Workers’ compensation subrogation was never intended to be a windfall for insurance carriers. It was, and remains, a carefully constructed legislative mechanism designed to serve broader economic and societal goals. At its core, subrogation ensures that the ultimate cost of an injury is borne by the party responsible for causing it, rather than by employers, insurers, and the premium-paying public, and that the workers’ compensation carrier or employer is entitled to be reimbursed if a third party is at fault for causing the employee’s injury or death. This prevents double recovery by an injured worker, promotes fairness in loss allocation, and, perhaps most importantly, functions as a critical cost-control mechanism within the workers’ compensation system. As one of the oldest doctrines in Anglo-American jurisprudence, subrogation reflects a fundamental principle of justice: the party who causes the loss should pay for it. And if workers’ compensation is thwarted by activist judges, the cost is passed on to innocent employers and Arkansas small businesses in the form of high workers’ compensation insurance premiums—one of the highest costs of doing business in that state.
The Economic Case for Subrogation
The economic implications of this doctrine are profound. Subrogation recoveries are not incidental; they are built into the actuarial framework that determines insurance premiums. When carriers recover payments from responsible third parties, those recoveries are factored into historical loss data, directly reducing the cost of future premiums. Without subrogation, those losses remain on the books, inflating experience modifiers and driving up the cost of workers’ compensation coverage for employers. This is particularly significant in the workers’ compensation arena, where subrogation not only allows recovery of past benefits but also provides a credit against future exposure, thereby stabilizing loss history and mitigating long-term costs for businesses. The elimination or erosion of subrogation rights does not punish insurers; it redistributes costs across all policyholders, disproportionately impacting small and mid-sized employers.
Arkansas once had a statutory scheme that reflected these principles. Ark. Code Ann. § 11-9-410 provided (and still does provide) a clear and structured framework for subrogation, including a defined allocation formula and a two-thirds lien on net recovery. The statute balances the interests of the injured worker, the carrier, and the public by guaranteeing the employee a minimum one-third recovery while allowing the carrier to recoup benefits paid. It is a legislative compromise designed to ensure that employees are protected while preventing the unjust shifting of losses onto employers who were not at fault.
How Arkansas Courts Dismantled a Working System
Enter trial lawyers and activist courts. This carefully crafted system has been systematically dismantled by judicial intervention. Beginning with General Accident Ins. Co. of Am. v. Jaynes, 33 S.W.3d 161 (Ark. 2000), Arkansas courts imported the equitable made whole doctrine into a statutory framework where the legislature deliberately chose not to include it. The result has been a profound and damaging shift in the law. Under Jaynes and its progeny, a carrier’s statutory lien does not arise unless and until the employee has been made whole—a determination that is inherently subjective and, in practice, nearly impossible to satisfy.
Subsequent decisions have only compounded the problem. In South Central Ark. Elec. Coop. v. Buck, 117 S.W.3d 591 (Ark. 2003), and Yancy v. B&B Supply, 213 S.W.3d 657 (Ark. App. 2005), courts refused to enforce subrogation rights even where significant recoveries were obtained, concluding that the employee had not been fully compensated. These decisions effectively nullify the statutory lien in the vast majority of cases, and contravene the grand societal bargain that was struck when workers’ compensation legislation first made its appearance in the early 20th Century. As your chapter correctly observes, Arkansas has reached a point where courts have almost never found an employee to be made whole, rendering subrogation rights largely theoretical.
The erosion does not stop there. Arkansas courts have imposed additional procedural hurdles that further discourage subrogation. Under Riley v. State Farm Mut. Auto. Ins. Co., 381 S.W.3d 840 (Ark. 2011), a carrier’s subrogation rights do not even arise until there is either an agreement or a judicial determination that the employee has been made whole. This creates a circular and untenable burden, requiring carriers to prove entitlement to a right before they are allowed to exercise it. Worse still, carriers who assert their statutory rights risk being assessed attorneys’ fees if a court later determines that the employee was not made whole, effectively penalizing them for pursuing reimbursement authorized by statute.
