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IN THE SUPREME COURT OF THE STATE OF IDAHO

Docket No. 37623

PATRICK W. WILLIAMS, 

 Claimant-Appellant,

v.

BLUE CROSS OF IDAHO, 

 Respondent-Respondent on Appeal.

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Boise, April 2011 Term

2011 Opinion No. 93

Filed: September 2, 2011

Stephen W. Kenyon, Clerk

Appeal from the Industrial Commission of the State of Idaho.

The decision of the Industrial Commission is affirmed, but the case is remanded.

Elsaesser Jarzabek Anderson Elliott & Macdonald, Chtd., Sandpoint, for 

appellant. James S. Macdonald argued. 

Chasan & Walton, LLC, Boise, for respondents. Timothy C. Walton argued. 

_____________________

J. JONES, Justice. 

Patrick Williams appeals the Industrial Commission’s determination that I.C. § 72-802 

does not prohibit Blue Cross of Idaho from seeking to exercise its contractual right of 

subrogation against Williams’ lump sum settlement proceeds. We affirm. 

I.

Factual and Procedural Background 

Patrick Williams suffered two injuries to his left shoulder while he was an employee of 

AAA Plumbing. Williams underwent two surgeries in an effort to repair these injuries. The State 

Insurance Fund (the SIF) initially provided Williams with workers’ compensation benefits to cover 

a portion of his medical expenses, but later refused to provide additional coverage on the ground 

that any medical treatment Williams received for his left shoulder was not for work-related injuries
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but, rather, for a pre-existing shoulder condition.1 As such, the SIF refused to cover the expenses 

associated with the two shoulder surgeries. 

After the SIF refused to provide further workers’ compensation benefits, Williams sought 

payment for his remaining medical expenses in the amount of $31,195.142 from Blue Cross of 

Idaho, his personal medical insurance provider. As a benefit of his employment with AAA 

Plumbing, Williams was insured through a non-occupational group insurance policy with Blue 

Cross for which AAA Plumbing paid a portion of the premium. Blue Cross accepted responsibility 

for payment of these medical expenses, and after making contractual adjustments with the medical 

providers, Blue Cross was able to satisfy Williams’ medical bills for $11,181.08. 

Williams’ insurance contract with Blue Cross contains several subrogation and 

reimbursement provisions. With regard to Blue Cross’ rights of subrogation and reimbursement, 

the insurance policy provides:

The benefits of this Policy will be available to an Insured when he or she is 

injured, suffers harm or incurs loss due to any act, omission, or defective or 

unreasonably hazardous product or service of another person, firm, corporation or 

entity (hereinafter referred to as “third party”). To the extent that such benefits for 

Covered Services are provided or paid for by Blue Cross of Idaho under this 

Policy or any other Blue Cross of Idaho plan, agreement, certificate, contract or 

policy, Blue Cross of Idaho shall be subrogated and succeed to the rights of the 

Insured or, in the event of the Insured’s death, to the rights of his or her heirs, 

estate, and/or personal representative.

In addition to seeking payment from Blue Cross, Williams filed a complaint with the 

Industrial Commission seeking workers’ compensation for the medical expenses incurred as a 

result of the two shoulder surgeries, as well as benefits for temporary and permanent disability as a 

result of such injuries. On February 20, 2008, Williams entered into a lump sum settlement 

agreement with the SIF. Pursuant to the settlement agreement, Williams received $70,000 in 

exchange for releasing the SIF from liability for any and all claims associated with the industrial 

accidents. The settlement agreement provides: 

There are genuine and substantial disputes and differences between the parties as 

to the degree, if any, of Claimant’s impairment and disability, the need for 

 

1 During his deposition, Williams testified he had injured his left shoulder in a motorcycle accident in 2005. 2 While counsel for Williams submitted documentation to the Commission indicating Williams’ medical expenses 

were substantially higher, the Commission found that, based on invoices provided by Blue Cross, Williams had 

incurred $31,195.14 in medical expenses. Williams did not object to this conclusion before the Commission nor 

does he challenge it on appeal. 
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retraining benefits, the need for the surgeries of September 5, 2006 and March 20, 

