Opinion ID: 1856277
Heading Depth: 1
Heading Rank: 5

Heading: Does the Subrogation Provision of the Mission Policy Inure to the Benefit of the Association?

Text: Finally, the Association contends the district court erred in refusing to require the Group to pursue its indemnification rights against its members pursuant to the Mission policy or, in the alternative, in not permitting the Association to be subrogated to those rights. The Mission policy provision (Section XI) that the Association relies on requires the Group to pursue all claims that it may have against any person or entity as a result of the payment of a loss and to apply any recovery to reduce that loss. In the event the Group fails or neglects to pursue such a claim within a reasonable time, the provision permits Mission to be subrogated to the claim. Because section 515B.5(1)(b) gives the Association the same rights that the insolvent insurance company has under the policy, the Association argues that this statutory provision entitles it to all of the rights Mission was entitled to assert under Section XI of the policy. The next step in the Association's argument is premised on 191 Iowa Administrative Code 56.7(5)(b). This regulation requires entities such as the Group to have an indemnity agreement in effect at all times that jointly and severally binds such entities and each employer member to meet the workers' compensation obligations of each member. Such an indemnity agreement was in force at the time of the losses. Consequently, the Association argues, the Group should be required to do one of two things according to Section XI of the Mission policy: (1) enforce its rights of indemnity under the indemnity agreement against the Group's members for the benefit of the Association, or (2) assign all of its rights under the indemnity agreement to the Association so that the Association can seek indemnity from the Group's members. Like the district court, we think the Section XI subrogation language was intended to track the provisions of Iowa Code section 85.22, part of the Workers' Compensation Act, rather than to give the Association any rights against the Group's members. Section 85.22 permits a paying party to be subrogated to the injured workers' rights against a third-party tortfeasor responsible for the injuries. Moreover, section 85.20 makes it clear that the employer is not such a third party even though the employer might have caused the injury. We reach this conclusion for two reasons. First, we agree with the Group that the Association's argument makes no economic sense. It would be unreasonable for the Group to pay $112,000 for a policy that afforded its members no protection. Second, the only time a self-insured group member may be assessed is when a deficit occurs in any fiscal year. In that event, the assessment is joint and several. 191 Iowa Admin.Code 56.7(5)(b). Here, a deficit is threatened because of Mission's insolvency. As the Group aptly argues in its brief, To use the Mission insolvency to make the [Group] members liable to the [Association] is to reverse the roles of the parties and stand chapter 515B on its head. Any other result would, as a practical matter, deny employers the statutory right to pool assets to provide workers' compensation benefits for their employees and the concomitant statutory right to be financially protected when they do so. We decline to interpret section 87.4, the provisions of chapter 515B, and the accompanying administrative regulations to accomplish such an impractical and unreasonable result. See Iowa Code §§ 4.6(1), (2), (5). After all, what is really involved here is a potential threat that would leave injured workers with no recourse. We have long been committed to a broad interpretation of statutory provisions involving workers' compensation benefits, so as to insure that injured workers receive what is justly due them. We should do no less here.