TAMARA JOAN HAEG, Employee, v. SEKO WORLDWIDE d/b/a VAST LOGISTICS, Employer/Appellant, and MINNESOTA ASSIGNED RISK PLAN adm=d by BERKLEY RISK ADM=RS, Insurer, and REGIONS HOSP., ST. PAUL RADIOLOGY, NORTH MEM=L AMBULANCE SERV., and TWIN CITY ANESTHESIA ASSOCS., Intervenors.
WORKERS= COMPENSATION COURT OF APPEALS
JANUARY 4, 2007
CONTRIBUTION & REIMBURSEMENT; SETTLEMENTS; STATUTES CONSTRUED - MINN. STAT. ' 176.221, SUBD. 9. Minn. Stat. ' 176.221, subd. 9, regarding payment of full wages to an injured employee, is silent on the question of whether an employer who pays full wages is entitled to reimbursement. In this case, where the stipulation for settlement preserved the non-participating employer=s claim for reimbursement and provided an opportunity to be heard on the claim, and where there was no evidence the employer paid wages pursuant to a contract or other agreement between the employer and the employee providing for reimbursement of such wages in the event of an award of temporary disability benefits, there is no basis for an award of reimbursment, and the denial of the employer=s claim is affirmed.
VACATION OF AWARD. Where the employer failed to prove entitlement to reimbursement of wages paid to the employee, there is no error of law and no basis for vacation of the award on stipulation on this ground. Nor does it appear the employer=s remedies for recovery of wage payments outside the workers= compensation system were prejudiced by the stipulation for settlement and we decline to vacate the award on this basis.
ATTORNEY FEES; JURISDICTION - SUBJECT MATTER. Whether there existed a conflict of interest between the employer and insurer, and whether the insurer was obligated to provide separate counsel to its insured, are not issues arising under the workers= compensation laws of this state, and this court lacks jurisdiction to resolve the insured employer=s claim for payment of attorney fees from the insurer.
Petition to vacate award denied.
Determined by: Johnson, C.J., Rykken, J., and Stofferahn, J.
Compensation Judge: Gary P. Mesna
Attorneys: Gary L. Meyer, Meyer, Puklich, Merriam & Johnson, Eden Prairie MN, for the Respondent Employee. Kris A. Wittwer and John Olchefske, Stewart, Zlimen, & Jungers, Minneapolis MN, for the Appellant. Roderick C. Cosgriff and Jennifer A. Clayson Kraus, Heacox, Hartman, Koshmrl, Cosgriff & Johnson, St. Paul, MN, for the Respondent Insurer.
THOMAS L. JOHNSON, Judge
The employer appeals from the compensation judge=s approval of a stipulation for settlement, the judge=s denial of its request for reimbursement of wage continuation payments, and the denial of its request for an order directing the insurer to pay the attorney fees of the employer.
Tamara Joan Haeg, the employee, worked as an account executive for SEKO Worldwide d/b/a Vast Logistics, the employer. On August 7, 2004, the employee attended a golf event with one of the employer=s clients at which time she was struck in the left eye by a golf ball. On that date, the employer was insured by the Minnesota Assigned Risk Plan administered by Berkley Risk Administrators.
Following the injury, the employee was off work for eight weeks during which time the employer paid the employee full wages. The employee later filed a claim petition claiming her injury arose out of her employment. The employee alleged that as a result of her injury, she was totally disabled from August 7 through September 10, 2004, sustained a 24 percent permanent partial disability for an enucleation of the left eye and incurred medical expenses in excess of $40,000.00. The insurer denied liability for the claimed injury contending it occurred during a golf outing in which the employee participated for recreational purposes unrelated to her employment.
The employee=s claim petition was initially scheduled for a hearing in November 2005, but was stricken and the parties pursued mediation. A tentative settlement was reached between the employee and the insurer and a stipulation for settlement was drafted. The parties were, however, unable to reach settlement with Regions Hospital on its intervention claim, and the case was rescheduled for a hearing on June 22, 2006.