These judicial developments have fundamentally altered the balance struck by the legislature. What was intended to be a predictable, formula-driven system has become an uncertain and inequitable process dominated by subjective determinations and judicial discretion. The predictable result is that Arkansas is now widely regarded as one of the worst jurisdictions in the country for workers’ compensation subrogation.
This decline places Arkansas in the company of states such as Georgia, Illinois, Florida, and Kentucky, all of which have experienced similar erosion of subrogation rights through legislative or judicial action. In those jurisdictions, the weakening of subrogation has been associated with increased system costs, higher loss ratios, and upward pressure on workers’ compensation premiums. The economic logic is unavoidable. When carriers are unable to recover losses from responsible third parties, those losses are absorbed into the system and ultimately passed on to employers through higher premiums and unfavorable experience modification factors.
Subrogation Is a Public Good, Not an Insurer Privilege
Workers’ compensation subrogation is a critical component of the grand societal bargain underlying the workers’ compensation system itself. Employers agree to provide no-fault benefits to injured workers regardless of negligence, surrendering traditional defenses and assuming liability even for losses they did not cause. In exchange, they are granted limited and predictable exposure, along with the ability to shift responsibility to truly culpable third parties through subrogation. This balance ensures that injured workers receive prompt and certain benefits while preventing the unjust result of employers and their insurers bearing the financial burden of losses caused by others. When subrogation functions properly, it reinforces accountability, prevents double recovery, and redistributes loss to the responsible party, thereby stabilizing the system and helping to keep insurance premiums affordable for businesses and, ultimately, the public at large.
This broader societal impact cannot be ignored. Subrogation is not merely a private right; it is a public good. It promotes accountability by ensuring that negligent actors bear the cost of their conduct. It reduces unnecessary litigation by discouraging marginal claims. It stabilizes insurance markets by allowing carriers to recapture losses and maintain reasonable premium levels. And it protects the economic viability of businesses that would otherwise be forced to absorb losses caused by others.
The current state of the law in Arkansas undermines all of these objectives. By elevating equitable considerations above clear statutory mandates, courts have effectively rewritten the workers’ compensation statute. In doing so, they have shifted the financial burden of workplace injuries away from negligent third parties and onto Arkansas employers and their insurers. This is not a neutral development. It reflects a policy choice—one that favors individual recoveries in the short term at the expense of systemic stability and long-term economic health.
Arkansas Stands at a Crossroads—And Needs Legislative Action
The recent decision in French v. Amazon.com, Inc., 767 F. Supp. 3d 854 (E.D. Ark. 2025), offers a limited procedural reprieve by confirming that carriers may initiate subrogation actions before a made whole determination is made. However, it does nothing to address the underlying problem: the near impossibility of ever satisfying the made whole requirement. As a result, French opens the courthouse door but leaves carriers with little hope of recovery once inside.
Arkansas legislators should take note. The workers’ compensation subrogation statute reflects a deliberate policy decision to balance competing interests and protect the economic integrity of the system. That balance has been disrupted by judicial decisions that disregard the statute’s purpose and impose extra-statutory limitations. If left unaddressed, the consequences will continue to be borne by Arkansas businesses in the form of higher insurance costs and reduced competitiveness.
Legislative action is necessary to restore the original intent of § 11-9-410 and to reaffirm that statutory subrogation rights cannot be nullified by judicially created doctrines. Subrogation is not an antiquated relic or an insurer windfall. It is a foundational component of a functioning workers’ compensation system. Without it, the system does not merely weaken—it begins to fail.
Arkansas stands at a crossroads. As of today, Arkansas stands on the precipice of being tossed on the subrogation trash heap with states like Georgia. It can continue down a path where statutory rights are subordinated to judicial discretion, or it can reassert the principles that have long governed subrogation and ensure that responsibility for loss rests where it belongs—with those who cause it.
For questions regarding subrogation in any state, please contact Lee Wickert at leewickert@mwl-law.com
