Delaware Supreme Court Revives Workers’ Compensation Insurer’s Subrogation Bid

The Delaware Supreme Court has revived a workers’ compensation insurer’s claim for subrogation in a case where an employee injured while driving for her employer received payment from her employer’s uninsured motorist (UIM) insurer after receiving her workers’ compensation benefits.

The high court reversed a Superior Court that had denied ProAssurance Group’s rights to subrogation. The high court remanded the case back for calculation of how much, if any, of the UIM awarded to employe Edna Manz is subject to subrogation.

Manz’s employer, Apis Services, used ProAssurance as its workers’ compensation carrier. Following the accident, ProAssurance paid Manz $374,070.72 for medical expenses and lost wages, as well as a lump sum of $80,000.00 for all future workers’ compensation entitlements.

In the settlement agreement, ProAssurance and Manz stipulated that ProAssurance reserved “any lien rights against any recovery” by Manz “from any entity, to include any insurance carrier, as a result of the work accident.”

For the same accident, Manz separately recovered $8,571.00 from the driver who caused her injuries. Due to the insufficiency of that recovery, Manz filed another claim with Apis’s underinsured motorist policy issued by Philadelphia Insurance Cos. The UIM policy contained a non-duplication clause that stated it would not pay for any element of loss if a person is entitled to receive payment for the same element of “loss” under any workers’ compensation, disability benefits or similar law.

On December 18, 2023, following an arbitration proceeding between Manz and Philadelphia Insurance, the arbitrator awarded Manz $215,000.00 for her UIM claim.

ProAssurance subsequently asserted a lien on Manz’s UIM award, alleging a right to subrogate on the UIM award. In response, Manz sought a declaratory judgment in the Superior Court that her UIM proceeds were exempt from ProAssurance’s lien because she was “only awarded monies not previously paid by her workers’ compensation claim” due to the non-duplication clause contained in the UIM policy.

ProAssurance moved for summary judgment, arguing that the Delaware Supreme Court’s opinion in Henry II applied to the case. According to ProAssurance, Henry II mandated subrogation for workers’ compensation carriers against an injured employee’s subsequent UIM recovery.

The Superior Court denied ProAssurance’s motion, ruling that Henry II did not apply because when Manz resolved her claims with Philadelphia Insurance and acknowledged the application of the non-duplication clause, Henry II had not been decided.

ProAssurance appealed, arguing that the Superior Court erred in ruling that Henry II did not apply.

The high court agreed with the insurer, noting that it decided Henry II in September 2023, before November 2023 when Manz finalized her settlement with ProAssurance and made her UIM demand. Henry II was therefore already the “law of the land” when Manz negotiated with the workers’ compensation and UIM carriers.

Manz further argued that even if Henry II predates the relevant events of this case, ProAssurance is still not entitled to subrogation on her UIM award because Henry II does not provide a workers’ compensation carrier with a guaranteed right to subrogation.

The high court found that Henry II does not entitle workers’ compensation carriers to a guaranteed subrogation right on an injured employee’s subsequent UIM awards. Instead, Henry II distinguished “boardable” and “non-boardable” damages suffered by an injured employee and held that a workers’ compensation carriers’ right to subrogation is limited to boardable damages.

On remand, the Supreme Court told the Superior Court it should apply Henry II and make factual determinations as to the amount, if any, of Manz’s UIM award that is “boardable” and therefore subject to subrogation.

Boardable damages, or economic or specific damages, are ones like property damage, medical expense, and lost wages that can be shown with a specific financial value and are admissible as evidence before a jury in court.

Non-boardable damages are subjective damages that are not as easily quantified and not admissible in court. Pain and suffering, loss of employment for life, and emotional distress are examples.

Under Henry II, non-boardable damages include, but are not limited to, those covered by personal injury protection (PIP) policies, and are not subject to subrogation, according tlo the high court..

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