Prior to the scheduled hearing, the employee, the insurer and the intervenors reached a settlement of their respective claims. By this point, the employer had retained separate counsel, and the insurer also made an offer to the employer to settle its reimbursement claim. The employer rejected the offer. The proposed settlement agreement provided the Aemployer=s intervention claim for reimbursement of wage continuation during periods of temporary total disability is reserved to be determined pursuant to Parker Lindberg proceedings.@ (Stip., _VIII(5).) The employer refused to participate in the settlement. On June 21, 2006, the employer=s attorney filed a motion seeking a hearing on the proposed stipulation for settlement. The employer contended it paid full wages to the employee during her claimed period of temporary total disability for which the employer sought reimbursement from the insurer. The employer further moved that approval of the settlement be denied, and sought an order directing the insurer to pay the employer=s attorney fees based upon a conflict of interest between the employer and the insurer.
A hearing was held before the compensation judge to determine whether the stipulation for settlement should be approved. No testimony was offered by any party. A copy of the workers= compensation insurance policy was received as an exhibit. Following the hearing, the compensation judge issued an Award on Stipulation approving the terms of the stipulation for settlement. By order dated July 20, 2006, the compensation judge also denied the employer=s motion seeking reimbursement for the wages paid to the employee during periods of her claimed total disability. The compensation judge further found there existed no conflict of interest between the employer and the insurer requiring the insurer to provide separate counsel for the employer. The employer appeals.
1. Reimbursement Claim
The compensation judge concluded that the employer=s claim for reimbursement of the wages paid to the employee is not enforceable under workers= compensation law and denied the claim. The employer appeals contending the judge=s decision is legally erroneous.
The appellant argues that under Minn. Stat. ' 176.221, subd. 9, and equitable principles, a Minnesota employer does have the right to seek reimbursement for wage loss benefits paid the employee. Minn. Stat. ' 176.221, subd. 9, provides:
Payment of full wages. An employer who pays full wages to an injured employee is not relieved of the obligation for reporting the injury and making a liability determination within the times specified in this chapter. If the full wage is paid the employer=s insurer or self-insurer shall report the amount of this payment to the division and determine the portion which is temporary total compensation for purposes of administering this chapter and special compensation fund assessments. The employer shall also make appropriate adjustments to the employee=s payroll records to assure that the employee=s sick leave or the vacation time is not inappropriately charged against the employee, and to assure the proper income tax treatment for the payments.
This court stated in Childers v. Honeywell, Inc., 49 W.C.D. 219, 228 (W.C.C.A. 1993), that the apparent intent of the statute Ais to allow an employer to pay full wages to an injured employee in lieu of temporary total compensation which would otherwise be due to the employee.@ However, the statute is silent on the issue of whether an employer who pays full wages to an injured employee is entitled to reimbursement. We conclude that resort to Minn. Stat. ' 176.221, subd. 9, does not resolve the issue.
An employee who sustains a work-related injury may be entitled to other benefits in addition to workers= compensation benefits. Such benefits may include public benefits such as Social Security, unemployment compensation or welfare benefits and private benefits including no-fault automobile insurance, disability benefits, wage continuation benefits and medical benefits. Certain of these benefits may be paid simultaneously with workers= compensation benefits while others are exclusive and can not be paid simultaneously with workers= compensation benefits. Private benefits may be provided an injured employee by a third party provider or insurer or through a plan established by a self-insured employer or a union.
Under Minn. Stat. ' 176.191, subd. 3, health and disability insurers are obligated to make medical or disability payments whenever there is a dispute about the compensability of a personal injury. The statute provides a right of reimbursement to the insurer if the injury is subsequently determined to be compensable. See Johnson v. Blue Cross & Blue Shield, 329 N.W.2d 49 (Minn. 1983). The employer, however, offered no evidence that its wage payments to the employee were made pursuant to a policy of accident and health insurance or group disability income coverage. Since the employer does not argue it is entitled to a right to reimbursement under Minn. Stat. ' 176.191, subd. 3, solely as an employer, we need not reach that issue in this case.
As a general rule, an intervenor=s right to reimbursement is contingent upon the employee prevailing on his or her claim. Although a health or disability insurer has a right of reimbursement, it cannot initiate a claim on its own but can only intervene or participate in an existing proceeding. Le v. Kurt Mfg. Co., 557 N.W.2d 202, 55 W.C.D. 650 (Minn. 1966). Thus, an intervenor=s rights are typically derivative. See Wenderski v. John A. Dalsin & Son, Inc., slip op. (W.C.C.A. 2003). However, once proceedings have commenced, they must be conducted so as to protect the health or disability carrier=s reimbursement interest. Brooks v. A.M.F., Inc., 278 N.W.2d 310, 31 W.C.D. 521 (Minn. 1979).
