Connecticut: Supreme Court Rules That Workers’ Comp Insurer Can Assert Equitable Subrogation Claim against Third-Party Tortfeasors

October 19, 2016 | Insurance Coverage

The Connecticut Supreme Court has ruled that a workers’ compensation insurer could maintain an equitable subrogation claim against third-party tortfeasors to recover benefits it paid on behalf of an insured employer to an injured employee.

The Case

An employee of a company doing business as Connecticut Reliable Welding, LLC, was working at a construction site when the retractable lifeline he was wearing failed, causing him to fall and sustain physical injuries. Because the employee’s injuries occurred during the course of his employment, Reliable was required to pay benefits under Connecticut’s workers’ compensation law.

Pacific Insurance Company, Ltd. issued a workers’ compensation insurance policy to Reliable and paid workers’ compensation benefits to the employee.

Pacific later sued Champion Steel, LLC, Shepard Steel Company, Inc., and Dimeo Construction Company (collectively, the “defendants”), seeking to recover the benefits it had paid to the Reliable employee. In its complaint, Pacific essentially alleged that the defendants had been negligent in their failure to provide an adequate fall arrest system at the work site, which negligence, Pacific asserted, had caused the employee’s injuries.

The defendants filed separate motions to dismiss the complaint, claiming that the trial court lacked subject matter jurisdiction because Pacific did not have standing to bring an action under either Connecticut’s workers’ compensation law or the common law doctrine of equitable subrogation.

The trial court granted the motion to dismiss, and the dispute reached the Connecticut Supreme Court.

The Connecticut Supreme Court’s Decision

The court reversed, ruling that Pacific could assert an equitable subrogation claim against the defendants.

In its decision, the court explained that equitable subrogation works to prevent a tortfeasor from being unjustly enriched by the fortuitous circumstance that the victim’s loss is covered by an insurer. The court added that the doctrine also serves to avoid double recovery in cases where the insured might recover from both the tortfeasor and insurer.

The court then observed that insurers had a longstanding and broad common law right to bring subrogation actions when they had paid insureds for losses caused by third-party tortfeasors, and it said that the workers’ compensation law had “not abrogated that right.” Moreover, the court decided, public policy supported recognizing an equitable subrogation claim in these circumstances because an employer or an employee might not have an incentive to bring an action against the tortfeasor.

The court rejected the defendants’ contention that Pacific could not bring its equitable subrogation claim because, at common law, personal injury claims could not be assigned. The court reasoned that a claim brought under the doctrine of equitable subrogation, such as Pacific’s claim against the defendants, was “not an assignment,” and, consequently, the common law prohibition against the assignment of personal injury claims did not apply.

The case is Pacific Ins. Co., Ltd. v. Champion Steel, LLC, Nos. SC 19402, 19403 (Conn. Sept. 27, 2016).

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  • Robert Tugander

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