Opinion ID: 854139
Heading Depth: 2
Heading Rank: 2

Heading: Protection of Subrogees Under the Workers' Compensation Statute

Text: The second certified question is: Under the portion of Indiana Code § 22-3-2-13 that provides, consent shall not be required where the employer or the employer's compensation insurance carrier has been fully indemnified or protected by court order, does it constitute protect[ion] by court order such that consent is not required for the settlement of claims and satisfaction of judgment in proceedings, for the court to specifically preserve a compensation insurance carrier/lienholder's right to bring suit against its agent for settling its claim while enforcing an oral settlement of claims by reason of injury or death? We understand this question to ask whether it constitutes protection by court order if a court specifically preserves the employer's or the employer's compensation carrier's right to bring suit against its agent for unauthorized settlement. The answer turns on interpretation of the Indiana Workers' Compensation Statute, specifically § 22-3-2-13, which provides in part: No release or settlement of claim for damages by reason of injury or death, and no satisfaction of judgment in the proceedings, shall be valid without the written consent of both employer or the employer's compensation insurance carrier and employee or his dependents, except in the case of the employer or the employer's compensation insurance carrier, consent shall not be required where the employer or the employer's compensation insurance carrier has been fully indemnified or protected by court order. IND.CODE § 22-3-2-13 (1993). In this case, the attorney may have been an agent for both the employer and the insurer and the insurer may have been an agent for the employer. Accordingly, we are uncertain whose claims would be preserved against whom. However, under any scenario, we do not regard preservation of a contingent claim as protection in the meaning of this section. [13] The quoted provision in Indiana Code § 22-3-2-13 is the ninth of nine lengthy unnumbered paragraphs. It is best understood in light of the entire section. Indiana State Highway Comm'n v. White, 259 Ind. 690, 695, 291 N.E.2d 550, 553 (1973) (words and phrases of a single section are construed together with the other parts of the same section). The section recognizes that an employer or the employer's insurer may have rights by subrogation to any recovery against a third party for the employee's injury. For ease of reference we refer to the subrogee, whoever it is, as the employer in this discussion. The statute includes meanssubrogation rights or liens on any recoveryfor the employer to recover expenditures from a third party who is liable for the employee's injury. The section provides that if: judgment is obtained and paid, and accepted or settlement is made ... with or without suit, then from the amount received by the employee ... there shall be paid to the employer ... the amount of compensation paid to the employee ... plus the medical, surgical, hospital and nurses' services and supplies and burial expenses.... IND.CODE § 22-3-2-13 (1993). The employer may join any suit against the third party so that all orders of court after hearing and judgment shall be made for [the employer's] protection. This joinder provision appears in the paragraph preceding the protection at issue. In this sense, the section protects or indemnifies the employer by creating a statutory obligation to pay the subrogated amounts to the employer. See, e.g., Sowers v. Covered Bridge Tree Serv., 621 N.E.2d 1111, 1112 (Ind.1993) (implies that protection is protection in the form of seeking reimbursement by lien or subrogation; statute contemplates that the protection shall be afforded through court order); New York Cent. R.R. Co. v. Milhiser, 231 Ind. 180, 187, 106 N.E.2d 453, 457 (1952) (this section of the statute is a protection provided for the employer). Protecting the employer, by providing the employer with the means of assuring reimbursement, is along with preventing double recovery, one of the twin purposes of the section. See id. and Freel v. Foster Forbes Glass Co., 449 N.E.2d 1148, 1151 (Ind.Ct.App.1983). The section provides for only two means of settling a claim against a third party. The employer must either give written consent or be fully indemnified or protected by court order. The reason the legislature required written consent as one alternative is obvious. Because settlement serves as a bar to further recovery against the third party, State v. Mileff, 520 N.E.2d 123, 126 (Ind.Ct.App. 1988), without a consent requirement, an employee could settle a lawsuit for an amount well below medical and disability costs and leave the employer with nowhere to turn for the additional money owed. Requiring the written consent of the employer is designed to protect an employer from being shortchanged without its advance approval. In the absence of written consent, a settlement is valid only if the employer is indemnified or protected by court order. As a substitute for the consent requirement, this language is directed to the same purpose: making sure the employer is not deprived of its recovery. An employer will be protected if, for example, the monies owed are set aside for the employer by court order in an escrow account or a similar arrangement. See, e.g., Kleeman v. Fragman Constr. Co., 91 Ill. App.3d 455, 46 Ill.Dec. 911, 915, 414 N.E.2d 1064, 1068 (1980) (interpreting similar statutory provision, court order approving settlement acknowledged employer's lien and stated that settlement would be set-off against lien); Legler v. Douglas, 26 Ill.App.2d 365, 167 N.E.2d 813, 819 (1960) (court held that [employer] was protected by court order recognizing [employer's] lien and granting the authority to deposit a settlement fund with the court until a hearing resolved the rights of the parties). These forms of protection by court order amount to complete protected assurance that the employer will be paid without further litigation. It is also significant that the term protection is used as a substitute for consent in tandem with indemnification by court order, i.e., a court order directing reimbursement. This too implies reasonable assurance of reimbursement. In sum, protection means the employer is assured of recovery and consent is unnecessary. Preservation of the right of the employer to sue its agent does not indemnify or protect the employer in this sense. The likelihood of recovery against the agent is far from a certainty. Not only would the employer have to prove breach of a duty by its carrier and/or attorney, but the employer must also establish that if there had not been a breach, either the agent would have settled for more money or the plaintiff would have maintained a successful claim against the defendant in court and recovered more than the amount settled for, net after all expenses of proceeding through this second dispute. The cost of pursuing such a claim is undoubtedly substantially greater than the cost of collecting from an escrow or recovery on a court ordered judgment. In short, this is not the sort of protection that the legislature envisioned. Accordingly, we answer that for purposes of the statute, it does not constitute protection by court order for a court merely to preserve the employer's or the employer's insurance carrier's right to sue the agent.