sharon-moad-individually-and-as-personal-representative-of-the-estate-of ( 2015 )

IN THE COURT OF APPEALS OF IOWA
No. 14-0290
Filed March 11, 2015
SHARON MOAD, Individually and as
Personal Representative of the ESTATE
OF DOUGLAS MOAD, et al.,
Plaintiff-Appellant,
vs.
RICHARD LIBBY, as Personal Representative
of the ESTATE OF MATTHEW LIBBY, et al.,
Defendant,
and
DAKOTA TRUCK UNDERWRITERS, et al.,
Intervenor-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Johnson County, Nancy A.
Baumgartner, Judge.
Appeal from an order denying the plaintiff’s motion to strike the
intervenor’s subrogation lien. AFFIRMED.
Martin Diaz and Elizabeth Craig of Martin Diaz Law Firm, Iowa City, for
appellant.
Sasha L. Monthei, of Scheldrup Blades Schrock Smith, P.C., Cedar
Rapids, for appellee.
Considered by Mullins, P.J., and Bower and McDonald, JJ.
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MCDONALD, J.
This case involves a dispute between Dakota Truck Underwriters
(hereinafter “DTU”), a workers’ compensation carrier, and the plaintiff Sharon
Moad, in her individual capacity and as the representative of the estate of
Douglas Moad, relating to reimbursement of workers’ compensation benefits paid
to Douglas prior to his death. The question presented on appeal is “whether the
law of Iowa or South Dakota should apply to determine whether a South Dakota
workers’ compensation carrier is entitled to subrogation for payments made to its
insured by underinsured and uninsured insurance carriers arising out of a
settlement resulting from third-party litigation in Iowa.” Moad v. Dakota Truck
Underwriters, 831 N.W.2d 111, 112 (Iowa 2013).
I.
This is the second time this matter has been on appeal. The facts and
circumstances giving rise to the dispute and the procedural posture of the case
are set forth in sufficient detail in the supreme court’s prior opinion and need not
be repeated at any great length here. See Moad, 831 N.W.2d at 111-13. As
relevant here, Douglas Moad was a resident of South Dakota. He was employed
as a truck driver by a South Dakota trucking company. Pursuant to South
Dakota law, DTU voluntarily paid workers’ compensation benefits to Moad arising
out of a work-related traffic accident occurring in Iowa. We use the term
“voluntarily paid” to mean the workers’ compensation benefits were paid without
Moad’s entitlement to the benefits being challenged through a contested case or
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similar proceeding. Douglas Moad accepted the workers’ compensation benefits
paid by DTU. Douglas deceased several months after the traffic accident.
Sharon sought workers’ compensation benefits in Iowa. She also filed this civil
suit against the motorist causing the traffic accident. DTU intervened in this
case, asserting a workers’ compensation subrogation lien for the benefits paid to
Douglas. Ultimately, Sharon settled this case with the underinsured and
uninsured motorist insurance carriers and moved to strike the subrogation lien on
the settlement proceeds. The parties agreed that DTU had a right to
reimbursement if South Dakota law controlled the subrogation question and no
right to reimbursement if Iowa law controlled the subrogation question. The
district court held Iowa law applied and “granted Moad’s motion to extinguish
DTU’s lien and denied DTU’s motion to vacate the order approving the
settlement.” Moad, 831 N.W.2d at 113. DTU appealed that decision.
In the first appeal, the supreme court concluded the district court and this
court incorrectly analyzed the conflict of laws issue. The court held Restatement
(Second) Conflict of Laws section 185 should be used to determine whether Iowa
law or South Dakota law applied to the subrogation issue. Id. at 118. The
supreme court also held “to the extent Restatement (Second) section 185 [did]
not apply,” then Restatement (Second) section 145 provided “the proper
approach to determining subrogation rules in a cause of action for personal
injuries.” Id. The supreme court remanded the case “to the district court to
consider the extent to which section 185 of the Restatement (Second) applies in
this case.” Id.
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On remand, Sharon renewed her motion to strike DTU’s subrogation lien.
DTU resisted the motion to strike on the ground that the lien was allowed
pursuant to South Dakota law. The district court concluded Restatement
(Second) section 185 applied to this case, concluded that South Dakota law
controlled the subrogation question, and held that DTU had a valid lien against
the settlement proceeds under South Dakota law for compensation benefits
already paid to Moad. In the order denying the motion to strike, the district court
stated it believed the parties had stipulated that the amount of the subrogation
lien was $84,446.55. The district court also stated that if the parties had not
stipulated to the amount of the lien, the court would consider the matter further.
