Jason Wolk and Jeffrey Meyer were injured while working for J. Wolk Construction, LLC. Their workers’ compensation insurer, Grinnell Mutual, covered their claims, paying Wolk $900,969.83 and Meyer $815,829.47. The employees pursued legal action against multiple third parties, and before the case proceeded to trial, one of the defendants agreed to a $1,000,000 settlement. Each employee reimbursed Grinnell $113,517.05 as a partial repayment of their liens.
Anticipating additional third-party recoveries, Wolk and Meyer separately negotiated settlement agreements with Grinnell. Under the terms, a 40% attorney’s fee was deducted first. From the remaining amount, 30% was allocated to their wives for loss of consortium claims. The remaining 70% was then divided equally among three parties: (1) the plaintiffs, (2) the plaintiffs’ counsel, and (3) Grinnell, satisfying the insurer’s subrogation interests. The agreement capped Grinnell’s recovery at the total amount of its original lien.
At trial, the jury awarded Wolk $11,000,000 (with 10% comparative fault) and Wolk’s wife $1,000,000 for loss of consortium. The jury awarded Meyer $13,500,000 and Meyer’s wife $3,000,000 for loss of consortium. After the jury verdict, plaintiff and defendants entered into a final settlement agreement (in order to avoid the risk and cost of appeal), limiting the defendants’ damages to $20,000,000, which plaintiffs agreed to split evenly. At this point the employees and Grinnell were unable to agree on the division of the proceeds under the settlement agreement between them. The employees filed a declaratory judgment action asking the trial court to interpret the Settlement Agreement in accordance with § 287.150.3.
On October 18, 2023, the trial court entered judgment. Appellants subsequently filed a motion to amend the judgment, and Respondent opposed the motion. The trial court granted the motion and entered an amended judgment on December 21, 2023. In its amended judgment, the trial court interpreted § 287.150.3 and applied its terms to the parties’ Settlement Agreement. Section 287.150.3 states, in pertinent part:
Whenever recovery against the third person is effected by the employee or his dependents, the employer shall pay from his share of the recovery a proportionate share of the expenses of the recovery, including a reasonable attorney fee. After the expenses and attorney fee have been paid, the balance of the recovery shall be apportioned between the employer and the employee or his dependents in the same ratio that the amount due the employer bears to the total amount recovered if there is no finding of comparative fault on the part of the employee, or the total damages determined by the trier of fact if there is a finding of comparative fault on the part of the employee. Notwithstanding the foregoing provision, the balance of the recovery may be divided between the employer and the employee or his dependents as they may otherwise agree.
In the amended judgment, the court stated:
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- … [T]he third sentence of Section 287.150.3 … specifically states “Notwithstanding the foregoing provision, the balance of the recovery ….”
- It is quite clear from the reading of Section 287.150, that the term “balance of the recovery” is the amount left after the expenses and attorney fees have been deducted.
- Both Petitioners and Respondents agree that Jason Wolk’s net recovery is $5,467.975.39, after deduction for attorney fees and expenses. Therefore, $5,467,975.39 is the “balance of recovery” as defined in Section 287.150.3.
- Both Petitioners and Respondents agree that Jeffrey Meyer’s net recovery is $4,880,506.96, after deduction for attorney fees and expenses. Therefore, $4,880,506.96 is the “balance of recovery” as defined in Section 287.150.3.
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Thus, the trial court concluded the “Notwithstanding” clause in Section 287.150.3 (underlined above) allows the parties to agree to divide only the “balance of the recovery.” The “balance of the recovery,” as defined in Section 287.150.3, is the amount of the recovery from the third-party suit, less the expenses of the recovery, including a reasonable attorney fee. After deducting the attorney fees and expenses to arrive at the balance of the recovery, the trial court then divided that balance according to the terms of the parties’ pre-trial Settlement Agreement. Grinnell argued that the $113,517.05 it received from each employee in the previous settlement should not be credited against the total amounts of $900,969.83 it paid Appellant Wolk and $815,829.47 it paid Appellant Meyer in workers’ compensation benefits. The trial court rejected Grinnell’s argument based on the terms of the Settlement Agreement limiting Grinnell’s recovery “up to the amount at which [Respondent] is fully repaid for all moneys paid in workers’ compensation benefits to [Appellant].”
Accordingly, the court found that Wolk owed Grinnell $787,452.78 ($900,969.83, less $113,517.05), and Meyer owed Grinnell $702,312.42 ($815,829.47, less $113,517.05), capping Grinnell’s share of the balance of the recovery at the total amount of its lien.
The two employees appealed, arguing that the carrier’s recovery should be capped at the total amount of their lien, less their proportionate share of attorneys’ fees and litigation costs, and that the trial court erred in awarding Grinnell the entire amount of its lien because § 287.150.3 does not allow the carrier to recover its attorney fees and expenses from the employees’ share of the recovery, which was the effect of the settlement agreement. However, Grinnell argued that their settlement agreement with the employees did allow that, because the settlement agreement—not the statute—governed the “balance of the recovery.”
In affirming the trial court’s amended judgment, the Court of Appeals first noted that there is no caselaw interpreting the “Notwithstanding” clause of § 287.150.3, making this is an issue of first impression. Once the court deducted the expenses of the recovery, including reasonable attorney fees, it arrived at the balance of the recovery pursuant to the first sentence of § 287.150.3, the parties’ Settlement Agreement governed the division of the balance of the recovery, as permitted by the third sentence of § 287.150.3: “Notwithstanding the foregoing provision, the balance of the recovery may be divided between the employer and the employee or his dependents as they may otherwise agree.” The Settlement Agreement explicitly allocated a portion of the balance of the recovery to Respondent in full satisfaction of its subrogation interests in the recovery. The trial court gave effect to the Settlement Agreement in the amended judgment.
In essence, the plaintiffs voluntarily entered into a settlement agreement with the carrier, not anticipating that the jury would return such substantial damage awards—ultimately increasing the lien reimbursement amounts. The trial court properly allocated the jury’s award in accordance with the statute (and, for Wolk, applied the “Ruediger Formula” due to the finding of comparative fault). It then distributed the “balance of the recovery” based on the terms outlined in the parties’ pre-trial settlement agreement.
The employees also asked the Court of appeals to rescind the settlement agreement on the basis of a “mutual mistake” and vague notions of “equity and reasonableness.” The Court of Appeals rejected this argument, noting that a mutual mistake only occurs when there is a mistaken belief among both parties as to a past or present material fact regarding the contract. Because a mutual mistake must be based on a mistake of fact, “a mutual mistake in prophecy or opinion may not be taken as a ground for rescission where such mistake becomes evident through the passage of time.” The “mistake” was that they didn’t expect such a large recovery.
For questions involving workers’ compensation subrogation in Missouri or any of the fifty U.S. states, contact Mark Solomon at msolomon@mwl-law.com.
