You probably know that if you are ever injured in the course of your job, your employer is liable for paying you workers’ compensation benefits. Under Iowa law, every employee is covered by workers’ comp. More to the point, these are considered “no-fault” benefits. In other words, you do not have to prove that your employer’s negligence caused your accident or injury in order to receive compensation.
The trade-off for these no-fault benefits is that Iowa law declares workers’ compensation an “exclusive remedy” for any legal claims the employee might have against the employer for their injury. Put another way, as long as your employer follows the workers’ compensation rules, you cannot file a personal injury lawsuit against your employer, even if its negligence did cause your accident.
What Is Subrogation?
The “exclusive remedy” rule only applies to Iowa employers, however, and not third parties. So if someone other than your employer caused your work-related injury, you are still free to sue that third party. For example, say a delivery driver makes a delivery to a customer. While on the customer’s premises, the driver is injured in a slip and fall accident caused by a hazard that the business owner should have known about but failed to correct. The driver is entitled to claim workers’ compensation benefits from their employer. But they could also file a separate personal injury lawsuit against the customer for negligence in keeping their premises in a reasonably safe condition.
So what impact does filing a personal injury lawsuit against a third-party have on an injured employee’s workers’ compensation rights? Essentially, in such cases the employer is allowed to claim “subrogation” rights. Subrogation is a term commonly used in insurance law to describe a situation where an insurer has the right to receive indemnification from a third party for a covered loss.
Basically, when you file an Iowa workers’ compensation claim, your employer and its workers’ compensation insurance carrier are on the hook to pay your benefits. If a third party was partly or wholly responsible for your injuries, however, your employer and its insurer have the right to recoup the money they paid you from the proceeds of any personal injury judgment or settlement you obtain from that third party. Put another way, you are not allowed to obtain “double recovery” for the same injury.
Employers Must Give Employees 90 Days Notice Before Suing on Their Own
Another aspect of subrogation in Iowa is that if the injured employee decides, for whatever reason, not to pursue a personal injury claim against a third party, the employer and their insurance company can. But this right is not automatic. The employer needs to follow certain procedures spelled out in Iowa law in order to preserve its rights.
The Iowa Court of Appeals recently addressed this issue in a decision, Midwest Builders’ Casualty Mutual Company v. RP Constructors, LLC. This case began with an accident at a highway construction site in Sioux City. An employee of Iowa Trenchless, LLC, worked on the project with two employees of a separate company, RP Constructors. The RP employees mistakenly told the Trenchless employee that the water pressure to a hose was off. It was not. Consequently, the still-active hose managed to knock the Trenchless employee back and into a steel beam.
Trenchless and its insurance carrier, Midwest Builders, paid workers’ compensation benefits to the injured employee. Two years later, the insurer sent the employee a written notice stating that it intended to exercise its subrogation rights and sue RP because the employee had not done so “within 90 days of the accident.” Forty-one days after sending this letter, the insurer filed its lawsuit.
But the Iowa courts ultimately dismissed the case. As the Court of Appeals explained in its decision, Midwest did not actually follow the proper subrogation procedures required by Iowa workers’ compensation law. Here is a short breakdown of how the law is supposed to work:
- An employee is injured in a work-related accident allegedly caused by a third party’s actions.
- The employee receives workers’ compensation benefits.
- The employer, or its insurance company, sends the employee a written notice that it will exercise its subrogation rights if the employee does not file a personal injury lawsuit.
- If the employee does not file a personal injury lawsuit within 90 days of this notice, the employer or insurance company can proceed to file a personal injury lawsuit on its own.
In this case, Midwest Builders did not wait the full 90 days before suing RP. RP therefore moved to dismiss the lawsuit because Midwest Builder did not follow the law. Midwest Builder advocated for a different interpretation of the law that favored its position. But as the Court of Appeals explained, it was not “at liberty” to modify precedent, which clearly required a full 90 days notice. So Midwest Builders was out of luck in this case because they jumped the gun on filing their lawsuit.
Subrogation and Workers’ Compensation Settlements
A question you might have about all this is, “Can I quietly settle a third-party claim without notifying my employer?” The answer is a resounding “no.” Iowa workers’ compensation law in fact requires employees who reach a third-party settlement to notify their employer (and insurance company) and obtain their consent before a court can approve such a settlement.
The reverse is also true. If you decide not to pursue your own personal injury claim against a third party and your employer subsequently does so and negotiates a settlement, you must give your written consent as well. And if there is a case where one side does not consent to a settlement negotiated by the other, then the settlement must receive written approval from the Iowa Workers’ Compensation Commissioner.
Contact a Cedar Falls Workers’ Compensation Lawyer Today
As you can see, even a fairly straightforward workers’ compensation case can get complicated when a third party is involved. That is why it is important to work with a qualified Cedar Falls workers’ compensation lawyer who can guide you through the system. Contact Ball, Kirk & Holm, P.C., today at 319-419-4279 to schedule a free consultation. We have offices in Waterloo and Iowa City. We are also available 24/7 and can travel to meet our clients when circumstances require.