2012 VT 93


Estate of Dunn (2011-419)
 
2012 VT 93
 
[Filed 26-Oct-2012]
 
NOTICE:  This opinion is
subject to motions for reargument under V.R.A.P. 40 as well as formal revision
before publication in the Vermont Reports.  Readers are requested to notify
the Reporter of Decisions by email at: JUD.Reporter@state.vt.us or by mail at:
Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801, of any
errors in order that corrections may be made before this opinion goes to press.
 
 

2012 VT 93

 

No. 2011-419

 

Estate of Monica Dunn


Supreme Court


 


 


 


On Appeal from


     v.


Commissioner of Labor


 


 


 


 


Windham Northeast Supervisory
  Union


June Term, 2012


 


 


 


 


Anne
  M. Noonan, Commissioner


 

Jennifer K. Moore of Ellis Boxer &
Blake, Springfield, for Plaintiff-Appellee.
 
Keith J. Kasper of McCormick, Fitzpatrick, Kasper & Burchard, P.C., Burlington, for 
  Defendant-Appellant.
 
 
PRESENT:  Reiber, C.J.,
Dooley, Skoglund, Burgess and Robinson, JJ.
 
 
¶ 1.            
REIBER, C.J. This case asks us to determine whether a workers’
compensation insurer is entitled to reimbursement*
of death benefits it has paid when a claimant’s beneficiary also receives
proceeds from a life-insurance policy.  We hold that under 21 V.S.A. §
624(e) a workers’ compensation carrier cannot seek reimbursement from
life-insurance payments because such proceeds are not “damages,” as
contemplated by the statute, paid because of a third party’s tortious actions.  We therefore affirm the
Commissioner of Labor’s grant of summary judgment to the estate of claimant,
Monica Dunn.  
¶ 2.            
The underlying facts are not disputed.  Claimant was an employee of
Windham Northeast Supervisory Union.  In October 2009, claimant died of
complications from surgery to treat a work-related knee injury.  Windham’s
workers’ compensation insurer, the Vermont School Boards Insurance Trust, began
paying workers’ compensation death benefits to her estate.  Claimant also
held a life insurance policy, which named her husband as her beneficiary. 
The plan provided for a lump-sum payment upon proof of her death, as well as
payments of $3000 a year per child for up to four years while the children
attended college.
¶ 3.            
Windham/VSBIT sought reimbursement of the death benefits it had paid,
and a credit against future benefits, to the extent of claimant’s husband’s
receipt of life-insurance proceeds.  The parties agreed to submit
cross-motions for summary judgment following an informal conference at the
Department of Labor in June 2011.  The motions sought to settle the
preliminary issue of whether Windham/VSBIT could claim reimbursement of the
benefits pursuant to 21 V.S.A. § 624(e).  Windham/VSBIT argued that
claimant’s receipt of both workers’ compensation and life-insurance proceeds
was the type of double recovery § 624(e) was designed to prevent. 
Claimant’s estate, meanwhile, contended that the reimbursement provisions apply
only to money employees recover from third parties who are responsible for
their injuries.  The Commissioner, agreeing with claimant’s estate,
concluded an employer’s right to workers’ compensation reimbursement under §
624(e) attaches only to damages received from a third party tortfeasor. 
The Commissioner reasoned that any right to reimbursement to prevent double
recovery “is specifically tied to the ‘recovery against the third party for
damages’ ” as discussed in the reimbursement provision.  Even if the
statute were construed to permit reimbursement out of proceeds from any
third party, including a life insurer, life-insurance payments made to
claimant’s beneficiaries did not constitute “damages,” which the Commissioner
defined as “a sum of money awarded to a person injured by the tort of another.”
 Windham/VSBIT now appeals.  
¶ 4.            
The Department of Labor certified the following question: “Is
[Windham/VSBIT] entitled to an offset under 21 V.S.A. § 624(e) for the workers’
compensation benefits paid and/or payable on account of Claimant’s death from
the proceeds of a life insurance policy?”  See 21 V.S.A. § 672 (“The
jurisdiction of [the Supreme Court] shall be limited to a review of questions
of law certified to it by the commissioner.”).   
¶ 5.            
We review questions of law de novo.  See Smith v. Desautels, 2008 VT 17, ¶ 12, 183 Vt. 255, 953 A.2d 620
(noting statutory construction “is a pure question of law”).  “If the
meaning of the disputed statutory language is unambiguous and resolves the
conflict without doing violence to the legislative scheme, we accept the plain
meaning as the intent of the Legislature without looking further.”  Town of Killington v. State, 172 Vt. 182, 188, 776 A.2d 395,
400 (2001) (quotations omitted).  We will affirm the Commissioner
of Labor’s conclusions regarding the workers’ compensation statutes when they
“are supported by the findings and reflect the correct interpretation of the
law.”  Morin v. Essex Optical, 2005 VT 15, ¶ 4, 178 Vt. 29, 868 A.2d
729 (citation omitted).
¶ 6.            
Vermont’s workers’ compensation reimbursement statute provides, in
relevant part, that:
  (a) Where the injury for which
compensation is payable under the provisions of this chapter was caused under
circumstances creating a legal liability to pay the resulting damages in some
person other than the employer, the acceptance of compensation benefits or the
commencement of proceedings to enforce compensation payments shall not act as
an election of remedies, but the injured employee or the employee’s personal
representative may also proceed to enforce the liability of such third party
for damages in accordance with the provisions of this section.  If the
injured employee or the employee’s personal representative does not commence
the action within one year after the occurrence of the personal injury, then
the employer or its insurance carrier may, within the period of time for the
commencement of actions prescribed by statute, enforce the liability of the
third party in the name of the injured employee or the employee’s personal
representative.
. . .
  (e) In an action to enforce the liability of a third
party, the injured employee may recover any amount which the employee . . .
would be entitled to recover in a civil action.  Any recovery against the
third party for damages resulting from personal injuries or death only . . .
shall first reimburse the employer or its workers’ compensation insurance
carrier . . . . Reimbursement required under this subsection, except to prevent
double recovery, shall not reduce the employee’s recovery of any benefit or
payment provided by a plan or policy that was privately purchased by the
injured employee, including uninsured-under insured motorist coverage, or any
other first party insurance payments or benefits.
 
