## Facts

- Robert D. Piper, a Chrysler employee, was seriously injured in October 1986 when a tow vehicle he was driving tipped over.
- Chrysler paid $278,461.81 in workers’ compensation wage-loss and medical benefits under the Michigan Worker’s Disability Compensation Act (WDCA).
- Piper and his spouse sued Pettibone Corporation, the tow vehicle manufacturer, as a third-party tortfeasor under MCL 418.827(1).
- Chrysler asserted a statutory lien under MCL 418.827(5) and intervened in the third-party action.
- Piper settled with Pettibone for $75,000, an amount less than Chrysler’s lien.
- The parties disputed distribution of the settlement proceeds; the trial court entered an apportionment order awarding Chrysler 4% of the settlement.

## Issues

1. Whether MCL 418.827(5) requires that a third-party recovery, after deducting expenses of recovery, must first reimburse the employer/carrier for workers’ compensation benefits paid or payable to the date of recovery.
2. Whether a court may equitably apportion a third-party settlement to give the employer less than first-priority reimbursement when the settlement is insufficient to satisfy the lien.

## Decision

- The Michigan Supreme Court vacated the judgments approving the 4% allocation to Chrysler and remanded.
- The court held that MCL 418.827(5) mandates first-priority reimbursement to the employer/carrier from any third-party recovery after expenses of recovery are deducted.
- The court rejected equitable apportionment that would dilute the statutory reimbursement priority when the recovery is less than the lien amount.

## Legal Principles

- Under MCL 418.827(5), after deducting expenses of recovery, the third-party recovery “shall first reimburse” the employer or carrier for amounts paid or payable under the WDCA to the date of recovery.
- Courts may not depart from the statutory order of distribution based on fairness concerns when the recovery is inadequate to satisfy the employer’s lien.
- The statutory distribution scheme is: (1) deduct expenses of recovery; (2) reimburse the employer/carrier up to its lien; (3) pay any remaining balance to the employee (with the balance functioning as an advance against future compensation).

## Conclusion

The court enforced the WDCA’s mandatory priority rule for distributing third-party recoveries: after recovery expenses are deducted, the employer’s workers’ compensation lien must be reimbursed first, and trial courts lack authority to allocate a reduced share to the employer through equitable apportionment.


Piper v. Pettibone Corp., 450 Mich. 565, 542 N.W.2d 269 (1995)