Insurer's failure to intervene in third-party action cuts reimbursement
Case name: Liberty Mutual Insurance Co. v. Shoemake, No. 2011-CT-00179-SCT (Miss. 05/02/13).
The Mississippi Supreme Court held that an insurer was not entitled to recover additional funds from a worker's settlement against a third party.
What it means: In Mississippi, an employer or insurer must join or intervene in an action against a third party in order to enforce its statutory subrogation claim.
Summary: A worker was injured in the course and scope of his employment when a train collided with his truck in Alabama. The worker, who lived in Mississippi and was employed by a Mississippi employer, filed a workers' compensation claim in Mississippi and received benefits from the employer's insurance carrier. The worker sued the train operator in Alabama. The insurer had notice of the action but did not attempt to join in, intervene in, or participate in the Alabama action. The suit was settled, and the worker remitted a portion of the settlement to the insurer. The insurer sued the worker in Mississippi to recover an additional amount, arguing that it was entitled to recover all of the benefits it paid. The Mississippi Supreme Court held that the insurer was not entitled to recover additional funds from the worker.
The court explained that the worker's receipt of benefits, his right to sue a responsible third party, and the insurer's subrogation claim all arose out of the Mississippi workers' compensation law. Mississippi law clearly conditioned an insurer's right to reimbursement on its joinder or intervention in the third-party action. Only after joinder or intervention does the law mandate that an insurer that paid benefits must be reimbursed from any third-party recovery.
The court noted that nothing prohibits an insurer from entering a contractual subrogation agreement with the worker that makes joinder or intervention unnecessary. The court emphasized that an insurer could not sit out a third-party action and after judgment was entered and funds dispersed, sue to enforce its subrogation claim.
The court said that the insurer should have intervened in the Alabama action and tried to persuade the court to apply Mississippi law to its subrogation claims.
The court also pointed out that the Mississippi action should have been dismissed for lack of jurisdiction even if the insurer had intervened in the Alabama action.
Read more at the WorkersComp Forum homepage.
August 12, 2013
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