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Defense Digest

A Double Take: Workers’ Compensation Liens Render UIM Non-Duplication Clauses Unenforceable

Defense Digest, Vol. 31, No. 1, March 2025

March 1, 2025

by Joshua D. Scheets

Key Points:

  • Delaware Superior Court permits injured plaintiffs-employees to board medical bills and lost wages already paid by the workers’ compensation carrier in subsequent UIM claim related to the same incident, despite a non-duplication clause in UIM policy. 
  • In John Henry, et al. v. The Cincinnati Ins. Co., C.A. No. N18C-03-092 (December 23, 2024) (Brennan, J.), the court resolved seeming conflict of public policies between those underlying subrogation rights under the Workers’ Compensation Act and those behind the Uninsured Motorist Statute.

In a departure from historical precedent, the Delaware Superior Court permits injured plaintiffs-employees to board medical bills and lost wages that were already paid by the workers’ compensation carrier in a subsequent underinsured motorist (UIM) claim related to the same incident, despite the inclusion of a non-duplication clause in the UIM policy. John Henry, et al. v. The Cincinnati Ins. Co., C.A. No. N18C-03-092 (December 23, 2024) (Brennan, J.) (Henry III). In so doing, the court resolves the seeming conflict of public policies between those underlying subrogation rights under the Workers’ Compensation Act (the Act) and those behind the Uninsured Motorist Statute. 

Even though it may appear there is a duplicate recovery by the plaintiff-employee recovering these damages in a workers’ compensation claim and then boarding them in a subsequent UIM claim, functionally there is no duplication of damages since the recovery in the UIM context is now subject to a statutory right to subrogation of those recovered amounts by the workers’ compensation carrier/employer. The new paradigm created is best described as one in which the injured plaintiff-employee is permitted access to an advanced payment by the tortfeasor, but through the workers’ compensation carrier, with the ability to put on a full damages case against the employer’s UIM carrier where the third-party tortfeasor’s coverage in insufficient. Under the court’s rationale, by permitting this new category of damages in the UIM claim, Delaware law puts the workers’ compensation carrier or the employer as whole as reasonably can be accomplished while still fully compensating the injured plaintiff-employee.

The Henry III case involves an employee who was seriously injured in an automobile crash and then collected significant workers’ compensation benefits. The plaintiff-employee then filed third-party claims against the tortfeasors and collected the relatively modest policy limits and reimbursed the workers’ compensation carrier with a portion of those proceeds. The employee next filed a claim with his employer’s UIM carrier. The UIM carrier attempted to have the UIM claim dismissed pursuant to the workers’ compensation exclusivity provision. The Delaware Supreme Court held that the UIM carrier itself was not an employer under the Act and, instead, stepped into the shoes of the tortfeasor, thus, eliminating the exclusivity bar under the Act. Henry v. Cincinnati Ins. Co. & Fritz v. Cincinnati Ins. Co., 212 A.3d 285 (Del. 2019) (consolidated appeal) (Henry I). 

In the wake of Henry I, and following a robust procedural history, the workers’ compensation carrier eventually filed an action seeking declaratory judgment, which was dismissed and appealed, and then ultimately led to the Supreme Court’s holding, for the first time, that the Act “expressly allows the employer and its workers’ compensation carrier to assert a subrogation lien against benefits paid to the employee under the employer’s uninsured motorist policy.” Horizon Servs., Inc. v. Henry, 304 A.3d 552, 555 (Del. 2023) (Henry II). The Supreme Court then remanded the case to the trial court to develop the facts and determine the impact of the UIM non-duplication clauses. 

Back to Henry III, the Superior Court was faced with reconciling the statutory right of a workers’ compensation carrier/employer to subrogation with the contractual language of the non-duplication clause in a UIM policy. The controversy implicated competing public policies between the right to subrogation under the Act and the policy behind mandating UIM coverage through. Faced with resolving this question, Judge Brennan reasoned, given the statutory right to subrogation announced in Henry II combined with the fact that the workers’ compensation carrier was not a party to the contract with the non-duplication clause, the non-duplication clause could not be upheld. Henry III, at 12. The court noted that the way to resolve this supposed clash of public policies was to “harmonize the statutes” in a way to give both public policies meaning and effect. The simplest way to do this, the court reasoned, was to allow the plaintiff “to bring an action for all damages with the workers’ compensation lien against any damage award.” Id. at 15. In this context, there is no double recovery or duplication of indemnity since the monies paid in the UIM claim were subject to the subrogation rights of the workers’ compensation carrier/employer. 

