Trott v. Brinks and reimbursement: why Alabama's third-party statute should be amended.

• Author: Kennemer, Dustin Wesley

INTRODUCTION

In Trott v. Brinks, Inc., the Alabama Supreme Court held that a workers' compensation insurer was not entitled to subrogation of medical benefits in a third-party wrongful-death suit because the deceased employee's estate was not entitled to recover medical benefits in a wrongful-death action. (1) Though the court properly applied the doctrine of equitable subrogation to reach its holding, Alabama's poorly worded third-party credit statute led to an unforeseen consequence. Before 1992 the statute did not grant a right of reimbursement to employers who paid medical expenses pursuant to workers' compensation laws. In 1992, the legislature amended the third-party statute to give employers the right to reduce their liability for medical benefits paid. However, as Trott reveals, an apparent misunderstanding and the legislature's unfortunate use of the word "subrogation" prevents the amendment from fully realizing its purpose.

The first section of this note discusses the relevant history of Alabama's third-party credit statute, as well as the progression of case law interpreting the statute. The second section contains a statement of the case and the court's holding and reasoning. The third section is an analysis of the Trott decision, including corrective measures the legislature could take to harmonize legislative intent with real world application.

THE HISTORY OF ALABAMA'S THIRD-PARTY CREDIT STATUTE

The purpose of Alabama's third-party credit statute is to shift the burden of compensation related to injury, disease, or death suffered during the course of employment from the employer to the culpable third-party. (2) In doing so, the statute ostensibly fulfills the legislature's intent to "reduce the total costs of compensation by any amount attributable to third-party negligence." (3) Alabama's original third-party statute allowed employers a reimbursement right to any amount of compensation paid by the culpable third party, but did not explicitly refer to the right of reimbursement for medical benefits paid. (4) Another section of the 1940 code, however, suggested that employers had a right to reduce their liability for medical benefits expended. (5) When the 1949 amendment declared that compensation did not include medical benefits, (6) it created an inconsistency similar to the one still plaguing the third-party statute in its present form.

In 1960, the first Alabama case to deal directly with the issue of compensation for medical benefits was Liberty Mutual Insurance Co. v. Manasco. (7) In that case, Liberty, a workers' compensation insurer, paid disability and medical benefits to Manasco when he was injured in the course of his employment. (8) Manasco sued the third-party liable for his injuries and Liberty intervened seeking reimbursement for the disability and medical benefits it expended. (9) Manasco subsequently amended his complaint to exclude each count that claimed damages relating to hospital or medical bills. (10) The Alabama Supreme Court concluded that the statute's language, as amended in 1949, did not include medical benefits within reimbursable compensation. (11) However, the court commented that it did not believe the legislature intended to allow employees to word complaints in a way that would deprive employers of rights to reimbursement for medical benefits paid on behalf of employees. (12) The court realized the inconsistency created by the amended wording of the statute, but left the issue for the legislature to correct. (13)

The court of appeals had an opportunity three years later to reconsider the portion of the Manasco opinion declaring that compensation did not include medical benefits. (14) That court should have recognized that another section of the workers' compensation code provided for an employer to reduce its liability for medical benefits paid when an employee recovered from a culpable third party. (15) Section 293 of the 1940 Code stated that when an insurer pays for medical bills pursuant to workers' compensation laws and the employee subsequently receives payment for those bills from any other source "the employer shall not be required in such case to pay any part of such expense." (16) Thus, when an employee recovers from a third-party, medical payments should be subject to the employer/insurer's right of reimbursement. The court would have better served the statute's purpose, which was to reduce the employer's liability, if it had accepted this argument. Instead, the court encouraged employees to circumvent an employer/insurer's reimbursement right by omitting any reference to medical expenses in the third-party complaint. (17) This holding directly implicated the Manasco court's warning that employees would be able to defeat a reimbursement claim through deceptively artful pleading. (18)

Unfortunately, the legislature did not heed the Manasco court's warning about the inconsistency inherent in the third-party statute. Manasco held that compensation did not include medical benefits, and courts consistently reaffirmed that holding in subsequent cases. (19) Medical and related expenses constitute a large part of employer liability for work related injuries. (20) Thus, the purpose of the third-party statute was not being fulfilled.

The present third-party statute states in relevant portion:

If the injury or death for which compensation is payable under Articles 3 or 4 of this chapter was caused under circumstances also creating a legal liability for damages on the part of any party other than the employer, whether or not the party is subject to this chapter, the employee, or his or her dependents in case of death, may proceed against the employer to recover compensation under this chapter or may agree with the employer upon the compensation payable under this chapter, and at the same time, may bring an action against the other party to recover damages for the injury or death, and the amount of the damages shall be ascertained and determined without regard to this chapter.... If the injured employee, or in case of death, his or her dependents, recovers damages against the other party, the amount of the damages recovered and collected shall be credited upon the liability of the employer for compensation.... For purposes of this amendatory act, the employer shall be entitled to subrogation for medical and vocational benefits expended by the employer on behalf of the employee. (21) The statute allows employees to sue liable third parties as well as recover benefits under workers compensation law...