An interesting decision has emerged from the Texas Supreme Court, and I predict there will be a whole lot of workers' comp insurance policy revision going on in the Lone Star State as a result. The court ruled Friday that a workers' compensation insurer was not entitled to claim settlement proceeds from an injured worker who won a third-party injury lawsuit related to his injury, despite Texas law clearly allowing that process.
Business Insurance reports that “the ruling in Wausau Underwriters Insurance Co. v. James Wedel and Michele Wedel affirms a 2017 Court of Appeals of Texas El Paso ruling that stated while Texas grants the right of an insurer to seek reimbursement after an injured worker collects after suing a third party related to the compensable injury, the insurer waived that right.”
It seems that the injured workers employer policy language included an endorsement “waiving the carrier's right to recover from the third party sued by the employee.” Wausau maintained that this did not prevent them from recovering funds from the employee directly if they were ultimately successful in their suit against that same third party.
The court said they were wrong with their presumption.
The case involved a truck driver who was injured while loading asphalt at a refining company location. According to court records, he sustained brain and spinal cord injuries as a result of the accident. The driver, who worked for a separate transportation firm, sued the refinery for negligence.
The Texas Supreme Court singled out the endorsement language, and said it essentially prevented the carrier from recovering any funds from a liable third party, even if those funds were part of a tort suit that would have been subject to subrogation under state law. The court wrote in its decision:
The policy in this case includes an endorsement waiving the carrier's right to recover from the third party sued by the employee. The carrier concedes it can't recover directly from the third party but insists it can recover indirectly from any settlement the third party pays to the employee. Standing on over twenty years of unanimous case law to the contrary, as well as Texas Department of Insurance rulings consistent with that case law, we disagree.
Subrogation is not an uncommon act in the workers' compensation world. In most states, carriers who suffer a loss as the result of a negligent act of a third party have been entitled to recover those losses, either directly or by claiming all or part of a third-party award. The endorsement language, at least in Texas, appears to be poised to bring that activity to a halt.
I am not an underwriting expert. I have no idea why such an endorsement would exist. Perhaps an insurance professional or two can log in to the Comments area and splain' that to me. I don't see why they can't, someone is usually willing to do so whenever I am wrong about something, so confused and befuddled about something should qualify as well.
One thing I think I can confidently predict. Over the next year any Texas policy that contains similar endorsement language can expect a bit o' revision at the renewal. Maintaining that verbiage sounds like it is going to be just too dang expensive.
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Robert Wilson is President & CEO of WorkersCompensation.com, and "From Bob's Cluttered Desk" comes his (often incoherent) thoughts, ramblings, observations and rants - often on workers' comp or employment issues, but occasionally not.
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