Refresher on Subrogation Rights in Nebraska

by | Jul 21, 2016

The employer (or its insurer) has a statutory right to be subrogated to any recovery by the employee against a third-party tortfeasor for his or her work-related injuries. For accidents occurring after July 16, 1994, the employer is entitled only to a “fair and equitable distribution” of any judgment or settlement from the tortfeasor. Turco v. Schuning, 271 Neb. 770, 716 N.W.2d 415 (2006); Jackson v. Branick Industries, 254 Neb. 950, 581 N.W.2d 53 (1998).

There is no set rule as to what constitutes a “fair and equitable distribution.” However, the Nebraska Supreme Court has specifically rejected a claim that a claimant must be “made whole” before consideration may be given to the workers’ compensation subrogation interest. In so doing, the Court stated as follows: “[§48-118] includes language providing for a fair and equitable distribution. It does not, however, adopt the made whole doctrine. Nor does it adopt any other specific rule for determining how to fairly and equitably distribute the settlement. Instead the language is plain: The court shall order a fair and equitable distribution. Because we apply statutory subrogation, we decline to further read into §48-118 a requirement that the employee be made whole.” The Court went on to distinguish the case from Dailey v. Blue Cross Blue Shield, 268 Neb. 733, 687 N.W.2d 689 (2004) on the basis that Dailey involved a contractual right of subrogation, while Turco involved a statutory right of subrogation. The Court also refused to set forth a rigid or defined method for determining the subrogation interest under §48-118, noting that the statute simply requires the Court to determine a fair and equitable distribution under the facts of each case.

In Burns v. Nielsen, 273 Neb. 724, 732 N.W.2d 640 (2007), the trial court overseeing the third-party settlement determined the employer had no subrogation interest under the doctrines of unclean hands and equitable estoppel because the employer had denied the workers’ compensation claim before ultimately settling. The Nebraska Supreme Court held that NEB. REV. STAT. §48-118 does allow the employer to defend against a workers’ compensation claim and to still claim a subrogation interest in third-party claims. Employers’ subrogation rights under the Act are statutory and not governed by equitable principles.

For more information on this topic, please contact a Baylor Evnen Nebraska Workers’ Compensation attorney by calling 402.475.1075.