Bar News - August 17, 2012
Workers’ Compensation & Personal Injury: Butcher v. American Economy Insurance Company Federal Court Upholds Workers’ Compensation Lien Asserted against Uninsured Motorist Policy
By: Rick Weinstein
RSA 281-A:13 [Liability of Third Person] enables an injured employee to seek damages from another person if he or she has sustained a work-related injury caused by that other person or if the circumstances of the injury trigger a contractual obligation to pay benefits under the uninsured motorist provision of a motor vehicle insurance policy, and if the action is not otherwise barred under RSA 281-A:8. This statute also gives the employer or workers’ compensation insurance carrier a lien on the amount recovered by the employee, to the extent of workers’ compensation payments made, less the employer or carrier’s share of the expenses and costs of the action. Does this workers’ compensation lien attach to the proceeds of an uninsured motorist policy where the policy language states that it will not pay for elements of loss which have been paid to the injured employee by a workers’ compensation carrier?
In a recent federal court ruling, United States District Judge Paul Barbadoro ruled that the lien may be asserted despite this contrary policy language. The claimant, while in the course of his employment, was injured in an automobile accident with a motorist whose carrier had denied coverage leaving the tortfeasor motorist uninsured. Accordingly, the employer’s automobile liability carrier (American Economy, the uninsured motorist [UM] carrier) stepped into the breach. Pointing to provisions barring payment for items that would benefit a workers’ compensation carrier or that were paid by the workers’ compensation carrier, the UM carrier took the position that any payments it made would be restricted to pain and suffering, loss of enjoyment of life, and any other items not covered by the workers’ compensation carrier.
In rejecting the UM carrier’s position, the Court first reviewed the 1984 decision in Merchants Mutual Insurance Group v. Orthopedic Professional Association, 124 N.H. 648 (1984). In that case, the NH Supreme Court invalidated the very same type of policy provision at issue in Butcher but held that because the statute on third-party actions then in effect did not extend to uninsured motorist policies the workers’ compensation carrier’s lien could not be asserted against such policies, but only against traditional tortfeasors. Not long after Merchants Mutual was decided, the legislature amended the workers’ compensation statute to permit a lien to be exercised against a UM policy. See RSA 281-A:13 I (a)(2). The statute has not been further amended.
In invalidating the UM carrier’s policy language, Judge Barbadoro concluded that it was attempting to do something similar to what Merchants Mutual attempted to do in 1984, namely limit its coverage obligations in a manner contrary to the uninsured motorist statute. The Court also noted that the collateral source rule is designed to prevent a tortfeasor from getting a windfall when the injured party is able to obtain coverage for the same benefits from another source. In other words, American Economy could not benefit by paying less under its policy simply because the injured employee was able to recover benefits from the workers’ compensation carrier.
In response to American Economy’s argument that its "coordination of benefits" clauses should be upheld, the Court noted that the statute governing third-party recoveries, RSA 281-A:13, already coordinated benefits as between workers’ compensation carriers and uninsured motorist carriers: the uninsured motorist carrier’s policy provisions would alter the established rights and responsibilities in favor of the UM carrier and against the workers’ compensation carrier. The Court emphasized that the legislature had not intended to permit UM carriers to limit their liability in this manner. Accordingly, the workers’ compensation carrier was entitled to assert fully its lien against the UM policy proceeds.
Despite this rather unequivocal opinion from the federal court, practitioners and claims professionals should know that the issue of the enforceability of so-called "coordination of benefits" provisions in UM policies continues to be litigated in both state and federal courts. The ruling in the Butcher case will not be appealed because the case has been resolved, but this issue is likely to arise in future cases and the possibility of inconsistent results cannot be overlooked. For now, however, workers’ compensation lienholders can rely on this ruling for the proposition that their liens may be asserted against the proceeds of uninsured motorist policies containing the kind of restrictive language at issue in this case.
Rick Weinstein is an attorney with Bernard & Merrill in Manchester. He practices workers’ compensation, general liability and insurance law. He is a former member of the Bar News Editorial Advisory Board.