Nev. Top Court Rules Subrogees May Collect on Third Party Settlement Proceeds

Case File

In overruling a precedent case, the Nevada Supreme Court granted that workers' compensation insurers may assess the total proceeds of a third-party settlement with an injured worker, regardless of whether the proceeds are economic or noneconomic. Simply Research subscribers have access to the full text of the court's decision.

Case

Amtrust North America, Inc. v. Vasquez, 2024 WL 4233423 (Nev. 09/19/24)

What Happened

A workers' compensation insurer intervened as a subrogee in a third-party lawsuit filed by an injured worker against multiple defendants in connection with injuries he sustained while in the course and scope of his employment. The worker and the defendants reached a settlement agreement, and the trial court determined that the insurer was not entitled to any portion of the settlement proceeds despite its having a workers' compensation lien.

The settlement amount was $400,000, and the insurer had paid workers' compensation benefits of $177,335.59. The settlement was allocated as follows:

(1) $83,577.22 for past medical.

(2) $316,422.78 for pain and suffering.

After the costs and fees were subtracted from the settlement amount, the worker was left with a net recovery of $193,706.71. At that point, the insurer had spent more than $50,000 in costs and fees.

The insurer appealed the district court's decision, which adjudicated the lien on the settlement proceeds at $0.

Rule of Law

Under NRS 616C.215(5), when a workers' compensation insurer pays benefits to an insured worker, an insurer may assert an interest against further recovery collected by the worker from a third party.

What the Nevada Supreme Court Said

Addressing the rights of an insurer following a settlement between an insured and a third party, Nevada's top court held:

(1) There is no requirement that an insurer intervene or participate in an injured worker's third-party claim to recover on a workers' compensation lien under NRS 616C.215(5).

(2) The formula from Breen v. Caesars Palace, 715 P.2d 1070 (Nev. 1986) was created in direct conflict with the controlling statute, so the court overruled Breen in favor of a "straightforward lien analysis under which the insurer's lien applies to recovery from any third parties for the covered injuries without an allocation of the injured employee's litigation fees and costs."

(3) Poremba v. Southern Nevada Paving, 388 P.3d 232 (Nev. 2017) was due to be overturned because NRS 616C.215(5) mandates that an insurer collect from the total proceeds of a recovery of an injured worker, including any portion allocated to noneconomic injuries.

The court noted that NRS 616C.215 does not require insurers to bear a portion of an injured worker's third-party litigation expenses. In reaching its decision, the court rejected the Breen and Poremba decisions as regulation workers' compensation liens, something that is the purview of the state legislature.

The Takeaway

In Nevada, when a workers' compensation insurer pays benefits to an insured, NRS 616c.215(5) provides that the insurer has a lien against the total proceeds of any recovery the insured may collect from a third party.

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