2007 which Defendants assert are due to preexisting conditions, and the need for 

future medical benefits. The parties, however, wish to settle their differences on a 

full and final basis advising the Commission that it is in the best interest of the 

parties to do so. Therefore, as provided by Idaho Code section 72-404, in an effort 

to settle this disputed matter, the Surety tenders to the Claimant and the Claimant 

accepts the sum of $70,000.00 in full and final settlement of any and all claims he 

has or may have as a result of any of the alleged injuries described herein. Further,

the parties agree to waive any underpayment of total temporary disability benefits 

and temporary partial disability benefits which may exist for any reason, including 

any underpayments that may exist as a result of the method used to calculate the 

compensation rate(s). 

The portion of the settlement agreement regarding the allocation of the settlement proceeds 

contains the following provision: 

ITEMIZED LIST OF OUTSTANDING MEDICALS TO BE PAID BY 

CLAIMANT FROM THE LUMP SUM SETTLEMENT BALANCE: (List 

provider and amounts)

None 

However, the settlement agreement specifically states that the $70,000 is to be paid in settlement of 

all potential claims by Williams, including claims for “[d]isputed past medical expenses and future 

medical benefits.” Nothing in the agreement resolves the question of whether the medical care that 

Williams received was causally related to any of the industrial accidents, nor does the agreement 

establish what portion of the settlement proceeds are allocated for payment of the disputed medical 

bills. After the Commission approved the settlement agreement, the SIF paid Williams $70,000, 

thereby discharging its obligations under the agreement.

While Williams was negotiating the settlement with the SIF, counsel for Blue Cross 

contacted counsel for Williams on several occasions to inform him that Blue Cross intended to 

exercise its contractual right of subrogation in the event Williams succeeded in obtaining workers’ 

compensation benefits. After the agreement was finalized before the Commission, Blue Cross sent 

a letter to counsel for Williams demanding that, pursuant to Blue Cross’ right of subrogation, he 

withhold money from the workers’ compensation proceeds for payment to Blue Cross.

In response to these communications from Blue Cross, Williams filed a declaratory 

judgment action with the Commission arguing that pursuant to I.C. § 72-802, the lump sum 

proceeds paid to an injured worker are exempt from the claims of all creditors, including Blue 

Cross. Williams asked the Commission to enter an order directing Blue Cross to take no further 
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action against Williams to collect any portion of the workers’ compensation proceeds. 

Before the Commission considered the merits of Williams’ petition for declaratory 

judgment, it requested briefing from both parties regarding whether the Commission had 

jurisdiction to issue a declaratory ruling in the matter. While both parties asserted that the 

Commission did not have jurisdiction to decide the matter, the Commission disagreed and 

proceeded to the merits of the claim. 

The Commission ultimately concluded that I.C. § 72-802 does not prohibit Blue Cross 

from seeking to exercise a contractual right of subrogation because Blue Cross is a subrogee, and 

not a creditor, within the meaning of the statute. However, the Commission found it did not have 

jurisdiction to consider a breach of contract claim by Blue Cross against Williams and, therefore, 

determined that Blue Cross must pursue its remedy in district court. Williams timely appealed the 

Commission’s decision to this Court. 

II.

Issues on Appeal

I. Whether the Commission had jurisdiction to consider whether Blue Cross is a 

subrogee, rather than a creditor, within the meaning of I.C. § 72-802?

II. Whether I.C. § 72-802 prevents a medical insurer, like Blue Cross, from 

exercising a contractual right of subrogation against the proceeds of a workers’ 

compensation lump sum settlement?

III.

Discussion 

A. The Commission had jurisdiction to determine Blue Cross’ status as a 

subrogee. 

As mentioned above, the Commission requested briefing on the issue of jurisdiction and 

ultimately concluded it had jurisdiction to issue a ruling on Williams’ declaratory judgment action,

even though both parties asserted the action was not appropriately before the Commission. 

