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Wesco Insurance Co. v. Berube

Superior Court of Massachusetts, Essex

January 29, 2018

Wesco Insurance Company aso Jean Larson, Jean Larson, Individually and John Larson, Individually
v.
Lori Berube et al.

          Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Feeley, Timothy Q., J.

          MEMORANDUM AND ORDERS ON PLAINTIFF’S SECOND MOTION TO AMEND COMPLAINT AND COMPETING PETITIONS FOR APPROVAL OF SETTLEMENT

          Timothy Q. Feeley Associate Justice

         Plaintiff Jean Larson (" Larson") commenced this personal injury action against defendant Lori Berube (" Berube") on August 25, 2015. Larson was working within the scope of her employment when the vehicle she was riding in (as a passenger) was struck by a vehicle driven by Berube.[1] Now before the court is Larson’s first amended complaint, adding defendant Thomas Theriault (" Theriault") as a defendant. [D. 18.] Theriault is the registered owner of the vehicle operated by Berube. Despite the caption in this case, this is a subrogation case commenced by WESCO Insurance Company (" WESCO"), the workers’ compensation insurance carrier that paid workers’ compensation benefits to Larson the injuries she suffered during the scope of her employment. See G.L.c. 152, § 15. According to the first amended complaint, Larson has incurred $17, 109.56 in lost wages and $147, 338.51 in medical expenses. However, the court’s current understanding is that WESCO paid something the range of $275, 000 in workers’ compensation benefits to Larson. The court has been told that about $38, 000 of that amount was paid to Larson’s husband, John Larson.

         Plaintiff, although nominally Jean Larson, but actually WESCO, moved to file a second amended complaint. [D. 25.] The proposed second amended complaint had several purposes. It re-identified the original plaintiff (Larson) as WESCO, as subrogee of Larson, identified Jean Larson individually as a plaintiff, and added her husband John Larson as a plaintiff. The three counts of the first amended complaint were reasserted on behalf of both WESCO and Larson. In addition, three counts were added on behalf of John Larson: (1) loss of consortium against Berube; (2) respondeat superior against Theriault seeking loss of consortium; and (3) negligent entrustment against Theriault seeking loss of consortium.

         At the time of acting on the motion to amend the complaint, the court incorrectly viewed the proposed second amended complaint as asserting a claim by WESCO up to the amount of benefit payments made to Larson under its workers’ compensation insurance policy, and a claim by Larson for any settlement or verdict amount in excess of the benefits paid. See G.L.c. 152, § 15; Pinto v. Aberthaw Construction Co., 418 Mass. 494, 500 (1994). The court will sua sponte reconsider its ruling on the motion to amend complaint in light of its current understanding of the respective rights of WESCO and Larson to the settlement proceeds negotiated by WESCO with the insurance carriers defending this personal injury action.[2]

         The court continues to characterize this action as a subrogation action, in that it was permissively commenced by WESCO, and not by Larson. " An insurer who has paid all or part of a loss may sue in the name of the assured to whose rights it is subrogated." Mass.R.Civ.P. 17(a). In addition to subrogation rights, the right to maintain an action against a potentially negligent third-party is conferred by legislative grant and is not dependent upon contractual subrogation rights. Burke v. Atlantic Research Corp., 358 Mass. 764, 766 (1971). But at the same time, the court understands that WESCO is pursing Larson’s personal injury claim against potentially liable third-parties in its entirety, and not just the reimbursement of the benefits it paid. The original complaint and all subsequent complaints are to that effect.

         Now before the court are competing petitions for approval of the $200, 000 settlement negotiated by WESCO. [D. 32, 41.] The court sees no challenge by the Larsons to the amount of the settlement, but the parties submit very different plans for apportionment of the $200, 000 between WESCO and the Larsons. WESCO, relying on statutory language, as the court did, seeks the full amount of the settlement, which is well less than the workers’ compensation benefits it paid to the Larsons. The Larsons seek to apportion the $200, 000 as follows: $120, 000 to Jean Larson for pain and suffering; $40, 000 to John Larson for loss of consortium; $40, 000 to WESCO under its lien; and counsel fees to be deducted " ratably."

