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Workers' Compensation

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.

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Florida Supreme Court Rules Florida Statute §627.70152 Does not Apply Retroactively

In a decision that resolves years of appellate uncertainty and confirms that insurers and insureds alike can rely on the legal framework in place when a policy is issued, the Supreme Court of Florida last week found that Florida Statute §627.70152, which involves an insured’s requirement to provide an insurer with pre-suit notice before filing a suit, cannot be applied retroactively. In Universal Property & Casualty Insurance Company v. Hughes, the Court was presented with the issue of whether the statutory pre-suit notice requirement applied retroactively and whether it would apply to a breach of contract of an insurance policy that was issued before the statute went into effect. Before the Court was an appeal from a homeowner, Ms. Hughes, who sued her insurance carrier, Universal Property & Casualty Insurance Company (Universal) for breach of contract under an insurance policy that was in effect from April 24, 2019 through April 24, 2020. During the policy period, Ms. Hughes suffered a loss and, on May 29, 2019, made a claim for water damage. The carrier investigated the loss and issued payment; Ms. Hughes disputed the payment, finding the amount insufficient for repairs. On July 1, 2021, Florida Statute §627.70152 went into effect, which required insureds to provide notice of intent to initiate litigation against the carrier prior to filing a lawsuit; if an insured filed the lawsuit without complying with §627.70152, a court must dismiss the case without prejudice. On August 4, 2021, Ms. Hughes filed her lawsuit against Universal for breach of contract. Universal moved to dismiss based on her failure to comply with §627.70152. Ms. Hughes contended the notice requirement could not be applied retroactively. The trial court disagreed and dismissed the lawsuit without prejudice, and Ms. Hughes appealed. During the appeal, the Fourth District Court of Appeal, in Cole v. Universal Property & Casualty, 363 So. 3d 1089 (Fla. 4th DCA 2023), ruled that Florida Statute §627.70152 did apply retroactively to policies issued before the effective date of §627.70152. However, the Sixth District Court agreed with Ms. Hughes and overturned the trial court’s ruling, finding the statute could not retroactively apply to policies issued prior to the statute effective date. Thereafter, the other district courts weighed in, with the Third District Court agreeing with the Fourth District Court, and the First, Second and Fifth District Courts agreeing with the Sixth District Court. In resolving the conflict amongst the district courts, the Supreme Court advised “as a general rule, ‘the statute in effect at the time an insurance contract is executed governs substantive issues arising in connection with that contract.’ Hassen v. State Farm Mut. Auto. Ins. Co., 674 So. 2d 106, 108 (Fla. 1996). The Court applied the two-step test when deciding whether a statute has retroactive application: “First, the Court must ascertain whether the Legislature intended for the statute to apply retroactively. Second, if such an intent is clearly expressed, the Court must determine whether retroactive application would violate any constitutional principles.” Menendez v. Progressive Exp. Ins. Co., 35 So. 3d 873, 877 (Fla. 2010). In analyzing the Legislature’s intent, the Court must determine whether the Legislature has manifested a clear command for retroactivity in the statutory text.  In review of the statutory text, the Court found nothing in the language of the statute to indicate that the phrase “all suits” was serving another purpose of expanding its reach to suits based on policies that both predate and postdate the enactment of the statute. Buis v. Universal Prop. & Cas. Ins. Co., 394 So. 3d 738, 741 (Fla. 2d DCA 2024). Further, the Court noted the statute has an effective date, which has long been considered to be evidence against retroactive application of a statute. The Court concluded that, on its face, no provision of §627.70152 speaks to application of the statute to insurance policies issued before the statute’s effective date and therefore, the Legislature did not clearly command retroactivity of the statute to include insurance policies issued prior to the enactment of the statute. The Court briefly reviewed Universal’s argument that the presuit notice requirement was procedural, not substantive, and therefore should be applied retroactively; however, the Court agreed with the Sixth District Court’s finding that, in its entirety, §627.70152 transformed an insured’s ability to sue an insurance company under a property insurance policy and an insurer’s obligations to respond to and pay insurance claims, thus making the requirement a substantive change. The Court thereby upheld the decision of the Sixth District and disapproved the decision of the Fourth District in Cole.

