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In re Petitions for Approval of Settlement and Distribution of Wrongful Death Proceeds for the Next of Kin of Markuson

August 24, 2004

IN THE MATTER OF THE PETITIONS FOR APPROVAL OF SETTLEMENT AND DISTRIBUTION OF WRONGFUL DEATH PROCEEDS FOR THE NEXT OF KIN OF: MARCIA WELLSTONE MARKUSON, MARY ALICE MCEVOY, THOMAS HENRY LAPIC AND WILLIAM MICHAEL MCLAUGHLIN, DECEDENTS.


St. Louis County District Court. File Nos. C6-03-100194, C2-03-100192, C0-03-100191 & C7-03-100186.

Considered and decided by Schumacher , Presiding Judge, Halbrooks , Judge, and Forsberg , Judge.

SYLLABUS BY THE COURT

1. An election to allocate third-party settlement proceeds under Henning v. Wineman, 306 N.W.2d 550 (Minn. 1981), permits an insurer to satisfy its subrogation claim from the amount allocated to recoverable damages; the district court must first allocate proceeds of the third-party settlement between recoverable and nonrecoverable damages and then apply the statutory formula to that part of the settlement allocated to recoverable damages.

2. The district court errs when it first calculates the amount of the insurer's subrogation claim under Minn. Stat. § 176.061, subd. 6 (2002), and then reduces that claim by a percentage based on nonrecoverable damages.

3. Under Minn. Stat. § 176.061, subd. 6, a district court does not abuse its discretion by deducting what it considers to be the reasonable cost of collection, even though those costs are greater than the actual costs charged by the party's attorneys and incurred by the employee.

4. A district court does not clearly err by finding that an insurer failed to prove that dependents were unlikely to continue with school beyond the age of 18, for purposes of calculating future workers' compensation benefits, where the insurer merely referred to the fact that the dependents' families had histories of higher education and professional degrees.

The opinion of the court was delivered by: Forsberg, Judge

Affirmed in part, reversed in part, and remanded

Forsberg, Judge*fn1

OPINION

The Special Compensation Fund (the fund) appeals from a district court order determining the amount of its subrogation claim for workers' compensation paid or to be paid after the deaths of four employees of the Wellstone for Senate Campaign. See Minn. Stat. § 176.061, subd. 6 (2002) (setting out statutory formula to determine how settlement proceeds are to be divided between employee's dependents and the fund). The district court determined that the fund was entitled to $200,000 from the wrongful-death settlement proceeds received by respondents, who are trustees for the families of the deceased employees.*fn2

Because the district court did not abuse its discretion or clearly err when it reduced the fund's subrogation claim by one-third for the reasonable costs of collection, even though the trustees' actual fees and costs were only 17%, and when it ruled that the fund did not meet its burden of proof to establish that the youngest dependents of two of the deceased employees would go to school beyond the age of 18,*fn3 we affirm on those issues. Because the district court misapplied the statutory formula when it reduced the amount of the fund's subrogation claim, rather than the amount of the wrongful-death settlement, by 60% to account for nonrecoverable damages, we reverse on that issue and remand to the district court to recalculate the fund's subrogation claim in a manner consistent with this opinion.

FACTS

On October 25, 2002, a chartered plane crashed outside Eveleth, Minnesota, killing all eight people aboard, including Paul and Sheila Wellstone; two crew members; and four employees of the Wellstone for Senate Campaign: Marcia Wellstone Markuson, Mary McEvoy, Thomas Lapic, and William McLaughlin. Because the campaign failed to carry workers' compensation insurance, the responsibility for providing benefits to the dependents of these four employees was assumed by the fund. See Minn. Stat. § 176.183 (2002).

In February 2003, trustees were appointed for the families of each of the six passengers to pursue wrongful-death claims against the charter company. The trustees settled the claims on a Pierringer basis with the company and its affiliates. The trustees thereafter filed petitions in district court to approve the settlements and distribute the settlement proceeds. The petitions were approved on October 13, 2003, with money placed in escrow, subject to resolution of the fund's subrogation claim.

The fund and the trustees entered into a stipulation setting out the issues and evidence to be presented at a hearing to determine the amount of the fund's subrogation claim. The parties agreed that as of the date of stipulation, the families had received $161,091 in workers' compensation benefits, the fund had been reimbursed $661,875.87 by the campaign,*fn4 and the trustees' attorney fees and costs amounted to 17% of the third-party wrongful-death proceeds.

The parties further agreed to submit a number of issues to the district court, only three of which are involved in this appeal: (1) under Henning v. Wineman, 306 N.W.2d 550 (Minn. 1981), what is the appropriate allocation "of the wrongful death settlements" between recoverable and nonrecoverable damages considering the trustees' claim that "the settlements do not fully compensate" the families for their respective damages; (2) what is the present value of the future workers' compensation benefits to be paid by the fund to the Markuson and McEvoy families; and (3) what is the ...


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