The last 40 years have been a roulette wheel of changing opinions and positions for the Idaho Supreme Court with regard to the subrogation and reimbursement rights of an employer or its workers’ compensation carrier when there is employer negligence. However, the white ball representing the latest position of the Idaho Supreme Court with regard to this issue has just landed squarely on “00.” The Supreme Court’s December 30, 2016 opinion in Maravilla v. J.R. Simplot Company, 2016 WL 7488385 (Idaho 2016) announces that any employer negligence bars the subrogation or reimbursement rights of the employer or its workers’ compensation insurance carrier. With this decision, Idaho adopts the minority rule – a rule which will surely lead to increased workers’ compensation premiums within that state.
Workers’ compensation subrogation is almost totally dependent on state law. The laws of each state vary greatly as to when and how a workers’ compensation carrier may recover its lien. However, with very few exceptions, if an employee is injured on the job, his recourse against the employer is limited to the recovery of workers’ compensation benefits. Known as the “workers’ compensation bar” or the “exclusivity rule,” the employee is “barred” from directly suing his employer for negligence under most circumstances. While each state deals with the workers’ compensation bar differently, most states do not allow the employer’s negligence to be submitted to the jury along with the negligence of the defendant and contributory negligence of the plaintiff. Rather, many states allow only an instruction to the jury advising them that they may find neither the plaintiff nor defendant negligent if they find that the employer was the “sole proximate cause” of the injury. This can be a tremendously strong tool for subrogating workers’ compensation carriers, because it allows for subrogation even when the employer is primarily at fault in causing an injury. While this seems incongruous, equally incongruous is the unfair and onerous system of placing the responsibility for potentially millions of dollars in medical expenses and other benefits on an employer whose employee, through no fault of the employer, is catastrophically injured. Allowing subrogation has been a key component of the social compromise which is represented by our system of workers’ compensation. Idaho seems to have forgotten the deal America made with its employers, small and large.
A short history on this issue in Idaho is appropriate. In 1966, the Idaho Supreme Court in Liberty Mutual Ins. Co. v. Adams, 417 P.2d 417 (Idaho 1966) held that an employer who was concurrently negligent in causing an employee’s injury could not subrogate. In 1979, the court in Tucker v. Union Oil Co. of California, 603 P.2d 156 (Idaho 1979) backed off the Adams rule and held that the comparative fault of the employer would serve only to reduce the subrogation recovery by the percentage of fault. The defendant could argue employer negligence and the jury would then determine the employer’s percentage of fault. The court deducted the employer’s percentage share of the employee’s total recovery from the third party’s liability up to the amount of the worker’s compensation benefits assessed against the employer. This prevented the employee from receiving a double recovery.
Although it noted that Adams was decided before the adoption of comparative negligence in Idaho, the court in Tucker stopped short of saying that the principles of comparative negligence and joint and several liability affected a negligent employer’s subrogation rights. In 1980, the Supreme Court noted that Adams was decided before comparative fault came into being and acknowledged that the effect of employer negligence on the carrier’s subrogation rights was “currently unknown.” Pocatello Industrial Park Co. v. Steel West, Inc., 621 P.2d 399 (Idaho 1980). However, since then, the Supreme Court has cited the rule in Adams with approval stating that allowing subrogation to a negligence employer is contrary to public policy. McBride v. Ford Motor Co., 673 P.2d 55 (Idaho 1983); Schneider v. Farmers Merch., Inc., 678 P.2d 33 (Idaho 1983).
In the recent 2016 Idaho Supreme Court decision of Maravilla v. J.P. Simplot Co., 2016 WL 7488385 (Idaho 2016), the Commission rejected the employee’s argument that the employer’s negligence should preclude it or its workers’ compensation carrier from recovering anything by way of a lien. Instead, the Commission adopted a new rule regarding an employer’s subrogation rights. The new rule, based on the fact that joint and several liability had been abolished in Idaho, stated that employer’s negligence is no longer an absolute bar to the exercise of its right of subrogation. Rather, an employer’s right of subrogation will be reduced by its proportionate share of fault in contributing to the claimant’s damages. The employee appealed. On appeal, the Supreme Court noted that the Workers’ Compensation Act was a compromise between injured workers and their employers and was specifically intended to remove industrial accidents from the common law tort system.
The negligence of non-parties, including an employer, may still be submitted to the jury for purposes of determining the liability of other third parties in a third-party action. Pocatello, supra. When liability of an employer is based independently on contractual liability, the liability of the employer is limited to the amount of compensation benefits which the employer is liable for under Idaho Workers’ Compensation Act, unless the employer and a third party agree to share liability in a different manner. Idaho Code § 72-209(2). Therefore, a negligent employer is once again denied the right to subrogation of its workers’ compensation lien in Idaho.
This new decision is surprising given that the Idaho Supreme Court is comprised of five, conservative Republican justices. It assures an increase in workers’ compensation premiums for Idaho employers by inviting trial lawyers to allege employer negligence in virtually ever third-party action. Subrogation professionals handling Idaho losses must keep this case in mind when strategizing and taking action on potential third-party subrogation.
If you have any question on subrogation in Idaho or subrogation in general, please contact Gary Wickert at [email protected].