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Digital EditionDelaware Supreme Court Limits Workers’ Comp Carriers’ Rights to UIM Awards
A Delaware Supreme Court ruling refines the subrogation rights of workers’ compensation carriers against an injured employee’s underinsured motorist (UIM) recovery.
In ProAssurance Grp. vs. Manz, the court reversed a lower court’s decision, clarifying that while a carrier’s right to reimbursement exists, it is not absolute. The decision provides critical guidance for insurers on the nuanced application of a key legal precedent, signaling that the composition of a UIM award, not just its existence, determines the extent of a workers’ compensation lien.
The case originated from a motor vehicle accident involving Edna Manz, who was injured while working for Apis Services Inc. Her employer’s workers’ compensation carrier, ProAssurance Group, paid over $454,000 for her medical expenses, lost wages, and a final settlement. The settlement agreement stipulated that ProAssurance reserved its lien rights against any third-party recovery Manz might obtain.
After recovering a small amount from the at-fault driver, Manz pursued a claim under her employer’s UIM policy, which was held by Philadelphia Insurance Companies (PIC). That UIM policy contained a non-duplication clause, stating it would not pay for any losses already covered by workers’ compensation. Following arbitration, Manz was awarded $215,000 from the UIM policy.
Following the UIM award, a dispute arose between Manz and ProAssurance. The workers’ compensation carrier asserted a subrogation lien on the entire $215,000 UIM recovery, arguing that a recent Supreme Court decision, Horizon Servs. vs. Henry (“Henry II”), gave it a clear right to be reimbursed from those funds. Manz countered by filing for a declaratory judgment, arguing that her UIM award was exempt from the lien. She contended that because of the UIM policy’s non-duplication clause, the arbitrator awarded her funds only for damages not already paid by workers’ compensation, leaving nothing for ProAssurance to claim.
The Supreme Court’s analysis focused on clarifying the scope of its own precedent in Henry II. The court first established that the lower court erred in finding that Henry II did not apply to the case. However, it then corrected ProAssurance’s “overbroad” interpretation of that precedent.
The justices explained that Henry II does not grant workers’ compensation carriers a guaranteed right to an employee’s entire UIM award. Instead, it creates a distinction between different types of damages. The court held that a carrier’s subrogation right is limited to what it termed “boardable” damages—essentially, those economic losses like medical bills and wage loss that are compensable under workers’ compensation. Other damages, such as those covered by Personal Injury Protection (PIP) policies, are considered “non-boardable” and are protected from a subrogation lien.
Ultimately, the Supreme Court reversed the lower court’s judgment and remanded the case for further proceedings.
The decision directs the Superior Court to apply the framework established in Henry II. It must now conduct a factual analysis of Manz’s $215,000 UIM award to determine what portion, if any, represents “boardable” damages. Only that specific amount will be subject to ProAssurance’s subrogation lien, a conclusion that underscores the need for a detailed allocation of damages in UIM arbitration involving workers’ compensation claimants.
View the full decision here. &
