-party negligence suit against Thermal Control. In January 1992, Worker and Thermal Control settled the tort action for $140,000, which Worker and Employer agreed, and the workers’ compensation judge expressly found, was a reasonable compromise of the third party claim. Employer then asserted that Section 52-5-17 entitled it to reimbursement from Worker’s settlement proceeds for the full amount of compensation benefits it had paid, minus its proportionate share of the legal fees and costs incurred in her third party suit. See Transport Indemnity Co. v. Garcia,
{3} The workers’ compensation judge heard evidence on the extent of Worker’s tort damages proximately caused by Thermal Control, and determined that she had sustained $367,609.13 in actual tort damages, the elements being $24,969.13 in medical expenses (entirely paid by workers’ compensation), $220,604.00 in total lost wages (only a portion paid by workers’ compensation), and $122,000.00 in pain and suffering (none paid by workers’ compensation). Gutierrez,
{4} In a divided decision, the Court of Appeals reversed, holding that Employer was entitled to full reimbursement of the benefits it had paid to Worker. See
II. Discussion
{5} Section 52-5-17 of the Worker’s Compensation Act is entitled “Subrogation” and provides in relevant part:
The right of any worker ... shall not be affected by the Workers’ Compensation Act ... but the claimant shall not be allowed to receive payment or recover damages for those injuries ... and also claim compensation from the employer. In such case, the receipt of compensation from the employer shall operate as an assignment to the employer ... to the extent of payment by the employer to or on behalf of the worker or employee for compensation or any other benefits to which the worker ... was entitled under the Workers’ Compensation Act....
NMSA 1978, § 52-5-17 (1989, before 1990 amendments) (emphasis added).
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In Montoya, we interpreted this provision to allow an injured worker who receives compensation to pursue a tort action against a non-employer third party who caused the injuries.
This is fair to everyone concerned: the employer, who, in a fault sense, is neutral, comes out even; the third person pays exactly the damages he would normally pay, which is correct, since to reduce his burden because of the relation between the employer and the employee would be a windfall to him which he has done nothing to deserve; and the employee gets a fuller reimbursement for actual damages sustained than is possible under the compensation system alone.
Larson’s § 71.20, at 14-5 to 14-13.
{6} In this case, however, “there is not enough to go around.” Gutierrez,
Of $140,000 recovered in the tort settlement, Worker paid $47,530.70 for attorney fees and related costs. Worker owes another$15,221.78 for doctor’s bills not covered by workers’ compensation. From the balance (approximately $77,000), the City [Employer] seeks reimbursement for all the benefits it has paid out as well as a credit for any benefits it may owe in the future. That reimbursement may well equal or exceed all that is left of the tort settlement. If so, Worker will retain nothing at all or a marginal sum at best.
{7} The Court of Appeals majority reasoned that an employer’s interest is the amount the employer paid, regardless of the elements or the amount of the tort recovery.
{8} Here, the methods of allocation urged by the judge, the parties, and amici were inconsistent to some degree with legislative intent. Specifically, there was a failure to analyze the “extent of payment by the employer ... for compensation” called for in Section 52-5-17 in determining the amount of Employer’s reimbursement. We hold that the employer’s extent of reimbursement for compensation paid is determined by identifying the nature and purpose of the payments made by the employer, and comparing the elements of the tort recovery with those which are duplicative of the employer’s compensation payments. The total of the duplicative payments is the amount which must be reimbursed.
A. Background of Section 52-5-17
{9} Section 52-5-17 sits at the intersection of workers’ compensation law and tort law. The legislature’s broader objective under 52-5-17 was “to achieve an equitable distribution of the risk of loss” and an “equitable allocation of responsibility.” Montoya,
B. Employer’s Interest in Tort Recovery
{10} The legislature intended an employer’s interest in the tort recovery, whatever that interest is called, to be a function of the
{11} A tort recovery is the product of a system designed to make parties at fault pay for the injuries they cause. Justice Ransom described the public policies behind tort recovery in Trujillo:
Our fault system of recovery ... today serves the important social functions of [1] redistributing the economic burden of loss from the injured individuals on whom it originally fell, [2] deterring conduct that society regards as unreasonable or immoral, and [3] providing a vehicle by which injured victims may obtain some degree of compensation and satisfaction for wrongs committed against them and [4] by which society may give voice and form to its condemnation of the wrongdoer.