Although neither party challenges the Commission’s decision regarding jurisdiction on appeal, this 

Court can consider the issue of subject matter jurisdiction sua sponte. Bagley v. Thomason, 149 

Idaho 799, 804, 241 P.3d 972, 977 (2010). Because the issue of jurisdiction in this type of case is 

an important one, we find it appropriate to address the issue. 

We conclude that the Commission had jurisdiction to consider whether Blue Cross is a 

subrogee, rather than a creditor, under I.C. § 72-802, and that the Commission also had jurisdiction 

to determine the extent of Blue Cross’ entitlement to the settlement proceeds. According to I.C. § 
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72-707, “[a]ll questions arising under [the workers’ compensation laws of this state], if not settled 

by agreement or stipulation of the interested parties with the approval of the commission, except as 

otherwise herein provided, shall be determined by the commission.” I.C. § 72-707. Generally, the 

Commission’s jurisdiction is limited to adjudicating “certain complaints filed by a workers’ 

compensation claimant against an employer or an employer’s surety.” Owsley v. Idaho Indust. 

Comm’n, 141 Idaho 129, 134, 106 P.3d 455, 460 (2005) (emphasis omitted). However, the 

Commission may properly exercise jurisdiction in cases, like this one, where the Commission is 

asked to clarify a claimant’s rights under a lump sum settlement agreement. Pursuant to I.C. § 72-

404, the Commission has the responsibility to approve lump sum settlement agreements and, in 

doing so, must determine that the settlement is in the best interest of the parties. It necessarily 

follows that the Commission has jurisdiction to clarify a claimant’s rights under a lump sum 

settlement agreement that is presented for Commission approval. 

This is particularly the case where a third party that has provided or paid for medical 

services received by the claimant asserts entitlement to a portion of the lump sum settlement 

agreement proceeds. I.C. § 72-803 provides that “[c]laims of attorneys and claims for medical 

services and for medicine and related benefits shall be subject to approval by the commission.” 

Pursuant to the authority granted under this statute, the Commission has promulgated rules relating 

to medical fee claims (IDAPA 17.02.09), including a dispute resolution process for settlement of 

disputes between payors and providers. IDAPA 17.02.09.034.10. If the Commission has legislative 

authority to resolve disputes between payors and medical providers, there is no ground to conclude 

that it could not sort out a dispute over lump sum settlement proceeds between a workers’

compensation claimant and a payor with a subrogated claim. In fact, read together, I.C. §§ 72-707, 

-803, and -404 obligate the Commission to determine whether and to what extent a third-party 

medical insurance provider is entitled to be subrogated to a workers’ compensation claimant’s 

rights in a settlement agreement subject to Commission approval.

This Court has previously recognized that the Commission has exclusive jurisdiction to 

determine the subrogation rights of the SIF where a worker also recovers from a third party. Idaho 

State Ins. Fund by and through Forney v. Turner, 130 Idaho 190, 938 P.2d 1228 (1997); Van Tine 

v. Idaho State Ins. Fund, 126 Idaho 688, 889 P.2d 717 (1994). In both cases, we held that the 

district court lacked jurisdiction to decide whether the SIF was entitled to subrogation under I.C. §

72-223(3), which provides, “If compensation has been claimed and awarded, the employer having 
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paid such compensation or having become liable therefor, shall be subrogated to the rights of the 

employee, to recover against such third party to the extent of the employer’s compensation 

liability.” Id. Although that provision does not expressly grant the Commission jurisdiction to 

determine subrogation rights of the SIF, in each case we held that it was a question arising under 

workers’ compensation law and, thus, within the Commission’s grant of exclusive jurisdiction in

section 72-707. Turner, 130 Idaho at 191, 938 P.2d at 1229; Van Tine, 126 Idaho at 690, 889 P.2d 

at 719.

