Opinion ID: 1864717
Heading Depth: 2
Heading Rank: 4

Heading: a uim self-insurer has a statutory lien for worker's compensation paid but uim policy provisions providing a setoff for worker's compensation are invalid.

Text: The trial court held as a matter of law that both U.S. West and National Farmers were entitled to setoffs for worker's compensation benefits paid to Bergstresser. We disagree.
Bergstresser's UIM policy with National Farmers provides: Uninsured Motorists Coverage shall not apply to the benefit of any insurer or self-insurer under any workers' compensation or disability benefits law or any similar law.... Any amounts payable will be reduced by: (1) A payment made by the owner or operator of the uninsured motor vehicle or organization which may be legally liable. (2) A payment under the Liability Coverage of this policy. (3) A payment made or amount payable because of the bodily injury under any workers' compensation law or disability benefits law or similar law. National Farmers asserts it is contractually entitled to set off against UIM all worker's compensation paid or payable to Bergstresser. This issue has been addressed by a number of jurisdictions and the overwhelming majority have held such policy provisions invalid. See State Farm Mutual Auto. Ins. Co. v. Cahoon, 287 Ala. 462, 252 So.2d 619 (1971); State Farm Mutual Auto. Ins. Co. v. Karasek, 22 Ariz.App. 87, 523 P.2d 1324 (1974); Travelers v. National Farmers Union Prop. & Cas. Co., 252 Ark. 624, 480 S.W.2d 585 (1972); Nationwide Mut. Ins. Co. v. Hillyer, 32 Colo.App. 163, 509 P.2d 810 (1973); Jeanes v. Nationwide Ins. Co., 532 A.2d 595 (Del.Ch.1987); Leist v. Auto Owners Ins. Co., 160 Ind.App. 322, 311 N.E.2d 828 (1974); Fryer v. National Union Fire Ins. Co., 365 N.W.2d 249 (Minn.1985); Cano v. Travelers Ins. Co., 656 S.W.2d 266 (Mo. 1983); Sullivan v. Doe, 159 Mont. 50, 495 P.2d 193 (1972); Merchants Mut. Ins. Group v. Orthopedic Professional Assoc., 124 N.H. 648, 480 A.2d 840 (1984); Sweeney v. Hartford Accident & Indem. Co., 136 N.J.Super. 591, 347 A.2d 380 (1975); Bartlett v. Nationwide Mut. Ins. Co., 33 Ohio St.2d 50, 294 N.E.2d 665 (1973); Chambers v. Walker, 653 P.2d 931 (Okla.1982); Peterson v. State Farm Mut. Auto. Ins. Co., 238 Or. 106, 393 P.2d 651 (1964); Selected Risks Ins. v. Thompson, 520 Pa. 130, 552 A.2d 1382 (1989); Aldcroft v. Fidelity & Cas. Co., 106 R.I. 311, 259 A.2d 408 (1969); Ferguson v. State Farm Mut. Auto. Ins. Co., 261 S.C. 96, 198 S.E.2d 522 (1973); Thamert v. Continental Cas. Co., 621 P.2d 702 (Utah 1980); Allstate Ins. Co. v. Welch, 45 Wash.App. 740, 727 P.2d 268 (1968); Niemann v. Badger Mut. Ins. Co., 143 Wis.2d 73, 420 N.W.2d 378 (App.1988). We agree with the Pennsylvania Supreme Court which said: The rationale of these courts is varied but certain common themes emerge; first, uninsured motorist coverage is paid for by a separate premium, and to give the uninsured motorist carrier a set-off based on the fortuitous existence of a collateral source would result in a windfall to the carrier; second, uninsured motorist coverage is mandated by statute and any variations from that statutory mandate should come from the legislature; third, workmen's compensation only covers a fraction of what tort damages would cover, and a dollar-for-dollar set-off does not recognize this reality; and fourth, there is no public policy against an individual purchasing additional uninsured motorist coverage to protect himself and his family against the shortfall which could result from a dependency on workmen's compensation. Selected Risks, 552 A.2d at 1388. Moreover, we are guided by the fact that the legislature has not provided any statutory setoff of worker's compensation benefits for UIM carriers. Where the legislature intended to grant such a setoff, it has specifically provided one. South Dakota Medical Service, Inc. v. Minnesota Mutual Fire & Cas. Co., 303 N.W.2d 358 (S.D.1981) (finding provision excluding coverage for benefits provided by worker's compensation was statutorily provided by SDCL 58-17-10); accord, Westphal v. Amoco Ins. Co., 87 S.D. 404, 209 N.W.2d 555 (1973) (holding UIM policy provision decreasing amount due passenger by amount paid by driver's UIM was invalid if it reduced recovery below actual loss); Meyers, 88 S.D. at 168, 216 N.W.2d at 821 (stating compensation carrier should not be beneficiary of claimant's personal policy). Therefore, a policy provision purporting to reduce UIM benefits paid by worker's compensation is void as a matter of public policy.
