### SEP 19 202

URT
EF DEPUTY CLERK BY 

### 140 Nev.,Advance Opinion (.- 0 IN THE SUPREME COURT OF THE STATE OF NEVADA

No. 84974 

# FILED AMTRUST NORTH AMERICA, INC., Appellant, vs. RAMON VASQUEZ, JR., INDIVIDUALLY, Respondent.

Appeal from a district court order adjudicating a workers' compensation lien. Eighth Judicial District Court, Clark County; Susan Johnson, Judge.

Reversed and remanded.

HooksMeng & Clement and Shaun R. Meng, Las Vegas, for Appellant. GGRM Law Firm and Jason D. Mills, Las Vegas; Naqvi Injury Law and Farhan R. Naqvi, Elizabeth E. Coats, and Paul G.Albright, LasVegas, for Respondent.

BEFORE THE SUPREME COURT, EN BANC.'

OPINION By the Court, LEE, J.:

Workers'compensation servesa vital role inprotectingworkers by providing financial support to those who suffer injury or death in the
'The Honorable Linda Marie Bell, Justice, having voluntarily disqualified herself, did not participate in the resolution ofthis appeal.
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### course and scope of their employment. Understanding the importance of

this benefit, the Nevada Legislature enshrined workers' compensation legislation in the early 1900s allowing injured workers to receive financial recovery for medical care as a result of their on-the-job injury without resorting to common-law tort remedies. See Virden v. Srnith, 46 Nev. 208, 210, 210 P. 129, 129 (1922). However, when a workers' compensation insurer pays benefits to an insured worker, Nevada law allows the insurer to assert an interest against further recovery collected by the worker from
a third party. NRS 616C.215(5). Guided by the importance of workers' compensation benefits and the statutory directive to refrain from applying
common law principles, we consider the rights of an insurer following a settlement between the insured and a third party. NRS 616A.010.

Appellant AmTrust North America, Inc., a workers' compensationinsurer, intervened assubrogee in athird-partylawsuit filed by respondent Ramon Vasquez, Jr., against multiple defendants, in connection with injuries he sustained while in the course and scope ofhis employment. Afteryearsoflitigation, Vasquezand the defendants reached
a settlement agreement. On a subsequent motion to adjudicate AmTrust's workers' compensation lien based on Vasquez's settlement proceeds, the district court determinedthat, under Breen andPorernba,AmTrust was not entitled to recover anyportion ofthe settlement proceeds despite its lien.2

We issue this opinion to reconcile the conflict between our caselaw and NRS 616C.215(5), the statute that controls a workers' compensation insurer's lien rights. Namely, we hold that (1) there is no requirement that an insurer intervene or otherwise participate in the

2

### Breen v. Caesars Palace, 102 Nev. 79, 715P.2d 1070 (1986); Poremba v. S. Nev. Paving, 133 Nev. 12, 388 P.3d 232 (2017).
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•injured worker's third-party claim to recover on its lien under NRS

616C.215(5); (2) the Breen formula, created in direct conflict with the controlling statute, has proven unworkable and is therefore abandoned 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; and (3) in contradiction of our holding in Poremba, NRS 616C.215(5) mandates that
an insurer collect from the "total proceeds" of any recovery of an injured worker, including any portion allocated to noneconomic injuries. We therefore overrule those portions of Breen and Poremba that are inconsistent with this opinion.

FACTSANDPROCEDURAL HISTORY While working in a restaurant, Vasquez slipped in a puddle of liquid and sustained injuries. Shortly thereafter, he filed a workers' compensation claim, which AmTrust accepted. AmTrust paid workers' compensation benefits for medical expenses, missed wages, permanent disability, and vocational rehabilitation, totaling $177,335.59.

