NE Code § 48-118 (2021)
2021 Nebraska Revised Statutes|Chapter 48 - Labor|48-118 - Third-party claims; subrogation.

48-118.  Third-party claims; subrogation.When a third person is liable to the employee or to the dependents for the injury or death of the employee, the employer shall be subrogated to the right of the employee or to the dependents against such third person. The recovery by such employer shall not be limited to the amount payable as compensation to such employee or dependents, but such employer may recover any amount which such employee or his or her dependents should have been entitled to recover.Any recovery by the employer against such third person, in excess of the compensation paid by the employer after deducting the expenses of making such recovery, shall be paid forthwith to the employee or to the dependents and shall be treated as an advance payment by the employer on account of any future installments of compensation.Nothing in the Nebraska Workers' Compensation Act shall be construed to deny the right of an injured employee or of his or her personal representative to bring suit against such third person in his or her own name or in the name of the personal representative based upon such liability, but in such event an employer having paid or paying compensation to such employee or his or her dependents shall be made a party to the suit for the purpose of reimbursement, under the right of subrogation, of any compensation paid.Source   Laws 1913, c. 198, § 18, p. 585;   R.S.1913, § 3659;   C.S.1922, § 3041;   Laws 1929, c. 135, § 1, p. 489;   C.S.1929, § 48-118;   R.S.1943, § 48-118;   Laws 1963, c. 283, § 1, p. 844;   Laws 1986, LB 811, § 37;   Laws 1994, LB 594, § 1;   Laws 1997, LB 854, § 1;  Laws 2000, LB 1221, § 2;  Laws 2005, LB 13, § 2;  Laws 2005, LB 238, § 2.  Annotations  1. Who is third person 2. Refusal of employer to sue 3. Suit by employee 4. Subrogation 5. Choice of law 6. Notice provisions 7. Miscellaneous 1. Who is third person There is a strong presumption that a parent company is not the employer of its subsidiary’s employees. Bacon v. DBI/SALA, 284 Neb. 579, 822 N.W.2d 14 (2012). “Third person” under the Nebraska Workers’ Compensation Act includes any person other than the employer or those whom the Nebraska Workers’ Compensation Act makes an employer. Bacon v. DBI/SALA, 284 Neb. 579, 822 N.W.2d 14 (2012). “Third person” under the Nebraska Workers’ Compensation Act is an entity with which there is no employer-employee relationship. Bacon v. DBI/SALA, 284 Neb. 579, 822 N.W.2d 14 (2012). An employee can bring suit against a third party at any time, provided that his or her employer be made a party if that employer has paid compensation benefits to the employee. Polinski v. Omaha Pub. Power Dist., 251 Neb. 14, 554 N.W.2d 636 (1996). Employee may sue third person for injuries received, but employer having paid compensation must be made a party. Niemeyer v. Forburger, 172 Neb. 876, 112 N.W.2d 276 (1961). Employer may be made party to suit by employee against third person. Vontress v. Ready Mixed Concrete Co., 170 Neb. 789, 104 N.W.2d 331 (1960). Owner requiring contractor to take out compensation insurance is third person as respects employees of contractor. Matthews v. G. A. Crancer Co., 117 Neb. 805, 223 N.W. 661 (1929). Subcontractor is immediate employer of his workmen and all others are third parties even though interested in enterprise. Boyd v. Humphreys, 117 Neb. 799, 223 N.W. 658 (1929). A third-party settlement is deemed compensation. Thomas v. Lincoln Public Schools, 9 Neb. App. 965, 622 N.W.2d 705 (2001). 2. Refusal of employer to sue On refusal by employer liable for compensation to sue third person for negligence resulting in injury, not death, of employee, latter may sue in own behalf, and consent by employer to employee's action is equivalent to refusal. Luckey v. Union P. R. R. Co., 117 Neb. 85, 219 N.W. 802 (1928). Right to bring action rests with employer until he has neglected or refused to sue. O'Donnell v. Baker Ice Mach. Co., 114 Neb. 9, 205 N.W. 561 (1925). 