Brief Fact Summary. The Iowa District Court for Pottawattamie County determined the amount of the State’s lien in the Appellee, Sourbier (Appellee) a highway patrol officer’s recovery against a third party tortfeasor in the officer’s declaratory judgment action. The Appellants, the State of Iowa and the Iowa Industrial Commissioner (Appellants), challenged the decision.
Synopsis of Rule of Law. An employer is fully entitled to be reimbursed from third-party recoveries for pain and suffering, even when the portion of an award attributable to pain and suffering is clearly separable from the portion attributable to economic losses.
Issue. Did the State have a right to a lien on that portion of the officer’s judgment compensating him for pain and suffering?
Held. Yes. The court reversed the judgment, holding that the district court erred in finding that the Appellants did not have a lien on the portion of the officer’s judgment for pain and suffering. The court also concluded that the Appellants’ lien should not have been limited to the amount awarded by the jury, nor should it have been reduced by 20 percent for the Appellee’s comparative fault.
Discussion. Employer subrogation essentially protects an employer by allowing recovery of compensation paid to its employee when the employee files an independent action against the responsible third party. The right of subrogation usually does not mature into an enforceable claim or lien unless, as was the case in Sourbier, and until the employer perfects the right, i.e., properly files within the statutory period. As the Sourbier court succinctly stated, “[W]orkers’ compensation law provides that an employer, or the employer’s insurer, who has paid compensation to an employee, shall be indemnified out of the recovery of damages paid to the injured employee by a third party and shall have a lien on the claim for such recovery and the judgment thereon for the compensation for which the employer or insurer is liable.” The court then explained, as per the relevant statute (which mirrors comparable statutes in most jurisdictions), “An employer’s statutory right to be indemnified and to
have a lien on a judgment entered upon the employee’s third-party tort action is provided [by the statute]. The statute is dense in its detail, providing a calculus by which to arrive at subrogation: “[I]f compensation is paid the employee . . . the employer by whom the same was paid, or the employer’s insurer which paid it, shall be indemnified out of the recovery of damages to the extent of the payment so made, with legal interest, except for such attorney fees as may be allowed, by the district court, to the injured employee’s attorney and shall have a lien on the claim for such recovery and the judgment thereon for the compensation for which the employer or insurer is liable.”
The court then takes the opportunity to expand on the general purpose and structure of workmans’ compensation law, noting first, “Under workers’ compensation law, an employer provides, secures, or pays compensation for any and all personal injuries sustained by an employee arising out of and in the course of the employment, and in such case, the employer is relieved from other liability for recovery of damages or other compensation for such personal injury.” The court further explained, “Damages for personal injuries generally consist of loss of earnings, medical expenses, and mental and physical pain and suffering.” An important factor in the equation, however, is the liability of a third party, as the court noted, “An employee’s amount of recovery in a third-party action might be greater than the workers’ compensation paid, since there may be other elements of damage allowed in an action for tort, as, for instance, pain and suffering.” Thus, as here, “An employer is fully entitled t
o be reimbursed from third-party recoveries for pain and suffering, even when the portion of an award attributable to pain and suffering is clearly separable from the portion attributable to economic losses.”