Subsequently, Vasquez initiated third-party litigation against several defendants, asserting multiple claims related to his workplace injuries. AmTrustintervened as subrogee and also filed claims against the third-party defendants. After nearly two years of litigation, Vasquez and the third-party defendants reached a $400,000 settlement. Without input from AmTrust, Vasquez and the third-party defendants allocated the settlement as follows: $83,577.22 in special damages (past medical) and $316,422.78 in general damages (noneconomic damages, namely, pain and suffering). After Vasquez's costs and attorney fees were subtracted from the settlement amount,Vasquezwasleft witha net recoveryof$193,706.71. At the time ofthe settlement, AmTrust had expended over $50,000 in costs

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### and fees. Following the settlement, Vasquez filed a motion to adjudicate

the workers' compensation lien and argued that AmTrust was entitled to
none ofthe settlement proceeds or, at most, $83,577.82, pursuant to Breen and Porernba.

After holding a hearing on the motion, the district court found that, although AmTrust intervened, it did not meaningfully participate in thethird-partylitigationandthereforewasrequiredtobear aportionofthe third-party litigation costs and fees pursuant to Breen. The district court alsoheldthatAmTrust could not recover from theportionofthe settlement designated to compensate Vasquez for noneconomic damages, pursuant to Porernba. Without providing a mathematical calculation, the district court found thatAmTrust was not entitled to any recovery on its lien. The district court stated that, "notwithstanding the application of Poremba, AmTrust's proportionate share ofthe litigation expenses in obtaining the [s]ettlementexceeds"itslien "under anyapplicationoftheBreenformulain this matter." Put another way, the application of the Breen formula resulted in AmTrust owing money for litigation expenses in an amount greater than its lien. Accordingly, the district court granted Vasquez's motion, adjudicating the lien on the settlement proceeds at $0, and dismissedAmTrust's complaint. AmTrust now appeals. DISCUSSION AmTrust challengesthedistrictcourt'sapplicationofBreenand Poremba. We review the application ofcaselaw de novo. Las VegasMetro. Police Dep't v. Blackjack Bonding, Inc., 131Nev. 80, 85, 343 P.3d 608, 612 (2015). In consideringthe district court's application ofthe two cases, it is evident that Breen and Porernba conflict with the plain language of NRS 616C.215(5). It is also clear that the formula set forth in Breen is

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### 4unworkable. Based on these observations, we are compelled to overrule

thoseportionsofBreen andPoremba that are inconsistent with thisopinion and reverse the district court's order adjudicatingAmTrust's lien. Legal standard

"[U]nder the doctrine of stare decisis, we will not overturn [precedent] absent compelling reasons for so doing." Miller v. Burk, 124 Nev. 579, 597, 188 P.3d 1112, 1124 (2008) (footnote omitted). Rigid adherence to stare decisis is the preferred course of action because it "promotestheevenhanded, predictable, andconsistent development oflegal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity ofthejudicial process." Payne v. Tennessee, 501U.S. 808, 827 (1991). However, the doctrine ofstare decisis should not be so rigidly applied that the court avoids revisiting its prior decisions, especially where it appears that a prior decision runs contrary to the plain language of a statute. See Rupert v. Stienne, 90 Nev. 397, 400, 528 P.2d 1013, 1015 (1974) ("The doctrine of stare decisis must not be so narrowly pursued that the ...law is forever encased in a straight jacket."). Precedent should be overruled where it is proven "unworkable" or "badly reasoned." State v. Lloyd, 129 Nev. 739, 750, 312 P.3d 467, 474 (2013) (internal quotation marks omitted). We overrule Breen to theextent it conflicts with this opinion

In Breen, an employee was injured in the course of his employment and was taken to a hospital, where he later died. Breen v. Caesars Palace, 102 Nev. 79, 80, 715 P.2d 1070, 1071 (1986). Because the employee's work-related injuries were apparently nonfatal, the employee's family filed a complaint against the treating physician and the hospital, alleging medical malpractice. Id. Two years after the employee's death, andjust weeks before the family reached a $1,000,000 settlement with the

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### physician and the hospital, Caesarsintervened and filed a subrogation lien

against the prospective settlement. Id. At the time of the settlement, Caesars had paid $39,728.16 in benefits and had reserved $650,000 as future pension benefits. Id. at 81, 715 P.2d at 1071. Subsequently, the employee's family used the settlement proceeds to reimburse Caesars for thepaidbenefits, and Caesarsstoppedpayingpensionbenefits, claimingan offset. Id. The employee's family challenged Caesars' interest in the settlementproceedsbefore a Department ofAdministration hearingofficer. Id. The hearing officer, an appeals officer, and the district court all concluded that, pursuant to NRS 616C.215, then codified as NRS 616.560,3 Caesars was entitled to assert a lien against the settlement proceeds. Id.