3. Suit by employee An employer's vested subrogation interest in settlement proceeds is not extinguished when the injured employee pursued the claim against the alleged tort-feasor out of time. Combined Insurance v. Shurter, 258 Neb. 958, 607 N.W.2d 492 (2000). If an employer is not joined in an action, there must be a recovery before the nonjoined employer is liable for attorney fees; joined parties may be liable for costs even if there is no recovery. In apportioning cost pursuant to this section, the critical factor is not whether there is a recovery, but whether the employer has participated sufficiently in the litigation to be considered "joined". Janssen v. Tomahawk Oil Co., Ltd., 254 Neb. 370, 576 N.W.2d 787 (1998). Employee's right of action against third persons for negligence survives death of wrongdoer. Rehn v. Bingaman, 151 Neb. 196, 36 N.W.2d 856 (1949). Section does not prevent employee from suing third party responsible for his injury in his own name but requires that employer, having paid compensation, be made party. Oliver v. Nelson, 128 Neb. 160, 258 N.W. 69 (1934). If workman, injured by negligence of third party, obtains assignment from employer of right to bring action, it may be maintained by workman directly against third party. Thomas v. Otis Elevator Co., 103 Neb. 401, 172 N.W. 53 (1919). Employee has right to sue third party, though he has settled with employer for compensation, but must make employer a party. Muncaster v. Graham Ice Cream Co., 103 Neb. 379, 172 N.W. 52 (1919). 4. Subrogation An employer’s right to a future credit against an employee’s recovery in an action related to a workers’ compensation claim does not depend upon who brought the action which led to the employee’s recovery or who happens to “recover” first. Bacon v. DBI/SALA, 284 Neb. 579, 822 N.W.2d 14 (2012). The beneficent purposes of the Nebraska Workers’ Compensation Act do not require narrow interpretation of an employer’s statutory subrogation rights; the act’s beneficent purposes are to provide an injured worker with prompt relief from the adverse economic effects caused by a work-related injury or occupational disease, and concern the employee’s ability to promptly obtain workers’ compensation benefits, not the employee’s ability to additionally retain recovery against negligent third parties in tort actions. Bacon v. DBI/SALA, 284 Neb. 579, 822 N.W.2d 14 (2012). The policies behind the Nebraska Workers’ Compensation Act favor a liberal construction in favor of the employer’s statutory right to subrogate against culpable third parties; workers’ compensation acts generally seek to balance the rights of injured workers against the costs to the businesses that provide employment, and in order to reach this balance, most acts liberally allow employers to shift liability onto third parties whenever possible. Bacon v. DBI/SALA, 284 Neb. 579, 822 N.W.2d 14 (2012). The workers’ compensation subrogation statute was not intended to draw a distinction which would grant the right to a future credit in recovery from actions brought by the employer, but deny that right in actions brought by the employee; such a distinction would be arbitrary insofar as it would depend on who first brought suit, and insofar as the timing of the suit would change the amount of recovery. Bacon v. DBI/SALA, 284 Neb. 579, 822 N.W.2d 14 (2012). This section grants an employer who has paid workers' compensation benefits to an employee injured as a result of the actions of a third party a subrogation interest against payments made by the third party. Burns v. Nielsen, 273 Neb. 724, 732 N.W.2d 640 (2007). When an employer, rather than taking advantage of its opportunity to have the settlement set aside, seeks to share in the settlement proceeds under this section, the employer is obligated to pay a reasonable portion of the employee's attorney fees under this section, and any defect in the notice provided to the employer is waived. Turney v. Werner Enters., Inc., 260 Neb. 440, 618 N.W.2d 437 (2000). An amendment to this section allowing an equitable distribution between an injured employee and the employer or insurer of a settlement from a third-party is substantive rather than procedural in nature; thus, the statute as it was in effect at the time of the employee's injury controls, and the employee is not entitled to an equitable