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COMMERCIAL UNION INS. CO. v. SUITT CONSTR. CO.

October 30, 1987

Commercial Union Insurance Company, Plaintiff
v.
Suitt Construction Company, Inc. and Crompton Company, Inc., Defendants



The opinion of the court was delivered by: WATERS

 Hon. H. Franklin Waters, Chief Judge

 This is a case in which plaintiff, Commercial Union Insurance Company, seeks to recover workers' compensation benefits which it paid to Wayne Page as a result of injuries which he suffered on the job on September 23, 1983.

 At the time of the accident which resulted in the injuries, Page was employed by Swift Construction Company, one of the subcontractors on a construction project on property owned by defendant, Crompton Company, Inc. The other defendant, Suitt Construction Company, Inc., was the general contractor on the job.

 Page sustained serious back injuries resulting in almost total paralysis from the neck down when he fell several feet through a hole which had been left in one of the floors on the construction project.

 On August 9, 1984, Page sued Suitt and Crompton, claiming that his injuries were a result of the negligence of employees of these two companies. Suit was instituted under the provisions of Ark. Stat. Ann. § 81-1340 (Repl. 1976), the third party liability provisions of the Arkansas Workers Compensation Act. Pursuant to the provisions of that section, Commercial Union Insurance Company, the workers' compensation insurance carrier for Page's employer, intervened in the lawsuit seeking recovery of the compensation benefits paid to Page and to establish the lien provided for in Ark. Stat. Ann. § 81-1340 (Repl. 1976) upon any recovery

 Subsequently, Suitt filed a cross-complaint against the intervenor, alleging that the provisions of the subcontract between Suitt and Swift, Commercial Union's insureds, provided that Swift would obtain a workers' compensation insurance policy which would contain a subrogation waiver in favor of Suitt. It was claimed that Commercial Union, as subrogee of Swift, had no greater rights than Swift and that Swift's agreement to waive subrogation rights is binding on Commercial Union. It was also alleged that Commercial Union had actual knowledge of these provisions of the subcontract at the time that it was entered into.

 Some six months after that suit was filed, Suitt filed a motion for summary judgment with respect to the claims made by intervenor, alleging that Commercial Union had no right to recover workers' compensation benefits from it because of the waiver provisions contained in the subcontract. Simultaneously, Suitt filed a motion to file a third party complaint against Swift, Page's employer, seeking indemnity in the event that it was required to pay any sum to Commercial Union.

 Page objected to the motion to file the third party complaint. Approximately two months later, and before the late Judge William R. Overton, the judge to whom that matter was then assigned, had ruled on the various matters pending, Commercial Union filed a motion for voluntary nonsuit of its intervention, and for a dismissal of the cross-complaint filed by Suitt. Commercial Union in its motion claimed that the nonsuit and dismissal should be granted to "eliminate unnecessary collateral issues in this case." Both Suitt and Crompton filed a response to the motion, objecting to the voluntary nonsuit and to the dismissal of the cross-complaint.

 On June 3, 1986, Judge Overton entered an order which provided, in pertinent part, as follows:

 
Commercial Union's intervention is based upon its claim for recovery of workers' compensation benefits allegedly paid to plaintiff. Commercial Union has now filed a motion for voluntary nonsuit of its complaint and for dismissal of defendants' cross-complaint. Defendants have filed a motion to file a third party complaint against Swift Construction Company, the employer of plaintiff and the insured of Commercial Union. All of these motions involve matters between and among defendants, Commercial Union, and plaintiff's employer regarding their respective obligations for workers' compensation coverage and liability. While these issues are related in some respects to the primary issue before the court and, in certain situations could be considered in conjunction with it, it does not appear that under the circumstances of this case it would be appropriate to do so. Because of the factual disputes which apparently exist between the collateral parties concerning the coverage and liability, injecting these issues into the proceedings would unnecessarily confuse and complicate matters for the trier of fact. For that reason, Commercial Union's motion for voluntary nonsuit is granted, as is its motion for dismissal of the cross-complaint filed by defendants. Additionally, defendants' motion to file a third party complaint is denied. These rulings are made without prejudice to the parties to later litigate the issues raised should a judgment against defendants result from the trial of this case.

 Because of Judge Overton's serious illness, the Page personal injury action was subsequently reassigned to this court and was tried to an Eastern District of Arkansas, Jonesboro Division, jury which returned a verdict in favor of Page against both of the defendants in the amount of $ 4,000,000. Judgment was entered on this verdict on August 22, 1986.

 While the Page lawsuit was on appeal, the parties settled the case for $ 3,200,000 and executed a settlement agreement which stated that it was "the written embodiment of the verbal settlement agreement previously made by the parties hereto on December 31, 1986." The agreement provides, among other things, that Page will immediately cause the judgment rendered to be satisfied on the record. It is also obvious from provisions of the settlement agreement that it is an attempt to "settle around" the workers' compensation carrier in the manner permitted by St. Paul Fire and Marine Ins. Co. v. Wood, 242 Ark. 879, 416 S.W.2d 322 (1967), and other Arkansas cases following that decision to be discussed in more detail later. In an attempt to accomplish this, the agreement provides:

 
The parties hereto also agree that it is their intent to reserve any and all rights, claims or causes of action which Suitt and Crompton have or may have against Swift Construction Company, Commercial Union Insurance Company, and any other person or entity not a party to this agreement arising out of the subject of the above described action and it is also the intent of the parties to reserve all rights Page has to benefits under the Arkansas Workers' Compensation Act. The parties further understand and agree that by this settlement Page is not affecting any rights of Commercial Union Insurance Company under Ark. Stat. Ann. § 81-1340 et seq.

 The parties requested and were granted an "approval hearing" which seems to be required by the case of Travelers Insurance Company v. McCluskey, 252 Ark. 1045, 483 S.W.2d 179 (1972). *fn1" On February 19, 1987, the court held the hearing at which attorneys for Page, Suitt, Crompton and Commercial Union appeared. At that hearing defendants' attorneys again, in effect, objected to the cause of action being split. In that respect, the following colloquy occurred:

 
MR. HALE: Your Honor, I want the record to be clear that Suitt Construction Company and Crompton do not feel that Commercial Union has a subrogation right at this time. The record will reflect that Commercial Union intervened in the lawsuit and subsequent to intervening voluntarily wanted to be dismissed. We objected on behalf of both Suitt and Crompton. And the Court granted Commercial Union's motion to voluntarily withdraw and I'd like the record to reflect that if subrogation cause of action is brought against us, we would object as pleading the cause of action.
 
THE COURT: I understand that, that's something that some judge will have to cross that bridge when that comes up, I suppose.

 On the day of the hearing the court executed an order provided by the attorney for Page approving the settlement and finding, among other things, that:

 
IT IS FURTHER CONSIDERED, ORDERED AND ADJUDGED that this settlement does not extinguish any rights Wayne Page has to benefits under the Arkansas Workers' Compensation Act and said rights are specifically reserved. The right of Commercial Union Insurance Company to pursue whatever rights that may exist, if any, with respect to subrogation claims pursuant to Ark. Stat. Ann. 81-1340, et seq. is not affected by this settlement.

 Subsequent to the settlement hearing and the satisfaction and release of the judgment entered in that case, Commercial Union brought this action against Suitt and Crompton, claiming that it should recover from those companies all sums that it has paid to Wayne Page as a result of its providing workers' compensation coverage to his employer. Defendants answered and counterclaimed, asserting that the agreement by Page's employer (Swift) allegedly waiving its workers' compensation subrogation rights against Suitt is binding upon Commercial Union. Both parties filed motions for summary judgment and they seem to agree that the ...


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