IN RE SMITH, W.C. No. 4-102-203 (6/30/97)


IN THE MATTER OF THE CLAIM OF GEORGE B. SMITH, Claimant, v. ADAMS CONSOLIDATED SCHOOL DISTRICT, Employer, and SELF-INSURED, Insurer, Respondent.

W.C. No. 4-102-203Industrial Claim Appeals Office.
June 30, 1997

FINAL ORDER

The claimant seeks review of a final order of Administrative Law Judge Friend (ALJ), which determined that the respondent is entitled to offset its liability for workers’ compensation benefits based on the claimant’s receipt of proceeds from a third-party lawsuit.

It is undisputed that the claimant sustained injuries in an automobile accident while performing the duties of his employment. Apparently, the respondent then provided workers’ compensation benefits in the form of medical treatment. However, at that time, the claimant did not lose time from work.

Subsequently, the claimant brought suit against the third-party tort-feasor. In May 1994, the claimant settled the third-party lawsuit and received $29,336.88 in net proceeds. The ALJ found that at the time of the settlement the claimant had suffered noneconomic damages from pain and suffering in an “undeterminable amount,” and had “not lost any wages.” The parties agree that the respondent received “notice” that the claimant intended to enter into the third-party settlement.

The claimant’s condition worsened subsequent to the third-party settlement, and he was ultimately declared permanently and totally disabled. The respondent then sought to offset its liability for workers’ compensation benefits by an amount equal to the net proceeds of the claimant’s third-party settlement. The respondent further sought to reduce liability based on the claimant’s receipt of retirement benefits.

Ultimately, the parties resolved the issue concerning the right to offset retirement benefits. However, the matter proceeded to hearing on the issue involving the settlement proceeds.

Relying on § 8-41-203(1), C.R.S. (1996 Cum. Supp.), an Kennedy v. Industrial Commission, 735 P.2d 891 (Colo.App. 1986), the ALJ concluded that the respondent is entitled to an offset based on the net proceeds of the third-party settlement. Moreover, the ALJ relied on Jordan v. Fonken Stevens, P.C., 914 P.2d 394 (Colo.App. 1995), for the proposition that he lacked jurisdiction to “apportion the amount of noneconomic or economic damages” under the third-party settlement agreement.

I.
On review, the claimant contends that because he received only medical benefits prior to the third-party settlement, and because he was retired at the time of the third-party settlement, “it can be inferred that the settlement was for noneconomic damages.” Therefore, the claimant reasons that the entire settlement is exempt from offset under principles announced i Martinez v. St. Joseph Hospital and Nursing Home of Del Norte, Inc., 878 P.2d 13 (Colo.App. 1993). We perceive no error.

As a general matter, the subrogation provisions of §8-41-203(1) grant a workers’ compensation insurer an “assignment” of a claim against a third-party tort-feasor to the extent of workers’ compensation benefits actually paid. The remainder of the cause of action remains with the claimant, as does the right to settle the unassigned portion of the claim. See Kirkham v. Hickerson Brothers Truck Co., 29 Colo. App. 303, 485 P.2d 513
(1971). However, the workers’ compensation carrier retains a right to reduce its future compensation liability to the extent the claimant receives proceeds from settling the unassigned portion of the third-party action. Metcalfe v. Bruning Division of AMI, 868 P.2d 1145 (Colo.App. 1993).

It is true that a workers’ compensation carrier is not entitled to credit for third-party proceeds to the extent they are paid for noneconomic damages such as pain and suffering. Martinez v. St. Joseph Hospital and Nursing Home of Del Norte, Inc., supra. However, a claimant is not entitled “unilaterally to characterize” third-party settlement proceeds “as being only for pain and suffering, thereby defeating the carrier’s subrogation rights.”Kennedy v. Industrial Commission, supra. The compensation carrier may choose to waive, or may be estopped from asserting, a right to an offset against future benefits. Sneath v. Express Messenger Service, 931 P.2d 565 (Colo.App. 1996). But, the mere acceptance of that to which the insurer is entitled is not the equivalent of a waiver or estoppel. Metcalfe v. Bruning Division of AMI, supra.

