§71.1 Effect of Fault of Employer or Employee on Workers’ Compensation Subrogation Interest

The Case: Castleman v. Ross Engineering, Inc ., 958 S.W.2d 720 (Tenn. 1997).

The Basic Facts: Plaintiff, an employee of a subcontractor, sustained a compensable injury and received approximately $100,000 in benefits from the general contractor’s workers’ compensation insurance carrier. Plaintiff then filed an action against a third party for personal injuries and the general contractor’s workers’ compensation insurance carrier filed an intervening petition, asserting a subrogation right and a lien on any recovery Plaintiff might obtain in the third party suit.

The Bottom Line:

• “This case presents for review the issue of whether, in a tort action for personal injuries, an employer’s workers’ compensation insurance carrier is entitled to enforcement of a subrogation claim for benefits paid to the employee, where at trial, fault was attributed to the employee and to the employer.” 958 S.W.2d at 720.
• “The plaintiff does not deny that Hartford has a subrogation claim against the third party judgment for the total amount of workers’ compensation benefits paid to the plaintiff. Section 50-6-112 (1991) provides that when the injury compensated under the Workers’ Compensation Law was caused by the negligence of a third party, the injured employee may pursue an action against the third party.^FN2 Subsection (c)(1) provides as follows:

  In [the] event of such recovery against such third person by the worker, or by those to whom such worker’s right of action survives, by judgment, settlement or otherwise, and the employer’s maximum liability for workers’ compensation under this chapter has been fully or partially paid and discharged, the employer shall have a subrogation lien therefor against such recovery, and the employer may intervene in any action to protect and enforce such lien.
  
  FN2 ‘When the injury or death for which compensation is payable under the Workers’ Compensation Law was caused under circumstances creating a legal liability against some person other than the employer to pay damages, the injured worker, or such injured worker’s dependents, shall have the right to take compensation under such law, and such injured worker, or those to whom such injured worker’s right of action survives at law, may pursue such injured worker’s or their remedy by proper action in a court of competent jurisdiction against such other person.’ Tenn. Code Ann. § 50-6-112(a)(1991).”

  Id . at 721-22.
• “The statute creating the subrogation claim does not by its terms condition the claim upon the employee obtaining a full recovery of damages sustained. The subrogation lien attaches to ‘the net recovery collected’ and secures the amount ‘paid’ by the employer or the amount of the employer’s ‘future liability, as it accrues.’^FN6 It appears that, under the statute, the subrogation lien attaches to any recovery from the tortfeasor ‘by judgment, settlement or otherwise.’ Id. Consequently, even if under equitable principles of subrogation the employer was not entitled to assert the subrogation lien, the statute specifically creates that right.

  FN6 Tenn. Code Ann. § 50-6-112(c) provides:
  
  (1) In [the] event of such recovery against such third person by the worker, or by those to whom such worker’s right of action survives, by judgment, settlement or otherwise, and the employer’s maximum liability for workers’ compensation under this chapter has been fully or partially paid and discharged, the employer shall have a subrogation lien therefor against such recovery, and the employer may intervene in any action to protect and enforce such lien.
  
  (2) In the event the net recovery by the worker, or by those to whom such worker’s right of action survives, exceeds the amount paid by the employer, and the employer has not, at the time, paid and discharged the employer’s full maximum liability for workers’ compensation under this chapter, the employer shall be entitled to a credit on the employer’s future liability, as it accrues, to the extent the net recovery collected exceeds the amount paid by the employer.
  
  (3) In the event the worker, or those to whom such worker’s right of action survives, effects a recovery, and collection thereof, from such other person, by judgment, settlement or otherwise, without intervention by the employer, the employer shall nevertheless, be entitled to a credit on the employer’s future liability for workers’ compensation, as it accrues under this chapter, to the extent of the net recovery.”

  Id . at 724.

Other Sources of Note: Graves v. Cocke County, 24 S.W.3d 285 (Tenn. 2000) (reaffirming the statutory construction employed in Castleman and reiterating that the “made whole doctrine” does not apply to workers’ compensation cases).