Viewpoint: Subrogating Employees’ Intentional Act Damage Recoveries

The quid pro quo premise underlying the social compromise known as workers’ compensation is simple: an employee injured at work receives no-fault medical expenses and wage replacement indemnity benefits and, in exchange, the employer is given protection from employee lawsuits and a statutory right to be reimbursed from the tortfeasor who actually caused the work-related injury – sometimes referred to as subrogation. This is the employee’s exclusive remedy against the employer, who enjoys immunity from tort liability for the injuries. The exclusive remedy rule prevents injured employees from suing their employers and usually prevents culpable third parties from bringing a third-party action against the employer for contribution. Even though every state allows the employee to bring a lawsuit against “third parties” (persons or entities other than the employer or employee), workers’ compensation benefits are the sole remedy available to the employee. If and when the employee makes a third-party recovery, the employer’s workers’ compensation carrier is granted a statutory right of subrogation and/or reimbursement of the benefits it paid. If that were the end of the story, however, this article would not be necessary.

The exclusive remedy rule has been under assault since the mid-20^th Century, with trial lawyers’ lobby groups and labor organizations arguing strenuously that courts and legislatures should craft various exceptions to the rule. One such exception which has become quite common is allowing an injured employee to sue the employer for an intentional act or assault by the employer or a co-employee against the injured employee. For example, in Louisiana, this exception was created by the Louisiana Legislature in 1976. La. R.S. § 23:1032. In Texas, a cause of action for an intentional act is guaranteed to the employee by the Texas Constitution and cannot be taken away by the Legislature. Tex. Const. art. I, s 13; Castleberry v. Goolsby Bldg. Corp., 617 S.W.2d 665 (Tex. 1981).

Not all states took the bait, however. Many states still grant the employer exclusive remedy protection even when their actions constitute an intentional act or even gross negligence. Today, 43 states provide for an intentional act exception to the exclusive remedy rule. Colorado, Delaware, Georgia, Hawaii, Iowa, Rhode Island, and possibly Idaho remain states which do not allow an injured employee to sue the employer even if there is an intentional act.

In states where a tort action is allowed by the employee against an employer for injuries caused by an assault or an intentional act, a dilemma arose as to whether the employer or its workers’ compensation insurance company should be allowed rights of subrogation and/or reimbursement, such that it would effectively be receiving reimbursement for the workers’ compensation benefits it just got done paying, from its own insured – the employer. Over time, some states began to allow such rights of subrogation and/or reimbursement, while others have not. In an equally large number of states, the issue has yet to be decided. It is important for claims and subrogation professionals to know such rights are available to the insurance carrier, and when they are not. The concept of allowing an insurance company to recover benefits it pays under a policy of workers’ compensation insurance directly from its own insured is perplexing, and seemingly in violation of the anti-subrogation rule.

The anti-subrogation rule is a long-standing common law defense to subrogation. It states that a subrogated insurance company standing in the shoes of its insured cannot bring a subrogation action against or sue its own insured to recover its claim payments. Sometimes known as the “suing your own insured” defense, the anti-subrogation rule was originally developed based on the logical premise that, because the carrier stands in the shoes of its insured, it would essentially be suing itself. Therefore, no right of subrogation can arise in favor of an insurance company against its own insured. Wager v. Providence Ins. Co., 150 U.S. 99 (1893). This seemingly simple concept has many tentacles and each state has developed their own bodies of law with regard to how and when the rule will be applied, setting forth numerous exceptions and rules regarding its application.

Notwithstanding the anti-subrogation rule, some states willingly allow an employer or its workers’ compensation carrier to seek reimbursement from a tort damage payment made by the employer – its own insured – as a result of an intentional tort or an assault committed by the employer. States such as California straddle the fence by allowing the amount of compensation otherwise payable to the employee to be increased by 50%, together with costs and expenses not to exceed $250, where the employee is injured by reason of the serious and willful misconduct of the employer. Cal. Lab. Code § 4553.

In other states, such as Florida, the workers’ compensation carrier is allowed to seek recovery of its subrogation interest even out of a tort recovery by the employee against the employer. Jones v. Martin Electronics, Inc., 932 So.2d 1100, 1108 (Fla. 2006). States such as Idaho have not yet clearly answered the question.

Effective workers’ compensation subrogation requires a complete knowledge of all aspects of workers’ compensation law, and an aggressive recovery program must necessarily involve a carrier holding out its hand for reimbursement from an employer whose intentional acts caused the work-related injury. Knowing when and under what circumstances this can be done is an obvious necessity of successful subrogation.

A 50-state summary of the law regarding subrogating against intentional act claims against employers can be found HERE. It details the law in every state with regard to when and whether an employee can proceed with a lawsuit against an employer whose intentional act has resulted in a work-related accident. It also contains any available law or precedent with regard to whether the workers’ compensation carrier is also entitled to be reimbursed from such a tort recovery for its workers’ compensation lien.