An employer asserting a reimbursement claim for wages paid to an employee is entitled to the same protection and rights as an intervenor under Minn. Stat. ' 176.361, and is entitled to participate in a settlement like any other intervenor. If the employer asserts a reimbursement claim, the insurer must include the employer in any settlement negotiations and comply with the principles established in Parker/Lindberg v. Friendship Village, 395 N.W.2d 713, 39 W.C.D. 125 (Minn. 1986). If an employer with a wage reimbursement claim participates in the settlement and receives reimbursement, the employer is liable for attorney fees pursuant to Edquist v. Browning-Ferris, 380 N.W.2d 787, 38 W.C.D. 411 (Minn. 1986). The employer may, however, decline to participate in the settlement and elect to proceed to hearing. In such case, the employer must, at hearing, prove the employee=s claim was compensable, including proving entitlement to wage loss benefits for the period wages were paid, and establish its right to reimbursement. Parker/Lindberg at 719, 39 W.C.D. at 135-36.
In this case, the settlement agreement preserved the employer=s reimbursement claim and allowed the employer to establish its claim at a hearing. We conclude, however, the employer failed to prove its claim. Proof that an employer made payment of wages to the employee during a period of total disability, standing alone, is not legally sufficient to establish a right to reimbursement. A right of reimbursement is contractual and must be established by the language of a policy of insurance or a contract between the employee and the party paying the benefit. Typically, wage continuation and disability contracts include language that specifically provides an employee is entitled to such benefits only if the employee is not entitled to workers= compensation benefits for the same disability or for the same period of time. Such contracts may also provide that in the event the employee subsequently receives workers= compensation benefits, for the same period of time, the employee will reimburse the provider. See e.g., Ransom v. Ford Motor Co., 472 N.W.2d 134, 45 W.C.D. 45 (Minn. 1991). There is no evidence in this case that the employer paid the wage benefits pursuant to any contract, nor is there any evidence that the employee agreed to reimburse the wage benefits to the employer in the event she received workers= compensation benefits. In Farah v. Mall of America, slip op. (W.C.C.A. Nov. 1, 2001), this court stated, A[a]bsent evidence of a contractual agreement between the employee and the employer concerning reimbursement of wage continuation benefits in the event of an award of temporary disability benefits, the compensation judge and this court have no basis to award a reimbursement to an employer for payments made to an employee.@ On this basis, we affirm the compensation judge=s denial of the employer=s claim for reimbursement.
2. Vacation of Award on Stipulation
The appellant contends the compensation judge issued the award on stipulation based on the erroneous conclusion that the employer=s reimbursement claim is not recognized by workers= compensation law. The appellant contends this conclusion is legally incorrect and asserts the award on stipulation should be vacated pursuant to Minn. Stat. ' 176.521, subd. 3, on the grounds of an error of law. We disagree. The employer was afforded a hearing and an opportunity to prove its claim. The employer failed to prove entitlement to reimbursement of the wage paid the employee. We, therefore, find no error of law.
The employer also argues the insurer=s settlement with the employee bars the employer=s reimbursement/subrogation claim for the recovery of wages against the employee or a third-party tortfeasor. They contend the insurer=s right to settle claims should not include the right to compromise the employer=s claim for affirmative relief against a third party. For these reasons, the appellant contends the award is not in accord with workers= compensation law. We are not persuaded.
Paragraph 9 of the stipulation for settlement provides:
Employer and insurer, as part of this claim, assert their rights to subrogation under Minn. Stat. ' 176.061 against any and all third parties who may be found ultimately responsible for the employee=s injuries and damages arising out of the incident and injury of August 7, 2004. In exchange for valuable consideration relinquished by the employee in agreeing to the settlement of her workers= compensation claims, however, employer and insurer do hereby assign any and all subrogation rights they might be entitled to, with the sole exception of any subrogation rights the employer may have for premium increases, over to the employee against any and all tort feasors [sic] arising out of the incident and injury of August 7, 2004. In so assigning these rights, employer and insurer agree they will not pursue said rights themselves, save and except for any subrogation rights the employer may have for premium increases, and give those rights to the employee. They further agree that as a result of this assignment, the disbursement scheme under Minn. Stat. ' 176.061 does not and shall not apply, but that all proceeds of any third party claims shall belong solely to the employee, with the exception of any proceeds attributable to the employer=s claim for subrogation for any premium increases. This assignment is intended to have the same effect as the assignment in the case of Buck v. Schneider, 413 N.W.2d 589 (Minn. Ct. App. 1987), and is intended by the parties that such effect shall persist despite any subsequent change in the law.
