
    MANNINEN v WARNER & SWASEY COMPANY
    1. Workmen’s Compensation — Insurance Carriers — Torts— Waiver of Rights — Reimbursement—Costs of Recovery— Proportionate Expenses.
    An injured party entitled to collect workmen’s compensation is permitted to sue a third-party tortfeasor without waiving any rights he may have to collect compensation from an insurance carrier for his employer, but from any recovery resulting from the suit he must reimburse the carrier, after deducting his proportionate expenses of recovery, for money it paid and will have to pay to him as workmen’s compensation; the costs of recovery must be shared proportionately by the injured party and the insurance carrier (MCLA 418.827[5], [6]; MSA 17.237[827] [5], [6]).
    2. Workmen’s Compensation — Torts—Third-Party Tortfeasors— Damages — Allocation of Award.
    A trial court, in determining the allocation of an award of damages made to an employee injured in the course of his employment who, with his wife as co-plaintiff, successfully sues a third-party tortfeasor for his injury, should first determine what portion of the award represents the interest of the wife and deduct that amount, then deduct the reasonable costs of recovery, then any benefits paid by the employer’s workmen’s compensation carrier; the balance, if any, should be paid to the plaintiff worker.
    References for Points in Headnotes
    [1, 2] 81 Am Jur 2d, Workmen’s Compensation § 65 et seq.
    
    Appeal from Houghton, Stephen D. Condon, J.
    Submitted October 4, 1977, at Marquette.
    (Docket No. 77-818.)
    Decided December 6, 1977.
    Complaint by Earl Manninen and June Manninen against the Warner & Swasey Company, Bark River Culvert Company, and Employers Mutual Insurance Company of Wausau for damages for injuries received by Earl Manninen resulting from negligent design of a vehicle he was riding while in the course of his employment and for failure to make proper inspection of the vehicle. A settlement was reached with defendant Warner & Swasey, and the circuit court entered an order apportioning the proceeds. Plaintiffs appeal, and defendant Employers Mutual cross-appeals.
    Reversed and remanded.
    
      Wisti & Jaaskelainen (by Michael E. Makinen), for plaintiffs.
    
      Weis, Cossi & Slade, for defendant Employers Mutual Insurance Company of Wausau.
    Before: Quinn, P. J., and Bashara and D. E. Holbrook, Jr., JJ.
   Per Curiam.

Plaintiffs appeal from a final order of the Houghton County Circuit Court which affirmed an order granting reallocation of a $25,000 consent judgment. Defendant Employers Mutual also appeals alleging error in the court’s reallocation.

Plaintiff, Earl Manninen, was injured while in the course of his employment. He commenced collecting workmen’s compensation benefits for total and permanent disability. The lawsuit alleged injuries from the negligent design by defendant, Warner & Swasey Company, of a vehicle in which defendant was riding. Plaintiff also complained that defendants, Bark River Culvert Company and Employers Mutual Insurance Company, failed to make a proper inspection of the vehicle.

Plaintiffs subsequently settled with defendant Warner & Swasey Company, for the sum of $25,-000. Initially, the court ordered that $12,500 be paid to each plaintiff, with plaintiff Earl Mannimen to reimburse defendant Employer’s Mutual for workmen’s compensation benefits from his share of the judgment only. After Employers Mutual filed objections, the court reallocated the amount of the judgment ordering 1/3 to be paid to plaintiffs attorneys, 1/2 of the balance to Employers Mutual as reimbursement for workmen’s compensation payments, and the balance to plaintiffs. The court reaffirmed its order on a subsequent motion for rehearing.

The sole issue is whether the trial court correctly apportioned the proceeds of the consent judgment under the statute providing for reimbursement to a workmen’s compensation carrier. MCLA 418.827; MSA 17.237(827) is the appropriate statute. Its pertinent language is as follows:

"(5) In an action to enforce the liability of a third party, the plaintiff may recover any amount which the employee or his dependents or personal representative would be entitled to recover in an action in tort. Any recovery against the third party for damages resulting from personal injuries or death only, after deducting expenses of recovery, shall first reimburse the employer or carrier for any amounts paid or payable under this act to date of recovery and the balance shall forthwith be paid to the employee or his dependents or personal representative and shall be treated as an advance payment by the employer on account of any future payments of compensation benefits.
"(6) Expenses of recovery shall be the reasonable expenditures, including attorney fees, incurred in effecting recovery. Attorney fees, unless otherwise agreed upon, shall be divided among the attorneys for the plaintiff as directed by the court. Expenses of recovery shall be apportioned by the court between the parties as their interests appear at the time of the recovery.”

We believe that the correct application of the statute was set forth in Schalk v Michigan Sewer Construction Co, 62 Mich App 658; 233 NW2d 825 (1975), lv granted, 398 Mich 810 (1976).

In reference to the statute, the Court said at 660-661:

"Under MCLA 418.827; MSA 17.237(827), an injured party is permitted to sue a third-party tortfeasor without that injured party waiving any right to collect from the insurance carrier. MCLA 418.827(1); MSA 17.237(827X1). If such a suit results in recovery for the injured party, that party must reimburse the insurance carrier for money it paid and will have to pay to him as compensation. MCLA 418.827(5); MSA 17.237(827X5). The 'expenses of recovery’ may, however, be first deducted from any recovery gained from the third-party tortfeasor. MCLA 418.827(5); MSA 17.237(827X5). It has been determined that the costs of recovery must be shared proportionately by the injured party and the insurance carrier. MCLA 418.827(6); MSA 17.237(827X6).”

It is unnecessary to further reiterate the case law and reasoning cited in Schalk. However, we note that Schalk was silent as to the method of determining a plaintiff spouse’s share in either the recovery or expenses of recovery. Accordingly, the trial court should first have determined what portion of the total settlement, including a pro rata share of the costs of recovery, represented the interest of plaintiff, June Manninen, and deducted that amount. The court should then determine the reasonable costs of recovery including the attorney’s fees expended by defendant, Employers Mutual, to the extent its attorney contributed to obtaining the recovery, as well as the expenses incurred by plaintiffs in reaching the settlement, and deducted that amount. The court should then deduct the benefits paid by defendant, Employers Mutual, or an amount which may be agreed upon by the parties. The balance, if any, should be paid to plaintiff Earl Manninen.

Reversed and remanded for proceedings consistent with this opinion.  