Subrogation abomination! Supreme Court overrules its own precedent.

The Supreme Court of Delaware holds that an employer or a workers’ compensation carrier may assert a subrogation lien against an employee’s recovery of benefits under an employer-purchased UIM policy, overruling its own precedent in Simendinger v. National Union Fire Insurance.

In September 2015, Mr. Henry was injured in a compensable industrial accident and received over $584,000 in workers’ compensation benefits. He sought damages from the non-party tortfeasor and settled at the $50,000 liability insurance policy’s limits. The workers’ compensation carrier received reimbursement for its lien from those proceeds after an attorney fee was deducted. Mr. Henry then filed claims for UIM coverage with both his personal policy and the employer’s policy. When those claims were denied, he filed actions against the UIM insurers in the Superior Court. The employer and its workers’ compensation carrier moved to intervene in those proceedings, but the motion was denied.

In response, the employer/workers’ compensation carrier filed a declaratory judgment action in Superior Court that asserted entitlement to a lien against any recovery of damages in the UIM action pursuant to 19 Del. C. § 2363(e). The court granted the UIM insurer’s motion for judgment on the pleadings. The judge reasoned that § 2363(e) limited the right to reimbursement of workers’ compensation benefits for the employer/workers’ compensation carrier to damages recovered from the non-party tortfeasor, according to the Supreme Court’s holding in Simendinger v. National Union Fire Insurance. The employer/workers’ compensation carrier appealed.

On appeal, the Supreme Court of Delaware overruled Simendinger and held that § 2363 permits an employer or workers’ compensation carrier to assert a subrogation lien against the employee’s recovery of benefits under an employer-purchased UIM policy. The court explained that the Simendinger court relied on dictum from an earlier Supreme Court opinion, Hurst v. Nationwide Mutual Insurance Co., to reach its conclusion. However, the Hurst court mistakenly construed the 1993 amendment to § 2363(e) as eliminating an employer’s ability to obtain a lien against benefits paid under an employer-purchased UIM policy. The actual effect of the amendment was limited to PIP eligible benefits. The employer’s right to lien reimbursement from a UIM recovery was not changed by the amendment. The court explained that § 2363 does not preclude the workers’ compensation lien against employer-funded UIM benefits. In fact, it expressly allows it. Accordingly, Simendinger was overruled, and the decision below was reversed. However, it could not be determined from the record whether the language of the UIM policy itself precluded assertion of the lien. Therefore, the case was remanded to develop the record and consider the contractual arguments of all parties.
 

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