Opinion
February 15, 1944. —
March 14, 1944.
APPEAL from an order of the circuit court for Outagamie county: HENRY P. HUGHES, Circuit Judge, Presiding. Reversed in part; affirmed in part.
The cause was submitted for the appellant on the brief of Quarles, Spence Quarles and Charles H. Gorman, attorneys, and Kenneth Grubb of counsel, all of Milwaukee, and for the respondent on the brief of Gustave J. Keller of Appleton.
On behalf of the Industrial Commission a brief was filed by the Attorney General and Mortimer Levitan, assistant attorney general, as amicus curiae.
Action by Walter Richtman, an employee, against Richard C. Honkamp and General Accident Fire Life Assurance Corporation, Ltd., the interpleaded defendants Irving A. Grunwaldt and the Northwestern National Casualty Company. The American Mutual Liability Insurance Company, the employer's insurer, intervened as a plaintiff.
Walter Richtman received injuries in an automobile collision while employed by the Clinton Company under circumstances entitling him to workmen's compensation from it and its insurer, the American Mutual Liability Insurance Company. On August 16, 1940, Richtman commenced an action against the third party to recover damages. On June 10, 1941, judgment in the amount of $8,376.92 was entered and paid to the clerk of court to be disbursed on the order of the court. This judgment was subsequently affirmed by this court January 13, 1942. ( 241 Wis. 414, 6 N.W.2d 230.) After costs of collection had been paid, the insurer had been reimbursed for its payments to the date of the trial, and Richtman had received his statutory one-third distributive share, there remained a balance of $2,220.77 in the hands of the clerk of court.
On April 10, 1942, a hearing on plaintiff's claim for permanent partial disability was had before the industrial commission and an award was made by the commission entitling Richtman to compensation for seven hundred twelve weeks at $3.15 per week, an amount exceeding the balance of the judgment.
Upon petition, the trial judge ordered the clerk of court to disburse the balance of the judgment as follows:
"1. To Walter Richtman the sum of $138.70. This payment is to cover the amount of $138.70 paid into court by the American Mutual Liability Insurance Company and to meet the condition precedent set by the Hon. JOSEPH R. McCarthy in a previous order covering expenses of this action and is not a part of the recovery in this action.
"2. To Charles H. Gorman the sum of $549.57 as per the previous orders of the court.
"3. To American Mutual Liability Insurance Company the sum of $525.32 covering payments made to the plaintiff, Walter Richtman, since the trial of this action.
"4. To Walter Richtman, the sum of $1,154.88 covering the balance recovered in this action.
"The industrial commission of Wisconsin can, upon application of the American Mutual Liability Insurance Company, calculate the credit to be given the American Mutual Liability Insurance Company because the payments from this action and the said credit to apply on the award of the industrial commission heretofore made on the application of Walter Richtman against Clinton Company and American Mutual Liability Insurance Company."
From that order, the American Mutual Liability Insurance Company appeals.
This proceeding is in a third-party-liability action authorized by the Workmen's Compensation Act.
The law governing the third-party liability and the distribution of avails between the employer and the employee in such an action is that making a claim for compensation against an employer or compensation insurer for an injury of an employee does not affect the right of the employee or his personal representative to claim damages in an action against another party for such injury. But the employer or his insurer is entitled to repayment of the amount paid by him as compensation. He or it has a first claim upon the proceeds after deducting reasonable costs of collection and one third of the proceeds. The one third in all cases is to be paid to the employee. Sec. 102.29(1) (a), Stats. Hence an action may be commenced by an employee or his dependents against a third party for an injury to which secs. 102.03 to 102.64 are applicable. But in the event of a recovery it is provided that "so much thereof as is necessary to discharge in equal amount the liability of the employer and the insurer for compensation shall be paid to such employer or insurer; and any excess shall belong to the injured employee or his dependents." Sec. 102.29(1) (5).
It thus appears that only so much as remains of the amount recovered in such an action over the one third and costs of collection and what is necessary to discharge in equal amounts the liability of the employer and the insurer, goes to the employee.
Here the award of the industrial commission has made the insurer liable for payment to the plaintiff of $3.15 each week for the period of seven hundred twelve weeks. The statute referred to expressly provides that the insurer shall receive an amount sufficient to discharge his liability. That is not only the amount already paid but the amount for which the employer or his insurer is liable. One objection to the order appealed from is that in effect the court has ordered that the entire proceeds after deducting amounts already paid, be paid to respondent, leaving the employer and insurer to get such relief as they can by petitioning the industrial commission to credit them with the amount due under the award. Another objection is that it interferes with the obligation of the industrial commission under the Workmen's Compensation act, to see that its order and award is fully discharged. Had the industrial commission, in its discretion, made an award in a lump sum to the employee, there would be no issue raised as to the necessity of the amount passing through other hands before being received by the respondent. However, no order has been made by the commission under sec. 102.32(7), Stats., granting payment in a lump sum. The statute providing for payments for permanent disability on an instalment basis is a welfare measure and was enacted for a practical purpose. In cases where an employee has maintained an action against a third person and has also applied for compensation, the disbursement of the proceeds must be under and according to the statute. The court cannot exercise administrative powers. Those powers are placed in the commission.
An examination of the history of this statute sustains the position that the award of the commission is directive and controlling. The fruits of the judgment of the third-party action can only be enjoyed in a manner consistent with the industrial commission's award. A history of the legislation is given in the opinion in the case of Employers Mut. Liability Ins. Co. v. Icke, 225 Wis. 304, 274 N.W. 283. Originally, under the compensation act an employee, electing to take compensation, entirely lost his right to a third-party action. The insurer or employer became the owner of the cause of action under the theory of assignment. There has been a gradual transition from the theory of sole ownership under assignment to regulated and specified interests in the results of such actions. Although the rights of the employee were increased by successive amendments, still control in certain respects has been left in the commission by these enlargements which have been substituted for the original plan. The right to a recovery against a third person as it exists under the present law, therefore, is limited by the terms of sec. 102.29, Stats. And in the light of this development the right is given to the insurer to have such an amount from the proceeds of the judgment over the one third and costs, as is necessary to discharge his liability. It is apparent that the legislature intended that, when an employee chose to make a claim for compensation, the award of the industrial commission was to be fully carried out and the action against a third party was not to operate so as to compel changing the commission's award for compensation to be paid over a period of weeks.
The contention of respondent, that his rights to the entire balance of the proceeds of the judgment might be jeopardized should the industrial commission subsequently accelerate the payments because then a discount might be allowed the insurer, is not well grounded. The respondent can be adequately protected by payment of this fund to the insurer in trust for its own reimbursement as it makes future payments to plaintiff, or by letting it remain in trust with the clerk of court to be repaid to the insurer as fast as the insurer pays compensation payments to the respondent.
Other provisions of the order are in accordance with law and are not challenged on this appeal.
In checking over the figures set forth in the order there is an apparent discrepancy in the order of $10. Where the amount reads $1,154.88 it should read $1,144.88. This error should be adjusted.
By the Court. — The order requiring the payment of the sum recited in paragraph 4 of the order to Walter Richtman is reversed. In other respects the order is affirmed.