         DISCUSSION

         There is no dispute that Section 15 of Chapter 152 (" Section 15") governs the apportionment of settlements/verdicts in circumstances where workers’ compensation is payable and a legal liability is established (by settlement or verdict) in some other person (i.e., third-party). For purposes of this case, the crucial language of Section 15 is as follows:

Either the employee or insurer may proceed to enforce the liability of such person, but the insurer may not do so unless compensation has been paid in accordance with sections seven, eight, ten A, eleven C, twelve or nineteen nor until seven months following the date of such injury. The sum recovered shall be for the benefit of the insurer, unless such sum is greater than that paid by it to the employee, in which event the excess shall be retained by or paid to the employee . For purposes of this section, " excess" shall mean the amount by which the gross sum received in payment for the injury exceeds the compensation paid under this chapter. (Emphasis added.)

         The Supreme Judicial Court has stated that " the provisions of G.L.c. 152, § 15, are, in certain respects, unambiguous." Pinto v. Aberthaw Construction Co., 418 Mass. 494, 498 (1994). The court was obviously not referring to the above-emphasized portion of Section 15. At least as the law has developed since 1994, the above-emphasized portion of Section 15 would not be referred to as unambiguous. The law has in fact developed since 1994, and this court did not recognize the change until the recent oral argument in this case and the Lawson’s reliance on the Supreme Judicial Court’s decision in DiCarlo v. Suffolk Construction Co., Inc., 473 Mass. 624 (2016). DiCarlo did not change the lien of the insurer under Section 15. It changed the reach of the lien (i.e., that to which it attaches), making the lien unenforceable against the portion of any settlement/verdict against a third-party that compensated the injured employee for pain and suffering. See also Curry v. Great American Ins. Co., 80 Mass.App.Ct. 592, 595 (2011). The lien remains as set by Section 15 as the workers’ compensation benefits paid to the employee. But it is the reach of the lien, that is, to what portions of any settlement/verdict it attaches to or does not attach to, that must be determined in this case and other cases in which liability is established by suit against a third-party or parties (other than the employer) who might be liable for the injury for which compensation is payable under the workers’ compensation law. G.L.c. 152, § § 1 et seq.

         What this court thought was the plain meaning of the above-emphasized language of Section 15 is no longer the law of this Commonwealth.[3] WESCO or any other workers’ compensation carrier may have a lien to the full extent of workers’ compensation benefits paid, but the lien is enforceable only to the extent of appropriate judicial (or DIA) approval that takes into account the non-compensable (under Chapter 152) aspects of the settlement/verdict and shields them from the reach of the insurer’s lien. Nor does this court’s prior view that the above-emphasized language applies to subrogation cases such as this, permissibly commenced after seven months from date of injury by the workers’ compensation carrier, survive DiCarlo . This court reads DiCarlo as applying to all settlements/verdicts with liable third-parties, with no distinction drawn between those actions commenced by the injured employee and those commenced by the insurer.[4] In this court’s view, there is no principled way, and certainly not after DiCarlo, to recognize an insurer’s right to attachment/reimbursement to the full extent of workers’ compensation benefits paid in a subrogation case, but not in the more typical lien case, such as DiCarlo, commenced by the injured employee against one or more third-parties.

         ORDER

         Upon reconsideration, plaintiff’s second motion to amend complaint is ALLOWED without limitation. The second amended complaint is already docketed. A hearing will be scheduled for argument on the competing petitions for approval of the respective requested apportionments. The parties will be expected to address attorneys fees at the hearing, including specific amounts and not just percentages. The parties should confer about mutually convenient dates, and should consult with Ms. Patten about the court’s availability. Of course, a contested hearing will only be necessary if the parties ...


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