Unlike National Farmers, U.S. West has no contractual policy provision providing for a setoff of UIM benefits for worker's compensation benefits received. However, as the worker's compensation carrier, U.S. West has a statutory worker's compensation lien if the employee collects damages from another person. SDCL 62-4-39 provides: If compensation has been awarded and paid under this title and the employee has recovered damages from another person, the employer having paid the compensation may recover from the employee such an amount equal to the amount of compensation paid by the employer to the employee, less the necessary and reasonable expense of collecting the same. National Farmers asserts that the statutory lien is not applicable where the damages received are UIM benefits from a self-insured employer. We are aware there is a jurisdictional split as to whether a worker's compensation carrier's subrogation rights extend to actions based on an employer's UIM policy. See, e.g., Manning v. Fletcher, 324 N.C. 513, 379 S.E.2d 854 (1989) (finding statute permits reduction of UIM by the amounts paid as worker's compensation); Christy, 510 A.2d 22 (holding self-insurer is required to provide UIM to employee but has statutory lien on any worker's compensation benefits paid); Terry v. Aetna Cas. & Sur. Co., 510 S.W.2d 509 (Tenn.1974); cf. Knight v. Insurance Co. of North America, 647 F.2d 127 (10th Cir.1981) (finding subrogation is allowed only for tort damages and UIM sounds in contract); Travelers Ins. Co. v. National Farmers Union Prop. & Cas. Co., 252 Ark. 624, 480 S.W.2d 585 (1972); Janzen v. Land O'Lakes, Inc., 278 N.W.2d 67 (Minn.1979). The statutes interpreted in many of the cases disallowing a worker's compensation lien have language limiting subrogation only to actions in tort. SDCL 62-4-39 clearly has no such restriction and allows reimbursement if the employee has recovered damages from another person. Moreover, allowing the lien is consistent with South Dakota's public policy of avoiding duplicate recovery for the same injury. SDCL 62-4-38; St. Paul Fire & Marine Ins. v. Farner, 648 F.2d 489, 491 (8th Cir.1981). Therefore, U.S. West has a statutory lien for any worker's compensation that it may apply against its liability for UIM. Defendant Bang's argument that allowing a lien will result in procedural complications requiring a plaintiff to choose between proceeding against either a tort-feasor or his worker's compensation carrier has no merit. A plaintiff is not required to determine the extent of worker's compensation before proceeding with a tort claim. Helmbolt v. Lemars Mut. Ins. Co., 404 N.W.2d 55, 59 (S.D.1987). In conclusion, we hold that a self-insurer is required to provide UIM, that an employee may recover UIM from his employer if his injury was caused by a third-party tort-feasor, that the statutory UIM limit for a self-insurer is $100,000 absent a request for additional coverage, that UIM policy provisions purporting to set off worker's compensation are invalid and that an entity that is self-insured for worker's compensation has a statutory lien against any self-insured UIM benefits for compensation paid. WUEST, HENDERSON, SABERS and AMUNDSON, JJ., concur.