21 V.S.A. § 624.
 
¶ 7.            
Windham/VSBIT contends principally that claimant’s life insurer is a
“liable” third party under § 624(e) and that the proceeds it paid constitute a
“recovery of damages” that is subject to reimbursement to prevent an insured’s
double recovery from a first-party insurance benefit.  We disagree.
¶ 8.            
At the outset, we note that the workers’ compensation reimbursement
provisions must be read as a harmonious whole.  See Trickett
v. Ochs, 2003 VT 91, ¶ 22, 176 Vt. 89, 838 A.2d 66 (noting that
individual provisions must be construed in light of the entire statutory
framework).  Taking the statutory language as a whole, we conclude that a
workers’ compensation carrier is entitled to reimbursement only when a claimant
or—in this case, a claimant’s estate—receives money for damages because of a
third party’s responsibility for an injury.  This is the case whether the
claimant receives payment directly from the tortfeasor
or, as happens frequently, from the third party’s own liability insurer.
¶ 9.            
In its introductory sentence, § 624(e) discusses reimbursement in the
context of an action to “enforce the liability of a third party.”  The
liability a covered employee may seek to enforce under this subsection, in
turn, arises when the injury “was caused under circumstances creating a
legal liability to pay the resulting damages in some person other than the
employer.”  § 624(a).  Windham/VSBIT urges us to equate a
life-insurer’s contractual obligation to pay a fixed sum in the event of an
insured’s death with the “legal liability” to pay “resulting damages” to which
the reimbursement statute refers.  Given the statute’s wording, however,
it is clear that the circumstances causing the injury must be the circumstances
that create the liability to compensate it.  This is to say, the statute
necessarily refers to a cause of action an employee may maintain against a
person responsible for her injuries.  Indeed, the statute permits an
employer or its carrier to commence such an action on behalf of the injured
employee if the employee does not do so herself within a year. 
§ 624(a). 
¶ 10.         The
statute’s use of the word “damages” confirms our conclusion that an employer’s
right to reimbursement of workers’ compensation benefits is limited to
situations in which an employee is entitled to receive money from a third party
because of a third party’s malfeasance.  “Damages,” as the
Commissioner recognized, is a term of art.  They are generally understood
to consist of a “sum of money which the law awards or imposes as pecuniary
compensation, recompense, or satisfaction for an injury done or a wrong
sustained.”  Ballentine’s Law Dictionary 303
(3rd ed. 1969); see also Black’s Law Dictionary 445 (9th ed. 2009) (defining
damages as “[m]oney claimed by, or ordered to be paid
to, a person as compensation for loss or injury”).  No wrong is required
to trigger the payment of a life insurance policy; only the occurrence of a
specified event: death.  There is no indication here that the Legislature
intended to deviate from the normal legal meaning of “damages.”  See State v. Filippo, 172 Vt. 551,
552, 772 A.2d 531, 532 (2001) (mem.) (presuming Legislature intends common meanings).  
¶
11.        
Our conclusion regarding the scope of an employer’s right to workers’
compensation reimbursement is in keeping with our long-standing interpretation
of the statute.  As we have observed, the reimbursement statute aims to
create a fair result for all parties.  St. Paul Fire &
Marine Ins. Co. v. Surdam, 156 Vt. 585, 590, 595
A.2d 264, 266 (1991) “When a third party is found responsible in a
personal injury action for damages suffered by the worker, the worker is not
permitted double recovery. . . . Rather, the law evens out the
consequences by permitting the [workers’ compensation] carrier to recoup the
benefits it paid the worker.”  Id. (emphasis added).  Under
our workers compensation scheme: 
 
[T]he insurance carrier, representing the employer, comes out even, being
without fault or injury; the third party wrongdoer pays exactly the damages he
would have paid without any workers’ compensation law; the attorney is
reimbursed for services rendered, and the employee—in addition to what he has
already received in compensation benefits—is entitled to the remainder. 
  
