Federal Court Allows Comp Insurer to Intervene in Injured Worker’s Third-Party Action

Providing a casebook-like discussion of the issues related to a workers’ compensation insurer’s intervention in a third-party civil action, the U.S. District Court for the Eastern District of Missouri held that while the insurer had failed to show that it had an absolute right to intervene, such intervention could—and would—be granted on a discretionary basis [Henderson v. Black & Decker (U.S.) Inc.], 2021 U.S. Dist. LEXIS 75730 (E.D. Mo. Apr. 20, 2021)]. The district court was unpersuaded that the court’s action would cause delay since the case was still in its early stages. The district court also stressed that the defendants’ arguments of potential prejudice due to jury confusion or logistical problems were speculative and could be easily remedied.

Background

Plaintiff filed a civil action against Black & Decker and Ratermann Manufacturing, alleging strict liability and negligence claims in connection with injuries Plaintiff sustained while he was operating a DeWalt drill in the course of his employment with his employer. The employer’s workers’ compensation insurer moved to intervene in the action, contending that it had provided workers’ compensation benefits to Plaintiff, that it would likely continue to pay medical and disability benefits to Plaintiff, that by virtue of the Missouri Workers’ Compensation Act it was surrogated to the rights of Plaintiff against any liable third-party, and that it desired to protect its subrogation lien.

Intervention as a Matter of Right

The district court initially turned to the question of whether the insurer could intervene as a matter of right. The court observed that under Missouri law, an employee who sues and recovers damages from a third-party tortfeasor for injuries to the employee holds the amount due to the employer in trust so as to ensure that the employer’s right of subrogation is protected. Moreover, if the third-party tortfeasor settled with the employee for a sum less than the workers’ compensation benefits paid by the employer, the settlement did not extinguish the employer’s right of subrogation if the amount of the settlement was inadequate and constituted a fraud on the employer.

Citing State ex rel. Transit Cas. Co. v. Holt, 411 S.W.2d 249 (Mo. App. Ct. 1967), the district court said that in order to intervene as a matter of right, the employer or insurer must show

1. Timely application for relief,
2. Inadequate representation of the applicant’s interest by existing parties, and
3. The possibility that applicant might be bound by a judgment in the action.

The court said it was undisputed that the insurer had an interest relating to the subject matter of the civil action. The insurer had not, however, demonstrated the other required elements. The Court found that Plaintiff and the insurer had the common interest of seeking maximum damages from the defendants. The insurer had pointed to nothing other than speculation to suggest otherwise. Accordingly, the district court concluded that the insurer had failed to meet its burden to demonstrate that it was entitled to intervene as a matter of right.

Permissive Intervention

The insurer argued in the alternative that the district court should permit intervention. Here, the insurer was on more solid ground. Permissive intervention was inherently discretionary. The district court noted that the Eighth Circuit had advised district courts to err on the side of intervention. While the defendants argued that allowing the insurer to intervene would cause delay and prejudice to the original parties, the court found such arguments unpersuasive.

The court stressed that the case was still in its beginning stages. It said, in fact, a Rule 16 Conference had not been held. As to the defendants’ arguments of potential prejudice due to jury confusion or logistical problems, the court found that such concerns were speculative and are easily remedied. The Rule 16 Conference would provide an opportunity to proactively address those issues. Any concerns that later developed due to the presence of the insurer in the action would be addressed by the Court as they arose.

The insurer undoubtedly had an interest in the civil action due to its subrogation right. Although the insurer had other options available to recoup the funds paid to Plaintiff, those options all required the insurer to file a separate action and plead additional elements. The court said intervention in the instant suit would, therefore, be the most expedient method for the insurer to protect its interests. Because the district court was required to err on the side of intervention, the insurer would be permitted to intervene.