Although the case at hand concerns the subrogation of a third-party insurer rather than the 

SIF, both instances require clarification of a worker’s rights arising under workers’ compensation 

law. According to the statutory mandates in I.C. §§ 72-707, -803, and -404 mentioned above, the 

Commission is the proper tribunal to clarify such rights, particularly in the case of a lump sum 

settlement where a claim for medical services is at issue. Williams, by filing this declaratory 

judgment action, was essentially asking the Commission to clarify his rights to the proceeds of the 

lump sum settlement agreement that he entered into with the SIF, particularly in light of Blue 

Cross’ claim for a portion of the settlement proceeds that it argued were for amounts it paid for 

medical services provided to Williams. In order to determine Williams’ rights under the settlement 

agreement, the Commission necessarily had to determine whether Blue Cross was a subrogee. In 

determining that Blue Cross was a subrogee, the Commission implicitly determined that Williams 

was not entitled to all of the lump sum proceeds because Blue Cross had paid Williams’ disputed 

medical bills and, therefore, Blue Cross, as a subrogee, assumed Williams’ legal right to attempt 

to collect payment for such expenses. Consequently, the Commission had jurisdiction to consider 

whether Blue Cross is a subrogee because Blue Cross’ status as subrogee directly affects Williams’

entitlement under the lump sum settlement agreement. 

Further, although the Commission found that it lacked jurisdiction to decide the extent of 

Blue Cross’s subrogation entitlement, such a determination was also within its authority and was, 

in fact, necessary to determine whether the lump sum settlement was in the parties’ best interest. 

As mentioned above, the Commission must approve all lump sum settlement agreements, and in 

doing so, it is the Commission’s responsibility to ensure that the settlement is in the best interest of 

the parties. I.C. § 72-404. This is a responsibility that the Commission must scrupulously honor. 

See Wernecke v. St. Maries Joint Sch. Dist. # 401, 147 Idaho 277, 286, 207 P.3d 1008, 1017 

(2009). If an injured worker’s insurance company has provided compensation for medical 
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expenses for which the worker is now seeking to obtain workers’ compensation benefits, it is in the 

best interest of the parties to ensure that the insurance company’s subrogation claim is resolved 

contemporaneously with the proposed settlement. This would help ensure that the parties will not 

be subjected to further litigation after the settlement agreement is finalized. Coupled with the 

jurisdiction grants in I.C. §§ 72-707 and -803, section 72-404 requires the Commission to do so.

It is also worth noting that before approving the lump sum settlement agreement in this 

case, the Commission could and should have requested that the parties stipulate as to how the lump 

sum settlement proceeds were to be allocated, including what portion was to be allocated to Blue 

Cross for payment of the disputed medical bills. Therefore, pursuant to its authority, the 

Commission could have attempted to get the parties to stipulate as to how the settlement proceeds 

were to be allocated and, failing such agreement, determined the entitlement of each.

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Now that this Court has determined that the Commission had jurisdiction to consider the 

question raised in Williams’ declaratory judgment action, we must next determine whether the 

Commission erred in determining that Blue Cross is a subrogee, rather than a creditor, under I.C. § 

72-802.

B. The Commission did not err in determining that Blue Cross is a subrogee, 

rather than a creditor, within the meaning of I.C. § 72-802. 

I.C. § 72-802 provides, 

No claims for compensation under this law, including compensation payable to a 

resident of this state under the worker’s compensation laws of any other state, shall 

be assignable, and all compensation and claims therefor shall be exempt from all 

claims of creditors, except the restrictions under this section shall not apply to 

enforcement of an order of any court for the support of any person by execution, 

garnishment or wage withholding under chapter 12, title 7, Idaho Code.

I.C. § 72-802. 

Williams argues that Blue Cross is a creditor under the statute and, therefore, his lump 

sum settlement proceeds are exempt from any claim by Blue Cross. Blue Cross responds by 

 

3 Although Blue Cross paid $11,181.08, after contractual adjustments, toward Williams’ medical bills, Blue Cross 

may not necessarily be entitled to that full amount as a subrogee. In his workers’ compensation complaint, Williams 

not only sought compensation for the medical expenses that he incurred as a result of the two shoulder surgeries, but 

he also sought benefits for temporary and permanent disability. Additionally, as consideration for the lump sum 

settlement payment, Williams gave up his right to compensation for future medical expenses arising from his 

injuries, and agreed to release the SIF from liability for any and all claims associated with the industrial accidents. 

