Radzisz v. Harley Davidson of Metrolina, Inc. , 346 N.C. 84 ( 1997 )

WHICHARD, Justice.

Plaintiff-employee, David Eugene Radzisz, a motorcycle mechanic employed by defendant-employer, was involved in a collision with an automobile on 1 June 1990 while operating a customer’s motorcycle. As a result of injuries sustained in the accident, plaintiff filed both a workers’ compensation claim with defendants and a civil action against the owners of the automobile (“third party”). Upon learning of the civil suit, defendant-carrier Universal Underwriters notified plaintiff and the third party of a potential subrogation lien in the workers’ compensation action and requested that no settlement funds be disbursed in the civil action until the potential lien was satisfied. Defendants subsequently denied compensation, claiming that the collision occurred outside the course and scope of plaintiff’s employment. On 24 September 1990, plaintiff and the third party agreed to settle the civil action for $25,000 and to the entry of a consent judgment in that amount.

In order to accommodate the potential workers’ compensation lien on the proceeds of the civil action, plaintiff and defendants entered into a “Settlement Stipulation and Agreement” on 8 November 1990, which provides in pertinent part:

In order to accommodate the potential worker’s compensation lien on the proceeds of the civil action, [the parties] hereby execute this Stipulation and Agreement whereby [plaintiff] stipulates that if his worker’s compensation claim is upheld by the Industrial Commission or if [defendants] file a written admission of liability for benefits with the Commission, [defendants] will have a lien, as provided in G.S. § 97-10.2, against these proceeds, and stipulates that they will be entitled to a credit against the worker[’]s compensation benefits to the extent that they have a subrogation interest in the proceeds of the settlement of the civil action. The amount of this subrogation interest is to be determined as if the civil action were settled after the total amount of the worker’s compensation lien is determined by the Industrial Commission or a court, and is to be determined in accordance with . . . G.S. § 97-10.2. The parties specifically reserve the right to contest the issue of the amount of the lien.

... As of the date of execution of this agreement, [plaintiff] contends that no such interest exists in this case. This Agreement is not to be construed as granting or conceding the existence of any potential subrogation interest until [plaintiff’s] worker[’]s compensation claim is honored.

A consent order requiring payment of $25,000 by the third party to plaintiff was entered 16 November 1990, and the funds were thereafter disbursed to plaintiff, subject to the terms of the settlement agreement.

Following a June 1991 hearing before Deputy Commissioner Charles Markham, plaintiff was awarded workers’ compensation benefits. The Deputy Commissioner also concluded that “[p]ursuant to the agreement between all the parties to the consent judgment,” defendants wére entitled to a credit or lien against the proceeds of the third-party settlement.

Plaintiff appealed to the full Commission, which, in a 13 December 1994 opinion and award, determined that plaintiff was entitled to workers’ compensation benefits but denied defendants’ subrogation interest. The Commission concluded that “[a]s defendants did not admit liability for this injury and instead denied and contested liability, and as no final award has been entered by the Industrial Commission, defendants shall have no subrogation interest or lien as to the $25,000 third party settlement.” The Commission also noted that the settlement agreement entered into by the parties did not create a subrogation interest but rather “purports and preserves any such interest as defendants may have eventually been found to exist” pursuant to the requirements of N.C.G.S. § 97-10.2.

The Court of Appeals, in a unanimous decision, reversed the Commission and held that defendants did possess a lien interest in funds received by plaintiff through settlement with the third party prior to the resolution of the workers’ compensation claim. This Court allowed plaintiff’s petition for discretionary review on 7 November 1996, and we now affirm the Court of Appeals.

