Utah Supreme Ct. Rejects Employer’s Bid to Recoup WC Benefits from Settlement with Debt Collectors

Special education teacher Robyn Young had to fight the Granite School District for benefits after she suffered a concussion and mental injuries at the hands of her students. Then she was hounded by debt collectors who demanded that she pay for treatment of those workplace injuries.

The debt collectors agreed to pay a $610,000 settlement after Young filed a lawsuit alleging they violated the federal Fair Debt Collections Practices Act, her lawyer said. But then the Salt Lake City school district sued her, seeking reimbursement for the $307,000 in workers’ compensation benefits it paid.

The Utah Supreme Court put an end to that lawsuit on Thursday, ruling that the Granite School District must make its reimbursement claim to the state Labor Commission, where her claim for permanent total disability benefits is still being litigated.

“I’ve never seen anything like this one before, where workers’ compensation has attempted to do that,” Young’s attorney, Gary E. Atkin, said Friday. “The only reason the bill collectors were after her is because the Granite School District wasn’t paying the bills. Now they are saying they should be allowed to be reimbursed for the bills that they wouldn’t pay.”

Young was injured twice in tussles with her special needs students. She suffers post-concussive syndrome, mental health issues, and debilitating migraines, according to the opinion.

An administrative law judge for the Labor Commission ruled that Young suffered compensable injuries and ordered Granite to pay for her medical care. The school district disputed that some of her care was medically necessary. Young was unable to pay for all of treatment out of her own pocket. Her medical providers handed off the debt to collection agencies.

Young says those collection efforts exacerbated her mental injuries. Under the Utah Workers’ Compensation Act, debt collection agencies are not allowed to collect worker’s compensation medical debts from injured workers. Young was able to keep only about $300,000 out of the $610,000 settlement, Atkin said. The rest went toward costs and attorney fees.

Young returned to the Labor Commission claiming that she was permanently and totally disabled after the fiasco with the debt collectors. An ALJ agreed, found that Granite had not complied with the prior order and directed the school district to reimburse Young for medical expenses she had paid.

Granite appealed to the Labor Commission Appeals Board. The school district also filed a subrogation lawsuit against Young seeking reimbursement for the benefits it paid out of the settlement with the debt collectors. The 3rd District Court in Salt Lake County dismissed the lawsuit, ruling that Granite needed to take its reimbursement claim to the Labor Commission.

The Utah Supreme Court affirmed the decision unanimously. The opinion said the district court cannot decide on the school district’s lawsuit until after the Labor Commission issues a final ruling in Young’s workers’ compensation claim.

Attorney Brett N. Anderson argued the school district’s case on appeal. He said Friday that Granite’s request for reimbursement from Young’s settlement is no different that seeking a reimbursement from any third-party tortfeasor who caused injury. He said Young cited the mental trauma that was caused by the debt collector’s efforts in her claim for permanent total disability benefits, so it is only fair that the employer receive reimbursement from the settlement monies for any expenses that were paid as a result of that trauma.

“The carrier has a right to be reimbursed for third-party tort recoveries,” he said.

Anderson said Granite will likely seek to recover the benefits it paid from Young’s settlement as the case continues to proceed through the Labor Commission. Atkin said the Appeals Board has asked a medical panel to issue an opinion on issues that were not resolved during hearings before the administrative law judge, but the panel has not yet issued a report.