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Travelers Insurance Co. v. Henry6/24/2005
onsistent with the general concept of preventing a double recovery present in § 624(e).
24. Therefore, when an injured employee recovers damages under an employer-purchased insurance policy, or any other first-party insurance policy, the settling parties, or the trial court, must apportion the award between economic and non-economic damages. Workers' compensation benefits reflect an employee's economic losses. See Surdam, 156 Vt. at 589-90, 595 A.2d at 266 ("Workers' compensation law provides injured workers with expeditious and certain payments for economic losses without proof of fault and employers with limited liability."); see also 1 A. Larson, Larson's Workers' Compensation Law § 1.03 (2004) ("In compensation, unlike tort, the only injuries compensated for are those which either actually or presumptively produce disability and thereby presumably affect earning power."). Using the type of benefits provided by workers' compensation as a guide, we conclude that the economic damages recoverable by the workers' compensation insurer include those awarded for lost wages, diminished earning capacity, medical expenses, vocational rehabilitative services, and in the case of the employee's death, burial and funeral expenses, and wage replacement paid to a surviving spouse, dependent children, or other dependents. See generally 21 V.S.A. §§ 601-711. If the employee recovers such damages and has already been compensated for these losses by the insurer, the insurer is entitled to reimbursement to prevent a double recovery. All other damages that the employee recovers under a first-party insurance policy, including compensation for pain and suffering and other related non-monetary injuries, are considered non-economic damages. Because workers' compensation does not compensate an employee for such losses, there is no danger of a double recovery, and the insurer is not entitled to reimbursement from this portion of the employee's award.
25. We recognize that an injured employee and a UIM carrier could attempt to structure a settlement agreement so as to avoid reimbursing the employer or the workers' compensation insurer for the benefits that it has provided. See, e.g., Colo. Comp. Ins. Auth. v. Jorgensen, 992 P.2d 1156, 1166 (Colo. 2000) (en banc) (holding that employee may not attempt to circumvent legitimate subrogation rights of insurer without risking that apportionment between economic and non-economic damages will be set aside).
Section 624 provides some protection against such a result. See 21 V.S.A. § 624(a) (employee must notify workers' compensation insurance carrier of action against liable third party; any party in interest shall have a right to join in suit); id. § 624(b) (consent of employer or workers' compensation insurer required if employee seeks to settle claim against third party for less than compensation benefits that would have been payable in the future); id. § 624(c) (settlement and release by employee not a bar to action by employer or its insurance carrier to proceed against third party for any interest or claim that it might have). As an additional safeguard, the employer, or workers' compensation carrier, has a right to seek judicial review of such a settlement agreement to ensure that the apportionment of damages is fair and that it reasonably reflects the injured party's actual economic and non-economic losses. See Jorgensen, 992 P.2d at 1166; see also Dearing v. Perry, 499 N.E.2d 268, 272 (Ind. Ct. App. 1986) (invalidating provision in settlement agreement allocating reimbursable and non-reimbursable damages where workers' compensation carrier had no opportunity to participate in settlement; carrier is entitled to decision on allocation by impartial factfinder)
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