Workers Compensation Carrier Cannot Subrogate Against Injured Party’s UIM Benefits.

July 24, 2007

The Court of Appeals just published G&J Pepsi-Cola Bottlers, Inc. v. Fletcher, et al. The primary issue became whether G&J could assert a subrogation claim against the UIM benefits Fletcher was seeking from US Fire Insurance Co. and Ohio Casualty Group. The circuit court concluded that the employer’s statutory subrogation rights extend only to recovery of benefits paid “from the other person in whom legal liability for damages exists[;]” in other words, the tortfeasor.

The Court of Appeals noted, “that while Samples makes clear that the UIM carrier’s liability is measured by the liability of the tortfeasor, it does not follow that payments made under a UIM contract are the payment of legal damages in the traditional sense. While the UIM carriers may stand in the shoes of the tortfeasor for the sole purpose of making the injured party whole, the UIM contract does not provide an additional right of subrogation not provided for in KRS 342.700(1).”

This appeal was held in abeyance pending a ruling by the Supreme Court of Kentucky of the issues advanced in Cincinnati Insurance Company v. Samples, 192 S.W.3d 311 (Ky. 2006). The issue became whether or not that ruling affected the Employer’s subrogation rights for workers compensation benefits. The Court of Appeals found; “It is clear that the holding in Samples is directed to the question of what damages an injured employee may recover from his own or his employer’s UIM carrier; it neither addresses nor changes the law regarding an employer’s subrogation rights as set out in State Farm v. Fireman’s Fund.

Simply put, a workers compensation carrier who pays benefits to an injured party is subrogated to the extent of those benefits against the tortfeasor. They simply cannot recover those benefits from any source of Plaintiff’s recovery, particularly UIM benefits, as those are not payments for damages by the person in whom legal liability rests.

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