N.C.G.S. § 97-10.2 defines the rights and remedies of employees and employers against third-party tort-feasors. The statute provides in pertinent part:

(f)(1) If the employer has filed a written admission of liability for benefits under this Chapter with, or if an award final in nature in favor of the employee has been entered by the Industrial Commission, then any amount obtained by any person by settlement with, judgment against, or otherwise from the third party by reason of such injury or death shall be disbursed by order of the Industrial Commission for the following purposes and in the following order of priority:

c. Third to the reimbursement of the employer for all benefits by way of compensation or medical compensation expense paid or to be paid by the employer under award of the Industrial Commission.

(g) The insurance carrier affording coverage to the employer under this Chapter shall be subrogated to all rights and liabilities of the employer hereunder but this shall not be construed as conferring any other or further rights upon such insurance carrier than those herein conferred upon the employer, anything in the policy of insurance to the contrary notwithstanding.

(h) In any proceeding against or settlement with the third party, every party to the claim for compensation shall have a lien to the extent of his interest under (f) hereof upon any payment made by the third party by reason of such injury or death, whether paid in settlement, in satisfaction of judgment, as consideration for covenant not to sue, or otherwise and such lien may be enforced against any person receiving such funds. Neither the employee or his personal representative nor the employer shall make any settlement with or accept any payment from the third party without the written consent of the other and no release to or agreement with the third party shall be valid or enforceable for any purpose unless both employer and employee or his personal representative join therein ....

N.C.G.S. § 97-10.2(f)(l)(c), (g), (h) (1991).

Plaintiff argues that, when read in pari materia, subsections (f) and (h) of section 97-10.2 create a temporal requirement whereby written admission of liability or a final award from the Industrial Commission are conditions precedent to a subrogee’s lien interest on the third-party proceeds. Subsection (h) provides that each party “shall have a lien to the extent of his interest under [subsection] (f).” Plaintiff contends that pursuant to subsection (f)(1), the Industrial Commission has jurisdiction to distribute third-party settlement proceeds to an employer only if the employer has filed a written admission of liability or if a final award favorable to plaintiff has been entered by the Commission. Here, at the time of disbursement of the third-party funds, defendant had denied liability, and there was no award, final or otherwise. Plaintiff argues that defendants therefore had no lien interest to enforce under subsection (h).

In response, defendants argue that they have a mandatory right to reimbursement under N.C.G.S. § 97-10.2 that is not waived by failure to admit liability or obtain a final award prior to distribution of the third-party settlement proceeds. Defendants contend that the Industrial Commission cannot abrogate an employer’s subrogation interest by creating conditions precedent to recovery that the General Assembly has never expressed, implied, or intended. We agree.

This Court’s primary task in statutory construction is to ensure that the legislative intent is accomplished. State ex rel. Hunt v. N. C. Reinsurance Facility, 302 N.C. 274, 288, 275 S.E.2d 399, 405 (1981). The best indicia of legislative purpose are “the language of the statute, the spirit of the act, and what the act seeks to accomplish.” Stevenson v. City of Durham, 281 N.C. 300, 303, 188 S.E.2d 281, 283 (1972). The purpose of the North Carolina Workers’ Compensation Act is not only to provide a swift and certain remedy to an injured worker, but also to ensure a limited and determinate liability for employers. Barnhardt v. Yellow Cab Co., 266 N.C. 419, 427, 146 S.E.2d 479, 484 (1966). Section 97-10.2 and its statutory predecessors were designed to secure prompt, reasonable compensation for an employee and simultaneously to permit an employer who has settled with the employee to recover such amount from a third-party tortfeasor. Brown v. Southern Ry. Co., 204 N.C. 668, 671, 169 S.E. 419, 420 (1933). Absent extenuating circumstances not present here, the Act in general and N.C.G.S. § 97-10.2 specifically were never intended to provide the employee with a windfall of a recovery from both the employer and the third-party tort-feasor. Where “[t]here is one injury, [there is] still only one recovery.” Andrews v. Peters, 55 N.C. App. 124, 131, 284 S.E.2d 748, 752 (1981), disc. rev. denied, 305 N.C. 395, 290 S.E.2d 364 (1982).