However, this workers= compensation settlement is not conditioned or contingent upon any expected outcome of any third party claims the employee may have or the treatment of said assignment by any other party, court or tribunal.
The employer contends it has three potential remedies for recovery of its wage payments outside of the workers= compensation system. These are: (1) sue the employee in state court for reimbursement of the wages paid; (2) sue the insurer in state court for reimbursement of the wages paid; and (3) collect its reimbursement through a subrogation action brought by the employee against a third party. All of these remedies, the appellant contends, are prejudiced by the terms of the stipulation for settlement. We disagree.
Paragraph 9 of the stipulation for settlement deals solely with of the right of subrogation under Minn. Stat. ' 176.061, not with any independent contractual agreement or equitable claim that may be enforced in state court. To the extent the employer has any cause of action against the employee, nothing in the stipulation for settlement impairs that right. With respect to the purported claim against the insurer, the employer=s right to reimbursement for the wage continuation benefits was amply protected within the workers= compensation system. The employer had the opportunity to prove its right to reimbursement at the hearing before the compensation judge but failed to do so. Finally, we find no right to reimbursement for wages paid in Minn. Stat. ' 176.061, subd. 6. That subdivision sets out the allocation of the proceeds of a third party action and provides the employer Ashall be reimbursed in an amount equal to all benefits paid under this chapter to or on behalf of the employee . . . .@ The wages paid the employee were not workers= compensation benefits so no right of reimbursement is provided by this statute. We, therefore, deny the employer=s petition to vacate the award on stipulation.
3. Award of Attorney Fees
At the hearing before the compensation judge, the employer sought an order directing the insurer pay its attorney fees due to a conflict of interest. The compensation judge denied the request finding no conflict of interest was created by the settlement. The employer appeals the denial of attorney fees and contends there was a direct conflict of interest between the insurer and the insured with respect to the employer=s wage reimbursement claim, citing United States Fidelity & Guarantee Co. v. Lewis A. Roser Co., Inc., 585 F.2d 932 (8th Cir. 1987). The appellant contends the insurer must bear the expense of providing independent counsel to its insured.
In Pine Island Farmers v. Erstad & Riemer, 649 N.W.2d 444 (Minn. 2002), the Supreme Court held Athat in an insurance defense scenario, defense counsel has an attorney-client relationship with the insured.@ Thus, the court acknowledged, when the interests of the insurer differ from those of the insured, defense counsel may find itself in Aan exceedingly awkward position.@ But, as is apparent from a reading of Pine Island, whether there existed a conflict of interest and whether the insurer was obligated to provide separate counsel for the insured, are not issues arising under the workers= compensation laws of this state. Accordingly, this court lacks jurisdiction to resolve those issues. See Minn. Stat. ' 175 A.01, subd. 5.
 See, generally, Minnesota Workers= Compensation Deskbook ' 14.1.
 Minn. Stat. ' 176.191, subd. 3, provided, in part:
Insurer payment. If a dispute exists as to whether an employee=s injury is compensable under this chapter and the employee is otherwise covered by an insurer pursuant to chapters 62A, 62C and 62D, that insurer shall pay any medical costs incurred by the employee for the injury up to the limits of the applicable coverage and shall make any disability payments otherwise payable by that insurer in the absence of or in addition to workers= compensation liability. If the injury is subsequently determined to be compensable pursuant to this chapter, the workers= compensation insurer shall be ordered to reimburse the insurer that made the payments for all payments made under this subdivision by the insurer, including interest at a rate of 12 percent a year.
This statute was amended effective June 4, 2005. Chapter 62A governs policies of accident and health insurance which are defined as policies that Ainsure against loss or damage by the sickness, bodily injury or death by accident of the assured or dependents, or those for whom the assured has assumed a portion of the liability for the loss or damage, including liability for payment of medical care costs or provision of medical care.@ Minn. Stats. ' 60.06, subd. 1(5)(a), 62A.01, subd. 1. Minn. Stat. ' 62A.23, governs group disability income coverage. Chapters 62C and 62D are not relevant to this proceeding.
 As a named party to the proceeding, it was not necessary for the employer to intervene in order to claim reimbursement. Immerman v. Independent Sch. Dist. #625, 51 W.C.D. 31 (W.C.C.A. 1994).
 We take no position on whether such a contract need be in writing or may be oral.