Appeal of Michael Langenfeld, No. 2009-362
(Decided April 8, 2010)
The petitioner sustained a work injury in 1990 that resulted in paraplegia. Since the injury, the petitioner has required the use of a wheelchair, undergone multiple medical procedures, and must take numerous prescription medications. The employer’s workers’ compensation carrier complied with its obligation to provide benefits.
The petitioner brought a lawsuit against several third parties whom he alleged were responsible for the accident. In 1994 he entered into a structured settlement with a present value of $687,500. The settlement was approved by the federal court, which determined that the carrier was entitled to a lien of $367,344, less its pro rata share of attorney’s fees and expenses. The court found that since the lien was 53.43% of the present value of the settlement, its pro rata share of fees and costs was 53.43%. After deducting the carrier’s share of fees and costs, the present value of its lien was $240,184.37. The net amount of the petitioner’s portion of the settlement was $209,330.92.
As a result of the settlement, the carrier was temporarily relieved of its liability for compensation payments until the sum of all payments due exceeded the net value of the settlement. The carrier’s “holiday” was equal to $209,330.92 – the net amount of the third party settlement to the petitioner.
In 2005 the petitioner sought a hearing before the DOL to determine when the carrier’s holiday was exhausted, and also sought additional reimbursement for legal fees he incurred to secure the third party settlement and the resulting carrier’s holiday. In 2008 the board ruled that the holiday was exhausted on October 16, 2000 when the qualifying medical expenses reached $209,000.
The board also ordered the carrier to reimburse the petitioner $72,461.90 for legal fees and costs incurred to secure the holiday. Since the amount of the holiday was about 30% of the total present value of the settlement, the court arrived at this figure by multiplying the total legal fees and costs ($229,166.67) by approximately 30%. The board also ruled that the petitioner was entitled to 10% interest on the overdue bills and the legal fees. However, the carrier filed a motion for reconsideration and the board reversed its decision, finally deciding that the carrier was not required to reimburse the petitioner for the $72,461.90 in legal fees, costs and interest.
The board also decided that it had erroneously applied the 1994 version of the workers’ compensation act, ruling that it should have applied the 2005 version because that was the date of the petitioner’s request for an initial hearing. Under the 2005 version, the interest applied only to medical bills which the petitioner had paid out-of-pocket and which qualified for reimbursement.
The petitioner appealed, arguing that the board erred when: 1) it reversed its prior decision requiring the carrier to pay its pro rata share of in legal fees and costs associated with the carrier’s “holiday”; and 2) it applied the 2005 version of the worker’s compensation act in determining the interest to which the petitioner was entitled.
Reversed and remanded.
The Court reversed the board’s decision with respect to the carrier’s obligation to pay its pro rata share of the attorney’s fees and costs for the holiday. The insurer’s ability to take a holiday from future compensation is of economic benefit to it. The federal court in this case did not consider the carrier’s pro rata share of fees and costs due for the holiday, and instead based the carrier’s pro rata share solely on the percentage the lien represented at the time of third-party settlement, based upon the present-day value at that time. The board erred when it ruled that the carrier was not obligated to pay a pro rata share of the fees and costs associated with the holiday.
The Court also held that the board erred in applying the 2005 version of the statute in determining the petitioner’s entitlement to interest. Under the 2005 version, interest is payable only on amounts which have been paid directly by the employee. The version of the statute in effect in 2000 did not so limit interest awards, but instead authorized an award of 10% interest on that portion of any award the payment of which is contested.
Where, as here, the legislature does not specify whether a statute is to apply prospectively or retrospectively, the court must determine whether the statute affects the parties’ substantive or procedural rights. Where application of a new law would adversely affect a party’s substantive rights, it may not be applied retrospectively. The Court ruled that interest is an integral part of the employee’s substantive benefits. Since the statutory provisions governing interest are substantive, they apply prospectively only. The board should have applied the version of the statute in effect in June of 1990, the date of the injury rather than the 2005 version.
Stephen J. Schulthess