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There is a great deal of confusion in Louisiana regarding whether a workers’ compensation carrier can subrogate against or receive reimbursement from the proceeds of an uninsured or underinsured (UM/UIM) automobile policy. The Louisiana Supreme Court has unequivocally stated that a UM carrier is considered a third person under Louisiana workers’ compensation law. Travelers Ins. Co. v. Joseph, 656 So.2d 1000 (La. 1995); Degruise v. Houma Courier Newspaper Corp., 815 So.2d 1074 (La. App. 2002). That holding was recently confirmed in Kennedy v. Durden, 116 So.3d 12 (La. App. 2013). A workers’ compensation carrier can, therefore, proceed against an UM policy directly or by intervening into a suit filed by the injured worker because the UM carrier is considered to be a “third person” who has a “legal liability to pay damages” to the employee pursuant to La. R.S. § 23:1101. Townsend v. Ford Motor Co., Inc., 569 So.2d 238 (La. App. 1990).
Notwithstanding the above, subrogation against, contribution from, or reimbursement from an UM policy will not be allowed if the UM policy specifically excludes any benefit to the workers’ compensation carrier. Travelers Ins. Co. v. Joseph, supra; Tommie’s Novelty v. Velasco, 868 So.2d 962 (La. App. 2004); Landry v. Martin Mills, Inc., 737 So.2d 58 (La. App. 1999); Cleansing Specialists, Inc. v. Johnson, 695 So.2d 562 (La. App. 1997); Kelly v. Scottsdale Ins. Co., 2010 WL 2572078 (M.D. La. 2010), aff’d sub nom. Kelly v. Scottsdale Ins. Co., 465 Fed. Appx. 296 (5th Cir. 2012). The usual exclusion found in Louisiana UM policies which would eliminate this right of reimbursement reads as follows:
This insurance does not apply to…the direct or indirect benefit of any insurer or self-insurer under any workers’ compensation, disability benefits or similar law.
This clause would then prevent not only subrogation, contribution, or reimbursement of a carrier’s past benefit payments, but also any right to take a statutory credit based on the recovery by the employee from the UM policy with the exclusion. LeJeune v. Brewster, 722 So.2d 74 (La. App. 1998); Bergeron v. Williams, 764 So.2d 1084 (La. App. 2000) (holding that the “direct or indirect” language in the UM exclusion prevents the compensation carrier from taking a credit); see also Bellard v. American Central Ins. Co., 980 So.2d 654 (La. 2008). Alternatively, the UM policy might contain the following exclusion:
This insurance does NOT apply to any of the following:
(3) Workers’ Compensation:
Any obligation for which the “insured” or the “insured’s insurer” may be held liable under any workers’ compensation, disability benefits or unemployment compensation or any similar law. Kennedy v. Durden, supra.
Despite the Louisiana courts’ precedent allowing subrogation against UM/UIM benefits paid by the employer’s automobile policy, a new 5th Circuit opinion obfuscates the issue. Kelly v. Scottsdale Ins. Co., 465 Fed. Appx. (5th Cir. 2012); see also Cutsinger v. Redfern, 12 So.3d 945 (La. 2009). The Court in Kelly brings up the confusing legal issue of “solidary obligors” because they have coextensive obligations to reimburse the plaintiff for lost wages and medical expenses incurred as a result of the injury caused by the tortfeasor. Kelly announced that in such situations, the workers’ compensation carrier and the UM/UIM carrier are solidary obligors as to the benefits paid to the employee and, therefore, the workers’ compensation carrier is not subrogated to the benefits paid by the UM/UIM carrier. In other words, the UM carrier and workers’ compensation insurer are solidary obligors and payment by one to the insured extinguished obligation of other. Cutsinger v. Redfern, supra. The contractual relationship between the employer and the UM carrier changes the employer’s (or its compensation carrier’s) right to recover from and/or subrogate against the UM carrier. Louisiana law holds that a solidary obligation exists when the obligors: (1) are obliged to do the same thing; (2) so that each may be compelled for the whole; and (3) when payment by one exonerates the other from liability toward the creditor. Bellard v. American Central Ins. Co., supra.
In 2008, the Louisiana Supreme Court in Bellard addressed the issue of a UM carrier’s entitlement to a credit for workers’ compensation benefits paid and declared that a UM carrier and a workers’ compensation provider are solidary obligors vis-a-vis the injured person to whom they owe compensation. Kelly v. Scottsdale Ins. Co., supra. The Court held that by the effect of the law and the terms of their insuring agreements, both the UM insurer and workers’ compensation insurer were solidary obligors because they have coextensive obligations to reimburse the plaintiff for lost wages and medical expenses incurred as a result of the injury. The Court went on to recognize there was no right of reimbursement or subrogation in favor of the workers’ compensation carrier because the terms of the UM policy excluded coverage for the “direct or indirect benefit of any insurer or self-insurer under any workers’ compensation, disability benefits or similar law.”
