The Delaware Supreme Court has broken with its own precedent to rule that a workers’ compensation insurance carrier may assert a lien against benefits an injured employee recovers from other sources.
The particular issue before the court was whether an employer or its workers’ compensation insurance carrier may assert a lien against uninsured motorists (UIM) benefits paid to an employee under the employer’s UIM policy for injuries previously compensated under workers’ compensation. The high court has now said the answer is yes — it is statutorily permitted.
The ruling came in a case familiar to the court involving John Henry, who was injured in an accident in 2015 while traveling in a vehicle owned by his employer, Horizon Services, Inc. while acting in the course of his employment.
In a previous action between these parties, the high court addressed whether the exclusive-remedies provision in the workers’ compensation act precluded Henry from pursuing recovery from an uninsured motorist policy. There, the court held that the exclusive-remedies provision did not apply, and the injured employee could pursue uninsured motorists coverage benefits.
Henry had received more than $584,000 in workers’ compensation benefits from Horizon and Eastern Alliance. Henry also pursued damages from the non-party tortfeasor who caused the accident and had a $50,000 liability insurance policy. Henry ultimately settled with the tortfeasor’s insurance carrier for the policy limit. After deducting attorneys’ fees and costs, Henry reimbursed the remainder of his recovery from the tortfeasor’s policy to his employer and his employer’s workers’ compensation carrier, Eastern Alliance Insurance Co., pursuant to Delaware’s Workers’ Compensation Act.
After recovering the tortfeasor’s policy limit, Henry filed a claim for UIM benefits under the employer’s policy issued by Cincinnati Insurance. After the carrier denied his claim, Henry and his wife sued Cincinnati in the Superior Court.
Horizon and its workers’ compensation carrier Eastern Alliance sought a judgment that they were permitted to assert a lien against any UIM recovery Henry might obtain for injuries already compensated by workers’ compensation.
Henry and Cincinnati opposed the lien, contending that any such lien was barred by statute. In so arguing, Henry relied on the high court’s 2013 decision in Simendinger v. National Union Fire Insurance Co. The Superior Court followed that binding precedent and dismissed the declaratory judgment bid by Horizon and Eastern Alliances.
The state Supreme Court, recognizing the Superior Court had no choice but to follow its Simendinger precedent, has now reversed the Superior Court’s decision and held that the state’s workers’ compensation act expressly allows the employer and its workers’ compensation carrier to assert a subrogation. The high court found that Simendinger was decided in error because it misinterpreted a 1993 amendment to Section 2363 of the workers’ compensation law that prevented an employer from obtaining a subrogation lien against an employee for personal injury protection (PIP)-eligible expenses, since the employee could not present evidence of those damages at a trial against a tortfeasor or a UIM insurer.
The high court acknowledged that the ruling in Simendinger “did not recognize the limited scope of the 1993 amendment and instead mistakenly interpreted the statutory change” as entirely eliminating an employer’s ability to obtain a lien against benefits paid under an employer-purchased UIM policy.
“We therefore overrule Simendinger and hold that, except as to expenses excluded from evidence at trial under the PIP statute, Section 2363(e) gives an employer and its workers’ compensation insurer a right to assert a subrogation lien against an employee’s recovery of benefits under an employer-purchased UIM policy,” the court wrote.
Cincinnati has also argued that terms in its UIM policy also bar the lien but the high court said those issues should be decided by the trial court.
Topics Workers' Compensation Talent Delaware
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