Wickert: State Fights Workers' Compensation Subrogation Obstacles

Monday, July 31, 2017 | 0

Plaintiff-friendly judges and legislators in various states have gained strength and influence over the last twenty years, resulting in statutes and court decisions inimical to the subrogation and reimbursement rights of workers’ compensation carriers. North Dakota is fighting back.

Gary Wickert

On March 13, 2017, the North Dakota legislature amended § 65-01-09, North Dakota’s workers’ compensation subrogation statute, by adding a simple sentence in a new subsection 7. The new subsection reads as follows:

If the Organization’s lien is not recognized by another jurisdiction, the Organization may issue a decision, including a decision demanding repayment from the injured employee, of all benefits and compensation the Organization has made on behalf of the injured employee, including costs and administrative fees.

This new subsection gives organizations that have paid workers’ compensation benefits to an injured employee the right to seek reimbursement of their workers’ compensation liens directly from the employee if § 65-01-09 is not recognized in another jurisdiction. The potential effect of this single sentence cannot be underestimated, and it should serve as an example for other states who wish to help hold down workers’ compensation insurance premiums for North Dakota businesses.

For example, in Georgia, the Court of Appeals made an unusual decision based on the provisions of subsection (a) of its workers’ compensation statute, which provides:

When the injury or death for which compensation is payable under this Chapter is caused under circumstances creating a legal liability against some person other than the employer, the injured employee or those to whom such employee’s right of action survives at law may pursue the remedy by proper action in a court of competent jurisdiction against some person other than the employer, the injured employee or those to whom such employee’s right of action survives at law may pursue the remedy by proper action in a court of competent jurisdiction against such other persons…

Focusing on the underlined language above, the Court of Appeals concluded that this provision limits the employer/carrier to subrogation rights in Georgia courts only when benefits were paid pursuant to Georgia’s workers’ compensation statute. Therefore, they held that since benefits in that case were paid under the Virginia Act, the employer/carrier had no right of subrogation. While the Court of Appeals cited no authority to support this novel interpretation, it should be noted that similar and identical language in the subrogation statutes of most other states clearly is meant only to limit the subrogation carrier to the recovery of benefits paid, and not to limit the right of subrogation when benefits are paid in a multi-state situation.

This decision gives us cause for concern because so many states have similar language.Only Georgia and Connecticut have interpreted this common language in such a fashion. It is clear that this bizarre decision was not merely a fluke on the part of the Georgia Court of Appeals. A more recent decision involving the subrogation rights of an employer paying benefits under Texas law resulted in the same finding of no subrogation rights. Later Georgia cases have perpetuated the poor logic and lack of respect for subrogation demonstrated in Comcar.

North Dakota’s statute could (and likely will) be interpreted to mean that, if an employee receiving North Dakota benefits is injured in Georgia and receives a third-party settlement in a Georgia court, and the court fails to recognize subrogation under the North Dakota statute, the Organization will have the right to seek reimbursement of its workers’ compensation lien directly from the employee. Such a right of reimbursement will likely be authorized in North Dakota’s courts.

The North Dakota amendment also opens up the door to giving the Organization negotiating leverage in states with anti-subrogation laws or statutory language harmful to the Organization’s rights of subrogation and reimbursement. It remains to be seen what is meant by “not recognized by another jurisdiction.” When benefits are paid by one state (e.g., North Dakota) and the injury and the resulting third-party lawsuit occur in another state, the conflict of law rule of the state where suit is filed (“forum state”) is looked to in order to determine what subrogation rights the carrier has. If the North Dakota statute is “not recognized”, the threat of the Organization seeking reimbursement from an employee due to its subrogation and/or reimbursement rights being reduced or eliminated under the law of the forum state might be enough to get the employee and his attorney to agree to reimbursing a much larger portion of the Organization’s lien.

The strength and constitutionality of the new North Dakota statute may be questioned in future litigation. However, one thing is clear – the amendment provides a template for other states who value the small businesses in their state which will allow them to strengthen the subrogation and reimbursement rights of their employers with the threat that anything less than recognition of the rights granted under the law of the state under which benefits are paid could result in “a decision, including a decision demanding repayment from the injured employee, of all benefits and compensation the Organization has made on behalf of the injured employee, including costs and administrative fees.” And it’s about time.

In non-monopolistic states, similar legislation could easily provide for reimbursement to the employer or carrier if the subrogation law of that state is also not recognized or given effect in another state.

Gary Wickert is a partner with the Matthiesen, Wickert & Lehrer law firm in Hartford, Wisconsin. He can be reached at gwickert@mwl-law.com. This blog post is reprinted with permission.