The recent case of Stosberg v. Elec. Ins. Co. addressed the applicability of an Uninsured Motorist Coverage (“UM Coverage”) Exclusion regarding when an insured makes a claim for UM Coverage after receiving Workers’ Compensation benefits. 2021 Mo. App. LEXIS 119 (Mo. App. W.D. Feb. 9, 2021). As this is a common policy exclusion that comes up in the context of UM Coverage, the decision in Stosburg should be helpful to practitioners advising their clients regarding when to pay out UM Coverage.
In Stosberg, the insured was injured while working a DUI checkpoint in the scope of his duties as a sergeant with the Missouri State Highway Patrol (“MSHP”). Id. at *2. After stopping a suspect on a motorcycle, the suspect refused the insured’s orders to get off and shut off the vehicle. Id. The insured attempted to apprehend the suspect when the suspect accelerated his motorcycle forward. Id. At the pertinent time, the insured had a hold on the suspect’s backpack. Id. The forward momentum of the motorcycle caused injuries to the insured’s neck as he pulled the suspect off the motorcycle. Id.
Following the incident, the insured made a claim against MSHP for Workers’ Compensation benefits relating to his workplace injuries. Id. The insured received $9,433.73 for his medical expenses and $19,093.20 as a lump sum settlement from the insurer of the MSHP’s workers’ compensation liability. Id. at *2–3.
The insured then filed suit against the suspect on the motorcycle and Electric Insurance Company (“Electric”). Id. at *3. The insured sued Electric for breaching an insurance agreement and vexatious refusal to pay. Id. At the time, Electric insured the insured for $200,000 in UM Coverage. Id. In part, Electric denied the claim for UM Coverage based on the argument that the suspect’s liability did not arise out of the ownership, maintenance, or use of an “uninsured motor vehicle.” Id.
More relevant to this discussion, Electric also denied based on a Exclusion to UM Coverage that provided the following:
This coverage shall not apply directly or indirectly to benefit any insurer or self-insurer under any of the following or similar law:
- Workers’ compensation law; or
- Disability benefits law.
Id. at *3–4.
On appeal, the insured argued the Workers’ Compensation Exclusion could not apply to his claim for UM Coverage because the Workers’ Compensation insurer has no right of subrogation against first-party UM Coverage because Mo. Rev. Stat. § 287.150 only applies to subrogation against “third persons.” Id. at *16. The court in Strosburg agreed and supported its conclusion with a review of § 287.150 and the subrogation rights held by a Workers’ Compensation carrier. Id. at *16–19.
The court in Strosburg noted that the Workers’ Compensation Exclusion could only be applicable if the UM Coverage would apply to benefit the Workers’ Compensation carrier in the prior Workers’ Compensation claim. Id. at *17. Electric unsuccessfully argued that the Workers’ Compensation carrier had a right of subrogation pursuant to § 287.150. Id. The court in Strosburg set forth the following relevant provisions of § 287.150:
Where a third person is liable to the employee . . . for the injury or death, the employer shall be subrogated to the right of the employee . . . against such third person, and the recovery by such employer shall not be limited to the amount payable as compensation to such employee . . . but such employer may recover any amount which such employee would have been entitled to recover. Any recovery by the employer against such third person shall be apportioned between the employer and employee . . . using the provisions [that follow in § 287.150].
Id. (emphasis in original).
Based on the language of § 287.150, the court concluded that whether the Workers’ Compensation insurer had a right of subrogation with respect to the UM Coverage claim turned on whether Electric was a “third person” as defined by § 287.150. Id. at *17–18. “It is well established that UM carriers are not ‘third persons’ within the meaning of § 287.150.” Id. at *18 (citing Yaakub v. Aetna Cas. & Sur. Co., 882 S.W.2d 743, 745 (Mo. App. E.D. 1994) and Barker v. Palmarin, 799 S.W.2d 117, 118 (Mo. App. W.D. 1990)).
Because Electric did not qualify as a “third person” within the meaning of § 287.150, the court concluded that no right of subrogation existed with the Workers’ Compensation insurer as to the claim for UM Coverage. Id. “Therefore, the policy exclusion at issue is not triggered.” Id.
The court further noted that the purpose of providing a right of subrogation to an employer or Workers’ Compensation insurer is to facilitate the recoupment of workers’ compensation payments made to the injured employee from the person ultimately responsible for injuring the employee. Id. In stark contrast, UM Coverage exists as a first-party coverage that insures the injured party rather than the tortfeasor. Id. at *18–19. “Although UM Coverage insures the insured against the tortious conduct of a third person, UM benefit claims are contractual claims rather than tort claims.” Id. at *19 (citations omitted). “Accordingly, the policy purpose of the subrogation statute—to place the loss upon the ultimate wrongdoer—would not be served by allowing a Workers’ Compensation employer a subrogation interest on sources of compensation that do not come from the ultimate wrongdoer.” Id.
Following its analysis of § 287.150 and the policy rationale of subrogation for a Workers’ Compensation insurer, the court concluded that no subrogation interest existed as to the UM Coverage claim against Electric and therefore the Workers’ Compensation Exclusion did not apply. Based on this finding, the court in Strosburg determined that UM Coverage existed for the insured.
The decision in Strosburg sheds light on the applicability of Workers’ Compensation Exclusions and severely limits their application under certain circumstances. Any Workers’ Compensation Exclusion that limits itself to the direct or indirect benefit of a Workers’ Compensation insurer will not be enforceable in the UM Coverage context.
Article by Jim Ribaudo