distribution of the settlement. Jackson v. Branick Indus., Inc., 254 Neb. 950, 581 N.W.2d 53 (1998). Ordinarily, one who creates a fund which benefits a workers' compensation subrogee is entitled to reimbursement for that portion of a reasonable attorney fee attributable to the benefit conferred; however, a workers' compensation subrogee is not liable for any portion of a fee exacted by an attorney who, because of a conflict of interest, abandoned protection of the subrogee's rights. Lawson v. Smith, 241 Neb. 639, 489 N.W.2d 566 (1992). The right of an employer to subrogation for amounts paid to the injured employee as workmen's compensation payments is well established in Nebraska statutory law. Turner v. Metro Area Transit, 220 Neb. 189, 368 N.W.2d 809 (1985). Ordinarily a division of attorneys' fees is not required where the subrogation interest of the employer or its insurance carrier is fully and adequately represented by its own counsel and where the services of the employee's attorney were not relied upon to effect the subrogation recovery. Schulz v. General Wholesale Coop. Co., Inc., 195 Neb. 410, 238 N.W.2d 463 (1976). Subrogated interest of employer for computation and allocation of fees and expenses is measured by the workmen's compensation liability relieved or discharged by recovery against third party. Gillotte v. Omaha Public Power Dist., 189 Neb. 444, 203 N.W.2d 163 (1973). This section requires the joinder of an employer for purposes of subrogation and reimbursement. Rogers v. Western Electric Co., 179 Neb. 359, 138 N.W.2d 423 (1965). Joinder of employer by employee in suit against third party is required for purpose of subrogation and reimbursement. American Province Real Estate Corp. v. Metropolitan Utilities Dist., 178 Neb. 348, 133 N.W.2d 466 (1965). Employer was made party defendant in action by employee against third party because of right of subrogation. Singles v. Union P. R.R. Co., 174 Neb. 816, 119 N.W.2d 680 (1963). Compensation carrier, who becomes obligated for compensation payments, may seek reimbursement. Fisher v. Chicago, B. & Q. R.R., 171 Neb. 804, 107 N.W.2d 740 (1961). Subcontractor made party defendant for purpose of subrogation. Rumsey v. Schollman Bros. Co., 156 Neb. 251, 55 N.W.2d 668 (1952). This section is for the benefit of the employer so he may recover from third person. Danner v. Walters, 154 Neb. 506, 48 N.W.2d 635 (1951). Where a party made a defendant for sole purpose of protecting his subrogation rights adopts and seeks to maintain the position of a plaintiff, a judgment for costs may be rendered against him. Rehn v. Bingaman, 152 Neb. 171, 40 N.W.2d 673 (1950). Characteristics of statutory subrogation and equitable subrogation are the same. Burks v. Packer, 143 Neb. 373, 9 N.W.2d 471 (1943). Employer was made party defendant to protect subrogation rights. Jones v. Rossbach Coal Co., 130 Neb. 302, 264 N.W. 877 (1936); Erwin v. Watson Bros. Transfer Co., 129 Neb. 64, 260 N.W. 565 (1935); McDonnell v. Wasenmiller, 74 F.2d 320 (8th Cir. 1934). Measure of employer's right of subrogation hereunder is reimbursement from third person whose negligence caused employee's death, for full amount of compensation paid by employer to employee's dependent, together with the expenses thereof. Goeres v. Goeres, 124 Neb. 720, 248 N.W. 75 (1933). Employer has statutory right of subrogation to extent of amounts properly paid under workmen's compensation law, plus expenses of recovering such damages from third person. Bronder v. Otis Elevator Co., 121 Neb. 581, 237 N.W. 671 (1931). Employer must be joined as defendant by virtue of right of subrogation. Vandervert v. Robey, 118 Neb. 395, 225 N.W. 36 (1929). Subrogation hereunder is not barred by employer's concurrent negligence. Graham v. City of Lincoln, 106 Neb. 305, 183 N.W. 569 (1921). If employee settles with third person, by whose negligence he was injured, employer is entitled to have amount applied on compensation, and notwithstanding settlement, employer has right to recover against negligent third party to extent of compensation awarded. Hugh Murphy Const. Co. v. Serck, 104 Neb. 398, 177 N.W. 747 (1920). Employer or carrier does not have subrogation rights against the independent contractual rights which the employee might have against an insurance company. Booth v. Seaboard Fire & Marine Ins. Co., 285 F.Supp. 920 (D. Neb. 1968), rev'd on other grounds, 431 F.2d 212 (8th Cir. 1970). Employer was made party to determine subrogation rights. Solomon Dehydrating Co. v. Guyton, 294 F.2d 439 (8th Cir. 1961). The fact that employer's negligence concurred with negligence of third person does not bar employer's right to subrogation. Otis Elevator Co. v. Miller & Paine, 240 F. 376 (8th Cir. 1917). 