Because the lump sum settlement agreement does not clarify what portion of the settlement proceeds are allocated to 

payment of disputed medical bills, it is not clear what portion of the lump sum settlement proceeds to which Blue 

Cross is entitled.
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arguing that (1) a subrogee, like Blue Cross, is not considered a creditor within the meaning of 

I.C. § 72-802; (2) Williams will obtain double recovery for his medical expenses if Blue Cross is 

not permitted to exercise its contractual right of subrogation; (3) the fact that Williams obtained 

workers’ compensation proceeds through a settlement agreement rather than an adjudication 

does not affect Blue Cross’ contractual right of subrogation; and (4) I.C. § 72-802 is preempted 

by the Employee Retirement Income Security Act (ERISA), if interpreted in the manner 

Williams proposes. 

The Commission determined that: 

[J]ust as the Blue Cross policy fails to create a prohibited assignment, neither is it 

in derogation of the statutory exemption of compensation from the claims of 

creditors. Case law draws a clear distinction between “creditors” and “subrogees.” 

. . . it is clear that Blue Cross is not a “creditor” within the meaning of the statute, 

but is, rather, a subrogee, against whom the prohibitions of the statute do not 

specifically apply.

This Court exercises de novo review over the Commission’s legal conclusions. Allen v. 

Reynolds, 145 Idaho 807, 811, 186 P.3d 663, 667 (2008). However, the Court will not disturb the 

Commission’s factual findings as long as they are supported by substantial and competent 

evidence. Id. The interpretation of a statute is a question of law over which this Court exercises 

free review. Idaho Conservation League, Inc. v. Idaho State Dep’t of Agric., 143 Idaho 366, 368, 

146 P.3d 632, 634 (2006).

We conclude that the Commission did not err in determining that the statutory 

prohibitions do not apply to Blue Cross because Blue Cross is not a creditor within the meaning 

of I.C. § 72-802. When interpreting a statute, the Court begins with the literal words of the 

statute, and where the language of a statute is plain and unambiguous, the Court gives effect to 

the statute as written, without engaging in statutory construction. Id. The plain language of I.C. 

§ 72-802 prohibits (1) a workers’ compensation claimant from assigning workers’ compensation 

proceeds to a third party, and (2) a creditor, other than one seeking to recover child support, from 

asserting a claim against workers’ compensation proceeds paid to a claimant. Because Williams 

makes no argument on appeal that the Blue Cross policy creates a prohibited assignment,4 the 

 

4 During the proceedings before the Commission, Williams argued that permitting Blue Cross to exercise its right of 

subrogation was tantamount to permitting Williams to assign his workers’ compensation proceeds in violation of 

I.C. § 72-802. However, as the Commission pointed out, this Court has specifically rejected the assertion that a 

subrogation clause in a contract constitutes an assignment. See Rinehart v. Farm Bureau Mutual Ins. Co. of Idaho, 
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only issue before this Court is whether Blue Cross is a creditor within the meaning of the statute 

such that it is barred from seeking to recover any portion of the settlement proceeds. This is an 

issue of first impression for this Court.

While the workers’ compensation statutes do not define the terms creditor and subrogee, 

Idaho case law makes a clear distinction between the two. For example, in Kenneth F. White, 

Chtd. v. St. Alphonsus Regional Medical Center, the Court of Appeals discussed the distinction 

between a creditor and a subrogee when determining whether the common fund doctrine was 

applicable where a creditor, rather than a subrogee insurer, is asserting a claim against settlement 

proceeds. 136 Idaho 238, 242–43, 31 P.3d 926, 930–31 (Ct. App. 2001). In White, Krivanec was 

treated at St. Alphonsus Medical Center for injuries sustained in a motor vehicle accident. Id. at 

240, 31 P.3d at 928. St. Alphonsus subsequently recorded a hospital lien for the medical 

expenses Krivanec had incurred. Id. White, Krivanec’s attorney, filed a negligence action against 

the driver of the other vehicle involved in the accident, and eventually settled on behalf of 

Krivanec for $25,000. Id. 

