Sourbier v. StateSourbier v. State
Iоwa’s workers’ compensation law provides that an employer, or the employer’s insurer, who has paid compensation to an employee, shall be indemnified out of the recovery of damages paid to the injured employee by a third party and shall have a lien on the claim for such recovery and the judgment thereon for the compensation for which the employer or insurer is liable.
I. Background.
Steve Sourbier was injured on February 3, 1989, in the course of his employment as a highway patrol officer when his parked patrol ear was struck from behind by another vehicle. The State of Iowa as employer paid workers’ compensation benefits to Sourbier. Sourbier brought an action against Robert Everett Miller and Betty L. Miller for the personal injuries he suffered. The State filed a lien for workers’ compensation benefits paid and to be paid as permitted by Iоwa Code
Sourbier also filed a workers’ compensation claim with the Iowa Industrial Commissioner (Commissioner) seeking addition *722 al benefits. The State had paid $2,633.50 for medical expenses, $2,289.92 for contract leave pay, and $8,498.75 in weekly benefits based uрon a five percent partial permanent disability. The total amount paid by the State was $13,422.17. While the workers’ compensation claim was pending, the tort action against the Millers was tried to a jury. The jury awarded damages as follows:
Past medical expenses. rfs»
Future medical expenses ... ; or
Loss of time — earnings jno 'oo co
5,000 Loss of future earning capacity .
1,500 Loss of function of the body — past.
5,000 Loss of function of the body — future.
1,500 Physical and mental pain and suffering — past.
5,000 Physical and mental pain and suffering — future.
TOTAL.$22,226
The jury found Sourbier twenty percent at fault. On September 18, 1990, after reducing the damage award in proportion to the fault attributed to Sourbier, the court entered judgment for $17,780.80 plus costs and interest.
On April 18, 1991, the Commissioner awarded Sourbier additional workers’ compensаtion benefits. Sourbier was found to have a ten percent permanent partial disability and was awarded fifty weeks of benefits at the rate of $346.10 per week. This award would require the employer to pay an additional $8,498.75 of benefits. His total permanent partial disability award was $17,305. The Commissioner also refused to hear Sourbier’s request for a declaratory judgment. 1
Sourbier then filed a petition for declaratory judgment in district court to determine the State’s rights in his third-party award. He conceded the State had an interest in the portion of his third-party award for lost earnings, reduction of future earning capacity, loss of function of the body, and medical expenses awarded by the jury. Sourbier, however, believes the State has no right to the portion оf his third-party award for pain and suffering.
The State urges it is entitled to be indemnified for all payments made and is entitled to a lien upon the entire judgment of $17,-780 less an allowance for attorney fees and unpaid litigation costs. The State also maintains its clаim and lien should not be reduced by twenty percent because of the jury finding that Sourbier was partially at fault.
The district court found the State’s lien did not attach to the portion of Sourbier’s award for pain and suffering. The court found the State’s lien and right to indemnification only extended to medical expenses actually awarded. The court found that the State had a lien on the amount of the jury’s award, excluding the award of pain and suffering, and after deducting twenty percent for fault, deducting attorney feеs, a one-third contingency fee, and a pro rata share of litigation expenses. Accordingly, the court declared that Sourbier could satisfy the State’s lien by payment in the amount of $7790. The State and Commissioner appealed.
II.
Iowa Code
The central dispute in this appeal concerns the extent of the State’s lien. The issue is whether the State’s right to be “indemnified out of the recovery of damages” extends to Sourbier’s third-party award for pain and suffering, and medical expenses not awarded by thе jury. Also disputed is the reduction in the State’s indemnification right for Sourbier’s comparative fault.
An employer’s statutory right to be indemnified and to have a lien on a judgment
*723
entered upon the employee’s third-party tort action is provided in
If compensation is paid the employee ... under this chapter, the employer by whom the same was paid, or the employer’s insurer which paid it, shall be indemnified out of the recovery of damages to the extent of the payment so made, with legal interest, еxcept for such attorney fees as may be allowed, by the district court, to the injured employee’s attorney ... and shall have a lien on the claim for such recovery and the judgment thereon for the compensation for which the employer or insurer is liable.