On appeal, this court held that insurers, to avoid any unjust enrichment, may be charged with a proportionate share of third-party litigationexpenseswhentheyfail totimelyintervene in theinsured'sthirdparty action. Id. at 85, 715P.2d at 1074. In other words, Breen held that a lienholder is subject to a reduction ofits lien when it refusesto exercise its independent right to pursue a cause of action against responsible third parties. The Breen court determined that while NRS 616C.215 made clearthat Caesarswasentitledtoassessitslienagainst the total settlement proceeds, the statute left open the equitable issue regarding the allocation offees and costsbetween the insured and the insurer underlyingthe thirdparty settlement. Breen, 102 Nev. at 84, 715 P.2d at 1073. To addressthis

3

### At the time of Breen, NRS 616C.215 was codified as NRS 616.560 (substituted 1995). Breen, 102 Nev. at 81 n.1, 715 P.2d at 1071 n.l. The minor differences between NRS 616C.215 and NRS 616.560 have no effect on our analysis or conclusion in this opinion.
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### 6perceived statutory deficiency, the Breen court looked to other states for

guidance. Id. at 84, 715 P.2d at 1073-74. In doing so, the court considered principles offundamental fairness and unjust enrichment to conclude that
aninsurer must bear aportionofthe feesandcostsincurredbythe insured. In furtherance ofpromotingthe same, the court devised a formula designed to balance the injured worker's efforts in obtaining a third-partyjudgment to compensate for his injuries and the insurer's right to subrogation. Consequently, the formula devised by the court to determine an insurer's proportionate share ofthe fees and costs is asfollows:

Total amount oflien Insurer's share — Settlement rninus fees and costs

Excess recovery Insured's share — Settlement minus fees and costs

Id. at 85, 715 P.2d at 1074.

Now, some decades later, time-tested application of the Breen formula has proven to be unworkable. For this reason, in addition to the Breen court's deviation from NRS 616C.215, as addressed more fullybelow,
we are compelled to overrule Breen to the extent that it conflicts with this opinion.

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OF NEVADA
0)) 1947A 7Breen conflicts with NRS 616C.215 because the statute does not require insurers to bear aportion of the injured worker's third-party litigation expenses While courts are often endowed with broad equity powers, workers' compensation is a creature ofstatute. Accordingly, la]nychanges in the workers' compensation program must come from the legislature, not the courts." 82 Am. Jur. 2d Workers' Cornpensation § 3 (2013).

Under NRS 616C.215(5) "[i]n any case where the insurer

. . . is subrogated to the rights of the injured employee

. . . the insurer

. . . has a lien upon the total proceeds of any recovery from some person other than the employer, whether the proceeds of such recovery are by way of judgment, settlement or otherwise." Although the Breen court correctly concluded that insurers are entitled to assess the total proceeds of thirdparty recoveries, meaning proceeds designated to compensate for both economic and noneconomic loss, nothing on the face ofthe statute requires insurerstobearaportionofthecosts andfeesincurredbyaninsured during third-party litigation. We recognize Breen's well-intentioned attempt to mimic the equitable approaches taken by sister states; however, in the context of the workers' compensation statutory scheme, this was inappropriate. See In re Fontainebleau Las Vegas Holdings, 128 Nev. 556, 569, 289 P.3d 1199, 1212 (2012) (explainingthat principles ofequitycannot
overcome statutory provisions). As neither NRS 616C.215(5) nor any other provision in the workers' compensation statutory scheme requires an insurer to monetarily contribute to third-party litigation before assessing its lien, we conclude that Breen was thus wrongly decided. The Breenformula is unworkable and is therefore abandoned In addition to violatingthe plain language ofNRS 616C.215(5), the Breen formula has proven unworkable both in its application and purpose. Breen emphasized that the proffered formula was designed to
SUPREME COURT OF NEVADA (:» Ig47A 8safeguard principles of fundamental fairness and equity. Breen, 102 Nev.