White then filed a petition seeking a declaratory ruling that he had a lien against the 

settlement proceeds for the amount of his attorney fees and costs, which was superior to the lien 

filed by St. Alphonsus. Id. The district court held that pursuant to the common fund doctrine, 

White was entitled to receive payment out of the settlement proceeds for the fees and costs 

associated with obtaining the settlement on Krivanec’s behalf. Id. 

On appeal, St. Alphonsus argued the common fund doctrine was not applicable because 

St. Alphonsus was not asserting a subrogation interest in the settlement but, rather, was a creditor 

of Krivanec “with a lien against the settlement proceeds to secure [Krivanec’s] debt to the 

hospital.” Id. at 242, 31 P.3d at 930. When analyzing whether the common fund doctrine was 

applicable, the Court of Appeals specifically pointed out the difference between a creditor and 

subrogee, holding:

[i]n our view, the present case is not appropriate for application of the common fund 

doctrine. In common fund cases, the beneficiaries of the fund are similarly situated 

and have like claims to the fund. This commonality characterizes the beneficiaries of 

a trust as well as the subrogee insurer who stands in the shoes of the injured party for 

purposes of a claim to payment from a third-party wrongdoer. In addition, in 

 

96 Idaho 115, 117–18, 524 P.2d 1343, 1345–46 (1974). Williams does not appeal the Commission’s conclusion in 

this regard, and his only argument on appeal is that Blue Cross is a creditor within the meaning of the statute. 
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common fund cases there would be no recovery for any claimant but for the services 

of the attorney who generated the recovery. These characteristics are not present 

when one of the claimants to the fund is a hospital with a lien. A hospital does not 

stand in the shoes of the injured party as a subrogee does; rather, it is a creditor who 

possesses a lien on the tort recovery to secure payment of its charges for services 

provided to the injured party. A hospital is entitled to payment from the injured 

person regardless of whether compensation is ever received from a third party.

Id. at 243, 31 P.3d at 931. Therefore, the court in White made it clear that a subrogee insurer 

stands in the shoes of the injured worker, and is only entitled to payment if compensation is 

received from a third party, while a creditor is a third party to whom the injured worker owes 

money, regardless of whether payment is obtained from a third party. 

The distinction between a creditor and a subrogee, as correctly articulated in White, is 

also consistent with the definitions of creditor and subrogee found in Black’s Law Dictionary. A 

creditor is defined as “[o]ne to whom a debt is owed; one who gives credit for money or goods.” 

BLACK’S LAW DICTIONARY 375 (7th ed. 1999). A subrogee is defined as “[o]ne who is 

substituted for another in having a right, duty, or claim. An insurance company frequently 

becomes a subrogee after paying a policy claim, as a result of which it is then in a position to sue 

a tortfeasor who injured the insured or otherwise caused damages.” BLACK’S LAW DICTIONARY 

1441 (7th ed. 1999). Therefore, although it is true, as Williams argues, that he may end up being 

required to reimburse Blue Cross for the money expended, this alone does not make Blue Cross a 

creditor. Rather, Blue Cross possesses a contractual right of subrogation, which potentially 

allows Blue Cross to take the place of Williams and obtain, on behalf of Williams, compensation 

from a third party. If Blue Cross were simply a creditor, Williams would owe Blue Cross money 

regardless of whether any compensation was received from a third party. Additionally, if Blue 

Cross were a creditor, it would not have the same rights Williams possesses because a creditor 

does not stand in the shoes of the worker as a subrogee does. Consequently, because the plain 

language of the statute only prohibits creditors from asserting a claim against workers’ 

compensation proceeds, Blue Cross, as a subrogee, is not barred from exercising its contractual 

right of subrogation against the settlement proceeds. 

