Workers’ Compensation — Subrogation Lien – Third-Party Recovery – Amount – Standing – Tort/Negligence – Traffic Accident

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Dion v. Batten (Lawyers Weekly No. 011-251-16, 22 pp.) (Linda McGee, C.J.) Appealed from Duplin County Superior Court (W. Allen Cobb Jr., J.) N.C. App.

Holding: Where the amount of workers’ compensation benefits paid by an employer and its servicing agent to an employee is greater than all amounts obtained by the employee from a third-party tortfeasor, the amount of the workers’ compensation lien may not exceed the amount of the judgment against the tortfeasor.

We affirm the superior court’s order determining the amount of the workers’ compensation lien in this case.

Background

After an on-the-job traffic accident, plaintiff received $528,665.61 in workers’ compensation benefits. He sued defendant – the other driver in the accident – and the case went to arbitration. The arbitration panel decided plaintiff was entitled to recover $285,000 from defendant.

One of plaintiff’s underinsured motorist carriers, Foremost Insurance Co., asked the superior court to determine the subrogation amount pursuant to G.S. § 97-10.2(j). After subtracting attorney’s fees, interest, and court costs, the court found the amount of the workers’ compensation subrogation lien to be $190,000.

Standing

G.S. § 97-10.2(j) provides that when an “employee” obtains a judgment against, or arrives at a settlement with, a “third party,” then “either party may apply … to determine the subrogation amount.” Foremost, as a UIM carrier liable for payment of damages for the injuries defendant caused plaintiff, was a “third party” within the meaning of the statute, as set out in G.S. § 97-10.2(a) (a liable “person other than the employer”). Accordingly, Foremost had standing to ask the superior court to determine the subrogation amount.

Jurisdiction

Given Foremost’s motion, the superior court had subject matter jurisdiction pursuant to § 97-10.2(j) to determine the subrogation amount.

Appellants (plaintiff, his employer, and the employer’s workers’ compensation servicing agent) ask us to draw a distinction between “determining” the amount of a subrogation lien – which, in their view, a trial court lacks subject matter jurisdiction over because the amount of the lien is statutorily set – and “reducing” or “eliminating” the lien – over which, according to appellants, a trial court possesses subject matter jurisdiction, but only in a limited set of circumstances. We find no support for this argument in the text of § 97-10.2(j) or this court’s precedent.

We decline to draw an unyielding distinction between “reducing” or “eliminating” a workers’ compensation subrogation lien, and “determining” the amount of such a lien. Pursuant to § 97-10.2(j), the trial court had subject matter jurisdiction to rule on Foremost’s application to “determine” the subrogation amount.

Lien Amount

In this case, the amount paid by the employer and its workers’ comp servicing agent is much greater than the amount of the third-party recovery. Appellants argue that the amount of the lien may exceed the amount of proceeds recovered against a third-party tortfeasor. We disagree.

A reading of G.S. §§ 97-10.2(f)(1) and (h) confirms that the amount of a workers’ compensation subrogation lien cannot exceed the amount of proceeds recovered from third-party tortfeasors. N.C.G.S. §97-10.2(h) gives an employer who has paid workers’ compensation benefits a “lien to the extent of his interest under (f) hereof upon any payment made by the third party….” G.S. § 97-10.2(f)(1), in turn, states that the only funds subject to the lien are the “amount obtained … from the third party….”

Thus, the Industrial Commission cannot disburse, and the employer cannot have a lien on, an amount larger than the amount actually recovered from the third-party tortfeasor, in this case $285,000.

Appellants argue that the trial court abused its discretion by determining the workers’ compensation subrogation lien was $190,000, because doing so “effectively releas[ed] [the UIM carriers] from liability….” We do not agree. The UIM carriers contractually obligated themselves to provide plaintiff with UIM coverage in satisfaction of the judgment obtained against defendant. The arbitration panel decided that, in compensation for injuries he sustained, plaintiff was entitled to $285,000, not $528,665.61. The trial court – in accordance with G.S. §§ 97-10.2(f)(1)-(2) and Bartell v. Sawyer, 132 N.C. App. 484, 512 S.E.2d 93 (1999) – then excluded court costs, attorney’s fees, and interest from the amount of the judgment, and determined the amount of the employer’s and agent’s workers’ compensation subrogation lien to be $190,000. The trial court did not abuse its discretion in doing so.

Affirmed.