Forum Section Critical in Carolina UIM Benefits Case

A recently published North Carolina Court of Appeals workers’ compensation case highlights an issue for consideration when there is an opportunity to select a forum for workers’ compensation benefits involving a claim where UIM benefits are a potential recovery source for subrogation.

In Walker v. K&W Cafeterias, Robert Walker (decedent) was killed in a motor vehicle accident while driving a truck for his employer, K&W Cafeterias, Inc. K&W is a North Carolina corporation, but the accident occurred in South Carolina and decedent was a resident of South Carolina. The decedent’s wife, Gwendolyn Walker (plaintiff), filed a claim for death benefits pursuant to the North Carolina Workers’ Compensation Act. Although decedent had six children, they were all over the age of eighteen at the time of decedent’s death. It was stipulated that the plaintiff was the sole surviving dependent of decedent. The Industrial Commission entered a consent opinion and award of $333,763.00 in workers’ compensation benefits to the plaintiff.

The plaintiff was also the personal representative of her husband’s estate in South Carolina. In that capacity, she brought a wrongful death claim against the at-fault driver in South Carolina. The wrongful death lawsuit was ultimately settled for $962,500.00, $912,500.00 of which came from underinsured motorist (UIM) coverage. In addition to the plaintiff, decedent’s six children were able to share in this recovery.

K&W requested a hearing seeking a subrogation lien against $333,763.00 of the $962,500.00 third-party settlement. The deputy commissioner filed an opinion and award in favor of K&W, completely satisfying their $333,763.00 subrogation lien out of the $962,500.00 from the third-party settlement.

The plaintiff appealed to the full commission. The full commission held that the defendants were entitled to a subrogation lien on the entire third-party settlement proceeds, and not just the plaintiff’s share of the third-party recovery.

The plaintiff appealed to the North Carolina Court of Appeals contending that the Industrial Commission exceeded its jurisdiction by ordering the distribution of a wrongful death recovery for some beneficiaries who never received workers’ compensation benefits, specifically, decedent’s six children. In other words, the plaintiff did not dispute that the defendants had a lien, but argued that the lien should not extend to portions of the third-party settlement that are the shares of the decedent’s six children.

The Court of Appeals held that even though the beneficiaries under the third-party wrongful death claim (decedent’s six children) never received any workers’ compensation benefits, they were nevertheless subject to the subrogation lien statute under N.C.G.S. 97-10.2.

The plaintiff further contended that the UIM proceeds were located outside of North Carolina and therefore the Industrial Commission lacked jurisdiction over the proceeds. The Court of Appeals held that the defendants could enforce the opinion and award under South Carolina’s version of the Uniform Enforcement of Foreign Judgments Act. The Court of Appeals added that under traditional conflicts of law rules, procedural and remedial issues are determined by the law of the forum where the remedy was sought. Subrogation rights on UIM funds are procedural and remedial in nature and the forum where relief was sought was North Carolina. Thus, North Carolina law, rather than South Carolina law (which does not allow for subrogation of UIM proceeds for workers’ compensation benefits), controlled the rights of the parties concerning the subrogation lien.

In conclusion, the Court of Appeals held that the full commission correctly concluded that the defendants could assert a subrogation lien for workers’ compensation benefits paid to plaintiff on the UIM policy proceeds obtained by plaintiff in the South Carolina wrongful death action.

In hindsight, had the workers’ compensation claim been administered in South Carolina, there would have been a limited recovery for the workers’ compensation lien. It is also a good reminder of the reach of N.C.G.S. 97-10.2, which states that the “lien may be enforced against any person receiving such funds” from a third party settlement.

 

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