Sharon timely appealed the district court’s order, which is now before us. On
appeal, DTU disputes the amount of the lien and states it was not able to obtain
a hearing on the amount of the lien because the plaintiff filed her notice of appeal
before the issue could be resolved by the district court.
II.
Our review of the district court’s ruling is for corrections of errors at law.
See Iowa R. App. P. 6.907; see also Comes v. Microsoft Corp., 709 N.W.2d 114,
117 (Iowa 2006). On appeal, the plaintiff first contends the district court erred in
concluding Restatement (Second) section 185 was applicable to this case.
Section 185 provides as follows:
The local law of the state under whose workmen’s compensation
statute an employee has received an award for an injury
determines what interest the person who paid the award has in any
recovery for tort or wrongful death that the employee may obtain
against a third person on account of the same injury.
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Restatement (Second) of Conflict of Laws § 185 (1971). The plaintiff contends
an “award” can only be paid following an adjudicative determination of
entitlement to benefits, i.e., the entitlement to benefits must have been
established in a contested case or similar proceeding. Here, the plaintiff argues,
DTU voluntarily paid workers’ compensation benefits pursuant to South Dakota
law without a contested case proceeding. Therefore, the plaintiff argues, section
185 is inapplicable. DTU contends that section 185 includes those situations in
which the employer or insurance carrier has paid and the employee accepted
workers’ compensation benefits without regard to whether there was a contested
case proceeding. We conclude DTU has the better of the argument.
The plaintiff’s interpretation of section 185 is too narrow. First, the plaintiff
has not cited any cases adopting the narrow definition of “award.” Second, there
is authority to the contrary. Kaiser v. North River Insurance Co., 605 N.W.2d
193, 196 (S.D. 2000), holds that benefits voluntarily paid under South Dakota’s
workers’ compensation statute give rise to a statutory lien for benefits already
paid. Third, parsing the text of the Restatement as if it were statutory authority is
misplaced. “In general, we look to the Restatement not as the law but as a
guide.” Heinz v. Heinz, 653 N.W.2d 334, 339 (Iowa 2002). Our courts adopt the
rules and rationale set forth in a particular Restatement only to the extent the
rules and rationale are deemed consistent with our body of law and have
persuasive force. See Thompson v. Kaczinski, 774 N.W.2d 829, 839 (Iowa
2009). Thus, although our court may adopt the rules or rationale set forth in a
particular Restatement, we do not necessarily do so jot-for-jot.
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Most important, the plaintiff has not set forth any reason why an employer
or insurance carrier that voluntarily paid workers’ compensation benefits should
receive different treatment, for choice of law purposes, than an employer or
insurance carrier that paid benefits following a contested case proceeding.
Sound policy reasons actually militate against Moad’s interpretation of section
185. One purpose of the workers’ compensation law common to all states is to
encourage the efficient resolution of claims. See Moad, 831 N.W.2d at 118
(“[W]orker’s compensation is designed to be an efficient method for dealing with
workplace injuries . . . .”). It is at odds with workers’ compensation schema,
generally, to adopt a rule that incents employers and insurance carriers to
contest claims for no reason other than to preserve subrogation rights. Further, it
is at odds with workers’ compensation schema, generally, to force an employer
or insurance carrier to deny a claim without any factual or legal basis for doing
so, potentially subject to sanction, merely to protect a subrogation right. We thus
reject the plaintiff’s narrow interpretation of section 185.