5. Choice of law An employer's or insurer's subrogation interest in an injured employee's recovery from a third-party tort-feasor is determined by the law of the state in which the employee obtained workers' compensation benefits. Turney v. Werner Enters., Inc., 260 Neb. 440, 618 N.W.2d 437 (2000). The Workers' Compensation Court lacks jurisdiction to resolve disputes between employers and employees concerning the management of suits against third parties brought in courts of general jurisdiction or the division of funds obtained from a suit against a third party in a court of general jurisdiction. Because the existence of federal jurisdiction is a matter of federal law rather than state law, this section cannot, by itself, confer jurisdiction on federal courts to resolve subrogation disputes between employers and employees. The term "district court", as it is used in this section, does not exclusively mean federal district courts which have been conferred with jurisdiction by some federal statute; rather, it includes the district courts of the State of Nebraska as well. Miller v. M.F.S. York/Stormor, 257 Neb. 100, 595 N.W.2d 878 (1999). This section does not take away or abridge the right of removal to federal court if that right otherwise exists. State v. Northwestern Engineering Co., 69 F.Supp. 347 (D. Neb. 1946). 6. Notice provisions A reading of this section makes it quite clear that strict compliance with the written, certified, or registered mail notice provision was not intended to be mandatory and jurisdictional, and such notice may be waived in writing or may be implied from unequivocal conduct. The employer, through its "unequivocal conduct" of seeking to share in the settlement proceeds, has ratified the employee's settlement with the tort-feasor and thereby waived the objections it might have had to such settlement based on a lack of notice under this section. Combined Insurance v. Shurter, 258 Neb. 958, 607 N.W.2d 492 (2000). Substantial compliance with the notice requirement of this section is sufficient, and the requirement is met when the other party receives actual notice of a third-party claim and an opportunity to join in its prosecution. Where subrogated employer did not receive notice of certain discovery proceedings, but did have actual knowledge of the lawsuit in which the third-party claim was asserted, notice requirement of statute deemed satisfied. The notice required by this section may be waived in writing, or waiver may be implied from unequivocal conduct. The extent of a subrogated employer's participation in third-party litigation initiated by an injured employee is the critical factor in determining whether the employer has joined the action within the meaning of this section. Subrogated employer failed to join in prosecution of injured employee's third-party lawsuit where employer did nothing more than file an answer and respond to two sets of interrogatories. Austin v. Scharp, 258 Neb. 410, 604 N.W.2d 807 (1999). The purpose of the 1963 amendment to this section would allow the attorney fees to be prorated and one party must give to the other party notice of filing of suit. Turner v. Metro Area Transit, 220 Neb. 189, 368 N.W.2d 809 (1985). Substantial rather than literal compliance with notice provisions of this section is sufficient and strict compliance is not jurisdictional. Versch v. Tichota, 192 Neb. 251, 220 N.W.2d 8 (1974). Notice to workmen's compensation carrier of suit against third party is immaterial to proration of fees and expenses where carrier is made party and attorneys for carrier carried their share of trial load, and it is desirable there should be an agreement for apportionment. Kitchin v. Burlington Northern, Inc., 382 F.Supp. 42 (D. Neb. 1974). 