LaBombard v. Peck Lumber
Co., 141 Vt. 619, 624, 451 A.2d 1093, 1096 (1982).
¶ 12.         The
same fairness rationale underpins the requirement under § 624(e) that first-party
underinsured-motorist awards—when they are subject to the workers’ compensation
reimbursement statute—be apportioned between economic and noneconomic damages
to determine the extent to which a carrier may be entitled to recoup a portion
of its payments.  See Progressive Cas.
Ins. Co. v. Estate of Keenan, 2007 VT 86, ¶ 11, 182 Vt. 298, 937 A.2d 630
(“While an employee certainly has a persuasive claim that he or she should be
made whole first out of such awards, so too does the workers’ compensation
insurer, which has been paying workers’ compensation benefits despite the fact
that someone other than the employer bears the ‘legal liability’ for the
damages resulting from the employee’s injury.” (emphasis
added)).       
¶ 13.         Here,
claimant’s family has received life-insurance proceeds deriving from the
insurer’s contractual obligation to make payment upon the occurrence of a
specified event.  See 1 E. Holmes & M. Rhodes, Holmes’s Appleman on Insurance § 1.25, at 124 (2d ed. 1996)
(“Immediately upon the payment of the first premium, the insured attains an
estate, in the event of his death, of a fixed amount, determined by the face of
the policy.”).  Claimant’s beneficiaries received the life-insurance
proceeds because she died, not because of a third party’s actions.  Thus,
there is no third party whose malfeasance would occasion the need to more
equitably distribute financial responsibility for claimant’s injury. 
  