If the employee fails to bring a third-party action to recover for injuries within ninety days, then the employer or the employer’s insurer is subrogated to the rights of the employee.
When determining the employer’s rights we look at the language of the statute and the context in which it is used. We have рreviously held the language of
In ascertaining legislative intent we seek a reasonable construction that will serve the purpose of the statute and avoid absurd results. We discussed the purpose of
the purpose of ...section 85.22(1) is to permit the employer to recoup monies it has been required to pay under the provisions of chapter 85 from a tortious third party whose conduct has produced the injury which necessitated such payments.
A. Pain and suffering.
The district court concluded the State did not have a lien upon the portion of the judgment that represented a recovery for physical and mental pain and suffering. The court reasoned that pain and suffering were not within the scope of
Under workers’ comрensation law, an employer provides, secures, or pays compensation for any and all personal injuries sustained by an employee arising out of and in the course of the employment, and in such case, the employer is relievеd from other liability for recovery of damages or other compensation for such personal injury.
The term “compensation” has been construed broadly to allow an employer to recover the cost of medicine and hospital services furnished by the employer.
Johnson,
Construing section 85.22 to permit the employer to recoup monies from third-party payments received by the employee for pain and suffering furthers the section’s primary purpose. Such a construction was recognized in
United States v. Lorenzetti,
the prevailing rule under state workman’s compensation statutes is that an employer is fully entitled to be reimbursed from third-party recoveries for pain and suffering, even when the portion of an award attributable to pain and suffering is сlearly separable from the portion attributable to economic losses.
This continues to be the prevailing rule in the United States.
See
2 A. Larson,
Workmens’ Compensation Law
§ 74.35 (1990). We have suggested a similar result.
See, e.g., Fisher v. Keller Indus., Inc.,
B. Medical expenses.
The district сourt determined the State’s lien on medical expenses should only extend to those medical expenses actually awarded by the jury. Here, Sourbier deliberately did not submit to the jury some medical expenses paid by the employer. We conclude the State has a lien for medical expenses actually paid by the employer. The purpose of section 85.22 is to allow indemnification for amounts paid by the employer including medical expense payments. The lien is not limited to thе amount awarded by the jury. The district court erred in denying indemnification of the total medical expenses paid by the State.
C. Employee’s comparative fault.
The district court determined the State’s lien should be reduced by Sourbier’s comparative fault as determined by the jury. We have recently decided this issue. In Fisher, we were faced with whether an insurer’s lien is to be reduced by the percentage of fault allocated to the employee. We held:
The insurer’s right of indemnity under [section 85.22(1) ] is against the worker’s entire recovery, which has already been reduced because of the worker’s comparative fault. That reduction is not to be factored into the indemnity calculation because there is no correlation between the liability of the third party and the obligation of the insurer to the worker.
Fisher,
D. Attorney fees and litigation expenses.
The district court ordered the State’s lien reduced for attorney fees and pro rata unreimbursed expenses of litigation. Section 85.22(1) expressly allows a deduction for attorney fees. The district court determined that attorney fees of thirty-three-and-one-third percent of the amount receivеd were reasonable. We agree.
See Farris v. General Growth Dev. Corp.,
We reverse the declaratory judgment entered by the district cоurt and remand for entry of a judgment consistent with this opinion.
REVERSED AND REMANDED.
Notes
. Because the Commissioner refused to rule on Sourbier’s request for a declaratory judgment, he named the Commissioner as a defendant in his petition for declaratory judgment filed in the district court. He requested that if the district court refused to grant a declaratory judgment, the district court should review the Commissioner’s denial of his request for a declaratory judgment.
. Other states whose workers’ compensation statutes are silent as to the effect of an employee’s negligence upon the employer's right of recovery have also found that no reduction in the employer’s recovery is allowed.
See Land v. George Schmidt Co.,