In a case of first impression, the North Carolina Court of Appeals held in Outlaw v. APAC-Atlantic, Inc., 660 S.E. 2d 550 (2008), that a negligent employer still cannot recover its lien when a negligent third party had the last clear chance of avoiding an injury. An examination of the facts and the law behind Outlaw, as well as the lessons that advocates can take from the Court’s decision, are set forth below.

The Facts

Mr. Outlaw was injured when the steamroller he operated for his employer, APAC-Atlantic, was struck by a tractor trailer driven by Edward Leonard Johnson.  At the time, Mr. Johnson was an employee of Mail Contractors of America (MCA), who along with Mr. Johnson was also a defendant in the third-party action.  As defenses to the third-party action, the defendants raised Mr. Outlaw’s contributory negligence under common law tort theory and APAC’s negligence under N.C. Gen. Stat. § 97-10.2(e).  Mr. Outlaw replied that Mr. Johnson and MCA had the last clear chance of avoiding the collision.

After a trial on the merits, a jury returned a verdict finding that (1) Mr. Johnson was negligent, (2) Mr. Outlaw was contributorily negligent, (3) Mr. Johnson had the last clear chance to avoid the collision, (4) Mr. Outlaw’s damages totaled $450,000.00, and (5) APAC’s negligence joined and concurred with Mr. Johnson’s negligence in causing the collision.  The trial court entered an order that defendants were allowed to deduct $117,217.94 in workers’ compensation payments made by APAC to Mr. Outlaw pursuant to N.C. Gen. Stat. § 97-10.2(e), but that APAC could not recover its lien because of its own negligence.  APAC appealed, asserting that the jury’s finding on last clear chance excused APAC’s negligence and the application of N.C. Gen. Stat. § 97-10.2(e), thus entitling it to collect its workers’ compensation lien.

The Law

The Court of Appeals rejected APAC’s right to collect its lien under N.C. Gen. Stat. § 97-10.2 even though the jury found that Mr. Johnson had the last clear chance of avoiding the accident with Mr. Outlaw.  Although apparently harsh at first glance, this holding makes perfect sense based on the policies behind the Act and the plain language of N.C. Gen. Stat. § 97-10.2.

Outlaw confirms that an employer is not a true “subrogee” of the employee in third-party actions, despite the right of reimbursement being called “subrogation” by N.C. Gen. Stat. § 97-10.2(e).  At the start of the statute, N.C. Gen. Stat. § 97-10.2(a) states that

[t]he respective rights and interests of the employee-beneficiary under this Article, the employer, and the employer’s insurance carrier, if any, in respect of the common-law cause of action against such third party and the damages recovered shall be as set forth in this section.

Although N.C. Gen. Stat. § 97-10.2(g) provides that a carrier is subrogated to the rights and liabilities of its insured employer, there is no corresponding provision of subrogation between the employer and the employee.  Therefore, the lien established under N.C. Gen. Stat. § 97-10.2 is not truly subrogatory in character.  This is what prevented APAC from taking advantage of Mr. Johnson’s last clear chance, which Mr. Outlaw had taken advantage of.

N.C. Gen. Stat. § 97-10.2(e) provides the legal framework used by the Court.  In relevant part, this subsection provides that

[i]f the third party defending [the third party action], by answer duly served on the employer, sufficiently alleges that actionable negligence of the employer joined and concurred with the negligence of the third party in producing the injury or death, then an issue shall be submitted to the jury in such case as to whether actionable negligence of employer joined and concurred with the negligence of the third party in producing the injury or death. . . .  If the verdict shall be that actionable negligence of the employer did join and concur with that of the third party in producing the injury or death, then the court shall reduce the damages awarded by the jury against the third party by the amount which the employer would otherwise be entitled to receive therefrom by way of subrogation hereunder and the entire amount recovered, after such reduction, shall belong to the employee and the third party shall have no further right by way of contribution or otherwise against the employer. . . .