As of this writing, Henry III is the law of Delaware and necessitates a modification of the handling of UIM claims in this and similar situations. At the very least, it requires a careful review of release language in order to ensure a resolution of all claims and liens moving forward. 

*Joshua works in our Wilmington, Delaware, office and is a member of our Casualty Department. 


Defense Digest, Vol. 31, No. 1, March 2025, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2025 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

Firm Highlights

Thought Leadership

Two Tracks, No Preclusion: Ohio Supreme Court Preserves Separate Damages Claims After Chapter 2506 Appeals

The Supreme Court of Ohio has clarified that an administrative appeal under Ohio Revised Code Chapter 2506 does not bar a separate action for damages and declaratory relief that could not have been pursued in the administrative appeal. The Ohio Supreme Court considered Sheetz, Inc. v. Centerville (2026-Ohio-3531) as a result of a certified question from the Southern District of Ohio. The question was whether Sheetz, the gas station/convenience store brand, was barred from seeking damages in a separate action since damages were not sought in their administrative appeal. Ultimately, the Ohio Supreme Court ruled that res judicata does not bar a separate action for damages after ruling on an administrative appeal because R.C. Chapter 2506 is limited to judicial review and cannot grant affirmative relief. The case arose after Centerville’s city council rejected a site plan proposed by Sheetz, Inc. that had received unanimous approval from the City’s planning commission. Sheetz filed an administrative appeal pursuant to R.C. 2506 in the Montgomery County Court of Common Pleas, and two months later filed a complaint for damages and declaratory relief under 42 USC § 1983 as a takings action with the city, city council, and other objectors as improper takings and a violation of due process, as well as interference with business and contractual relationship. The city and city council removed the § 1983 action for damages to federal court. Montgomery County Court of Common Pleas reversed the city council’s denial, and allowed the Sheetz project to move forward. Upon that ruling, the federal court issued a show-cause order questioning whether the § 1983 action was barred by the doctrine of res judicata via claim preclusion (which includes all theories of recovery).  Sheetz argued that Ohio courts of common pleas do not have authority to award damages or declaratory relief as party of the R.C. Ch. 2506 appeal, therefore res judicata could not be triggered to apply to the § 1983 action. Additionally, Sheetz moved to certify the issue to the Ohio Supreme Court, citing differing results between the second and sixth districts on this same issue. Centerville approached the question, not from a claim preclusion standpoint, but from the holding in Grava v. Parkman, Twp which states that a final judgment rendered on the merits bars all subsequent action based on the same transaction or occurrence.  In yet another approach, an objector argued that claim preclusion was satisfied because Sheetz could have raised its damages claims in the administrative appeal – Sheetz disagrees. In their analysis, the Supreme Court of Ohio broke down the elements of a claim preclusion analysis: 1) a prior final, valid decision on the merits by a court of competent jurisdiction; (2) a second action involving the same parties, or their privies, as the first; (3) a second action raising claims that were or could have been litigated in the first action; and (4) a second action arising out of the transaction or occurrence that was the subject matter of the previous action. The Court held that R.C. Ch. 2506 does not permit a party to argue damages as R.C. Ch. 2506 limits the common pleas jurisdiction as if it were sitting on appeal, and therefore can only affirm, reverse, vacate, or modify the appealed order, or can remand the case to the administrative body. Further, the Court held that Grava’s conclusion that a final judgment precludes additional litigation for different relief is inapplicable under this fact pattern because it was meant only to apply to those matters in which the plaintiff brings the exact same case twice, but for new relief. The Court found Grava was inapplicable because Sheetz could have requested damages or declaratory relief in the R.C. 2506 appeal. Therefore, Grava would be nothing more than dicta if it even did apply. Going further, the Ohio Supreme Court disavowed Sixth Circuit precedent which, in reliance on Grava and other district court decisions, permitted an owner to seeking relief under 42 U.S.C. § 1983 alongside an administrative appeal. See Moore v Hiram Twp., 988 F.3d 353 (6th Cir.2021). The Ohio Supreme Court found that the Sixth Circuit had disregarded a critical decision in Community Concerned Citizens, Inc. v. Union Twp. Bd. of Zoning Appeals, 1993-Ohio-115, which clearly held that a R.C. Ch. 2506 appeal cannot be combined with a complaint seeking other claims for relief. Id. at ¶ 11. To that end, the Ohio Supreme Court has determined that the decisions Moore relied on (outside of Grava) are no longer good law, and that Moore was wrongly decided. The decision draws a clear procedural boundary: Chapter 2506 provides judicial review of an administrative decision, not a forum for independent claims seeking affirmative relief. Although Grava may place claims arising from a single transaction within the potential scope of claim preclusion, those claims are not barred unless the complete claim-preclusion test is satisfied. Because Sheetz could not have pursued damages or declaratory relief in its Chapter 2506 appeal, the separate action was not precluded. The remaining question for practitioners looking to apply or defend against this exception is when does the statute of limitations begin to run on damages and declaratory relief claims related to an administrative decision on appeal? A takings action in federal court has a 2-year statute of limitations, or as a state claim, 4 years (like the other tortious claims raised therein). Correlating this case with others, an administrative appeal will not likely toll the statute of limitations on claims based on a final decision by a municipal authority. Therefore, practitioners should look for these cases to be brought simultaneously.