at 84-85, 715 P.2d at 1073-74 (indicatingthat principles ofequity, fairness, andjustice shouldbe consideredwhen allocatinglitigationcosts)(citingSec. Ins. Co. ofHartford u. Norris, 439 S.W.2d 68, 70 (Ky. 1969)). Specifically, the formula was intended to prevent an insurer from being unjustly enriched. Id. at 85, 715 P.2d at 1074.

Mathematically, the Breen formula was intended to split litigation costs and fees between the insurer and the insured in a manner that, in accordance with fundamental principles offairness, led to recovery for both parties. Here, the Breen formula failed to provide a net positive recovery for AmTrust, demonstrating that it is mathematically flawed and unworkable. AmTrust paid Vasquez $177,335.59 in workers' compensation benefits and Vasquez subsequently received a $400,000 gross settlement. While the district court failed to perform the math, instead summarily opining that AmTrust would not be entitled to recovery under any application of the formula, were the district court to have performed the math, it would have likelyperformed the following calculations:
$177,335.59 (AmTrust lien) AmTrust's share — — .915

$193,706.71 (Settlement minus fees and cost)
$16,371.12 (Net settlement minus lien) Vasquez's share — — .085

$193,706.71 (Settlement minus fees and cost)

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### Under the formula, AmTrust's share ofthe third-party litigation costs and

fees would be $188,858.42, which exceeds the sum it paid to Vasquez in workers' compensation benefits. This is also after AmTrust expended in
excess of $50,000 in its own fees and costs to represent its interests in its subrogationclaim. Ironically, andcontrarytoitsintendedequitabledesign, the Breen formula results in a net negative recovery for AmTrust. The formula further results in a double recovery for Vasquez, as he initially received workers' compensation payments in the sum of $177,335.59 and
was then further able to recover a gross sum of $400,000 for the same injuries. Thisis an unintended result ofa fundamentallyflawed formula.4

Concurrent with its mathematical defects, the Breen formula hasalsobeen proven unworkable because the broad grant ofdiscretion has led to inconsistent results. For instance, while we have indicated that the Breen formula does not apply where an insurer timely intervenes, see generallyBreen, 102 Nev. 79, 715 P.2d 1070, orwhere aninsurer "expend[s] its own monies and efforts to obtain an adequate settlement orjudgment," StateIndus.Ins. Sys. v.EighthJud. Dist. Ct., 111Nev.28, 33, 888P.2d911, 914 (1995), overruled on other grounds by Am. Home Assurance Co. v. Eighth Jud. Dist. Ct., 122 Nev. 1229, 147 P.3d 1120 (2006), recent interpretations ofour directives have so evolved that some district courts, including this one, now require that the insurer not only intervene early andexpend itsownfeesinprosecutionofits subrogated claims,but thatthe insurer's participation also be "meaningful." Reverting to the plain language of the statute win remove the ever-evolving and inconsistent

4

### This result also contravenes NRS 616C.215's prohibition against double recovery for an insured.
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### 10application of Breen, as it simply allows insurers to assert a lien upon the

total proceeds ofthe injured worker's claim.

Here, AmTrust quickly intervened and participated in depositions, motions, and discovery. Reflective of these efforts, AmTrust expended over $50,000. Deeming these efforts to not be "meaningful," the district court subjected ArnTrust's lien recovery to the formula articulated in Breen, which resulted in a net zero recoveryfor AmTrust. This result is both unfair and inequitable as it not only deprived AmTrust ofthe amount it paid to Vasquez, but further forced AmTrust to absorb the $50,000 it expended duringthe third-party litigation.