N.C. Gen. Stat § 97-10.2(e) codifies the Supreme Court of North Carolina’s decision in Brown v. Southern Railway Co., 204 N.C. 668, 671, 169 S.E. 419, 420 (1933).   See also Harvey v. Kore-Kut, Inc., 180 N.C. App. 195, 200, 636 S.E.2d 210, 213 (2006).  After discussing this history, the Outlaw Court went on to point out that N.C. Gen. Stat. § 97-10.2(e) “raises a complete bar to an employer’s ability to recover on its workers’ compensation lien if the employer’s own negligence was a joint cause of the employee’s injury.”  Outlaw, 660 S.E.2d at 563.  Thus, if an employer is found even 1% negligent pursuant to the procedure under N.C. Gen. Stat. § 97-10.2(e), the employer loses 100% of its right to get reimbursed for workers’ compensation expenditures.  Both federal, see Geiger v. Guilford College Community Volunteer Firemen’s Ass’n, Inc., 668 F. Supp. 492, 497 (M.D.N.C. 1987), and North Carolina state courts, e.g., Johnson v. Southern Indus. Constructors, Inc., 347 N.C. 530, 538, 495 S.E.2d 356, 360-361 (1998); Jackson v. Howell’s Motor Freight, Inc., 126 N.C. App. 476, 480, 485 S.E.2d 895, 899 (1997), acknowledge this bar to the lien.  This bar is simply a reflection of the rudiments that the Workers’ Compensation Act is in derogation of common law, see Essick v. City of Lexington, 232 N.C. 200, 208, 60 S.E.2d 106, 112 (1950), and that employers—who are immune from liability in tort by operation of N.C. Gen. Stat. § 97-10.1—are not “tortfeasors” who enjoy the benefits of common law tort theory, see Johnson v. United States, 133 F. Supp. 613, 614 (E.D.N.C. 1955); Leonard v. Johns-Manville Sales Corp., 309 N.C. 91, 99-100, 305 S.E.2d 528, 533-534 (1983); Jones v. Douglas Aircraft Co., 253 N.C. 482, 491, 117 S.E.2d 496, 502 (1960); Johnson v. Catlett, 246 N.C. 341, 348, 98 S.E.2d 458, 463 (1957); Hunsucker v. High Point Bending & Chair Co., 237 N.C. 559, 569, 75 S.E.2d 768, 775 (1953);  Lovette v. Lloyd, 236 N.C. 663, 669-670, 73 S.E.2d 886, 892 (1953);  McCune v. Rhodes-Rhyne Mfg. Co., 217 N.C.  351, 355-356, 8 S.E.2d 219, 222 (1940); Hoover v. Globe Indemnity Co., 202 N.C. 655, 656, 163 S.E. 758, 759 (1932); Brown v. Southern Railway Co., 202 N.C. 256, 263-264, 162 S.E. 613, 617-618 (1932).

The bar also shows that contributory negligence—at least as this concept applies against employers—is therefore alive and well by legislative mandate under N.C. Gen. Stat. § 97-10.2(e), while the “last clear chance” doctrine under common law is not.  Although this might seem unfair at first glance, one must remember that “[t]he workers’ compensation system is a creature of statute enacted by the General Assembly. . . .”  Frost v. Salter Path & Rescue, 361 N.C. 181, 184, 639 S.E.2d 429, 432 (2007), while the “last clear chance” doctrine is a feature of common law.  In Outlaw, APAC’s request to incorporate the “last clear chance” doctrine under N.C. Gen. Stat. § 97-10.2(e) reminds one of N.C. Gen. Stat. § 4-1, which states that common law is in full force unless it has been specifically abrogated, repealed, or become obsolete in whole or in part.  However, it appears that the legislature had specifically negated Defendants’ argument through the plain language of N.C. Gen. Stat. § 97-10.2(a), even though the Outlaw Court did not expressly rely on this subsection of the statute to reach its conclusion.

The Lessons from Outlaw

The practitioner has several lessons to take home from Outlaw.  First, if the plain language of the Act provides an adequate remedy—not necessarily a favorable remedy, but an adequate remedy—the plain language of the Act controls.  Common law principles are inapplicable when the plain language of the Act applies. 

Second, there is a strong public policy in North Carolina maintaining that parties forfeit legal remedies when they are negligent. Contributory negligence has always precluded injured plaintiffs from recoveries when they are negligent to any degree.  Under N.C. Gen. Stat. § 97-10.2(e), however, the rule of contributory negligence also applies with full force against employers trying to collect their workers’ compensation liens.  As the Outlaw Court observed, the question of an employer’s actionable negligence “shall be the last question considered by the jury” under the plain terms of N.C. Gen. Stat. § 97-10.2(e), see 660 S.E.2d at 563-564 (emphasis in original), and this is the end of the analysis.  The doctrine of “last clear chance” never has a chance to fit within the framework of the statutory language. 

The final lesson is that what the legislature gives, the legislature can take away.  The Outlaw Court advised that the legislature would have to mandate a different outcome for similar cases in the future.  See Outlaw, 660 S.E.2d at 654.  In an era where some politicians would rather discount benefits to injured workers to allegedly attract domestic business through reduced workers’ compensation costs, it is refreshing to see that the Courts have not gone so far to subscribe to these special interest slogans and have instead stuck to their role—interpreting the law consistent with the fundamental and compensatory purposes behind workers’ compensation.  See Outlaw, 660 S.E.2d at 564.  And in Outlaw, the Court got it right.

We can tell that the Court got it right by asking what Mr. Outlaw’s recovery would have been if APAC had won the appeal.  Mr. Outlaw’s verdict of $450,000.00 would have been reduced once by the amount of workers’ compensation benefits ($117,217.94) in accordance with N.C. Gen. Stat. § 97-10.2(e), leaving him with $332,782.06. Then, APAC would have collected its workers’ compensation lien—potentially worth up to another $117,217.94—leaving a substantially reduced balance of $215,564.12 for Mr. Outlaw.  The Outlaw Court rejected this “double bite” at the apple, thus making the injured party whole and leaving the legislative intent behind N.C. Gen. Stat. § 97-10.2(e) intact.