Travelers Insurance Company appeals from an order distributing the proceeds of the settlement of the employee's third-party claim under sec. 102.29(1), Stats. 1 The trial court divided only part of the settlement according to the statutory fоrmula. We reverse and direct that the trial court, on remand, distribute the entire proceeds according to sec. 102.29(1).
*604 Section 102.29(1), Stats., of the Worker's Compensation Act permits the employee, the employer or the compensation insurer to make a claim against a negligent third party who has caused the employee's injuries. Regardless of who makes the claim, the employer or the compensation carrier is reimbursed for the amount of its expenditures, after payment of the costs of collection and one-third of the recovery to the employee, if the proceeds are sufficient.
The employee, Eleanor Nelson, suffered injuries to her neck, shoulders and back in a work-related automobile accident. She was treated with non-steroidal anti-inflammatory medication for pain associated with these injuries. She claimed that the treatment aggravated a preexisting gastrointestinal condition. Travelers compensated Nelson for her direct injuries, but refused to compensate her for her gastrointestinal complications. Nelson settled with Travelers "for any injury or injuries" arising out of the accident.
Nelson settled her third-party clаim for $130,000. The trial court concluded that the gastrointestinal aspect of Nelson's claim was not subject to division under sec. 102.29(1), Stats. It therefore held an eviden-tiary hearing after which it concluded that $40,000 was the value of her back-related сlaim and $90,000 was the reasonable value of her gastrointestinal claim. The $40,000 to be distributed under sec. 102.29(1) was not sufficient to pay the costs of collection, pay one-third to the employee and reimburse Travelers.
The trial court concluded that Travelers could not share in the amount recovered by Nelson for her gastrointestinal complications because it had not compensated her for that injury nor would it have any liability in the future because of the compromise agreement. The trial court's conclusion presents a question of law we decide
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without deference to the trial court.
Holdmann v. Smith Laboratories, Inc.,
Nelson argues that Travelers is not entitled to reimbursement for the compensation it paid for her direct injuries out of that portion of the sеttlement Nelson received for her aggravated injury. Nelson quotes that part of sec. 102.29(1), Stats., which provides: "The employer or compensation insurer who shall have paid or is obligated to pay a lawful claim under this chapter shall have the same right [as the employee] to make claim or maintain an action in tort against any other party for such injury or death." (Emphasis added by Nelson.) Nelson contends that Travelers did not compensate her for her gastrointestinal condition and, because of their compromise agreement, has no obligation to pay compensation for that injury. Thus, Travelers is not a party "having a right to make claim," which, Nelson argues, is a prerequisite to sharing in the proceeds of a third-party claim.
It is, however, undisputed that Travelers paid worker's compensation benefits to Nelson. Nelson's argument succeeds only if the third-party settlement settled two claims, one compensable under the Workеr's Compensation Act, for which Travelers paid her compensation, and one not compensable, for which Travelers did not pay her compensation.
The trial court accepted Nelson's argument that the settlement inсluded a claim which was not compensable under the Worker's Compensation Act. The trial court stated:
[W]e have reached the point where ... I find as a conclusion that it is necessary for me under the direction provided in . . . Brewer v. Auto Owners Insurance Company to determine a value for the portion of *606 the claim that Ms. Nelson made in this case based on her gastrointestinal problems as opposed to the problems for the back, neck and shoulder injuries that she experienced from the initial accident. I make that conclusion because I conclude that the gastrointestinal [aspect] of her claim is one that is not subject to the statutory division provided by Section 102.29. [Emphasis added.]
Brewer v. Auto-Owners Ins. Co.,
It is clear from the case law and there is a jury instruction right on point that I would have asked the Court to give the jury if we would have [gone] to trial. If you aggravate a pre-existing condition, you're liable for that aggravation.
Counsel correctly stated the law; a claim for an injury includes aggravation of a preexisting condition.
See Holdmann,
*607 Nelson makes several equitable arguments. First, she argues that because Travelers could not have recovered for Nelson's gastrointestinal comрlications, it should not be allowed to share in the recovery obtained through Nelson's efforts. Second, Travelers' reimbursement should be limited to Nelson's compensation claim which it recognized and paid.
Nelson's assertion that Travelеrs could not have maintained an action for
all
of her injuries is incorrect. In fact, had Travelers brought a third-party action it would have had a duty to Nelson to attempt to recover all of her damages, even though it considered her gastrointestinal claim doubtful. The employer's or compensation insurer's cause of action is derivative.
London Guar. & Accident Co. v. Wisconsin Pub. Serv. Corp.,
As to Nelson's second equitable claim, Nelson is not unfairly treated if Travelers is reimbursed for the compensation it paid her. The rationale underlying stаtutory worker's compensation is that the worker accepts a smaller recovery than that potentially available at common law, in return for coverage of all work-related injuries regardless of fault.
Coleman v. American Universal Ins. Co.,
It is inequitable, nоt to Nelson but to Travelers, to distribute the major share of Nelson's third-party settlement to her without reimbursing Travelers for compensation Nelson would not have received but for the Worker's Compensation "safety net." The action brought by Nelson was as much for the immediate benefit of Travelers as it was for Nelson.
See Skornia v. Highway Pavers, Inc.,
In the original Worker's Compensation Act, the third-party action was brought by the employer or the compensation insurer as the employee's assignee because by making a clаim under the Act, the employee assigned to the employer the employee's third-party claim. Section 2394-25, ch. 50, Laws of 1911;
Employers Mut. Liab. Ins. Co. v. Icke,
Reimbursement of the compensation payor according to the terms of a statute governing the distribution of proceeds is mandatory and cannot be modified by the courts. 2A Larson, Workmen's Compensation Law
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§ 74.31(b) at 14-448 to 14-449. This rule has been carried to "the extreme" of forbidding an adjustment in the division formula even where the compensation insurer has a conflict of interest.
Id.
at 14-464 (citing
Huck v. Chicago, St. P., M.&O. Ry.,
We assume that in many situаtions, persuasive arguments could be advanced that a particular division would be more just and equitable than that decreed by the legislature. Nevertheless, the formula does channel a portion of the net proceeds after costs of collection to each of the interested parties, and the legislature evidently considered it better policy to divide the funds by the formula it devised than to commit the matter to the discretion of court or commission.
A Pennsylvania case presents a fact situation much like that presented here. In
Kelly v. Workmen's Compensation Appeal Bd.,
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Even where the proceeds of the third-party claim are divided between separate claims, or among the elements of damages, which is the effect here, the courts have held that the right of reimbursement applies to the total amount.
See Capitol Aggregates, Inc. v. Great American Ins. Co.,
We conclude that the entire amount of Nelson's third-party settlement is subject to division under sec. 102.29(1), Stats. On remand, the trial court shall divide the settlement according to the statute.
By the Court. — Order reversed and cause remanded with directions.
Notes
Section 102.29(1), Stats., provides in part:
The making of a claim for compensation against an employer or compensation insurer for the injury or death of an employe shall not affect the right of the employe, the employe's personal representative, or other person entitled to bring action, to make claim or maintain an action in tort against any other party for such injury or death, hereinafter referred to as a 3rd party . . .. The employer or compensation insurer who shall have paid or is obligated to pay a lawful claim under this chapter shall have the same right to make claim or maintain an action in tort against any other party for such injury or death . . ..