Written by Attorneys Patrick C. Timoney and John M. Popilock

Haman v. MACO Insurance Company, 86 P.3d 34 (Mont., March 2, 2004)

A minority of states permit a workers’ compensation insurance carrier to subrogate on the proceeds of an uninsured/ underinsured motorists (UM/UIM) insurance policy, and Montana has recently joined that minority. In Haman v. MACO Insurance Company, the Montana Supreme Court dismissed the usual arguments against allowing subrogation in this context, and unequivocally held that the UM/UIM carrier stands in the shoes of the third-party tortfeasor, thereby permitting subrogation under Montana’s workers’ compensation subrogation statute.

In this case, the claimant was injured in an automobile accident while acting within the course and scope of his employment. Suit was brought against the operator of the vehicle that struck him, as well as his personal UIM insurer and his employer’s UIM insurer. He subsequently settled with the operator of the striking vehicle and his personal UIM insurer. Thereafter, the case proceeded to trial against his employer’s UIM insurer, wherein the jury awarded damages in excess of his earlier settlements.

The employer’s UIM insurer requested that the court lower the jury’s award by any workers’ compensation insurance proceeds received under Montana’s collateral source reduction statute.[1] Under this statute, a court must reduce a plaintiff’s recovery by any amount paid from a collateral source “that does not have a subrogation right.” The UIM carrier argued that workers’ compensation insurers do not have a right of subrogation in Montana against a UM/UIM recovery; therefore, workers’ compensation insurance benefits are in fact a “collateral source” that must be subtracted from any verdict.

The Montana Supreme Court disagreed, holding that when a UIM insurer accepts a premium for UIM coverage, it contractually establishes its own liability for the tort of another. Therefore, the court concluded that the suit against the operator of the striking vehicle, and the UIM insurers that stand in the shoes of the operator, give rise to the workers’ compensation carrier’s right of subrogation against UIM benefits paid under Montana’s Workers’ Compensation Act.

Practice Tips:

1. Many jurisdictions have addressed this identical issue and have reached the opposite conclusion.Specifically, some courts have concluded that workers’ compensation insurers cannot subrogate on any proceeds of UM/UIM recoveries, while others have merely limited the ability of a workers’ compensation insurer to subrogate on the UM/UIM policy when the policy was purchased directly by the injured worker.Therefore, it is important to consult the law in your particular jurisdiction before waiving any recovery, or prospective recovery, on UM/UIM proceeds.

2. Often in automobile accident cases, claims for UM/UIM benefits have not been made by the time a settlement is proposed or reached with the tortfeasor.In such situations, the employer or workers’ compensation insurance carrier is often asked to waive or compromise its lien, or negotiate a settlement of any future credit permitted by the carrier.However, to handle this situation best, specific inquiry must be made before compromising a lien or future credit as to the existence of any available UM/UIM coverage – either through the employer, injured worker, other household members, or the owner of the vehicle involved in the accident.In those jurisdictions that permit subrogation against a UM/UIM recovery, the insurer must be careful not to waive (or limit) its recovery ability through settlement of the workers’ compensation claim or lien.