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Commonwealth Court Reaffirms the Constitutionality of Act 111's IRE Provisions

In this case, the claimant sustained a work injury of January 6, 1994, which was acknowledged by Notice of Compensation Payable (NCP). After the claimant’s receipt of 104 weeks of temporary total disability benefits, the employer filed a Request for an Impairment Rating Examination (IRE). The IRE was performed in May 2023 and the IRE physician found that the claimant had a 5% whole person impairment, under the AMA Guides. The employer filed a Petition based on the IRE results, and the Petition was granted by the WCJ. During litigation, the claimant argued that the IRE provisions of Act 111 (Section 306(a.3) of the Act) were not applicable to her injury, since it predated June 24, 1996, the date Act 57 went into effect, and that the IRE provisions were unconstitutional. The Workers’ Compensation Judge (WCJ)) granted the Petition and the Board affirmed. On appeal to the Commonwealth Court, the claimant argued that Act 111 violated the nondelegation doctrine and that its retroactive application to the claimant’s injury was unconstitutional. The court rejected the arguments on the basis that they had already found the same arguments without merit in multiple, prior cases. The court also addressed an argument made by the claimant that Act 111 was procedurally defective under the Pennsylvania Constitution because it was only considered on two days in each House after having undergone amendments and reassignments. The court noted that the Pennsylvania Constitution requires every bill to be considered on three different days in each House. The claimant maintained that, according to the legislative history, the bill did not receive three separate days of consideration from each House when it was assigned a new bill number. The court pointed out, however, that the bill number, H.B. 1840 remained constant and was considered on three occasions by the House. Further, the court concluded that minor amendments to the bill were germane to its original subject, which was to modify the Act’s IRE process, in accordance with Protz II.

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WCJ Improperly Refused to Conduct C&R Hearing and Erroneously Required Settlement of All Pending Petitions

In this case, the claimant sustained injuries in the course and scope of her employment as a registered nurse. The employer acknowledged the injury by a Notice of Compensation Payable (NCP).  Subsequently, a Workers’ Compensation Judge (WCJ) expanded the description of injury. The employer then filed a Termination Petition, alleging the claimant was fully recovered from the injuries. Providers filed Utilization Review (UR) Petitions, challenging UR determinations finding their chiropractic treatment to be not reasonable and necessary. A settlement of the claim was eventually reached, and the employer filed a Petition to Seek Approval of a Compromise and Release (C&R) Agreement. The C&R outlined that the agreement fully resolved all future workers’ compensation claims except for the termination and UR Petitions. Briefs were filed and one day later, the WCJ issued an Interlocutory Order which stated if instructions were not followed regarding filing of a C&R, a settlement hearing date would not be given. The employer complied with the order, and filed the C&R. Subsequently, the WCJ notified the parties that the C&R must resolve all issues in the petitions, or would not be entertained. A settlement hearing was never held, and the WCJ then issued a decision, granting the Termination Petition and dismissing the UR Petitions. The WCJ also said that the Petition for Approval of a C&R was dismissed without prejudice, as the issues in the Termination and UR Petitions went to a decision. The claimant appealed to the Workers’ Compensation Appeal Board (Board). The Board granted the claimant’s appeal, finding that the WCJ violated the requirement of Section 449 that an expedited hearing be held when a Petition for Approval of a C&R is filed.  The Board further held that it was legally incorrect for the WCJ to insist that the C&R resolve all issues raised by the pending Petitions. The Board remanded the case to a new WCJ, and Employer appealed to the Commonwealth Court. The court affirmed the Board and held that the WCJ erred, as a matter of law, by refusing to hold an expedited hearing within 30 days, once the Petition for Approval of a C&R was filed.  The court noted that the language of Section 449(b) is mandatory, and a settlement hearing is not discretionary or dependent on a party’s separate request for a stay, or whether the record has been closed. The court further rejected Employer’s argument that the case should not be remanded to a new WCJ for a new decision on the termination and and UR Petitions, as the Board passed no judgment on whether the C&R Agreement resolved the termination and UR Petitions, and left it for the WCJ to decide in connection with the Petition for Approval of a C&R.

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