{12} Workers’ compensation benefits have vastly different objectives: they are not given to make the worker whole. The theory is that industry should bear the burden of injuries sustained by its workers. See Prosser § 80, at 573 (“The theory underlying the workers compensation acts never has been stated better than in the old campaign slogan, ‘the cost of the product should bear the blood of the workman’.” (footnote omitted)). Workers are to receive benefits expediently and without regard to fault, but in return the benefits provide only certain medical expenses and periodic subsistence payments, representing some portion of worker’s former wages, for a prescribed period of time. See Transport Indemnity,
{13} The remedies provided to an injured worker by each system are certainly not interchangeable, and at best overlap only to some extent. When a worker receives a fair but partial tort recovery, it is quite possible that the worker’s tort recovery will not duplicate the extent of compensation benefits paid by the employer. For example, that part of a tort recovery calculated to cover pain and suffering, loss of enjoyment of life, or loss of earning capacity would not overlap or duplicate any workers’ compensation benefits. That part of a tort recovery calculated to cover a worker’s necessary medical expenses,
C. Calculating Employer’s Interest
{14} The employer is entitled to only that part of the tort recovery which represents monies paid that duplicate compensation it has paid or is liable to pay. The judge must start from the presumption that the employer is entitled to full reimbursement, because, as we said in Montoya, “if the worker has dealt with the third party in good faith and at arm’s length, then the net amount paid presumptively would be the amount by which the employer’s liability is reduced.”
rogated interest, and it is the insured’s burden to rebut the presumption with evidence that the recovery includes elements of the cause of action for which there is no right of subrogation). However, a worker who has resolved her third-party suit can no longer be said, as a matter of law, to have been made financially whole. See Montoya,
{15} For example, in this case the workers’ compensation judge determined that Worker proved just over $367,609 in total tort damages needed to make her whole. The judge divided that sum into the following elements:
reasonable medical expenses 5 : $ 24,969 (about 7% of the total tort damages)
lost wages: $220,604 (about 60% of the total tort damages)
pain and suffering: $122,000 (about 33% of the total tort damages)
Worker reached a reasonable compromise settlement of $140,000. Apportioning this settlement in the same manner results in Worker receiving the following elements and amounts:
reasonable medical expenses: $ 9,800 (7% of the $140,000 settlement)
lost wages: $84,000 (60% of the $140,000 settlement)
pain and suffering: $46,200 (33% of the $140,000 settlement)
These breakdowns are illustrated below:
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{16} The next step is to compare the settlement breakdown to the elements of the compensation benefits Worker received. Here, Employer paid $24,969 in medical benefits, which was the total amount of Worker’s reasonable medical expenses. Because Employer paid 100% of these expenses, 100% of any amount that Worker received in tort for those expenses would duplicate benefits Employer paid. Therefore, Employer is entitled to 100% of the amount worker received in tort settlement for medicals, or $9,800.
{17} Employer did not pay the entire amount of Worker’s lost wages. Employer paid about $27,000 6 in disability benefits, which amounts to roughly 12% of the total wages required to make Worker whole ($27,000/$220,604 = .12). Employer is entitled to 12% of the part of Worker’s settlement covering lost wages (.12 x $84,000), or $10,080.
{18} Employer paid nothing to Worker for pain and suffering. Therefore, Employer is entitled to 0% of Worker’s tort settlement for this element. The amount of her settlement intended to compensate for pain and suffering ($46,200) is beyond the reach of Employer. Cf. Swanson v. Champion International,
{19} Employer, then, is entitled to $19,-880 in reimbursement, less its proportionate share of fees and costs. Note that Employer would not be entitled to draw on Worker’s pain and suffering recovery or the remainder of her lost wage recovery to receive full reimbursement for its outstanding medical outlays. See NMSA 1978, § 52-5-17 (employer’s right to reimbursement is limited “to the extent of payment by the employer” under the
Reimbursement
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D. Protecting Employer’s Interest Through Statutory Subrogation
{20} Once the amount of the employer’s interest in the tort recovery has been determined, we believe the legislature intended that amount to be paid or assigned to the employer under principles of subrogation. Compare Montoya,
E. Other Methods of Allocation
{21} We have carefully considered the various methods of allocation advocated by the parties and amici and conclude that they do not fulfill the legislature’s intent. Several of these methods are incorrectly premised on the basis that tort recovery and compensation benefits are freely interchangeable, and do not tie the employer’s right to reimbursement to the extent of compensation paid for each element of a worker’s recovery.
1. Method Advocated by Employer and NMDLA
{22} Employer and amicus New Mexico Defense Lawyers Association (NMDLA) maintain that any tort award a worker receives amounts to double recovery. We have demonstrated that under this interpretation Employer will be erroneously “reimbursed” with pain and suffering proceeds where Employer has paid nothing in satisfaction of this damage element. The legislature did not intend Section 52-5-17 to allow reimbursement to employers of monies which serve tort public policy goals.
2. Method Applied by Court of Appeals Majority
{23} The Court of Appeals majority’s analysis effectively adopted Employer’s position as a premise. It held that “Montoya should be read to mean what the statute says — employers are to get a pro tanto reimbursement from a worker’s tort recovery to the extent that the employer has paid compensation benefits.” Gutierrez,
Under the facts of this case, the reimbursement may well equal or exceed all that is left of the tort settlement. Yet, Worker suffered substantial, lasting injuries (e.g., lost wages, lost earning capacity, pain and suffering), some of which are not compensated at all under workers’ compensation benefits or only partially so. If the City takes the entire tort settlement, Worker will be left with no compensation for these additional injuries. Only the City and Worker’s own attorney would benefit from the settlement. Worker gains nothing for her efforts in pursuing the third-party litigation.