Turning to the provisions of N.C.G.S. § 97-10.2, we note that statutory interpretation properly commences with an examination of the plain words of a statute. Electric Supply Co. of Durham v. Swain Elec. Co., 328 N.C. 651, 656, 403 S.E.2d 291, 294 (1991). Subsection (h) explicitly states that “[i]n any proceeding against or settlement with the third party, every party to the claim for compensation shall have a lien to the extent of his interest under (f) hereof upon any payment made by the third party by reason of such injury.” (Emphasis added.) As the Court of Appeals correctly noted, the language “to the extent of his interest under (f)” refers to the priority of disbursement set out in subsection (f)(1)(a) through (d), and does not, as plaintiff asserts, require that defendants have claimed liability, made benefits payments, or sought a final award from the Commission at the time the third-party payment is made. Radzisz v. Harley Davidson of Metrolina, Inc., 123 N.C. App. 602, 608, 473 S.E.2d 655, 658 (1996). An employer’s statutory right to a lien on a recovery from the third-party tort-feasor is mandatory in nature, Manning v. Fletcher, 102 N.C. App. 392, 400, 402 S.E.2d 648, 652 (1991), aff’d per curiam, 331 N.C. 114, 413 S.E.2d 798 (1992), and the Industrial Commission'may not unilaterally discharge that right. The Commission’s authority to allocate third-party proceeds is limited to that stated by the legislature in subsection (f). The finding that defendants had no lien or subrogation interest whatsoever therefore exceeded the statutory authority granted to the Commission and is contrary to the mandate of section 97-10.2.

Additionally, since the passage of the Workers’ Compensation Act, the courts of this state have repeatedly affirmed employers’ entitlement under section 97-10.2 to recovery from a responsible third party. For example, in Byers v. N.C. State Highway Comm’n, 275 N.C. 229, 166 S.E.2d 649 (1969), this Court held that an employer’s failure to participate in an employee’s wrongful death action did not waive the employer’s right to reimbursement of proceeds from the wrongful death action. Similarly, in Williams v. Insurance Repair Specialists of N.C., Inc., 32 N.C. App. 235, 232 S.E.2d 5, disc. rev. denied, 292 N.C. 735, 235 S.E.2d 789 (1977), the Court of Appeals upheld the employer’s right to subrogation despite the fact that the Industrial Commission rejected the employer’s compensation agreement. Most recently, in Hieb v. Lowery, 344 N.C. 403, 474 S.E.2d 323 (1996), this Court affirmed the Court of Appeals’ decision that N.C.G.S. § 97-10.2 creates a lien for “all amounts paid or to be paid” to the employee. Id. at 408, 474 S.E.2d at 326. By inference, then, if the employer is entitled to a lien for benefits “to be paid,” this includes benefits awarded after the employee settles his third-party claim or obtains a judgment, regardless of whether the employer first filed an admission of liability or obtained an award from the Commission.

Finally, we note that plaintiff signed a Settlement Stipulation and Agreement which expressly states that “if [plaintiff’s] worker’s compensation claim is upheld by the Industrial Commission . . ., [defendants] will have a lien, as provided in G.S. § 97-10.2, against these proceeds” and that defendants are “entitled to a credit against the worker[’]s compensation benefits to the extent that they have a subrogation interest in the proceeds of the settlement of the civil action.” The Industrial Commission found that the settlement agreement “merely purports and preserves any such interest as defendants may have eventually been found to exist.” Contrary to the Commission’s finding, we conclude that the agreement acknowledges that defendants are legally entitled to a subrogation or lien interest and leaves undecided only the question of the amount of the lien. Accordingly, the Court of Appeals correctly held that the Settlement Stipulation and Agreement “created no rights other than those already existing under G.S. § 97-10.2.” Radzisz, 123 N.C. App. at 609, 473 S.E. 2d at 659.

We therefore affirm the decision of the Court of Appeals.

AFFIRMED.