7. Miscellaneous This section and sections 48-118.01 through 48-118.04 should be read as a whole. In re Estate of Evertson, 295 Neb. 301, 889 N.W.2d 73 (2016). Where an employer refuses to make lump-sum periodic lifetime workmen's compensation benefits due an employee or dependents, and where a recovery is made against a third party, the obligation of the employer to continue to make lifetime payments is not extinguished but merely suspended for the period of time the employer's share of the recovery satisfies the continuing obligation due the employee. In calculating the fees and expenses of both an employee and an employer, in connection with the recovery of damages from a third party, where a lump-sum agreement is not reached, the fees and expenses are to be deducted immediately from the recovery, and the employer's share of such fees and expenses is to be repaid weekly by the employer to the employee over the period of time benefit payments are due to the employee. Nekuda v. Waspi Trucking, Inc., 222 Neb. 806, 388 N.W.2d 438 (1986). Under this section, where an action is filed before a particular court and prosecuted to a final conclusion, whether by settlement or judgment, that court alone has jurisdiction to resolve any controversy relating to division of fees and expenses. Moyer v. Douglas & Lomason Co., 212 Neb. 680, 325 N.W.2d 648 (1982). Workmen's Compensation Act bars action by third party tort-feasor against employer for contribution or indemnity based on claim arising from the injury. Vangreen v. Interstate Machinery & Supply Co., 197 Neb. 29, 246 N.W.2d 652 (1976). An employer can bring an action directly against a third party tort-feasor for injuries suffered by an employee, but only a personal representative of a deceased employee can bring an action for wrongful death, which action must be filed within two years after death. United Materials, Inc. v. Landreth, 196 Neb. 525, 244 N.W.2d 164 (1976). Truck rental agreement, as modified, did not create relationship of employer and employee. United States F. & G. Co. v. Missouri Valley Constr. Co., 179 Neb. 565, 139 N.W.2d 222 (1966). Civil liability of third person for causing death of employee is not changed by Workmen's Compensation Act. Luckey v. Union P. R. R. Co., 117 Neb. 85, 219 N.W. 802 (1928). Act recognizes common-law liability of third persons for negligent injury to employee. Tralle v. Hartman Furniture & Carpet Co., 116 Neb. 418, 217 N.W. 952 (1928). A voluntary payment made by a workers' compensation insurer after the statute of limitations has run does not remove the bar of the statute of limitations. In workers' compensation cases, an advance payment by an employer does not remove the bar of a statute of limitations which had already run at the time of the payment from a third-party lawsuit. The statute of limitations bars further suit against an employer if 2 years pass without a payment of workers' compensation from the employer, including by way of an advance payment from a third-party suit against a tort-feasor before the 2-year statute runs, by direct payment by the employer or its insurer, or by a payment caused to be made by the employer. Thomas v. Lincoln Public Schools, 9 Neb. App. 965, 622 N.W.2d 705 (2001). An injured employee may use the common fund doctrine to shift an appropriate share of the cost of workers' compensation litigation to a health care insurer who directly and substantially benefits by the litigation through reimbursement. Kaiman v. Mercy Midlands Medical & Dental Plan, 1 Neb. App. 148, 491 N.W.2d 356 (1992). Under facts in this settled case, costs were prorated between employee and intervening compensation carrier in same proportion they shared in benefits; each to pay own attorney's fees. Carter v. Par-Kan Construction Co., 348 F.Supp. 1295 (D. Neb. 1972). Absent express contract of indemnity between seller of crane and purchaser, the Nebraska Workmen's Compensation Act insulated purchaser from contribution or indemnity in favor of seller in action by purchaser's employee for injuries sustained while dismantling crane. Petznick v. Clark Equipment Co., 333 F.Supp. 913 (D. Neb. 1971).