Opinion ID: 1836521
Heading Depth: 1
Heading Rank: 3

Heading: The Subrogation Issue.

Text: Curtin recovered underinsured-motorist benefits under an insurance policy provided by his employer. The employer and its workers' compensation carrier, United Fire and Casualty, filed a lien against the underinsured-motorist proceeds under Iowa Code section 85.22 (1997). That section, entitled Liability of OthersSubrogation, provides in relevant part: When an employee receives an injury... for which compensation is payable under this chapter, ... and which injury... is caused under circumstances creating a legal liability against some person, other than the employee's employer or any employee of such employer as provided in section 85.20 to pay damages, the employee ... may take proceedings against the employer for compensation, and the employee ... may also maintain an action against such third party for damages.... 1. If compensation is paid the employee under this chapter, the employer by whom the same was paid, or the employer's insurer which paid it, shall be indemnified out of the recovery of damages to the extent of the payment so made, ... and shall have a lien on the claim for such recovery and the judgment thereon for the compensation for which the employer or insurer is liable. In this case, the employer and its insurer argue that they are entitled to a lien on Curtin's underinsured-motorist proceeds to reimburse them for the workers' compensation benefits they have paid to Curtin. Curtin responds that the underinsured-motorist insurance carrier is not a third party which is obligated to pay damages to the worker as those terms are used in Iowa Code section 85.22. That was, in fact, our holding in March v. Pekin Insurance Co., 465 N.W.2d 852 (Iowa 1991). In March an injured worker received workers' compensation benefits and also recovered against his own underinsured-motorist policy. The workers' compensation insurer in March attempted to recover subrogation against the underinsured-motorist coverage. March, 465 N.W.2d at 852-53. We denied subrogation in March because section 85.22 provides for subrogation against a tortfeasornot against a party obligated to pay under an insurance contract. Id. In this case, the employer and its insurer contend that March must be distinguished because in that case the underinsured-motorist coverage had been purchased by the employee while in the present case the insurance was provided by the employer. We read nothing in March, however, that suggests that it makes any difference which party furnished insurance coverage; the right to subrogation turns on whether the fund against which subrogation is sought arose through an action for tort or breach of contract, and March controls; only a fund created through an action for tort may be the subject of subrogation under section 85.22. The fund at issue here was based on a contract recovery. We affirm the decision of the district court on this issue. AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.