Vol. 7, No. 1, Pg. 40. RIGHT WITHOUT A REMEDY: Setoff Under the South Carolina Workers' Compensation Act.

• Author: By Kelley M. Braithwaite and John A. Massalon

South Carolina Lawyer

1995.

Vol. 7, No. 1, Pg. 40.

RIGHT WITHOUT A REMEDY: Setoff Under the South Carolina Workers' Compensation Act

40RIGHT WITHOUT A REMEDY: Setoff Under the South Carolina Workers' Compensation ActBy Kelley M. Braithwaite and John A. MassalonINTRODUCTION

While South Carolina's Workers' Compensation Act (Act) may be characterized as a veteran statute, having persevered years of refinement by dozens and dozens of construing decisions, one issue under the Act remains unrefined and ambiguous: that of a third-party tortfeasors' right to claim a setoff for benefits paid under the Act. Consider the following common scenario.

Joe Worker works the third shift as a punch press operator on the assembly line at a manufacturing company. The punch press Joe operates is outfitted with a "two hand control" guarding system, which protects Joe by requiring both of his hands to remain on the operator's buttons for the duration of the press cycle. If either hand leaves a palm button, the press cycle ceases immediately.

One day, during the second shift, a maintenance employee of the manufacturing company performs some specialized maintenance on Joe's press but forgets to tighten a bolt that controls the two hand guarding system. Later that night, Joe, while running a cycle, removes his hand from the palm button and reaches into the point of operation to straighten a widget, fully expecting the cycle to stop. Because the bolt is not secure, the cycle does not stop, and Joe loses his right hand. Joe makes a workers' compensation claim and receives substantial benefits.

Joe then sues the manufacturer of the press, the distributor of the equipment and the retailer from whom his employer purchased the equipment, claiming that the press was defectively designed because the particular bolt should not have been adjustable in the first instance. Joe's sole remedy against his employer is the recovery of workers' compensation benefits, and hence, the employer is not named as a defendant.

Although Joe's employer is immune from suit, the defendants may raise a legitimate issue as to whether the negligence of Joe's employer, through the maintenance worker, caused or contributed to the injuries. A question that arises frequently in such situations is whether the defendants in the products liability action have a right to set off the amount of the workers' compensation benefits already received by Joe against any verdict Joe may receive at trial.

THE WORKERS' COMPENSATION ACT

Joe's right to pursue the press manufacturer, the wholesaler and the retailer is provided in South Carolina Code § 42-1-550, which specifically grants the injured employee the right to file an action at common law to recover against others who might be liable for his injuries. The reported decisions refer to such actions as third-party actions and the defendants in those cases as third-party defendants orthird-party tortfeasors. This article will do likewise. However, the reader should be cautioned not to confuse a third-party tortfeasor in this context with additional defendants who are brought into an action after it is commenced pursuant to Rule 14 of the SCRCP, governing third-party practice.

When a third-party suit is filed by the injured employee, the employer, of course, will not be named as a defendant, regardless of his fault, because of the statutory immunity from suit provided to employers in the Act. S.C. Code § 42-1-540, commonly known as the exclusivity rule, provides that an injured employee's sole remedy against his employer is to recover benefits under the Act. Thus, it is well settled that the Act abrogates all liability of the employer to the employee as a tortfeasor for work related injury. Boulware v. Mills, 294 S.C. 24, 362 S.E.2d 184 (Ct. App. 1987); Daniels v. Roumillat, 264 S.C. 497, 216 S.E.2d 174 (1975). The injured employee, then, cannot recover damages at law for his employer's negligence.

Absent the Workers' Compensation Act, a defendant faced with a suit in which the plaintiff has previously received partial compensation for his injuries may claim a setoff for the amount paid by the settling tortfeasor. S.C. Code Ann. § 15-38-50(1). Moreover, if the defendant has a claim for equitable or contractual indemnity against the settling tortfeasor, he may attempt to enforce that claim in a separate action or by adding the settling

41 party under Rule 14. The question becomes what effect does the Workers' Compensation Act have on these rights to setoff and indemnity when the "settling tortfeasor" is the plaintiff's employer.

The rights of any third-party tortfeasor as against the negligent employer of the plaintiff are governed by S.C. Code Ann § 42-1-580. This provision states that:

When...