Workers’ compensation schemes have a simple structure: the
State requires employers to carry workers’ compensation insurance to reimburse
employees for medical and economic losses resulting from work-related injuries—even
if a third-party tortfeasor caused the injury. In the latter case, the insurer ends up paying
the bill for someone else’s screw up.
To be fair, Vermont’s workers’ compensation program gives the
insurer a right to recover its losses from whatever award the employee gets as
compensation from the wrongdoer. It also
allows the insurer to go after the wrongdoer directly if the employee doesn't sue. This is what is known in the business
as subrogation: insurer gets to stand in the employee’s proverbial work shoes
and sue the wrongdoer on the employee’s behalf.
Today’s case involves a work-related injury gone really,
really bad: the employee, a member of the Windham Northeast Supervisory Union,
had surgery for a work-related injury to her knee and died from
“complications.” Following this tragedy,
Employee’s family received death benefits from two sources: the school’s
workers’ compensation insurer, Vermont School Boards Insurance Trust; and
Employee’s own life insurance policy, which went directly to her husband, its
beneficiary.
Employer and the workers’ compensation insurer (acting as
Claimants against the Estate) went after the death benefits from the life
insurance policy to offset what Insurer paid for the surgeon/hospital’s deadly
mistake. The Estate and Claimants met
informally with the Department of Labor, then submitted cross motions for
summary judgment to the Department of Labor Commissioner on the question of
whether the governing statute, 21 V.S.A. 624(e), entitled Claimants to the reimbursement
they wanted.
The statutory provision that is the crux of this case allows
the insurer to recover in two situations: 1) where the employee gets
compensation from the tortfeasor; and 2) where the employee is also reimbursed
by a private policy such as uninsured- or underinsured-motorist insurance, and
would otherwise get reimbursed twice for the injury (“double recovery”). The Commissioner read the statute to only
allow recovery from a private policy’s proceeds where the proceeds were paid in
connection with a third-party’s tort.
Claimants appealed.
On appeal, the Department of Labor certified the question on
appeal as whether Claimants were entitled to reimbursement from the life
insurance policy for the benefits paid on account of her death. This being a question of pure statutory
interpretation, the SCOV owes no deference to any interpretations below; the
Court reviews questions of law de novo.
Despite Claimants’ creative arguments though, the SCOV agrees with the
Commissioner and shoots down the Employer and Insurer’s attempt to dip into the
life insurance pot.
Claimants tried to label the life insurance policy death
benefits payout as “recovery of damages” for Employee’s death, which can be
tapped under the statute. But, the SCOV
says, the word “damages” is a term of art that is usually understood to mean
“pecuniary compensation, recompense, or satisfaction for an injury done or a
wrong sustained.” Life insurance policy
proceeds provide a lump sum to the named beneficiary, or the deceased’s estate,
as compensation for the loss of a loved one and post-mortem expenses, but there
is no “wrong” to trigger payment other than the insured’s death.
This interpretation is in keeping with the policy of
fairness underlying the statute, the SCOV notes. Where the employer isn’t directly responsible
for the injury, such as when an employee is injured on the clock by an
uninsured motorist, it’s only fair to let the workers’ compensation insurer
recover from whatever “economic damages” the employee receives under their
private uninsured motorist insurance policy.
But wait! cry Claimants. Doesn't this exception for double recovery from an uninsured motorist
policy mean that workers’ compensation insurers can at least tap into the
portion of life insurance benefits that are technically “economic damages,”
i.e., lost wages, medical expenses, etc.?
Sorry, the SCOV says, but in terms of life insurance “death is not a
‘loss,’” it’s merely the triggering event for a payout of a certain promised
sum of money. Unlike with workers’
compensation, or even uninsured motorist coverage, an employee’s family doesn't have to prove the nature and scope of, or responsibility for, a particular
injury to recover death benefits from a life insurance policy: all it has to do
is provide a copy of the death certificate.
The SCOV concludes that Claimants don’t get reimbursed from
life insurance proceeds for having to pay for the surgeon/hospital’s epic
failure. Such is the life of a workers’
compensation insurance carrier: win some, lose some, and hope that someone else
will foot the bill.
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