As the Breen formula has proven unworkable, it must be abandoned. The well-intendedformula wasdesignedtoapportionlitigation costs and feesbetween the insurer and insured in the name offairness and equity. The unintendedconsequence, however, canresultinthe divestment ofthe insurer's statutory lien in favor ofproviding an insured with double recovery, as was the case here. Given the unworkable nature ofthe Breen formula, triggered by an insurer's failure to timely intervene in the insured's third-party litigation, continued reliance on the same is not warranted. Insurers may collect from the "totalproceeds"ofany recovery by an injured worker Having determined that Breen set forth an unworkable standard and departed from the plain language of the controlling statute,
we turn our attention to Poremba and find a similar flaw.

Three decades after Breen, in Porernba v. Southern Nevada Paving, aninjuredemployee opened a workers'compensationclaim that the insurer accepted and later closed. 133 Nev. 12, 14, 388 P.3d 232, 234-35 (2017). The employee filed a tort claim and received a settlement designed to compensate for economic and noneconomic damages. Id. at 14, 388 P.3d
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OF NEVADA (0) 447A ar.gelp,at 235. After receiving the settlement, the employee requested to reopen

his workers' compensation claim under NRS 616C.390, but the insurer denied the request, claiming an offset based on the third-party settlement. Id. at 14-15, 330 P.3d at 235.

In addressing whether settlement funds designated to compensate for noneconomic damages are assessable by an insurer, the Poremba court held that insurers may only assess settlement funds designated to compensate for expenses within NRS 616A.090's definition of compensation, not the total settlement proceeds. Id. at 18, 388P.3d at 238. Inreachingthisholding, Porembadid notreference NRS616C.215orBreen, both of which indicate that an insurer's lien applies to the total settlement proceeds, not just those proceeds designated to compensate for expenses covered by NRS 616A.090. Thus, Porernba's limitation stands in direct conflict with both precedent and the plain language of the controlling statute.5 As demonstrated by the instant case, Poremba has left courts confused. Under Poremba, uncertainty as to when an insurer may assess the totalproceedsofa third-party settlement andwhen aninsurer mayonly
assess the settlement portion designated to compensate for expenses covered by NRS 616A.090 has loomed in lower courts. We now clarify that
an insurer may assess the total proceeds of a third-party settlement, even where the matter is reopened pursuant to NRS 616C.390 and irrespective of whether the proceeds are designated as economic or noneconomic in nature.

5We also note our concern that under Poremba's distinction between economic and noneconomic damages, litigants could be motivated to structure settlements in a manner that would unjustly minimize an insurer's statutorylien.
SUPREME COURT OF NEVADA 12 (th 1047A gdgrep.Basedonthe above-recognizederrorsinBreen and Porernba, we

conclude that strict adherence to these precedents is not warranted. We therefore overrule Breen and Porernba to the extent that they conflict with NRS 616C.215(5) and this opinion. Litigants and courts should now rely wholly upon NRS 616C.215(5) and applicable surrounding statutes when adjudicating workers' compensation liens. With this course correction, we return the issue of regulating workers' compensation liens to the Legislature. Cf. Moranz v. Harbor Mall, LLC, 502 P.3d 488, 500-01 (Haw. 2022) (applying a statute requiring insurers to bear a pro-rata share ofthe third-party litigation costs and fees); Knapp v. Tenn. Gas Pipeline Co., 829 A.2d 1052, 1053 (N.H. 2003) (applying a statute requiring courts to divide third-party litigation costs and fees as "justice may require"); Jones v. Pringle & Herigstad, P.C., 546 N.W.2d 837, 840-41 (N.D. 1996) (applying a statute outlining the percentage-based distribution of third-party settlement funds).6 CONCLUSION

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. In Breen and Porernba, we deviated from the plain language ofthe statute, and we now correct course by overruling the portions of those cases

6AmTrust also argues that the district court erred when it dismissed its complaint against the aforementioned third-party defendants; however, as the third-party defendants are not parties to the instant appeal, we do not address this contention.
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### inconsistentwiththestatute. Wethereforereversethedistrictcourt'sorder

adjudicating the workers' compensation lien and remand the case for furtherproceedingsconsistent with thisopinion.

Lee

We concur:
C.J. Cadish

J. Stiglich

# Picky J. Pickering
(74 Herndon Iftwo 

### J.

Parraguirre

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