All opinions are subject to modification
and technical correction prior to official publication in the
NO. COA08-476
Filed: 18 November 2008
RANDY E. STRICKLAND,
Employee,
Plaintiff,
v.
I.C.
File No. 537163
MARTIN
Employer,
SPECIALITY RISK SERVICES,
Carrier,
Defendants.
Appeal
by defendants from Opinion and Award entered 11 January 2008 by the Full
Commission for the North Carolina Industrial Commission. Heard in the Court of Appeals 25 September
2008.
Regan & Regan
PLLC, by James W. Ragan, for plaintiff appellee.
Teague, Campbell,
Dennis & Gorham, L.L.P., by George H. Pender, for defendant appellants.
McCULLOUGH,
Judge.
Defendant-employer
Martin Marietta Materials and defendant-insurer Specialty Risk Services appeal
from an Amended Opinion and Award entered 11 January 2008 by the Full
Commission (“the Commission”).
Defendants assigns error to the Commission’s decision to reduce their
credit for short-term disability benefits paid to plaintiff by twenty-five
percent (25%) in order to partially fund attorney’s fees for plaintiff. We hold that defendants are entitled to
receive full credit, under N.C. Gen. Stat. §97-42, for all compensation made to
plaintiff under their short-term disability plan. We reverse and remand.
Plaintiff
had been employed with defendant-employer Martin Marietta Materials, a rock
quarry business, for over twenty years.
On 24 March 2005, plaintiff injured his right shoulder while repairing a
bent engine compartment door of a rock loader.
Plaintiff reported his injury to defendant-employer and immediately
began receiving medical treatment for his shoulder. Plaintiff continued to work for defendant-employer
until his surgery on 22 June 2005.
Plaintiff’s surgery included an arthroscopic rotator cuff repair
procedure as well as a distal clavicle excision and subacromial decompression.
Due to physician-imposed physical restrictions, plaintiff has not returned to
work since his surgery. After plaintiff’s surgery,
defendants provided him with short-term disability benefits, pursuant to an
employer-funded plan. Under this plan,
plaintiff was paid for twenty-six (26) weeks in a total amount of
$11,532.00. All payments to plaintiff
were made during a time when defendants had not accepted plaintiff’s injuries
as compensable by workers’ compensation benefits.
Plaintiff
filed a Form 18 notice of injury on or about 11
July 2005. On 31 October 2006,
Deputy Commissioner Phillips entered an Opinion and Award denying plaintiff
workers’ compensation benefits.
Plaintiff appealed and the case was heard before the Commission on 1 May
2007.
On 7
September 2007, the Commission filed an Opinion and Award, reversing the Deputy
Commissioner’s decision and awarding temporary total disability payments to
plaintiff. The Commission concluded that
(1) plaintiff was entitled to a weekly compensation rate of $512.66, beginning
on 20 June 2005 and continuing until further order; and (2) plaintiff was not
entitled to attorney’s fees and costs because defendants had not engaged in
stubborn unfounded litigiousness, pursuant to N.C. Gen. Stat. §88.1.
The
Commission also approved attorney’s fees for plaintiff’s counsel in the amount
of twenty-five percent (25%) of compensation owed to plaintiff, ordering that
twenty-five percent (25%) of the lump sum due to plaintiff be deducted and paid
directly to plaintiff’s counsel, and thereafter, every fourth compensation
check due to plaintiff be deducted and paid directly to plaintiff’s
counsel. The Commission also held that
defendants were not entitled to a credit of $11,532.00, pursuant to N.C. Gen.
Stat. §97-42, because of their delay in filing a denial of plaintiff’s claim.
Defendants
filed a Motion for Reconsideration of the
Commission’s Opinion and Award, for denying defendants’ request for a
credit under N.C. Gen. Stat. §97-42. The
Commission granted defendants’ motion and reviewed the matter.
In an
Amended Order and Award issued on 11 January 2008, defendants were granted a
credit for the short-term disability
payments received by plaintiff.
The Commission concluded that defendants had been formally notified
about plaintiff’s claim on 13 January 2006 and had filed a Form 61 denying the
claim on 22 February 2006. However, the
Commission reduced defendants’ credit by twenty-five percent (25%) in order to
partially fund attorney’s fees for plaintiff and stated the following:
Defendants are entitled to a credit for
the employer-funded short-term disability plan payments received by Plaintiff
for the 26 weeks following Plaintiff’s June 22, 2005, shoulder surgery. N.C.