Here, the third-party settlement agreement does not expressly differentiate between economic and noneconomic damages. Further, although the claimant represented that the respondent agreed to the settlement, there is no evidence or stipulation that the respondent agreed that all, or any part, of the settlement proceeds represented compensation for noneconomic damages. Consequently, the respondent’s mere assent to or awareness of the third-party settlement does not rise to the level of a waiver or estoppel of its right to claim an offset. Cf. Sneath v. Express Messenger Service, supra (compensation carrier might be estopped from claiming offset where it advised claimant that it would pursue its own subrogation interests, and claimant’s counsel advised the carrier that he would not seek recovery for “any subrogated rights”).

Neither are we persuaded that the ALJ was required to infer that all of the settlement proceeds were for noneconomic damages simply because the claimant did not sustain any lost wages at the time of the injury, or because the claimant was receiving retirement benefits at the time of the settlement. It is possible that all, or a portion, of the proceeds were paid for a future loss of earning capacity. Since such payments would be for the same type of loss as permanent total disability benefits the statutory objective of § 8-41-203(1), which is to avoid double recovery, could be defeated. See Metcalfe v. Bruning Division of AMI, supra.

Similarly, the mere fact that the claimant was receiving retirement benefits did not require the ALJ to conclude that all of the settlement proceeds were for noneconomic damages. The claimant’s receipt of retirement benefits does not rule out the possibility that he had residual earning capacity, and that the loss of this earning capacity was compensated by the settlement agreement.

II.
The claimant next contends that the ALJ erred in determining that he lacked jurisdiction to make a factual determination concerning the amount of the third-party settlement which was paid for noneconomic damages. We reject this argument.

As the ALJ recognized, the Court of Appeals held in Jordan v. Fonken Stevens, P.C., supra, that ALJs lack the authority to “determine how the proceeds paid by a third-party tort-feasor should be apportioned between economic and noneconomic losses suffered by a claimant.” The court went on to state that this issue is to be determined “either by agreement of all interested parties or by the tribunal having jurisdiction over a claimant’s tort claim.” 914 P.2d at 395. In our view, Jordan v. Fonken Stevens, P.C. is dispositive of the claimant’s argument. Further, we are bound by published opinions of the Court of Appeals. C.A.R. 35 (f).

The claimant’s reliance on Tate v. Industrial Claim Appeals Office, 815 P.2d 15 (Colo. 1991), and Reed Ambulance v. Industrial Claim Appeals Office, 820 P.2d 1181 (Colo.App. 1991), is misplaced. These cases do not permit ALJs to determine the content or meaning of district court settlements. Rather, they address the issue of whether workers’ compensation insurance or PIP coverage is primary in work-related auto accidents. The scope of liability of a workers’ compensation insurer under the Act is a determination fully within the authority of an ALJ.

The claimant also argues that the ALJ’s order is untenable since it compels claimants to go to trial to establish noneconomic damages rather than to settle cases. However, as we have already noted, claimants are not precluded from obtaining a workers’ compensation insurer’s agreement to waive recovery of some or all of a third-party recovery. Sneath v. Express Messenger Service, supra. Here, there is no evidence of any such attempt and we find the claimant’s argument insufficient to outweigh the statutory objectives underlying the subrogation statute.

IT IS THEREFORE ORDERED that the ALJ’s order dated December 9, 1996, is affirmed.

INDUSTRIAL CLAIM APPEALS PANEL

______________________________ David Cain
______________________________ Bill Whitacre

NOTICE
This Order is final unless an action to modify or vacate theOrder is commenced in the Colorado Court of Appeals, 2 East 14thAvenue, Denver, Colorado 80203, by filing a petition to reviewwith the court, with service of a copy of the petition upon theIndustrial Claim Appeals Office and all other parties, withintwenty (20) days after the date the Order was mailed, pursuant to§§ 8-43-301(10) and 307, C. R. S. (1996 Cum. Supp.).

Copies of this decision were mailed June 30, 1997 to the following parties:

George B. Smith, Esq., 423 E. 111th Pl., Northglenn, CO 80233

Adams County School District #12, 440 E. 144th Ave., Broomfield, CO 80020-9237

Adams County Boces Workers’ Compensation, OHMS, 700 Broadway, Ste. 1132, Denver, CO 80237

Joan W. Froede, Esq. David Lichtenstein, Esq., 1333 W. 120th, One Park Center, Ste. 213, Westminster, CO 80234 (For the Claimant)

Bernard Woessner, 3900 E. Mexico Ave., Ste. 1000, Denver, CO 80210 (For the Respondent)

By: _______________________________