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When May An Insurer May Withhold Workers’ Comp Benefits And Obtain Reimbursement From A Third-Party Settlement

Poremba v. Southern Nevada Paving, et. al, No. 66888 (Nev. Jan. 26, 2017)

Background

Plaintiff William Poremba was injured on the job while driving a truck for Defendant Southern Nevada Paving when a backhoe, owned by a different company, struck Poremba’s truck. Poremba filed for workers’ compensation and filed a lawsuit against the backhoe driver and the other driver’s employer. Poremba received benefits through Defendant S&C Claims Services, Inc. (“S&C”), but S&C eventually closed the claim. However, S&C also sent Poremba instructions on how to reopen his workers’ compensation claim if his condition became worse.

Poremba also settled his lawsuit against the backhoe driver and his employer for $63,500, but the settlement did not specify how the funds were to be allocated. A “significant amount of that settlement [was] paid directly to cover health-care providers’ liens.” In addition, of the $34,631.51 Poremba personally received, Poremba spent about $14,000 on additional medical treatment.

Exhausting All Of A Claimant’s Third-Party Settlement Funds

Eventually, Poremba’s condition worsened and Poremba filed with S&C to reopen his workers’ compensation claim, but S&C denied the request. Poremba appealed to the administrative appeals officer, but the appeals officer granted S&C’s motion for summary judgment (“MSJ”). S&C’s MSJ was based on S&C’s interpretation of the case Employers Ins. Co. of Nevada v. Chandler, 23 P.3d 255 (Nev. 2001), arguing under Chandler, if a claimant spent any of his settlement funds on expenses other than medical costs then he is precluded from reopening his claim.

In this appeal, the Court disagreed with S&C’s interpretation of Chandler, holding only those funds allocated in the settlement for medical costs must be exhausted before a claimant can reopen a workers’ compensation claim. Those funds not allocated for medical costs, such as for lost wages or pain and suffering, may be spent by the claimant on non-medical items “without fear that the insurer will forever be able to deny or refuse to reopen claims for future expenses that are within the scope of workers’ compensation.” The Court continued: “To deny a worker the opportunity to reopen his claims for future workers’ compensation benefits because he properly used the portion of his settlement money designated for pain and suffering to feed himself and his family is patently unjust and not supported by the statute.”

The Court explained the policy behind NRS 616C.215, which the Chandler court interpreted, was to prevent a double recovery on funds allocated for medical costs in a settlement or judgment and to “make the insurer whole.”

Insurer’s Reimbursement From A Claimant’s Third-Party Settlement

The Court next addressed the issue of what portion of a claimant’s settlement funds an insurer is entitled to reimbursement:

We … hold that because workers’ compensation insurance never compensates the injured worker for pain and suffering, an insurer is not entitled to reimbursement from any of the settlement funds that were designated for pain and suffering, or any other expense beyond the scope of workers’ compensation defined in NRS 616A.090.
In a different part of its opinion, the Court succinctly restated its holding regarding reimbursement to insurers as follows: “workers’ compensation insurers are not entitled to reimbursement from the portion of third-party settlement funds that do not fall within the definition of compensation found in NRS 616A.090.” NRS 616A.090 defines workers’ compensation as “the money which is payable to an employee or to the dependents of the employee as provided for in chapters 616A to 616D, inclusive, of NRS, and includes benefits for funerals, accident benefits and money for rehabilitative services.”

Since Poremba’s settlement did not specify which portion of the funds was to be used for medical expenses other than those funds going directly to medical providers, the Court remanded the case for the appeals officer to hold an evidentiary hearing on which other portions of the settlement, if any, were allocated to medical expenses.

Significance

The Court’s decision in Poremba makes clear insurers cannot deny a claimant’s request to reopen his claim because he has not exhausted all his settlement funds, regardless of how the funds were allocated. Furthermore, the Court itself stated: “Going forward, parties can expressly designate how settlement funds are to be allocated so that future evidentiary hearings are not necessary.” In addition, Poremba sets a bright line rule that insurers cannot obtain reimbursement from a claimant’s third-party settlement from those portions of the settlement that are designated as pain and suffering or that fall outside the definition of compensation as defined in NRS 616A.090.

ABOUT THE AUTHOR: Chris Lund is an Associate in the Las Vegas, NV office. Mr. Lund specializes in insurance defense, personal injury, professional liability, and general civil litigation. Contact him at (702)724-2648 or clund@tysonmendes.com.