The 5th Circuit has held that, after Bellard, the compensation carrier should not be subrogated to benefits paid by the UM/UIM carrier, because the former’s payment extinguishes the UM/UIM carrier’s obligation to pay out the same benefits. The 5th Circuit’s opinion ignores the subrogation rights of the compensation carrier both under § 1804 of the Louisiana Civil Code and the statutory recovery rights set forth in La. R.S. § 23:1101, by narrowly looking at the rights of the employee. La. Civ. Code Ann. art. § 1804 provides:
“Among solidary obligors, each is liable for his virile portion. If the obligation arises from a contract or quasi-contract, virile portions are equal in the absence of agreement or judgment to the contrary. If the obligation arises from an offense or quasi-offense, a virile portion is proportionate to the fault of each obligor. A solidary obligor who has rendered the whole performance, though subrogated to the right of the obligee, may claim from the other obligors no more than the virile portion of each. If the circumstances giving rise to the solidary obligation concern only one of the obligors, that obligor is liable for the whole to the other obligors who are then considered only as his sureties.”
The 5th Circuit did recognize a right of contribution on the part of the workers’ compensation carrier against the UM/UIM carrier pursuant to § 1804 of the Louisiana Civil Code and the statutory recovery rights set forth in La. R.S. § 23:1101. However, certain policy language may exclude from coverage that right of contribution.
In 2013, the solidary obligor issue was once again before the Louisiana Supreme Court, as it decided Cutsinger. Cutsinger v. Redfern, supra. The Court held, by expanding its ruling in Bellard, that a UM carrier and the employer (or its worker’s compensation carrier) are solidary obligors, affecting what the UM carrier may owe to the injured employee. It held that any payments made to the injured employee by either the UM carrier or workers’ compensation carrier extinguishes the obligation of the other. However, it seems that while the solidary obligor issue may deal with whether benefits are due and payable to the injured employee, it wasn’t intended to have, but has subsequently been overly-expanded to have, an effect on the workers’ compensation carrier’s ability to be reimbursed when the injured employee does make a UM/UIM recovery from the employer’s policy.
In Kennedy v. Durden, the solidary obligor issue was not before the Louisiana Court of Appeals. Id. Instead, that Court dealt with the argument that even if the above policy exclusion applies to the UM coverage, the wording of the exclusion does not preclude workers’ compensation subrogation against UM benefits because the exclusion simply states that the automobile liability insurance does not apply to “any obligation for which the insured … may be held liable under any workers’ compensation.” Id. The carrier argued that the wording of the exclusion simply means that the employer cannot rely on the liability policy to cover any obligations that it may have related to workers’ compensation, but it does not address its ability to subrogate indirectly under the policy. The Court of Appeals held that because the policy excludes recovery for workers’ compensation obligations, a workers’ compensation carrier may not subrogate against a UM policy with such an exclusion in it. Id.
Even if a carrier is prohibited from seeking reimbursement of its lien, the issue of whether it is entitled to a future credit remains. In Tolbrid, the Louisiana Court of Appeals noted that while reimbursement may be prohibited when the UM policy contains exclusion language, the carrier is still entitled to a future credit for any net recovery by the employee. The Court held that a UM carrier is a “third person” against whom the workers’ compensation carrier may seek reimbursement from the UM insurer, but no public policy prevents a UM insurer from expressly contracting to exclude a compensation insurer’s right to reimbursement in it’s UM policy. Id., citing Johnson v. Fireman’s Fund Ins. Co., supra; Travelers Ins. Co. v. Joseph, supra. At the same time, other courts had held that the exclusion in the UM policy prevents both reimbursement of a workers’ compensation lien and the right to a future credit. Watson v. Funderburk, 720 So.2d 808 (La. App. 1998); Cleaning Specialists, Inc. v. Johnson, supra; Tommie’s Novelty v. Velasco, supra.
The latest word on the issue came in the 2014 case of Cole v. State Farm Mut. Auto Ins. Co., 149 So.3d 831 (La. App. 2014). The Court of Appeals, citing Cutsinger, held that policy language contained in a UM policy which specifies that UM coverage does not extend to the “direct or indirect” benefit of the workers’ compensation carrier reduces the UM benefits by the amount of workers’ compensation benefits paid to the insured and precludes the workers’ compensation carrier from claiming a credit for future benefits it might owe.
In summary, it appears that a Louisiana workers’ compensation carrier should be able to subrogate against an employer’s UM/UIM policy that does not contain the above exclusions. Tolbrid v. Wyble, supra. It should also be able to seek reimbursement from any recovery the injured employee makes from the employer’s UM/UIM policy. In Tolbrid, the Court of Appeals recognized that a UM carrier is a “third person” who is legally liable to pay an employee damages resulting from a work-related accident so that a compensation insurer may seek reimbursement from the UM insurer. Tolbrid v. Wyble, supra, citing the Supreme Court cases of Johnson v. Fireman’s Fund Ins. Co., supra; Travelers Ins. Co. v. Joseph, supra. Tolbrid further confirmed that the workers’ compensation carrier was also entitled to a future credit for payments made by the UM carrier. However, this appears to be the case only where the UM policy does not specifically exclude the workers’ compensation carrier’s right to a credit. Cole v. State Farm Mut. Auto Ins. Co., supra. If there is an exclusionary clause in the UM policy that prohibits any “direct or indirect benefit,” it precludes the workers’ compensation carrier from seeking a credit. Watson v. Funderburk, supra; Landry v. Martin Mills, Inc., supra; Bergeron v. Williams, supra. There are no statutory provisions or policy considerations that preclude a UM carrier from contracting to exclude liability for compensation reimbursement or subrogation even though it means that the plaintiff would receive a double recovery, and the UM carrier can reduce benefits by the amount of workers’ compensation benefits paid to its insured. Cutsinger v. Redfern, supra.
If you should have any questions regarding this article or workers’ compensation subrogation in general, please contact Jim Busenlener at [email protected].