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Eckhardt v. Village Inn3/10/1992
We granted certiorari to consider whether the court of appeals erred in affirming the decision by the Industrial Claim Appeals Office (Panel) to terminate future worker's compensation benefits payable to the claimant, Richard K. Eckhardt. In an unpublished opinion, the court of appeals held that the Colorado Workmen's Compensation Act, now called the Workers' Compensation Act (Act), does not require an employer and/or its insurance carrier to act reasonably in withholding consent to a compromise or settlement of a suit by an injured employee against the alleged third-party tortfeasors. Eckhardt v. Village Inn, No. 90CA0060 (Colo. App. Oct. 11, 1990). We reverse.
I.
On April 24, 1985, Eckhardt was injured in a highway accident in Missouri. When the accident occurred, Eckhardt was working within the scope of his employment with Village Inn, Inc. (Vicorp). Eckhardt slowed for a truck which turned onto the highway and another truck hit the rear of Eckhardt's vehicle. Because of the injuries sustained in the accident, Eckhardt claimed and received worker 's compensation benefits from Vicorp and its insurance carrier, Great American Insurance Company (carrier), respondents. Both the employer and the carrier filed a general admission of liability and paid Eckhardt temporary disability benefits and costs of medical care.
Eckhardt commenced an action in the United States District Court for the Western District of Missouri against the owner and operator of the truck which struck his vehicle. Eckhardt notified the respondents, including the carrier's adjuster, Gallagher Bassett Insurance Services (adjuster), of the suit. The carrier then notified counsel for the alleged third-party tortfeasors of its subrogated interest in the suit. Neither Vicorp nor the carrier participated directly in Eckhardt's suit.
Several weeks before the date when the suit was scheduled for trial, Eckhardt's attorney concluded that a successful suit was unlikely because it appeared that the defendants were not clearly at fault or at least were not primarily at fault for the accident, because Eckhardt's medical witnesses were less than certain as to the causes of his injuries, and because questions arose as to the applicability of the defendants' insurance coverage. In addition, defense counsel argued that Eckhardt himself caused the accident by slowing too early for the truck entering the highway. As a result, settlement negotiations began between Eckhardt and the defendants. The defendants offered settlement in the amount of $12,500.
Eckhardt's attorney, pursuant to section 8-52-108(2), 3B C.R.S. (1986), sought the carrier's approval of the settlement amount. During the course of negotiations, the carrier, via its adjuster, offered to approve a settlement in which the carrier would receive $7,000 and a complete release from its obligation to pay Eckhardt any future benefits related to his claim under the Act. Because those terms were not acceptable to Eckhardt, the negotiations reached an impasse, and the adjuster refused to consent to any settlement not sufficient to indemnify fully the carrier for its subrogated interest, which at the time was over $11,000.
Denied the carrier's approval, Eckhardt nevertheless settled with the defendants for $12,500. The defendants issued an initial check for that amount, payable to the adjuster, to Eckhardt and to Eckhardt's attorney. The adjuster, however, refused to endorse the check. Eckhardt's attorney informed the federal district court by letter of this impediment to the distribution of the proceeds. A copy of this letter was sent to the adjuster. The court, after a hearing, ordered the defendants to make the payment to the registry
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