Gen. Stat. §97-42. However, the Full
Commission, in its discretion, reduces the credit by twenty-five percent (25%)
in order to fund an attorney’s fee based upon the full workers’ compensation
award. Church v. Baxter Travenol Laboratories, Inc., 104 N.C. App. 411,
409 S.E.2d 715 (1991).
Defendants argue that
the Commission erred when it reduced their credit for payments made through
their short-term disability plan by twenty-five percent (25%). Defendants contend that under N.C. Gen. Stat.
§97-42, they are entitled to full credit in the amount of $11,532.00 for all
benefits paid to plaintiff. We agree.
Appellate
review of an Opinion and Award of the Commission is “limited to reviewing
whether any competent evidence supports the Commission’s findings of fact and
whether the findings of fact support the Commission’s conclusions of law.” Deese v. Champion Int’l
Corp., 352 N.C. 109, 116, 530 S.E.2d 549, 553 (2000). We review the Commission’s conclusions of law
de novo. Deseth v. LensCrafters, Inc., 160
N.C. App. 180, 184, 585 S.E.2d 264, 267 (2003) (citation omitted).
In its
conclusions of law, the Commission determined that under N.C. Gen. Stat. §97-42,
defendants were entitled to a credit in the amount that they had already paid
plaintiff in short-term disability benefits.
However, the Commission reduced their credit by twenty-five percent
(25%) “in order to fund an attorney’s fee based upon the full workers’
compensation award.” N.C. Gen. Stat. §97-42
provides, in pertinent part:
Payments
made by the employer to the injured employee during the period of his
disability, or to his dependents, which by the terms of this Article were not
due and payable when made, may, subject to the approval of the Commission be
deducted from the amount to be paid as compensation.
N.C. Gen. Stat. §97-42
(2007). “The decision of whether to
grant a credit is within the sound discretion of the Commission” and “will not
be disturbed on appeal in the absence of an abuse of discretion.” Shockley v. Cairn Studios,
Ltd., 149 N.C. App. 961, 966, 563 S.E.2d 207, 211 (2002), disc. review
denied, 356 N.C. 678, 577 S.E.2d 887, 888 (2003). Our Supreme Court has clarified the extent of
the Commission’s discretion by holding that it is an abuse of discretion for
the Commission to deny an employer full credit for benefits paid under an
employer-funded plan if the benefits were not due and payable when made. See Evans v. AT&T Technologies, Inc.,
332 N.C. 78, 85, 418 S.E.2d 503, 507-08 (1992); Foster v. Western-Electric
Co., 320 N.C. 113, 117, 357 S.E.2d 670, 673 (1987).
In
Foster, the employer was denied a credit for payments it made to the
employee under its private disability benefits plan.
Payment by the employer under a private
disability plan accomplishes sound policy objectives by providing immediate
financial assistance to the disabled worker while she is disabled. Through its plan, [the employer] affords a
much-needed continuity of income to injured employees fully consistent with the
expressed policies of workers’ compensation.
Our
Supreme Court also reversed the earlier decision in Evans v. AT&T
Technologies, which only granted the employer partial credit for payments
made to an injured employee under the employer’s disability plan. 332 N.C. at 90, 418 S.E.2d at 511. The Court clarified that, under N.C. Gen.
Stat. §97-42, employers are entitled to receive “full dollar-for-dollar credit”
for all benefits paid under a private plan, so long as payments were not due
and payable when made. Evans, 332
N.C. at 85, 418 S.E.2d at 508. Our Court
has also recognized that the Commission has limited discretion in denying an
employer full credit under N.C. Gen. Stat. §97-42. See Cox v. City of Winston-Salem,
171 N.C. App. 112, 115, 613 S.E.2d 746, 748 (2005) (discussing that it is an
abuse of discretion to deny an employer full credit for wage-replacement
benefits if solely funded by the employer); Lowe v. BE&K
Construction Co., 121 N.C. App. 570, 576, 468 S.E.2d 396, 399 (1996)
(holding that the Commission erred by denying the employer credit for payments
made when the employer had not accepted the employee’s claim as
compensable). In this case, defendants’
short-term disability plan was fully funded by defendant-employer. Furthermore, when plaintiff received the
short-term disability benefits, defendants had not accepted his injury as
compensable, nor had there been a determination of compensability by the
Industrial Commission. Thus, pursuant to
Foster and Evans, defendants are entitled to full credit of
$11,532.00 for all benefits paid to plaintiff.
