Insurance Company Gets Out of Paying Underinsured Motorist Benefits Because of Workers' Compensation Lien
When a workers' compensation lien exceeds the amount of a judgment resulting from an automobile accident, an insurer does not have to pay underinsured motorist benefits. The ruling stems from a lawsuit over an auto accident involving both workers' compensation and uninsured motorist claims.
David Ross was involved in a rear-end collision caused by John Agurs that occurred while Ross was driving within the scope of his employment with Shelton Transportation. Ross' left knee and lower back were injured.
Shelton had a workers' compensation policy through the Injured Workers Insurance Fund (IWIF) providing coverage for bodily injury and medical expenses. Ross filed a claim and received workers' compensation benefits of $84,446.21.
Ross' vehicle was insured by Shelton with a commercial liability policy issued by Progressive that included uninsured/underinsured motorist (UM/UIM) coverage with policy limits of $1,500,000.
The vehicle driven by Agurs was insured by State Farm with third-party liability coverage of $25,000/$50,000.
A Circuit Court for Prince George's County jury awarded Ross $91,583.90. The jury gave him $24,083.90 in medical expenses, $30,000 in lost wages and $37,500 in non-economic damages. However, the amount was reduced to $66,583.90 because Progressive had made a $25,000 payment before the trial.
After the trial, Ross asked the court to order Progressive to pay a portion of the judgment under its UIM coverage. Ross contended that Progressive should pay $51,875.98 - the balance remaining after reduction for unreimbursed workers' compensation benefits. The trial court denied the request. On appeal, the Court of Special Appeals affirmed the lower court's decision.
The court noted that both parties agreed that the balance of the circuit court's judgment was $66,583.90 and that the amount of the workers' compensation lien held by IWIF was $84,446.21 - the amount Ross received under his workers' compensation claim. The parties were also in agreement that Progressive was entitled to reduce the benefits payable to Ross under its UIM coverage to the extent of the unreimbursed workers' compensation benefits under Maryland insurance law.
Ross argued that the amount of the lien was not applicable under the insurance law. He argued that, in order to determine the extent to which UIM benefits may be reduced under Maryland insurance law, the amount of the unreimbursed workers' compensation benefits must first be calculated under a section of Maryland's labor and employment law. The section reads that, if a covered employee recovers damages, the covered employee, first, may deduct the costs and expenses of the covered employee, then shall reimburse the self-insured employer or insurer the compensation already paid and any amounts paid for medical services, etc and, finally, may keep the balance of the damages recovered. In addition, where court costs and fees are concerned, the covered employee, the self-insured employer, the insurer, SIF and the Uninsured Employee's Fund shall pay court costs and attorney's fees in proportion to the amount received by each has to the whole amount paid in settlement of any claim or satisfaction of any judgment obtained in the case. Ross contended that Maryland labor and employment law reduced the amount of the reimbursement to the workers' compensation insurer by a proportional amount of attorney's fees and costs; therefore, what was owed as reimbursement under Maryland insurance law was the amount of the workers' compensation lien less attorney fees and costs. Ross contended that, only after calculating the amount due under labor and employment law could the court determined the amount of the unreimbursed workers' compensation benefits that Progressive is entitled to deduct under the state's insurance law from the benefits payable under its UIM coverage. As a result. Ross contended that the amount of unreimbursed workers' compensation benefits was $39,708.32.
Progressive said the case was controlled by insurance law. Progressive argued that the labor and employment law did not suggest that a workers' compensation lien was reduced by costs or attorney fees and that Ross' reliance on the statute was misplaced. Progressive said it was not obligated to make payment to Ross under its UIM policy. Progressive argued that the lien held by IWIF for $84,446.21 represented the amount of benefits recovered by Ross for which IWIF had not been reimbursed and that there was nothing under the insurance law or Maryland employment law that allowed the unreimbursed portion of a workers' compensation lien to be reduced by attorney fees. Given that the workers' compensation lien exceeded the amount of $66,583.90 remaining on the judgment, Progressive contended that it owed nothing to Ross.
The appeals court agreed with Progressive, explaining that a 2009 case explained the interplay between Section 19-513 of the insurance law and Section 9-902 of the state's employment law. That case involved the estate of a police officer who died as a result of injuries sustained in an accident while on-duty. The court noted that Section 9-902 of the labor and employment law provided a choice of remedies to an employee injured on the job by a person other than their employer. An injured employee may elect to (1) file a claim for compensation against the employer; or (2) bring an action for damages against the person liable for the injury or death. However, in those situations in which the injured employee brings an action against and recovers damages from the third-party tortfeasor, following a workers' compensation award or payment of compensation, the role of Labor and Employment Section 9-902 is to prevent the injured employee from recovering a windfall recovery from both sources for the same damages, the court said.
As a result, the court held that, because the amount of the unreimbursed workers' compensation lien exceeded the balance of the judgment, Progressive was not obligated to make payment to Ross under the UM/UIM provision of its policy. The appellate court said the trial court properly denied Ross' motion to enforce judgment against Progressive.
Baltimore, Maryland-based Belsky, Weinberg & Horowitz has represented consumers in workers' compensation cases for many years. Call our attorneys at 410-234-0100 or email us for a free consultation.