Nebraska Supreme Court Vacates Unfavorable Employer Subrogation Decision in In re Estate of Evertson

On March 8, 2016 the Nebraska Court of Appeals issued a decision which had the potential to significantly impact the subrogation interest of employers and workers’ compensation insurers. The Court of Appeals held in In Re Estate of Evertson: Travelers Indemnity Co., v. Wamsley, as personal representative of the Estate of Bruce Evertson, 23 Neb. App. 734 (March 8, 2016), that unless a recovery against a third-party tort-feasor is made “by the employer or workers’ compensation carrier,” the employer or carrier is not entitled to a credit against future compensation that is payable to the employee, by virtue of the tort proceeds payable to the employee. The Court of Appeals also allocated no settlement proceeds to Travelers via a “fair and equitable distribution,” prescribed under Neb. Rev. Stat. § 48-118. Please see our March 26, 2016 blog post for a comprehensive discussion of the Court of Appeals decision.

Subsequently, the matter was appealed to the Nebraska Supreme Court. As part of a collective effort by numerous employers, associations and workers’ compensation insurers, Baylor Evnen filed an Amicus Brief arguing for vacation of the Court of Appeals decision. Raised therein was the argument that, not only did the Court of Appeals misinterpret the Nebraska Supreme Court’s prior applications of Section 48-118, but that the Court of Appeals decision should also be vacated due to the fact that trial-level County Court  did not have subject matter jurisdiction over the distribution of settlement proceeds under Section 48-118. It was argued that—pursuant to the plain language of Section 48-118—state District Courts have exclusive original subject matter jurisdiction over such allocations (rather than the County Court).

In a December 16, 2016 opinion, the Nebraska Supreme Court adopted the analysis raised in the Amicus brief that the County Court, whose decision the Court of Appeals affirmed, did not have subject matter jurisdiction to even decide the question in the first place.  As such, the Supreme Court vacated the Court of Appeal’s decision, which means that a new hearing must be held in the District Court.

Importantly, the Court also provided a subtle reminder that whether an employer/insurer is entitled to a credit as a result of an employee’s recovery of tort damages does not depend on which party (the employee or the employer/insurer) makes the recovery, or who is first to file a complaint.  The Court simply refers the reader to its prior decision which clearly, and unambiguously, decided that issue. Thus, while the Supreme Court did not provide explicit guidance on the issues surrounding Section 48-118, it reinforced its prior application and, in the process, vacated the “rogue” Court of Appeals decision which, if upheld, would have had a significant, negative impact on an employer’s/insurer’s ability to reduce its obligation to pay future benefits based upon an injured employee’s recovery of damages from the tortfeasor which injured the employee.

If you have questions about the Supreme Court’s decision or an employer/insurer’s rights of subrogation as against a third-party tortfeasor pursuant to Neb. Rev. Stat § 48-118, please contact Dallas Jones (djones@baylorevnen.com), David Dudley (ddudley@baylorevnen.com), or Michael Sands (msands@baylorevnen.com).