by: Michael G. Kelley
When dealing with a Claimant who has received workers’ compensation benefits, there are two issues which typically arise:
(1) What is the amount of the workers’ compensation lien?
and
(2) Has the claim been assigned to the workers’ compensation carrier? Both of these questions can be answered by reviewing A.R.S. § 23-1023, Arizona’s statute which addresses the liability of tortfeasors to injured employees.
The statute states:
23-1023. Liability of Third person to injured employee; election of remedies
A. If an employee who is entitled to compensation under this chapter is injured or killed or further aggravates a previously accepted industrial injury by the negligence or wrong of another person not in the same employ, the injured employee, or in event of death the injured employee's dependents, may pursue the injured person's remedy against the other person.
B. If the employee who is entitled to compensation under this chapter or the employee's dependents do not pursue a remedy pursuant to this section against the other person by instituting an action within one year after the cause of action accrues, or if after instituting the action, the employee or the employee's dependents fail to fully prosecute the claim and the action is dismissed, the claim against the other person is deemed assigned to the insurance carrier or self-insured employer and all of the following apply:
1. The insurance carrier or self-insured employer may institute an action against the other person.
2. Any dismissal that is entered for lack of prosecution of an action instituted by the employee or the employee's dependents shall not prejudice the right of the insurance carrier or self-insured employer to recover the amount of benefits paid.
3. If the statute of limitations of the claim is one year after the cause of action accrues, the insurance carrier or self-insured employer may file the action prior to one year after the cause of action accrues.
4. The claim may be prosecuted or compromised by the insurance carrier or the person liable for the self-insured employer or may be reassigned in its entirety to the employee or the employee's dependents. After the reassignment, the employee who is entitled to compensation, or the employee's dependents, shall have the same rights to pursue the claim as if it had been filed within the first year.
C. The employee or the employee's dependents shall provide the insurance carrier or the self-insured employer written notice of the intention to bring an action against a third party and shall provide to the insurance carrier or self-insured employer timely and periodic notice of all pleadings and rulings concerning the status of the pending action. In any action instituted by the employee or the employee's dependents, the insurance carrier or the self-insured employer shall have the right to intervene at any time to protect the insurance carrier's or the self-insured employer's interests.
D. If the employee proceeds against the other person, compensation and medical, surgical and hospital benefits shall be paid as provided in this chapter and the insurance carrier or other person liable to pay the claim shall have a lien on the amount actually collectable from the other person to the extent of such compensation and medical, surgical and hospital benefits paid. This lien shall not be subject to a collection fee. The amount actually collectable shall be the total recovery less the reasonable and necessary expenses, including attorney fees, actually expended in securing the recovery. In any action arising out of an aggravation of a previously accepted industrial injury, the lien shall only apply to amounts expended for compensation and treatment of the aggravation. The insurance carrier or person shall contribute only the deficiency between the amount actually collected and the compensation and medical, surgical and hospital benefits provided or estimated by this chapter for the case. Compromise of any claim by the employee or the employee's dependents at an amount less than the compensation and medical, surgical and hospital benefits provided for shall be made only with written approval of the insurance carrier or self-insured employer liable to pay the claim.
E. For purposes of this section, the commission shall have the same rights as an insurance carrier or self-insured employer.
By its plain language, subsection D of the statute establishes that a workers’ compensation carrier has a lien on the amount of any settlement or judgment paid to the injured employee. To make sure this occurs, subsection C of the statute requires the employee to provide written notice of her intent to bring a lawsuit against a third-party tortfeasor, and provide the insurance carrier with timely and periodic notice of all rulings in the lawsuit. If the workers’ compensation carrier chooses to do so, it also has the right to intervene in the lawsuit. Workers’ compensation carriers in Arizona typically choose not to intervene in the lawsuit, as they simply enforce their lien by providing notice of the same to the claimant. It is not uncommon for a workers’ compensation carrier to never provide written notice to the tortfeasor that a lien applies to the settlement, so it is important to determine if such a lien applies by reviewing how the medical bills are paid, or requesting this information from the claimant or the claimant’s attorney.
A more interesting development occurs when the injured employee fails to file a lawsuit within one year of the accident. Pursuant to subsection B of the statute, the entire bodily injury claim “is deemed assigned to the insurance carrier or self-insured employer.” Prior versions of the statue did not contain such strict assignment language. When the statute was amended in 2007 the legislature deleted the “shall be deemed assigned” language in its entirety from the statute. This resulted in the Arizona Court of Appeals issuing a now defunct decision in Acosta v. Kiewit-Sundt. In that case, the Court held that even though the injured employee had waited more than one year after the injury to file lawsuit, the claim not barred because the statute no longer automatically assigned the claim to the workers’ compensation carrier. The legislature was paying attention, though, and shortly after this decision amended the statute to its current version which includes a specific directive that the claim is deemed assigned to the workers’ compensation carrier if the injured employee does not a file lawsuit within one year after the cause of action accrues. As long as the workers’ compensation benefits were paid after the amendment of the statute in 2014, the current version of the statute applies, and the employee is required to bring a lawsuit within one year to avoid having the claim being automatically assigned to workers’ compensation carrier.
Even though the injured employee’s claim may have been assigned to the workers’ compensation carrier, the statute still permits the carrier to file a lawsuit against the tortfeasor. The workers’ compensation carrier may also reassign the claim in its entirety to the injured employee, thus negating the effect of the one-year limitation set forth in subsection B of the statute. As such, if a lawsuit is filed more than one year after the injury occurred, it is important for defense counsel to conduct discovery on whether the workers’ compensation carrier has re-assigned the claim to the injured employee. If there has been no reassignment, a motion to dismiss should be filed.
The Arizona Supreme Court has confirmed that injured employees must bring their lawsuit within one year of the accident to avoid having the claim being automatically assigned to the workers’ compensation carrier. In Jackson v. Eagle KMC L.L.C. (Ariz. Sup. Ct. Jan. 2, 2019), the court recognized that “if a person entitled to compensation under Arizona workers’ compensation laws does not file an action against a third person who caused the injury within one year of the action accruing, the action is deemed assigned to the employer or the workers’ compensation insurer.” However, the court ultimately held that the statute did not apply because the Plaintiff’s benefits were paid and administered in Nebraska. Since Nebraska does not have an automatic assignment provision, the Plaintiff was entitled to maintain her claim against the tortfeasor.
It is important to conduct an early evaluation of any claim involving a claimant whose medical expenses have been paid by workers’ compensation. If it has been more than one year since the injury occurred, the injured employee would be barred from bringing the lawsuit unless there has been reassignment of the claim by the workers’ compensation carrier. If there has been reassignment of the claim, insurers and their defense counsel need to be aware that the workers’ compensation carrier has a lien which may apply to any settlement or judgment obtained by the Plaintiff.
Thomas Rubin & Kelley has extensive experience in defending cases involving injured employees, including the proper handling of workers’ compensation liens. Please feel free to reach out directly to Brian Rubin at brubin@trkfirm.com or Michael Kelley at mkelley@trkfirm.com with any of your questions. We are always happy to help.