Insurer not entitled to reimbursement for life insurance proceeds
Case name: Estate of Dunn v. Windham Northeast Supervisory Union, No. 11-419 (Vt. 10/26/12).
Ruling: The Vermont Supreme Court held that a workers' compensation insurer was not entitled to reimbursement in the amount of life insurance proceeds received by a deceased worker's husband.
What it means: In Vermont, a workers' compensation carrier cannot seek reimbursement from life insurance payments paid to a deceased worker's beneficiaries.
Summary: A worker died from complications from surgery to treat a work-related knee injury. The employer's workers' compensation insurer paid death benefits to her estate. The worker also held a life insurance policy that paid a lump sum to her husband. The employer's insurer sought reimbursement of the death benefits it paid and a credit against future benefits in the amount of the husband's receipt of life insurance proceeds. The Vermont Supreme Court held that the insurer was not entitled to reimbursement for the life insurance proceeds.
The insurer argued that the worker's life insurer was a "liable" third party and that proceeds it paid were a "recovery of damages" that was subject to reimbursement to prevent double recovery. The court disagreed, stating that a workers' compensation carrier is entitled to reimbursement only when a worker or her estate receives money for damages because of a third party's responsibility for an injury. Here, the worker's family received life insurance proceeds deriving from the life insurer's contractual obligation to make a payment upon the occurrence of a specified event, the worker's death. The worker's husband received the life insurance proceeds because she died, not because of a third party's actions.
The insurer asserted that the life insurance benefits compensate the same economic losses that workers' compensation death benefits do, so it was entitled to reimbursement. The court explained that life insurance benefits are not necessarily directly linked to a quantifiable, compensable harm. They are contractual benefits paid upon proof of death. The court said that life insurance proceeds are not susceptible to the type of apportionment between economic and noneconomic damages that would be necessary to prevent a double recovery under workers' compensation.
Read more at the WorkersComp Forum homepage.
January 14, 2013
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