The plaintiff also argues that South Dakota law should not determine the
subrogation issue because she filed in Iowa a workers’ compensation claim for
benefits related to Douglas’s death. There is no doubt that Moad was entitled to
file a claim for workers’ compensation benefits in Iowa even after receiving
benefits pursuant to the workers’ compensation scheme established in South
Dakota. See Reid v. Hansen, 440 N.W.2d 598, 602 (Iowa 1988). The fact that
Moad sought additional benefits in Iowa, however, is not at all relevant to
whether DTU has subrogation rights for benefits already paid pursuant to another
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state’s law. Moad cites cases purporting to stand for the proposition that the
state in which the injured employee chooses to seek compensation benefits
controls the subrogation question. The cases do not bear such weight. In each
of the cases cited, the dispositive issue was not where the claimant chose to file
the case, the dispositive issue was under which state’s workers’ compensation
law were the compensation benefits paid. See Kolberg v. Sullivan Foods, Inc.,
644 N.E.2d 809, 811 (Ill. App. Ct. 1994) (“As to third-party actions, if
compensation has been paid in a foreign state and suit is brought against a third
party in the state of injury, the substantive rights of the employee, the subrogated
insurance company and the employer are ordinarily held governed by the law of
the foreign state.”); Langston v. Hayden, 886 S.W.2d 82, 85 (Mo. Ct. App. 1994)
(stating “the law generally states that the question of whether and to what extent
the employer or its insurer is entitled to subrogation or reimbursement is to be
determined according to the provisions of the workers’ compensation law under
which the compensation for the employee’s injury was paid”); Am. Interstate Ins.
Co. v. G & H Serv. Ctr., Inc., 861 N.E.2d 524, 527 (Ohio 2007) (stating “the laws
of the state in which the workers’ compensation benefits were paid are
controlling”); Allen v. Am. Hardwoods, 795 P.2d 592, 595 (Or. Ct. App. 1990)
(stating that the State law pursuant to which compensation was paid determines
the rights of subrogation).
There are sound policy reasons for concluding the law of the state
pursuant to which benefits were paid is the controlling law with respect to the
employer or insurance carrier’s subrogation rights:
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First, subrogation rights in the worker’s compensation situation
arise exclusively under the applicable worker’s compensation act.
As a result, since the employer’s right to subrogation, if any, is
created by statute, the state statute creating such rights should be
applied to determine each of the employer’s rights and liabilities
thereunder. Second, it has been determined that the state whose
worker’s compensation program is most significantly involved has
the most significant interest in the application of its policies. Finally,
the application of the statute assures uniform and predictable
results and does not allow one party to take advantage of the
portion he likes and disregard those portions of which he
disapproves.
Brown v. Globe Union, a Div. of Johnson Controls, Inc., 694 F. Supp. 795, 798
(D. Colo. 1988). The same rationale is set forth in the Restatement:
Situations arise where an employee while acting in the
course of his employment is injured by the wrongful conduct of a
third party who is not declared immune from liability for tort or
wrongful death by an applicable workmen’s compensation statute
(see § 184). In such situations, the third party remains liable even
after an award has been rendered and paid. The workmen’s
compensation statutes differ as to what interest the person who has
paid the award has in the recovery on the cause of action against
the third party. Under some statutes, acceptance of compensation
by an injured employee or his dependents terminates his rights
against the third party. In such a case, only the person who has
paid the award (either the employer or an insurer) has an interest in
the cause of action. Other statutes provide, however, that the
person who has paid the award shall be reimbursed out of the
proceeds of the judgment, and that the employee shall receive any
sum that may remain.
Under the rule of this Section, the local law of the state
under whose workmen’s compensation statute the claimant has
received an award for an injury determines what interest the person
who paid the award has in the recovery on any cause of action for
tort or wrongful death that the employee may have against a third
person on account of the same injury.
Restatement (Second) of Conflict of Laws § 185, cmt. a.
We thus hold that the local law of the state under whose workers’
compensation statute an employee has received benefits determines what
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interest the person who paid the statutory benefits has in any recovery for tort or
wrongful death that the employee may obtain against a third person on account
of the same injury. Here, DTU had an obligation to pay workers’ compensation
benefits pursuant to South Dakota law. See S.D. Codified Law § 62-8-6 (Supp.
1999) (subjecting all employers of workers subject to their workers’
compensation act to the act). DTU voluntarily paid the statutory benefits
pursuant to South Dakota law, and Moad accepted the same. South Dakota law
provides DTU is entitled to subrogation. See Kaiser, 605 NW.2d at 196.
Accordingly, the district court did not err in applying section 185 of the
Restatement (Second) of Conflict of Laws and did not err in denying the plaintiff’s
motion to strike the lien.
III.
We have considered each of the parties’ respective arguments, whether
explicitly discussed herein. For the foregoing reasons, the judgment of the
district court is affirmed. Because the amount of the subrogation lien is in
dispute, we remand this matter for determination of the amount of the statutory
lien pursuant to South Dakota law.
AFFIRMED AND REMANDED.