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Flower v Gensterblum; (COA-PUB, 10/18/1978; RB #126)


Michigan Court of Appeals; Docket No. 78-79; Published   
Judges Holbrook, Kelly, and Marutiak; 2-1 (With J. Kelly Dissenting)   
Official Michigan Reporter Citation: 86 Mich App 561; Link to Opinion alt   

Workers Comp Liens Regarding Auto Tort Claims [§3116]

Workers Disability Compensation Act (MCL 418.1, et seq.)   

In a lengthy written Opinion by Judge Holbrook, another panel of the Court of Appeals agreed with the conclusion reached in Reliance (item number 93) and Great American (item number 125) that a workers' compensation carrier should not be permitted reimbursement out of a tort recovery for noneconomic losses which is realized by an employee against an automobile tortfeasor.

In so holding, the Court analyzed the workers' comp lien provision [MCLA 418.827(5)] and the Supreme Court decision in Pelkey v Elsea Realty, 394 Mich 485 (1975) and noted that both of those authorities preceded the enactment of the no-fault law. The Court noted that the Supreme Court in Pelkey felt it necessary to allow the worker's compensation carrier to obtain reimbursement even with respect to damages denominated "noneconomic" in order to avoid the possibility of double recovery. Since enactment of no-fault, however, it can no longer be said that the employee is allowed to seek a second recovery for economic damages from the tortfeasor inasmuch as tort liability for economic loss is abolished pursuant to §3135(2) of the no-fault act. Accordingly, the workers' compensation lien is a declaration of priorities which reflects legislative concern over double recovery by the plaintiff to the exclusion of the insurer. When it is read in total, it presupposes that the employee's recovery in tort will include the amounts received by him from the insurer, thereby, under standard insurance principals, conferring a right of subrogation upon the insurer. The Court felt its interpretation was an "unavoidable result of the subsequent enactment of the no-fault insurance scheme with its radical departure from the previously existing tort law. The fundamental assumption underlying the enactment of MCLA 418.827(5)] is no longer operative."

In significant language the Court also held that the statutory workers' comp lien would not prevent the employee from seeking a second recovery for economic damages from his own automobile PIP carrier. In that respect, the Court stated, "It is true that the employee may seek to claim a second recovery for economic damages from his automobile insurer. According to the general view, such a recovery would not be subject to the compensation carrier's claims for reimbursement, as it is considered a personal contract right, bargained for by the victim. The fact that some plaintiffs may thus achieve a disfavored double recovery by carrying personal automobile insurance coverage, we consider to be a problem for the Legislature to consider." This statement is another affirmation by another panel of the Court of Appeals that employees injured in work-related automobile accidents are entitled to PIP benefits at least from their own PIP carriers.

Judge M. J. Kelly dissented in this case, but in so doing agreed with the holding of the majority that a workers' compensation carrier is not entitled to reimbursement for economic loss benefits paid to the injured employee out of that employee's recovery of noneconomic losses from the third party tortfeasor. However, Judge Kelly could not join the holding in this case because one of the tortfeasors was a liquor establishment with liability under the Dram Shop Act The judge noted that under the Dram Shop Act the plaintiff would be permitted to recover both economic and noneconomic losses from the liquor establishment and accordingly there would be a possibility of double recovery. In that respect, the workers' comp carrier should be permitted reimbursement out of that portion of a tort recovery which represents economic loss. In so holding, Judge Kelly stated, "In the case of liability based upon the Dram Shop Act, where recovery of economic loss is possible, these provisions, as interpreted in Peikey and Wrobel, should control and permit both intervention and reimbursement by the insurance carrier.''

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