Delaware Supreme Court Reverses Itself, Allows Workers’ Compensation Subrogation Of UIM Benefits

By Gary L. Wickert 

The ability of a workers’ compensation carrier to subrogate against and/or seek reimbursement from a recovery made from a third-party tortfeasor responsible for causing the employee’s work-related injuries is universally recognized across the country as a major tool for holding down workers’ compensation premiums for large and small businesses and employers. Whether or not this right of subrogation extends to medical malpractice recoveries, legal malpractice settlements or uninsured and/or underinsured motorist benefits paid under an auto policy, depends on the jurisdiction.  

Until 1993, Delaware allowed a workers’ compensation carrier to subrogate against uninsured motorists’ benefits recovered under a policy paid for by the employer.¹ Even then, this was only the case when the policy belonged to the employer. Delaware public policy has never allowed a workers’ compensation carrier to subrogate against the employee’s own uninsured motorists’ policy where the employee’s uninsured motorists’ policy expressly prohibits application of underinsured motorists’ coverage to a claim by a workers’ compensation carrier, and where that employee specifically contracted for underinsured motorists’ coverage for himself and his family.²  

Section 2363 is Delaware’s workers’ compensation subrogation statute. However, § 2363 was amended in 1993 and the Delaware Supreme Court soon thereafter noted that the amendment eliminated the ability of a workers’ compensation carrier to assert a lien against an employee’s UM coverage.³ Specifically, the statute read, “…reimbursement shall be had only from the third-party liability insurer and shall be limited to the maximum amounts of the third party’s liability insurance coverage awarded for the injured party, after the injured party’s claim has been settled or otherwise resolved,” carriers could no longer subrogate against UM/UIM benefits.⁴ 

The courts have been playing badminton with this issue ever since. In 2016, the Superior Court of Delaware was asked to decide whether an employee could pursue a UIM claim against her self-insured employer, the State of Delaware, for essentially the same injuries she received workers’ compensation for in light of the Act’s exclusive remedy rule.⁵ That court noted the need for clarification of the Exclusive Remedy Statute, in that it “could operate to unfairly deprive an employee of much-needed benefits.”⁶ In September 2016, following Simpson, § 2304 was amended. The language the amendment added is underlined: 

Except as expressly excluded in this chapter and except as to uninsured motorist benefits, underinsured motorist benefits, and personal injury protection benefits, every employer and employee, adult and minor, shall be bound by this chapter respectively to pay and to accept compensation for personal injury or death by accident arising out of and in the course of employment, regardless of the question of negligence and to the exclusion of all other rights and remedies.⁷ 

In 2017, the Superior Court of Delaware held that a plaintiff may not pursue a UIM claim against her self-insured employer (State of Delaware) for the same injuries for which she received workers’ compensation benefits.⁸  

In 2019, the Delaware Supreme Court weighed in, confirming that an employee is barred from recovering UIM benefits by the exclusive remedy rule.⁹ In Henry v. Cincinnati Ins. Co., the court’s logic was that where an injured worker receives workers’ compensation benefits, the court reasoned, workers’ compensation is playing the same role that the UIM benefits would provide for an individual who has access to them. Allowing an injured employee to recover underinsured-motorist benefits in addition to workers’ compensation benefits, the court further reasoned, would result in the worker being “compensated twice for the same injury. From this the court ultimately concluded that the phrase, ”exclusion of all rights and remedies” found in § 2304, prohibits the employee from gaining access to the State's UM/UIM policy. 

However, in 2023, the Supreme Court did an about-face after remand to the Superior Court. In Horizon Service, Inc. v. Henry (known as “Henry II”), the Delaware Supreme Court ruled the state’s Workers’ Compensation Act does permit employers and insurers to assert workers’ compensation subrogation liens against benefits paid to injured workers through uninsured motorist policies of the employer.¹⁰ In Henry II, the Supreme Court said that since the exclusive remedy rule doesn’t bar an employee from seeking UIM benefits it also doesn’t prohibit a workers’ compensation carrier from asserting a lien against such benefits.  

The dispute over allowing a workers’ compensation carrier subrogation rights against uninsured and underinsured motorist benefits is not limited to Delaware. The majority rule is to disallow such subrogation or reimbursement rights. However, a number of states allow recovery if the UM/UIM policy was purchased by the employer. Other states allow recovery against uninsured motorist benefits but not underinsured motorist benefits. A handful of states, such as New Hampshire, New Jersey, North Carolina, Ohio and a few others, simply allow it. Yet others allow it only if the employee has been “made whole.”  

A chart detailing the ability of a workers’ compensation carrier’s rights of subrogation and reimbursement (including the right to recover from UM and UIM benefits paid under the employer’s auto policy), in all 50 states, can be found HERE.  

For questions regarding the employer’s or workers’ compensation carrier’s important rights of subrogation, contact Gary Wickert at gwickert@mwl-law.com.  

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