§71.2 Effect of Uninsured Motorist Coverage Recovery on Workers’ Compensation Subrogation Interest

The Case: Hudson v. Hudson Municipal Contractors, Inc. , 898 S.W.2d 187 (Tenn. 1995).

The Basic Facts: "The Court of Appeals affirmed the trial court's judgment granting the workers' compensation carrier an award and lien against the proceeds of a settlement received by the widow of a deceased worker from his uninsured motorist carrier, in the amount of workers' compensation benefits paid as the result of the death of the worker. The issue presented is whether the workers' compensation carrier may recover, even though, pursuant to the terms of the uninsured motorist policy, the settlement had been reduced by the amount of workers' compensation benefits paid." 898 S.W.2d at 187-88.

The Bottom Line:

  • "Tenn. Code Ann. § 50-6-112(a) provides that an injured worker, or the dependents of a worker who was killed, may recover from a party that has 'a legal liability' with respect to the worker's injury, notwithstanding the fact that the injured worker, or his dependents, is entitled to receive compensation under the Workers' Compensation Law. However, where the injured worker must rely upon uninsured motorist insurance coverage to satisfy the claim for damages, the injured worker's recovery may be limited by an offset provision in the uninsured motorist policy. Tenn. Code Ann. § 56-7-1205 (1994) governs the minimum policy limits of uninsured motorist coverage. That statute includes the provision:
    Such forms of coverage may include such terms, exclusions, limitations, conditions, and offsets, which are designed to avoid duplication of insurance and other benefits."
    Id. at 188.
  • "'Other benefits' limiting coverage may include workers' compensation benefits. The policy in this case included the following provision:
    Limits of Liability. Regardless of the number of insureds under this policy, the company's liability is limited as follows:
    (a) ...
    (b) Any amount payable under the terms of this insurance because of bodily injury sustained in an accident by a person who is an insured under this coverage shall be reduced by ... the amount paid and the present value of all amounts payable on account of such bodily injury under any workers' compensation law, disability benefits law or any similar law."
    Id.
  • "Under the holdings in Terry v. Aetna Casualty & Sur. Co. and Dwight v. Tennessee Farmers Mut. Ins. Co., it is clear that an insured party's right to recover under an uninsured motorist policy that contains a setoff provision such as the one involved in this case may be reduced by the amount that the insured has collected, or could collect, under the Workers' Compensation Law." Id. at 189.
  • "And, even where the worker's recovery is against a solvent tortfeasor or the tortfeasor's liability insurance carrier, and, therefore, is not subject to the uninsured motorist contractual limitation, the worker's recovery is limited by the amount of worker's compensation benefits. The employer, or the employer's workers' compensation carrier, has a right of subrogation as provided in Tenn. Code Ann. § 50-6-112(c)(1), which states as follows:
    In 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."
    Id.
  • "Under this statute, the worker's recovery from the tortfeasor or his liability insurer would be reduced by the amount of the workers' compensation benefits." Id.
  • "The issue in this case is whether the workers' compensation insurance carrier is entitled to an award against the proceeds of a settlement between the worker's personal representative and the uninsured motorist insurer. Will the appellant's damages be reduced twice by the amount of the workers' compensation benefits, first by the offset and again by the subrogation claim?" Id. at 189-90.
  • "Resolution of this issue is found in the language of the statute, which defines the nature of the employer's claim and of the worker's recovery. Tenn. Code Ann. § 50-6-112 provides, relevant to this case, that when 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 deceased worker's personal representative may pursue an action for wrongful death against those persons having 'a legal liability' for the worker's death. It further provides that in the event of a recovery against such persons, 'by judgment, settlement or otherwise, ... the employer shall have a subrogation lien' for the amount of benefits 'against such recovery.' In this case, the uninsured motorist insurer's liability to the appellant is not 'a legal liability' for the worker's death. It is, instead, a liability in contract, determined by the terms of the insurance agreement." Id. at 190.
  • "In addition, because the appellant has no right to recover the damages represented by the offset provision of the policy, Maryland Casualty has no claim against the proceeds of the settlement. Maryland Casualty has no independent cause of action against Grange. Pursuant to Tenn. Code Ann. § 50-6-112(c)(1), Maryland Casualty, as the worker's compensation carrier, is subrogated to the rights of the deceased worker's personal representative. The right of recovery of a subrogee is no greater than the right of recovery of the subrogor. In McGee v. County of Wilson, 574 S.W.2d 744 (Tenn. App. 1978), the Court of Appeals discussed the rights and obligations of the parties where the injured plaintiff had released his claim against a deputy sheriff, who, during the course of his employment by the county, had caused the plaintiff's injury. The Court of Appeals held that, because the plaintiff had destroyed the county's right of subrogation against the tortfeasor by releasing the deputy sheriff, the plaintiff could not assert a claim for injuries against the county based upon the acts of the deputy sheriff. Pertinent to the issue in this case, the court held:
    Since the rights of the subrogee (the person held liable) would be identical to the rights of the subrogor (the injured person), the subrogee would have no right of subrogation if the injured party had released his rights against the wrongdoer.
    Id. at 747. See also Tennessee Farmers' Mut. Ins. Co. v. Rader, 410 S.W.2d 171 (Tenn. 1966). Since Maryland Casualty, as subrogee, has no rights greater than the appellant, as subrogor, Maryland Casualty has no claim against Grange or the proceeds received by the appellant from Grange." Id.

Other Sources of Note: Tenn. Code Ann. § 50-6-112.

After an accident, many injury victims and their families want more information on the accident and their legal rights. Consequently, many of them have found their way to these pages. While we are happy you are here, please understand Day on Torts: Leading Cases in Tennessee Tort Law was written to be a quick, invaluable reference for Tennessee tort lawyers. While the book provides the leading case for more than 300 tort law subjects and thousands of related case citations, it is not a substitute for personalized legal advice from a qualified lawyer.

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The foregoing is an excerpt from Day on Torts: Leading Cases in Tennessee Tort Law, published by John A. Day, Civil Trial Specialist, Fellow in the American College of Trial Lawyers, recipient of Best Lawyers in America recognition, Martindale-Hubbell AV® Preeminent™ rated attorney, and Top 100 Tennessee Mid-South Super Lawyers designee. Read John’s full bio here.

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