Furthermore, Blue Cross correctly argues that if this Court were to interpret the statute in 

the manner in which Williams proposes, it is very possible that Williams would receive double 

recovery for his expenses. The purpose behind exempting workers’ compensation proceeds from 

the claims of creditors is not to allow the injured worker to recover twice for his or her medical 
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expenses but, rather, to protect the worker and his or her family from the financial difficulties 

associated with the worker’s injury. 

Workers’ compensation awards are intended not to make the worker rich, but to 

keep an injured worker and the worker’s family from becoming destitute because 

the breadwinner has been injured and cannot work. In order to protect this award 

and further this policy, workers’ compensation statutes typically provide that these 

awards cannot be attached by creditors. Moreover, they provide that the worker 

cannot voluntarily assign the proceeds, primarily in order to ensure that injured 

workers who may have a valid claim but have not yet received the first payments 

and are desperate for cash do not sell their rights at fire sale prices. 

Validity, construction, and effect of statutory exemptions of proceeds of workers’ compensation 

awards, 48 A.L.R.5th 473 (1997). As such, if this Court were to affirmatively conclude that an 

insurance company, which has paid disputed medical bills, can never exercise its contractual 

rights of subrogation in workers’ compensation cases, there is a strong likelihood the worker 

could recover twice for his or her medical expenses, at least in cases that are factually similar to 

this case. This Court, in prior decisions, has recognized the importance of interpreting workers’ 

compensation statutes in such a way as to prohibit the injured worker from obtaining double 

recovery. For example, in Schneider v. Farmers Merchant, Inc., we held that “to allow [the 

injured worker] to retain both the workmen’s compensation benefits and the full tort recovery

[from the third-party tortfeasor], would be overcompensatory, and contrary to our [prior case 

law].” 106 Idaho 241, 245, 678 P.2d 33, 37 (1983). Moreover, as the Commission pointed out in 

its written decision, if an insurer is aware that, even if the Commission awards workers’ 

compensation benefits to an injured worker, the worker has no obligation to reimburse the 

insurance company for payment of the same expenses, the insurer will likely hesitate to provide 

compensation to injured workers who could potentially recover workers’ compensation benefits. 

Therefore, interpreting the statute in the way that Williams proposes could actually have a 

negative effect on injured workers by discouraging insurance companies from paying medical 

expenses while the worker is seeking workers’ compensation benefits—a potentially lengthy 

process. 

Williams cites to the cases of State ex. rel. Lisby v. Lisby, 126 Idaho 776, 890 P.2d 727

(1995), and In re Almgren, 384 B.R. 12 (Bankr. Dist. Idaho 2007), to support his claim that Blue 

Cross is prohibited from exercising its right of subrogation against his workers’ compensation 

proceeds. However, neither case provides guidance on the issue before this Court. In Lisby, this 
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Court held that only fifty-five percent of Lisby’s workers’ compensation benefits were subject to 

garnishment for payment of Lisby’s past-due child support obligations. 126 Idaho at 779, 890 

P.2d at 730. Williams argues that if the statutorily-favored child support creditor in Lisby was 

only able to garnish fifty-five percent of the workers’ compensation benefits, then Blue Cross 

cannot collect from the proceeds of his workers’ compensation settlement. Contrary to Williams’ 

argument, Lisby is not even applicable to the case at hand. Lisby dealt with a child support 

creditor, which is the type of creditor I.C. § 72-802 specifically allows to assert a claim against 

workers’ compensation proceeds. Further, the Court in Lisby determined the creditor was only 

entitled to garnish fifty-five percent of the workers’ compensation proceeds because I.C. § 11-

207 specifically limits the amount of money subject to garnishment to fifty-five percent of a 

person’s aggregate disposable weekly earnings, where the person is supporting a dependent child 

and the garnishment is to enforce a support order that is twelve weeks past due. Id. In other 

words, the Court limited the amount of workers’ compensation benefits that could be garnished 

based on this statutory limitation, and not based on some policy decision that workers’ 

compensation benefits should be entitled to more protection, even from a statutorily-authorized 

creditor. Therefore, Lisby does not support Williams’ position, nor does it provide any guidance 

on the issue of whether Blue Cross is a creditor pursuant to I.C. § 72-802. 

