Kentucky Court to Wal-Mart: Pay Workers’ Comp to Employee Who Sued

February 25, 2010

Wal-Mart Stores Inc. has lost its bid to deny workers compensation benefits to an employee who also received a $900,000 civil award from two third parties.

The Kentucky Court of Appeals ruling on Feb. 19 in Wal-Mart Stores Inc. vs. Donald Greg Wells arose in 2005 after Wells suffered injuries from exposure to carbon monoxide while working in a freezer for the Wal-Mart Distribution Center.

The Administrative Law Judge and Workers’ Compensation Board awarded him benefits and Wal-Mart a subrogation credit but Wal-Mart appealed.

Wal-Mart had hired contractors Atlas and Unarco to perform renovations to the freezer. These two contractors were using generators in the non-ventilated freezer. They also were using welding machinery. It was from these machines that Wells believed he was exposed to the carbon monoxide.

Wells simultaneously pursued a workers’ compensation claim against Wal-Mart and civil actions against Atlas and Unarco. The civil actions were resolved first, with Atlas settling for $500,000 and Unarco settling for $400,000.

As for the workers’ compensation claim, the ALJ awarded Wells a total of $440,659.21 in income benefits and past and future medical benefits and the Workers’ Compensation Board affirmed.

Wal-Mart claimed that Wells should only be allowed to collect from either the civil suits or the workers’ compensation claim, but not both, and that the $900,000 settlement reached in the civil suit precludes Wells from also being awarded workers’ compensation benefits.

The appellate court noted that if an employee does pursue both claims, then the employer has a right to subrogation against the proceeds recovered in the civil action that duplicate the workers’ compensation benefits. This prevents the employee from receiving a double recovery.

The ALJ examined Wells’ $900,000 civil recovery to determine which duplicated workers’ compensation benefits. The ALJ found that $444,080.36 duplicated workers’ compensation benefits and were amenable to a claim of subrogation for Wal-Mart. But Kentucky law also requires that the employee’s entire legal expense be deducted from the employer’s or insurer’s portion of any recovery. Wells’ attorney’s fees and expenses equaled $317,268.76. This reduced Wal-Mart’s subrogation credit to $126,811.60 ($444,080.36 minus $317,268.76).

The appeals court affirmed the amount of the subrogation credit.

Wal-Mart also argued that as part of his tort settlement with Atlas, Wells waived his right to bring a workers’ compensation claim. But the court found this issue to be without merit. “Nothing in the settlement agreement, especially the sections Wal-Mart brings to our attention, waives Wells’ right to pursue a workers’ compensation claim,” the court stated in its unanimous opinion.

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