Arizona Supreme Court rules on interstate workers’ comp cases
The Arizona Supreme Court recently ruled on the assignment of benefits when an employee received workers’ compensation benefits under another state’s laws.
The Arizona Supreme Court has ruled that Arizona’s automatic assignment provision did not apply when an employee received workers’ compensation benefits under another state’s laws. Rather, the court decided, the law of the state in which an employee’s workers’ compensation was paid determined the assignment rights of the employer and employee.
The case
Stephanie Jackson, a South Carolina resident, was employed as a semi-truck driver for Drivers Management, LLC, a Nebraska company. Drivers Management contracted with Eagle KMC, LLC, an Arizona company, to provide training for Jackson in Arizona.
In February 2014, Jackson was a passenger in a semi-truck driven by Rachael Hender, an Eagle employee. Jackson was injured in an accident while Hender was driving in Arizona.
Jackson applied for and received workers’ compensation in Nebraska.
Drivers Management, which was self-insured for workers’ compensation, paid Jackson’s benefits.
In February 2016, a few days before Arizona’s two-year statute of limitations expired, Jackson filed a personal injury action in Arizona against Eagle, Hender, and Werner Enterprises (the registered owner of the semi-truck) (collectively, “Eagle”), alleging several claims, including strict liability, negligence, and “statutory violations.”
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In accordance with Nebraska law, because Drivers Management had a subrogation claim against any third-party recovery, Jackson also named Drivers Management as a defendant.
Eagle moved for summary judgment, arguing that pursuant to Arizona law, Jackson had no legal interest in the action. The law provides, among other things, that if a person entitled to compensation under Arizona’s workers’ compensation laws does not file an action against a third person who caused the injury within one year of the action accruing, the action is deemed to be assigned to the employer or the workers’ compensation insurer.
The trial court granted summary judgment in favor of Eagle, reasoning that the law applied in this case and, therefore, that Jackson had no legal interest in the action.
The trial court’s decision was reversed on appeal. The Arizona appeals court held that the law did not apply to Jackson’s claim because her “workers’ compensation benefits were adjudicated and paid in Nebraska” and, therefore, the law of Nebraska governed “subrogation, lien, and assignment rights in this action.”
The Arizona Supreme Court granted review to determine whether the automatic assignment provision applied to actions against a third-party wrongdoer when an injured employee received workers’ compensation benefits under another state’s laws.
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The Arizona Supreme Court’s decision
The court vacated the court of appeals’ opinion, reversed the trial court’s grant of summary judgment in favor of Eagle, and remanded the case to the trial court for further proceedings.
In its decision, the court explained that the issue was whether Arizona or Nebraska law applied to Jackson’s claim against Eagle. If Arizona law applied, then Jackson had no legal interest in the action because, under the applicable law, she had not filed a claim against Eagle within one year after the accident and her claim had been automatically assigned to Drivers Management. In contrast, the court continued, if Nebraska law applied, then Jackson retained her legal interest, beause Nebraska had no automatic assignment provision.
The court then ruled that Arizona’s automatic assignment provision did not apply when an employee received workers’ compensation benefits under another state’s laws. Rather, it decided, the law of the state in which an employee’s workers’ compensation was paid determined the assignment rights of the employer and employee.
The court rejected Eagle’s contention that because Jackson didn’t qualify for an exemption, she was subject to the automatic assignment provision and, therefore, had no legal interest in this action. According to the court, the law was not relevant to the choice of law issue in this case because it did not apply to the assignment rights of employees and employers in the context of a third-party claim. Rather, the court said, the law addressed when an out-of-state employee who was injured in Arizona was “exempt from” (that is, not entitled to receive) workers’ compensation benefits in Arizona.
The court concluded that because Jackson received workers’ compensation benefits in Nebraska, that state’s law regarding assignment applied to her claims against Eagle in this action. Thus, because Nebraska did not have an automatic assignment provision, Jackson had a legal interest in those claims.
The case is Jackson v. Eagle KMC L.L.C., No. CV-18-0056-PR (Ariz. Jan. 2, 2019).
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Steven A. Meyerowitz, Esq., (smeyerowitz@meyerowitzcommunications.com) is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc.