Automatic Assignment of Bodily Injury Claims Under Arizona's Workers' Compensation Laws

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.

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 statute 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 file a 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.