Wisconsin Supreme Court Holds that Worker’s Compensation Carrier’s Settlement With Third Party Tortfeasor Binds the Employee to the Terms of the Settlement

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August 1, 2014

Under Worker’s Compensation, an injured employee receives benefits on a “no-fault” basis and the employer receives immunity from civil suit for damages. When a third party’s negligence causes or contributes to the employee’s injury, however, the third party is fair game to be sued by the injured employee and/or the employer’s worker’s compensation carrier (or employer that is self-insured for worker’s compensation). The employee and the worker’s compensation carrier have an “equal voice” in the prosecution of third-party suits.
Since 1953 it has been established that when the employee unilaterally decides to settle his or her claim, the worker’s compensation carrier is bound by the settlement amount. The Wisconsin Supreme Court affirmed that principle in Bergren v. Staples, 263 Wis. 477, 57 N.W.2d 714 (1953). In that case Richard Bergren, a construction worker, was killed on the job while directing the unloading of trucks owned and operated by a third party.
Liberty Mutual Insurance Company, the worker’s compensation carrier for Bergren’s employer, joined Bergren’s widow, Beatrice, in prosecuting a lawsuit against the driver and operator of the truck that was being unloaded at the time of Bergren’s death. The defendants offered a judgment to be taken in the amount of $5,500. Beatrice accepted this settlement maneuver offer, but Liberty Mutual objected. The Wisconsin Supreme Court held in Bergren that Beatrice’s unilateral decision to accept the settlement offer bound Liberty Mutual to the $5,500 settlement. The proceeds of the settlement were then allocated between Beatrice and Liberty according to the allocation formula in section 102.29, Wisconsin Statutes, which governs the prosecution of third-party claims and lawsuits arising out of industrial injuries.
On July 22, 2014, the Wisconsin Supreme Court issued its decision in Adams v. Northland Equipment Co., Inc., 2014 WI 79, which upheld the converse of Bergren. The unilateral decision of the worker’s compensation carrier to settle with the third party tortfeasor compels the injured employee to accept the terms of the settlement over his objection. Russell Adams was driving a snow plow for the Village of Fontana when he was injured. Adams sued a company that had performed maintenance work on the snow plow truck, Northland Equipment. The worker’s compensation carrier, The League of Wisconsin Municipalities Mutual Insurance Company (LWMMIC) joined the suit. LWMMIC had paid over $148,000 in worker’s compensation benefits for temporary and permanent partial disability benefits and medical expenses.
The discussion of the facts reveals that while Adam’s barely survived a motion for summary judgment, his case for establishing causal negligence against Northland was weak. Presumably, LWMMIC acted on the principle that a bird in the hand is worth two in the bush, and unilaterally accepted a $200,000 settlement offer from Northland’s liability insurance carrier. The majority decision held over a powerfully written dissent that the “equal voice” scheme under section 102.29 for prosecuting lawsuits against third parties applies equally to injured workers and worker’s compensation carriers (and self-insured employers). As a result, Russell Adams was compelled by LWMMIC’s settlement decision to settle, and he was not permitted to have his case be determined by a jury. The effect of Adams may be to create some leverage for liability insurers in defending third-party lawsuits by allowing them to exploit divergent interests between the employee and the worker’s compensation carrier.

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