The Right of Workers’ Compensation Reimbursement is Alive and Well in Indiana

White and Williams LLP

White and Williams LLP

When the direct door to a subrogation recovery closes, the reimbursement door remains open.

The United States District Court for the Northern District of Illinois, construing Indiana law, recently clarified the distinction between workers’ compensation subrogation rights and workers’ compensation lien rights. Workers’ compensation subrogation professionals should always keep this critical difference between direct subrogation and reimbursement in mind when evaluating any claim.

In McDermott v. Arcelormittal U.S.A., 2021 U.S. Dist. LEXIS 180352 (N.D. Ill.), the plaintiff/injured worker sustained work-related injuries and sued the owner of the property where the injuries occurred. The workers’ compensation carrier intervened, citing only its subrogation rights.

In an effort to avoid repaying the workers’ compensation lien, the plaintiff filed a motion to dismiss the carrier’s claims based on a subrogation waiver between the plaintiff’s employer and defendant. In denying the plaintiff’s motion, the court held the subrogation waiver was not for the plaintiff’s benefit and applied only to the defendant; and clarified that although no direct right of subrogation existed, the carrier maintained its right of reimbursement against the plaintiff/injured worker.

The court addressed the distinction between “lien rights and subrogation rights,” phrasing the issue as whether the carrier, by waiving its subrogation rights, also waived its right to enforce a lien against the plaintiff/injured worker. The court answered this issue with a resounding “NO”.

The court then questioned whether the carrier’s Intervenor Complaint was necessary, finding that simply filing a motion to intervene may have been sufficient. Without deciding the issue, the court noted that if an intervention complaint was to be filed, it also needs to be sufficiently pled. In the instant case, the intervenor complaint only pled subrogation rights against the defendants; it did not plead its right of reimbursement against the plaintiff. Thus, the court directed the insurer to file a written statement and/or motion for leave to amend its Intervenor Complaint.

The ruling in McDermott serves as a clear reaffirmation of the right of reimbursement that attaches to the plaintiff/injured worker. Just because a workers’ compensation carrier may not be able to pursue claims against the tortfeasor (via subrogation), the road to recovery (via reimbursement) may nonetheless still exist.

The issue in McDermott may have been avoided entirely had the carrier not intervened and instead asserted its reimbursement rights directly against the plaintiff. Regardless, while not necessary, intervention may still be desirable “so that all orders of court after hearing and judgment shall be made for the employer’s protection.” I.C. § 22-3-2-13(h). As such, any intervention filings need to be carefully drafted to assert all recoverable avenues for the subrogating carrier.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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