Thought Leadership

Pennsylvania Supreme Court to Review Whether Legal Malpractice Claims May Be Recast as Breach of Contract Claims

The Pennsylvania Supreme Court recently granted allowance of appeal to consider whether a plaintiff may pursue a breach of contract claim against an attorney based on allegations that the attorney failed to provide competent legal services. The issue is significant in professional liability litigation because it concerns whether a plaintiff may avoid the statute of limitations applicable to professional negligence claims by characterizing the alleged misconduct as a breach of contract. Antoine Poteat retained attorneys Gary Asteak and Nino V. Tinari to represent him in a criminal matter. After his conviction was subsequently overturned through a Post Conviction Relief Act proceeding, Poteat filed suit against his former attorneys alleging that they breached their retainer agreements by failing to provide competent legal services. The attorneys argued that the claims sounded in professional negligence, rather than breach of contract, and were therefore time-barred. The trial court dismissed Poteat’s complaint, but the Superior Court, sitting en banc, reversed. The Superior Court held that the gist-of-the-action doctrine did not bar Poteat’s breach of contract claim because the alleged failure to provide competent legal services could constitute a breach of the parties’ agreement. The Court further held that a legal-services agreement contains an implied duty requiring an attorney to provide competent legal services, even where the agreement does not contain an express provision requiring such services. The Pennsylvania Supreme Court granted review in July 2026 and will consider whether the Superior Court’s decision conflicts with Pennsylvania precedent distinguishing contract and tort claims, including Bruno v. Erie Insurance Co. The Supreme Court will also address whether a plaintiff may maintain a breach of contract claim based on an implied duty to provide competent legal services without identifying a specific contractual provision that was breached. The Supreme Court’s decision could have significant implications for professional liability litigation in Pennsylvania, particularly where plaintiffs seek to characterize claims arising from alleged professional negligence as contractual claims.

Thought Leadership

The Search-Incident-to-Arrest Doctrine Does Not License Strip Searches

In Beatty v. Gardner, No. 25-2860 (3d Cir. Sept. 16, 2026), Kyle Beatty sued police officers Clinton Gardner and Calvin Irvin under 42 U.S.C. § 1983 after they stopped, arrested, and searched him three times during a drug investigation in Williamsport, Pennsylvania. The officers initially smelled marijuana coming from the car in which Beatty was sitting and observed marijuana residue, giving them probable cause to arrest him. Beatty consented to the first pat-down, and the second search was conducted incident to his lawful arrest; neither search uncovered weapons or contraband. The officers then transported Beatty to the police station solely to strip-search him, but the strip search also revealed nothing. The District Court granted the officers summary judgment, concluding that the initial stop, arrest, and first two searches were reasonable and that qualified immunity protected the officers from liability for the strip search. The Third Circuit affirmed, but held that the strip search itself violated the Fourth Amendment. The court concluded that the search-incident-to-arrest doctrine does not automatically permit officers to strip-search an arrestee outside the jail or prison setting. Because strip searches are highly intrusive and the traditional justifications for searches incident to arrest (officer safety and preservation of evidence) did not justify the search of Beatty, the officers generally needed either the arrestee’s consent, exigent circumstances, or a warrant supported by probable cause to believe that a search beneath the clothing would reveal weapons, contraband, or evidence. Here, the officers had none of those justifications. Nevertheless, the court held that qualified immunity barred damages liability because, at the time of the search, the right against a warrantless strip search of an arrestee outside the institutional setting was not clearly established by Supreme Court or Third Circuit precedent. The court likewise upheld qualified immunity on Beatty’s First Amendment retaliation claim and affirmed summary judgment for the officers.