Delaware Workers’ Compensation Subrogation Rights Do Not Extend To PPD and Commutation Benefits

ACW Corporation v. Maxwell, 2019 WL 3024049 (Del. Super. 2019)

Delaware Workers CompensationIn what seems like a never-ending assault on an employer’s/carrier’s statutory right of subrogation and reimbursement, a Delaware Superior Court—the state trial court of general jurisdiction which also serves as an intermediate appellate court—has issued what constitutes in this author’s opinion one of the top five most illogical workers’ compensation subrogation decisions in history. With a leap of logic compounded by an incorrect reading of a select portion of the Delaware workers’ compensation subrogation statute, the court has with the stroke of a pen gutted the important right of subrogation in Delaware, increased the cost of doing business for Delaware small businesses, and provided significant incentive for workers’ compensation carriers to treat injured employees in Delaware less benevolently. Most people couldn’t intentionally accomplish this trifecta if they tried; but the Delaware Superior Court did.

On July 10, 2019, the Superior Court issued its ruling in ACW Corporation v. Maxwell. It was the simplest of fact patterns. Shanara Waters was employed by ACW Corporation (Arby’s) and was injured in an auto accident in which Christopher Maxwell was at fault. Waters filed a workers’ compensation claim, received workers’ compensation benefits, and received PIP benefits (lost wages and medical expense payments). Arby’s paid $633.25 in medical expenses and entered into a workers’ compensation commutation with Waters in the amount of $12,500—a total lien of $13,133.25.

Section 2363 is the Delaware workers’ compensation subrogation statute, and it allows either the employee or the employer (or its workers’ compensation carrier) to file a third-party action against a tortfeasor (in this case Maxwell). Compared to other states, the statute is fairly simple and straightforward and provides:

(e) In an action to enforce the liability of a third party, the plaintiff may recover any amount which the employee or the employee’s 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 its workers’ compensation insurance carrier for any amounts paid or payable under the Workers’ Compensation Act to date of recovery, and the balance shall forthwith be paid to the employee or the employee’s dependents or personal representative and shall be treated as an advance payment by the employer on account of any future payment of compensation benefits…

Where the employee doesn’t file suit within 260 days, the employer/carrier is given the broad right to file suit and “recover any amount which the employee…would be entitled to recover in an action in tort.” This is crystal clear. As in the vast majority of other states, the employer/carrier is given a joint right to pursue the employee’s personal injury cause of action. Obviously, that includes medical expenses, pain and suffering, mental anguish, loss of earning power (past and future), medical expenses, and compensation for the permanent nature of the injury. Garrett v. People’s R. Co., 64 A. 254 (Del. Super. 1906); Delaware Trial Handbook § 22:6. It doesn’t matter if the employer hasn’t suffered pain and suffering or a loss of earning power. The statute gives it the statutory right to enforce this cause of action in the place of the injured employee. If there is a third-party recovery, the statute is even clearer about how the recovery is to be apportioned:

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 its workers’ compensation insurance carrier for any amounts paid or payable under the Workers’ Compensation Act to date of recovery, and the balance shall forthwith be paid to the employee…

The employer is statutorily entitled to recover “any amounts paid or payable under the Workers’ Compensation Act.” This includes:

  1. Temporary Total (TT) Weekly Benefits;
  2. Temporary Partial (TP) Benefits;
  3. Permanent Total (PT) Benefits;
  4. Permanent Partial (PP) Benefits:
    1. Permanent Impairment Benefits
    2. Disfigurement Benefits
  5. Lump Sum Commutations; and
  6. Lump Sum Settlements.

Delaware worker’s compensation law provides that a commutation is an offer by the insurance company to “buy out” some or all of these benefits for a lump sum payment to the claimant. Some employees would prefer to have a lump sum benefit, but this is still considered “an amount paid or payable under the Workers’ Compensation Act.”

So how could a Superior Court judge issue a ruling that declares that commutation, permanent partial disability payments, and other benefits exclusively created by the Act are not recoverable from a third-party tortfeasor? That will be a question for the Delaware Supreme Court.