¶ 14.         Windham/VSBIT
correctly observes that some first-party insurance benefits may be subject to
reimbursement, noting our conclusion that uninsured/underinsured motorist
insurance payments are subject to apportionment and reimbursement insofar as
necessary to prevent a “double recovery” of economic damages.  See Travelers
Ins. Co. v. Henry, 2005 VT 68, ¶ 11, 178 Vt. 287, 882 A.2d 1133 (“[A]n
employee’s recovery of UIM proceeds . . . is a ‘first party insurance payment
or benefit’ that is not subject to the workers’ compensation carrier’s right to
reimbursement except to prevent double recovery.”).  That does not,
however, mean that all first-party benefits will trigger this right.  When
the Legislature added § 624(e)’s “first party” language it did so primarily to
“clarif[y] that any workers’ compensation recovery
will not be diminished by the proceeds from any plan or policy privately
purchased by the injured employee, or by any other first party insurance
payments or benefits that flow to the claimant.”  Act Summary, 1999, No.
41, available at http://www.leg.state.vt.us/docs/2000/acts/act041sum.htm. 
The amendment was not intended to establish a right to reimbursement from
first-party insurance plans, but rather to “change the result reached in [Travelers Cos.
v. Liberty Mutual Ins. Co., 164 Vt. 368, 374, 670 A.2d 827,
830 (1995)] . . . and protect an
employee’s UIM recovery from a workers’ compensation carrier’s right to ‘first
dollar’ reimbursement.”  Henry, 2005 VT
68, ¶ 22.  The final sentence of § 624(e), thus, must be
understood to limit the scope of a workers’ compensation carrier’s potential
recovery from first-party insurance proceeds to situations in which
reimbursement, as defined in the preceding sentences, is “required under this
subsection.”  § 624(e).  As we have indicated, reimbursement is not
required unless an employee receives damages as the result of a third party’s tortious actions.
¶ 15.         According
to Windham/VSBIT, life-insurance proceeds should be viewed as damages in the
same manner that uninsured motorist coverage payments are and should thus
trigger a workers’ compensation carrier’s right to reimbursement.
 Windham/VSBIT maintains that to the extent that these first-party
life-insurance benefits compensate the same economic losses that workers’
compensation death benefits do, the life-insurance proceeds must be apportioned
between noneconomic damages and economic damages, which may be tapped for
reimbursement.  See Henry, 2005 VT 68, ¶ 11-12.  Again, we
disagree.
¶ 16.         Windham/VSBIT’s
contention overlooks a key distinction between uninsured motorist coverage and
life insurance.  As we observed in Travelers Cos., uninsured
motorist insurance payments function effectively as compensation for tort
damages, the payment of which is contingent on a third party’s relative
fault.  164 Vt. at 374, 670 A.2d 827 at 830 (abrogated on other grounds by
statute, 21 V.S.A. § 624(e), as recognized in Henry, 2005 VT 68,
¶ 14); see also 23 V.S.A. § 941(a) (requiring automobile liability
coverage to include UM/UIM coverage “for the protection of persons . . . entitled
to recover damages, from owners or operators of uninsured, underinsured or
hit-and-run motor vehicles” (emphasis added)).  UM/UIM coverage
essentially provides a victim with the compensation she would otherwise have
received had the wrongdoer been adequately insured.  Life insurance
functions differently: Payments are not contingent on a third party’s
wrongdoing, nor are they necessarily directly linked to a quantifiable,
compensable harm, either economic or noneconomic.  They are contractual benefits
paid simply upon proof of death.  See 1 L. Russ & T. Segalla, Couch on Insurance § 1:39 (3d ed. 2005) (“It is
generally agreed that a life insurance policy is not a contract for indemnity
in the strict sense of most other types of insurance, but is a contract to pay a
certain sum of money in the event of death . . .  [D]eath
is not a ‘loss[]’ in the sense in which that term is applied in property
insurance.”); see also Holmes, supra, at 123 (“A life policy is a
contract to pay a certain sum of money to a payee on death of the life
insured.”).  
¶ 17.         This
difference in functioning is at least part of the reason that life-insurance
proceeds are simply not susceptible to the type of apportionment between
economic and noneconomic damages that would be necessary to prevent a “double
recovery” under the workers’ compensation statute.  See Progressive Cas. Ins. Co., 2007 VT 86, ¶ 9 (“Double recovery occurs when the employee recovers economic
damages from two sources . . . .” (emphasis
added)).  “Workers’ compensation benefits reflect an employee’s economic
losses.”  Henry, 2005 VT 68, ¶ 24 (citation
omitted).  As with tort-related economic damages,
workers’ compensation payments thus bear a direct relationship to the nature
and scope of the harm suffered.  As we have observed, a life
insurer’s contractual obligation to pay a beneficiary’s designee merely upon
the occurrence of a specified event, however, is unrelated to the nature and
extent of the harm.    
¶ 18.         To be
sure, people purchase life insurance to insulate beneficiaries from the
economic impact of lost wages or burial costs, which workers’ compensation
death benefits partially address.  See 21 V.S.A. § 632 (outlining workers’
compensation death benefits including burial expenses and wage replacement).  But
the amount that a lump-sum life-insurance policy pays out bears no relationship
to the costs an estate or a policy’s named beneficiaries actually
sustain.  Nor is the purpose of life insurance contractually limited in
any way, or conditioned on, compensating such readily ascertainable economic
losses.  A life-insurance policy may, for example, help the insured: 
take
care of such contingencies as costs of last sickness and burial, family income
after the insured dies, protection against foreclosure of a mortgage after the
insured’s death from inability to meet the payments, educational expenses,
dependent relatives, protection for old age, business protection, protection to
creditors, inheritance taxes, and many other possible catastrophes.
 
Holmes, supra,
at 125.  Life-insurance policies may be obtained for a host of
purposes, some of which may be known only to the purchaser, but these purposes
are never made a condition of the insurer’s obligation to pay any measure
thereof.  
¶ 19.         In
the context of damage awards and settlement agreements, the workers’
compensation statute provides safeguards to prevent recipients from improperly
allocating the entirety of first-party proceeds to noneconomic losses, thereby
defeating a carrier’s right to reimbursement of economic-loss payments. 
 See Henry, 2005 VT 68, ¶ 25.  In addition to a notification
requirement and subrogation rights in the event of an employee’s failure to
pursue a suit against a liable third party, a workers’ compensation carrier has
a right to seek judicial review of settlement agreements.  Id. 
In such cases, where an employee’s receipt of payment is conditioned on the
demonstration of a particular loss, these mechanisms permit an objective
inquiry into the proper allocation of proceeds.  Because the amount a
life-insurance policy pays is not conditioned on particular losses, no such
inquiry is possible.   
¶ 20.         In sum, 21 V.S.A. § 624(e) does not permit a workers’
compensation insurer to tap a claimants’ life-insurance proceeds for
reimbursement because the proceeds of that particular type of first-party
policy do not constitute damages paid because of a third party’s action.   We
affirm. 
Affirmed.
 

 


 


FOR THE COURT:


 


 


 


 


 


 


 


 


 


 


 


Chief
  Justice

 







*  “Reimbursement”
and “offset” in the context of workers’ compensation recoupment achieve an
identical economic outcome.  See Travelers Insur.
Co. v. Henry, 2005 VT 68, ¶ 18, 178 Vt. 287, 882 A.2d
1133.  For simplicity, we use the term “reimbursement” throughout
this opinion to address both concepts.