Similarly, In re Almgren does not provide any assistance to this Court in answering the 

issue presented on appeal. In that case, the bankruptcy court for the District of Idaho concluded 

that I.C. § 72-802 protects only those workers’ compensation benefits awarded under Idaho law, 

and not those recovered under a different state’s workers’ compensation scheme.5 384 B.R. at 16. 

Therefore, the court found that the workers’ compensation benefits awarded to the debtor in 

Tennessee were not exempt from the claim of the Idaho Chapter 7 bankruptcy trustee. Id. at 18. 

Although Williams is correct that Almgren stands for the proposition that workers’ compensation 

benefits are exempt from claims by a Chapter 7 bankruptcy trustee, this provides no insight 

regarding whether an insurance company, like Blue Cross, which possesses a contractual right of 

subrogation, is a creditor under the statute.

 

5 This holding has been overruled by the 2009 amendment to I.C. § 72-802, which specifically exempts 

“compensation payable to a resident of this state under the worker’s compensation laws of any other state” from the 

claims of creditors. I.C. § 72-802 (2009). 
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Williams also cites to various statutes that reiterate the point that workers’ compensation 

benefits are exempt from the claims of creditors. However, again, none of these statutes are 

relevant to the actual question of whether Blue Cross is a creditor. For example, Williams cites to 

I.C. § 11-607, which provides a list of creditor claims that are enforceable against exempt 

property. Williams argues that because the statute does not mention claims by medical insurance 

companies, Blue Cross cannot enforce a claim against Williams’ workers’ compensation 

proceeds. Williams fails to recognize that the key term in the statute is “creditor.” The statute is 

only applicable if Blue Cross is a creditor, which is the precise issue in this case. 

The only statutes Williams cites that could conceivably lend some support to his 

argument are I.C. § 45-701 and I.C. § 45-705. According to I.C. § 45-701, 

Every individual, partnership, firm, association, corporation, institution or any 

governmental unit or combination or parts thereof maintaining and operating a 

hospital in this state shall be entitled to a lien for the reasonable charges for hospital 

care, treatment and maintenance of an injured person upon any and all causes of 

action, suits, claims, counterclaims, or demands accruing to the person to whom such 

care, treatment, or maintenance was furnished, or to the legal representatives of such 

person, on account of injuries giving rise to such causes of action and which 

necessitated such hospital care, treatment and maintenance.

I.C § 45-701. I.C. § 45-705 then goes on to state, 

The provisions of this act shall not be applicable to accidents or injuries within the 

purview of the Workmen’s Compensation Law of this state.

I.C. § 45-705. Williams argues that if a hospital that has provided medical treatment to an injured 

worker cannot assert a claim against workers’ compensation proceeds, even though the hospital 

possesses statutory lien rights, then a medical insurer, like Blue Cross, is similarly not entitled to 

exercise a claim against workers’ compensation proceeds. Although Williams is correct that 

these statutes address a question closely related to the question in this case—whether I.C. § 72-

802 exempts workers’ compensation proceeds from the claims of medical providers that have 

contracted with the worker for the provision of medical services—Williams again fails to grasp 

the important distinction between a creditor and a subrogee. As the court made clear in White, a

medical provider that has provided services to an injured worker is a creditor. However, as the 

Commission correctly determined, Blue Cross is a subrogee, not a creditor. 

Because we conclude that the Commission did not err in determining that Blue Cross is a 

subrogee, it is unnecessary for us to address Blue Cross’ remaining arguments. 
14

IV.

Conclusion 

We affirm the Commission’s determination that Blue Cross is a subrogee, rather than a 

creditor, under I.C. § 72-802. Although the Commission’s ruling is affirmed, we remand the case 

for the Commission’s further consideration. Costs on appeal are awarded to Blue Cross.

Chief Justice BURDICK, and Justices EISMANN, W. JONES and HORTON CONCUR.