Opinion ID: 1305211
Heading Depth: 1
Heading Rank: 6

Heading: Subrogation Interest.

Text: Combined assigns as error the dismissal of its petition which was based on the trial court's reasoning that because the statute of limitations under the Act had run at the time of the settlement, Shurter was not entitled to recover from Southern Nebraska Power, and that consequently, Combined had no subrogation interest under § 48-118 in the $75,000 settlement between Shurter and Southern Nebraska Power. We conclude that the trial court erred as a matter of law in its interpretation of § 48-118, and we remand this cause for further proceedings. Section 48-118 pertaining to subrogation in the workers' compensation context was amended by 1994 Neb. Laws, L.B. 594. See § 48-118 (Reissue 1998). See, also, Jackson v. Branick Indus., 254 Neb. 950, 581 N.W.2d 53 (1998). The amendment dealt in part with the manner of distribution of third-party settlement proceeds between an employee and employer or between an employee and the employer's insurer. We held in Jackson that with respect to the amendment regarding the manner of distribution, L.B. 594 worked a substantive change, rather than a procedural change, 254 Neb. at 961, 581 N.W.2d at 59, and therefore, such amendment resulting from L.B. 594 should be applied prospectively only. Id. The L.B. 594 amendment was effective July 16, 1994. Shurter's injury occurred February 2, 1994. Accordingly, the pre-July 16, 1994, version of § 48-118 (Reissue 1993) applies to the instant case. We note for the sake of completeness that the provisions of § 48-118 relating to lawsuits against third parties and notice were unaffected by L.B. 594. Section 48-118 (Reissue 1993), on which the trial court relied, provides, inter alia, as follows: When a third person is liable to the employee or to the dependents, for the injury or death, the employer shall be subrogated to the right of the employee or to the dependents against such third person, and 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. (Emphasis supplied.) Elsewhere, § 48-118 provides that an injured employee may sue the third person, but the employee must make the employer a party to the lawsuit. Furthermore, before the employee can make a claim or file a lawsuit against the third person, the employee must give the employer notice of the opportunity to join in making the claim or instituting the lawsuit, all in accordance with § 48-118. It is undisputed that Shurter did not sue Southern Nebraska Power and that she did not notify Combined of her claim against Southern Nebraska Power or of her settlement negotiations with Southern Nebraska Power. Section 48-118 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 that third party. Jackson v. Branick Indus., supra . In Jackson, we held that under the pre-L.B. 594 version of § 48-118, the employer's subrogation interest ... became vested as soon as the injury occurred, because that is when the employer became liable to the employee for compensation to be paid according to the provisions of the workers' compensation statutes. 254 Neb. at 961, 581 N.W.2d at 59. Thus, Combined's subrogation rights vested on February 2, 1994, the date Shurter was injured. Subrogation has been explained as follows: Subrogation is substitution of one person who is not a volunteer, the subrogee [the employer or its insurance carrier], for another, the subrogor [the employee], as the result of the subrogee's payment of a debt owed to the subrogor so that the subrogee succeeds to the subrogor's right to recover the amount paid by the subrogee.... A party's right to subrogate may arise under principles of equity, may be contractual, or may be set out in statute. Neumann v. American Family Ins., 5 Neb.App. 704, 709, 563 N.W.2d 791, 794 (1997). In the instant case, Combined's subrogation rights are derived from statute. See § 48-118. On February 2, 1994, Shurter was injured in an automobile accident involving the collision of her automobile and a truck owned by Southern Nebraska Power. Under the Act, Southern Nebraska Power was potentially liable to Shurter, and such potential liability of Southern Nebraska Power accrued on the date of the accident. See, e.g., Bohl v. Buffalo Cty., 251 Neb. 492, 557 N.W.2d 668 (1997) (noting that date automobile accident occurred was date action accrued for purposes of statute of limitations under Act); Davis v. Town of Clatonia, 231 Neb. 814, 438 N.W.2d 479 (1989). See, also, Polinski v. Omaha Pub. Power Dist., 251 Neb. 14, 554 N.W.2d 636 (1996) (holding that for purposes of § 13-919(1), cause of action accrues when potential plaintiff discovers political subdivision's negligence). Section 13-919(1) sets forth the timing requirements which a potential plaintiff must follow in order to seek recovery from a potentially liable political subdivision. Under § 13-919(1), a person must make a written claim to the governing body of the political subdivision within 1 year after such claim accrued and must begin suit against the political subdivision within 2 years after such claim accrued. It is undisputed that neither party complied with the Act's notice requirements and that the Act's statute of limitations on a suit either party might have brought against Southern Nebraska Power had run at the time of the settlement. However, the stipulation of the parties states that Shurter made a claim at an unspecified time against Southern Nebraska Power for the injuries she had suffered. Further, according to the stipulation, Southern Nebraska Power thereafter made an offer to Shurter to settle the claim of Shurter for $75,000, Shurter accepted the offer, and Southern Nebraska Power sent a check to Shurter's attorney for $75,000 in settlement of the claim. We have observed that a settlement is, inter alia, `an adjustment of differences'  and an `[a]greement to terminate or forestall all or part of a lawsuit.' Horace Mann Cos. v. Pinaire, 248 Neb. 640, 646, 538 N.W.2d 168, 172 (1995) (quoting Black's Law Dictionary 1372 (6th ed.1990)). Thus, as a result of their stipulation, Shurter and Combined have agreed that Southern Nebraska Power's payment of the $75,000 in settlement is evidence of the resolution of possible liability of Southern Nebraska Power, and such concession is consistent with Combined's acquiring a subrogation interest in the settlement proceeds paid by Southern Nebraska Power to avoid such liability. The trial court ruled in its order dismissing Combined's petition that because neither Shurter nor Combined had filed a timely claim nor a lawsuit against Southern Nebraska Power, the statute of limitations under the Act, § 13-919(1), had run, and thus Southern Nebraska Power was not liable to Shurter. The trial court concluded that under the language of § 48-118, no `third person [was] liable [to Shurter],' and there was no amount of money which Shurter `should have been entitled to recover [from Southern Nebraska Power],' and therefore, there was no recovery subject to subrogation. The trial court misinterpreted § 48-118. In the instant case, Southern Nebraska Power was potentially liable to Shurter on the date of the accident, see, Bohl, supra ; Polinski, supra ; Davis, supra, and Combined's subrogation interest became vested on February 2, 1994, the date of Shurter's injury, see Jackson v. Branick Indus., 254 Neb. 950, 581 N.W.2d 53 (1998). On the date of the injury, Southern Nebraska Power was potentially liable to Shurter, Shurter was entitled to recover from Southern Nebraska Power, and Combined's subrogation interest vested. Black's Law Dictionary 1557 (7th ed.1999) defines vested as that which has become a completed, consummated right for present or future enjoyment; not contingent; unconditional; absolute. The fact that Shurter pursued her claim against Southern Nebraska Power out of time did not extinguish Combined's vested statutory subrogation interest in the settlement proceeds under § 48-118. Accordingly, we hold that the trial court erred as a matter of law when it concluded that Combined had no right of subrogation under § 48-118, and we remand this cause to the trial court to enter an order distributing the settlement proceeds pursuant to the 1993 version of § 48-118.