Talbot v. Cudd – Resolving Conflict in Workers’ Compensation Subrogation Lien Dispute

Workers’ compensation subrogation liens are actions taken by an employer asserting the right to collect on damages an injured worker won in a third-party injury lawsuit. For example, a worker who is injured by a negligent driver in a car accident may pursue not only workers’ compensation benefits but also a third-party lawsuit against the negligent driver. Intersection

N.C. 97-10.2(f) holds that employers have subrogation rights if they have filed a written admission of liability for benefits, and the employee has obtained a judgment against or settlement with a third party for the same injury. There are some guidelines, though. First, out of that damages award, the actual court costs and reasonable expenses incurred by the employee for litigation have to be paid. Then, the attorney who represented the employee in the third-party action has to be paid (not exceeding one-third of the total amount recovered). Then, the employer can be reimbursed for all of the benefits by way of compensation or medical bills paid by the employer. Then, after all that, the employee or personal representative will get paid.

This system puts the employer’s subrogation lien above the worker’s right to be made whole. It is not so in some other states. In Montana, for example, the law is that workers must be made whole before an employer has the right to impose a subrogation lien and collect its share. The conflict in the different state laws on subrogation was seen recently in the case of Talbot v. Cudd, a Montana Supreme Court case.

Here, the plaintiff worker was hit by a truck at an intersection in Billings, Montana. The 39-year-old father of three suffered a severe traumatic brain injury, as well as broken bones and other orthopedic injuries. His medical bills have thus far exceeded $680,000 and are still piling up. An economic expert for the worker estimated his lost earning capacity will exceed $3.5 million over the course of his life. The plaintiff had been in Montana at his employer’s request for a job, even though he lived in Oklahoma, where the employer was based.

The negligent driver had high limits of liability insurance, but even so, the limits were not adequate to fully compensate the worker. The employer didn’t argue that the worker was made whole, despite receiving workers’ compensation benefits and recovery from the third party. Nonetheless, the employer sought to assert a subrogation lien on approximately $600,000 it had paid in medical and disability payments for the worker.

The plaintiff obtained his workers’ compensation benefits in Oklahoma. Oklahoma law allows employers to assert the first lien on two-thirds of the net proceeds recovered in a third-party lawsuit after the payment of reasonable costs (similar to North Carolina’s law). The plaintiff argued his employer’s workers’ compensation lien was invalid in Montana, the state that had jurisdiction in the personal injury lawsuit.

The district court sided with the plaintiff, granting summary judgment, and the Montana Supreme Court affirmed.

The employer tried to argue Oklahoma law applied, but the court ruled Montana had jurisdiction because the injury happened in Montana. The defendant employer then tried to argue this was a claim that should be weighed by the industrial commission, rather than a district court. However, the state supreme court noted this was a tort action, rather than a workers’ compensation claim.

If you have been injured at work, contact the Lee Law Offices at 800-887-1965.

Additional Resources:

Talbot v. Cudd, Oct. 4, 2016, Montana Supreme Court

More Blog Entries:

Worker Killed in Industrial Accident Had THC in System, Sept. 30, 2016, Winston-Salem Workers’ Compensation Lawyer Blog

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