3.Method suggested by Dissent and TLA
{24} Judge Bosson’s dissent suggests, and amicus New Mexico Trial Lawyers Association (TLA) argues for, an allocation of Worker’s tort proceeds based on a determination of comparative fault. See
4.Worker’s Method
{25} One of the allocation methods urged by Worker also fails to comply with the intent of the statute. Worker argues that no reimbursement should occur until the amount received in compensation benefits and from the tort recovery exceeds her total tort damages. She reasons that until made “whole,” there is no windfall. We disagree. This approach unfairly requires an employer to participate in making the injured worker “whole,” which is contrary to legislative intent. Cf. NMSA 1978, § 52-1-8 (1973) (employer who has complied with the Act shall not be subject to any other liability to a worker). The important differences between the purpose and scope of tort recovery damage elements and the purpose and scope of workers’ compensation require that the judge look for duplication or windfall as to each element of each recovery.
5.The Method Employed by the Workers’ Compensation Judge
{26} Worker in the alternative claims that an employer has an equitable right of subrogation under Section 52-5-17, and the judge correctly valued that interest in her case. While we agree that the statute creates a subrogated interest, we are concerned that in other eases the judge’s allocation method might include elements of damage for which Employer paid nothing, and might fail to take into consideration the percentage of lost earnings paid by Employer. Thus the method of allocation may not accurately reimburse “to the extent of payment ... by the employer” as required by the statute.
{27} The method used by the judge was to allocate to Employer a percentage of its outlay equal to the percentage of Worker’s damages received in tort. The judge found the Worker’s tort settlement covered 38% of Worker’s total tort damages, then awarded Employer 38% of its compensation outlay. If a worker settles for a partial tort recovery, the judge’s method would always result in the employer receiving only a proportionate part for its wages and medical expenses outlay. Under our method, in contrast, the employer may well receive a full reimbursement for the benefits it paid despite the fact that a worker’s tort recovery was partial, if
III. Conclusion
{28} We hold that an employer is not necessarily entitled to a full reimbursement from a worker’s fair but partial tort recovery. Instead, an employer is entitled to recoup the amount of a worker’s duplicative recovery. Those monies a worker reasonably receives in tort to compensate for injuries not addressed by workers’ compensation are beyond the reach of the employer. We therefore reverse the decision of the Court of Appeals, and remand this matter to the workers’ compensation judge for proceedings consistent with this opinion.
{29} IT IS SO ORDERED.
Notes
. As Employer conceded at oral argument, the actual figure should reflect a deduction of its proportionate share of the legal expenses of the third-party claim. See also Transport Indemnity Co. v. Garcia,
. The statute was amended and reorganized effective January 1, 1991, but the operative language remains unchanged. See NMSA 1978, § 52-5-17 (effective January 1, 1991).
. Where an injured party's recovery from one comparatively negligent defendant does not make the injured party whole, the injured party has an incentive to bring claims against another negligent party or perhaps to obtain appropriate insurance in anticipation of this result before the injury is sustained.
. Of course, the workers' compensation judge might determine that the worker's settlement was not reasonable or was not reached in good faith. In such a case, the employer is entitled to a full reimbursement because worker has not rebutted the presumption.
. Worker had unpaid medical expenses in excess of this amount, but the workers’ compensation judge apparently found that these were not reasonable and not attributable to Employer.
. Under the statutory scheme in effect at the time, Worker’s disability benefits were to be calculated at two-thirds her former wage (or the statutory maximum) for the period of her temporary total disability (until Worker was determined to have reached maximum medical improvement) and then a percent of that amount corresponded to the degree of permanent disability from that point on. It appears that Worker received the statutory maximum of $270.97 from July 9, 1987 to March 30, 1989 and then received ten percent of that, or $27.09, until she voluntarily discontinued benefits. For this and all figures pertaining to lost wages benefits, the workers’ compensation judge will have more precise data than that available on the record before this Court.
. We do not find any semantic distinctions among the terms "pro tanto,” "reimbursement,” "subrogation,” and “assignment” to be helpful in determining the amount of an employer's reimbursement interest. As noted above, the statute is entitled "Subrogation” but uses the term "assignment” in the text. Courts, not the legislature, have inserted the terms "pro tanto” and "reimbursement” over time. See, e.g., Kandelin v. Lee Moor Contractors,
. We caution the Court of Appeals against application of the plain meaning rule to the Act. See Chavez v. Mountain States Constructors, 1996 NMSC 070 ¶¶ 23-25,