In ACW Corporation v. Maxwell, the court granted Maxwell’s Motion for Summary Judgment and denied Arby’s Motion for Summary Judgment, effectively holding that a portion of the lien which represents a $12,500 commutation of the workers’ compensation lien, where all lost wages and all but $635.25 of the medical expenses were paid for in the form of PIP payments by the employee’s auto insurance company, was not recoverable under § 2363(e). The court seemingly skipped a step in its statutory analysis, siding with Maxwell, who contended “that the first sentence of Section 2363(e) provides that the measure of damages recoverable to an injured employee are those that the employee would be able to recover ‘in an action in tort’, and thus commutation, permanent partial disability payments, and other benefits exclusively created by the Act are not recoverable from a third-party tortfeasor.” But the court overlooked the most important part of the statute – an employer’s/workers’ compensation carrier that has paid benefits of any kind which are authorized under the Act to recover any damages recoverable by an injured employee in an action in tort. Once that recovery is made, the second half of subsection (e) allows the carrier in even clearer terms to pay itself back for any amounts “paid or payable under the Workers’ Compensation Act.” It’s a simple two-step process clearly described and authorized by the statute unambiguously and concisely.

Confused PersonThe carelessness with which the decision was made is evidenced by the fact that the judge wrote the opinion using outdated language from the statute which has since been amended and updated. For instance, there is no longer a reference to “workmen’s compensation” as was made in the decision. In footnote 20, the court quotes from Maxwell’s Motion for Summary Judgment, “Section 2636 makes it clear that while the employer or the worker’s [sic] compensation carrier may pursue its own claim under subsection (a) for a tort claim the worker’s [sic] compensation carrier can only recover those claims in tort.” The Latin word sic, meaning thus or so, is used in quoted passages when the author believes the quoted passage has errors, but the author wants to quote the text exactly. In this case, Maxwell’s error in logic was perpetuated, and apparently simply copied, by the judge. The revised and current statute refers to “workers’ compensation”, not “workmen’s compensation.” The court cites the statute incorrectly in the opinion, suggesting that the judge didn’t even look up the statute, but just copied from Maxwell’s Motion.

The judge perpetuates Maxwell’s tortured analysis which concluded that the first sentence of § 2363(e) provides that the measure of damages recoverable to an injured employee are those that the employee would be able to recover “in an action in tort” and, therefore, (and here is where the leap of logic enters) “commutation, permanent partial disability payments, and other benefits exclusively created by the Act are not recoverable from a third-party tortfeasor.” Of course, they’re not. But, that’s not the limit of the employer’s/carriers’ workers’ compensation subrogation rights in Delaware.

As if declaring that commutations cannot be subrogated wasn’t enough, the court threw another non-sequitur in for good measure, seemingly doubling-down on the notion that “commutation, permanent partial disability payments, and other benefits exclusively created by the Act” are not recoverable by the employer/workers’ compensation carrier as suggested by Maxwell. The court limited Arby’s reimbursement to the $633.25 it had paid in medical expenses, denied it the ability to recover the commutation benefits it paid under the Act, and made no mention of the fact that the PIP carrier would likely still have a right to come back against the worker’s compensation carrier as primary and recover all of the benefits it had paid. The decision will hopefully be appealed.

On appeal, the Delaware Supreme Court should keep in mind that in Delaware, as in all other states, workers’ compensation subrogation is part of the great social compromise which was borne of the industrial revolution in the beginning of the last century. It should remember the vital role workers’ compensation subrogation plays in the vitality of our nation’s small businesses and in helping to keep workers’ compensation premiums low. This sacrosanct right of subrogation/reimbursement is borne of the social compact made with employers when workers’ compensation was born in this country 108 years ago. Safeguarding this right in Delaware needn’t be an enigma. It’s a simple as reading the statute.

If you have any questions regarding this article or workers’ compensation subrogation in general, please contact Gary Wickert at [email protected].

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Gary L. Wickert
Partner

Gary L. Wickert is an insurance trial lawyer and partner with the law firm of Matthiesen, Wickert & Lehrer, S.C. Gary has 35 years of litigation experience and is regarded as one of the world’s leading experts on insurance subrogation. He is the author of several subrogation books and legal treatises and a national and international speaker and lecturer on subrogation and motivational topics.