Recent California Appellate Case Holds Employer’s Workers’ Compensation Insurer Has No Right to Recover Benefits When Injured Employee Failed to Recover Damages Against Third-Party Defendant

The California Court of Appeal issued an unpublished opinion recently in a lawsuit involving a car accident that occurred when a driver crashed his vehicle through a restaurant and injured a restaurant employee. The employee received workers’ compensation benefits and medical expenses.  She then pursued a civil claim against the driver.  The issue in the case was whether the workers’ compensation insurer for the employer had a right to recover compensation from a trestauranthird party that had been released from liability by the insured individual.  The lower court had held that since the injured employee had not recovered damages from the defendant in a personal injury lawsuit, the workers’ compensation insurer had no right to reimbursement for benefits paid to the employee.

The restaurant’s workers’ compensation insurance company paid her $18,388.15 in workers’ compensation benefits and medical expenses. The employee then sued the driver for damages. The insurer filed a complaint in intervention, seeking to recover benefits paid to the employee.

Before the trial, the employee (the plaintiff) had rejected the driver’s offer to compromise in the amount of $50,000, which also required her to release all of her claims against the defendant and to reimburse all of the insurance carriers that might be able to recover.

The jury then awarded the employee less than the settlement offer ($23,030.07) in damages, finding that the defendant had been negligent and caused the accident.  The employee dismissed her complaint against the driver in exchange for his agreement to waive costs that exceeded the verdict. After dismissing the complaint, the court entered judgment for the injured employee. Ultimately, the two parties stipulated to set aside this judgment, and it was vacated in January 2015.

Then, the insurer moved to apportion the judgment, and the court rejected this motion.  The court held that the workers’ compensation insurer could not recover from a judgment that was not enforceable or valid, and it denied the insurer’s motion to apportion judgment. The court also dismissed the insurer’s complaint in intervention. On appeal, the insurer argued that it was entitled to reimbursement under the January 2015 judgment, and the court erred by vacating the judgment.

The California appellate court stated the general rule that when an individual injures an employee, that employee can sue the individual for all of the damages from the injury, despite receiving workers’ compensation benefits for some of the same injuries.  Employers may recover any workers’ compensation benefits they had become obligated to pay, or had paid, through intervening in a legal claim brought by the employee, bringing an action against the third party, or allowing the employee to pursue the action and then applying a lien against the employee’s judgment.  The court also noted an employer’s workers’ compensation insurer serves as the “employer” in the context of recovering payment.

In this case, the court stated the insurer could not recover under the January 2015 judgment.  Since there had not been a judgment in favor of the employee, but instead she had dismissed her complaint against the driver and did not recover money, the judgment was vacated.   Since the employee had not recovered against the driver, the workers’ compensation insurer did not have a right to recover.  The court stated the rule that an intervening insurer’s right to recover derives from the employee’s tort remedy.

The appellate court affirmed the orders and awarded costs to the defendant driver on appeal.

At Sharifi Firm, our attorneys represent Los Angeles workplace accident victims, helping them pursue workers’ compensation claims. In this particular case before the appellate court, a third party was liable for damages as well.  We can help you pursue compensation for your harm, and we provide a free, initial consultation with a skilled attorney. Contact us today by calling 866.422.7222 or completing our online form.

More Blog Posts:

California Court of Appeal Annuls Writ of Review Because Workers’ Compensation Orders and Decisions Must be Final before Seeking Writ, Southern California Injury Lawyer Blog, November 25, 2016

California Court Holds Injured Employee Did Not Show Defendant Affirmatively Contributed to Injuries, Southern California Injury Lawyer Blog, November 18, 2016

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