In its
Amended Opinion and Award, the Commission cited Church v. Baxter
Travenol Laboratories, 104 N.C. App. 411, 409 S.E.2d 715, (1991), when
referring to its discretion to reduce defendants’ credit. In Church, the employer’s private
insurer paid the plaintiff benefits in the amount of $2,797.44 while he was
injured.
After
careful review of our Supreme Court’s decisions in Foster and Evans,
it is unclear whether Church is still binding on this Court. If Church remains binding, it applies
only in the limited circumstance when the difference between the amount already
paid by the employer and the amount awarded to the employee is so small that
the claimant would be unable to obtain competent counsel if attorney’s fees
were only awarded from that amount.
Nevertheless,
Church is not applicable to the facts of this case. Unlike the circumstances in Church,
plaintiff’s counsel will be adequately compensated. In addition to receiving twenty-five percent
(25%) of all back compensation owed to plaintiff, plaintiff’s counsel will also
receive monthly payments of $512.66 for an indefinite duration. This is a substantial award of attorney’s
fees, and therefore, cannot fall under the rationale of Church.
As in Foster
and Evans, the legislative intent of N.C. Gen. Stat. §97-42 clearly
supports granting defendants full credit for all short-term disability benefits
paid to plaintiff. Defendants provided
plaintiff with wage-replacement benefits after he was injured, but before he
was entitled to receive workers’ compensation.
Defendants’ voluntary payments furthered the overall intent of the
statute to provide compensation to individuals with work-related injuries as
soon as possible. See Evans, 332 N.C. at 87, 418 S.E.2d at 509.
While
we do not think that the Commission intended to penalize defendants by reducing
their credit, the Commission’s decision had the effect of doing so. An employer who has “paid an employee wage-replacement
benefits at the time of that employee’s greatest need, should not be penalized
by being denied full credit for the amount paid as against the amount which was
subsequently determined to be due the employee under workers’ compensation.” Foster, 320 N.C. at 117, 357 S.E.2d at
673. Denying employers full credit could
be detrimental in that it “would inevitably cause employers to be less generous
and the result would be that the employee would lose his full salary at the
very moment he needs it most.”
In the
case sub judice, the purpose of the statute was thwarted when defendants
were required to pay significantly more solely due to the fact that they had
provided short-term disability benefits to plaintiff. If defendants had not provided plaintiff with
compensation under their disability insurance plan, they still would have been
required to pay the amount of $11,532.00 once plaintiff was awarded workers’
compensation benefits. Here, plaintiff’s
claim was not adjudged to be compensable until over two years after his
injury. If defendants had waited until
that time to compensate plaintiff in the amount of $11,532.00, plaintiff would
have only been permitted to retain $8,649.00, seventy-five percent (75%) of
that amount, as the remaining $2,883.00 would have been paid directly to
plaintiff’s attorney.
However,
because defendants had already voluntarily paid $11,532.00 to plaintiff, the
Commission denied their request for a
full credit and ordered them to pay an additional $2,883.00 to plaintiff’s
attorney — an amount they would not otherwise have been required to pay. This
discourages employers from providing disability benefits, resulting in injured
employees having to wait until awarded workers’ compensation benefits to be
compensated. This ruling is inconsistent with the legislative intent of N.C.
Gen. Stat. §97-42, which is to encourage employers to make voluntary payments
to injured employees before workers’ compensation benefits are awarded and due.
For
the above-mentioned reasons, we hold that defendants are entitled to full
credit for all short-term disability payments made to plaintiff and find that
the Commission erred in reducing defendants’ credit by ordering additional
payment of plaintiff’s attorney fees. We reverse and remand for appropriate
modification of the Commission’s Opinion and Award.
Reversed
and remanded.
Judges
TYSON and