Allstate Insurance Co. v. Salem, et al./Nationwide Mutual Insurance Co. v. Lloyd.
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SUPERIOR COURT OF THE STATE OF DELAWARE T. HENLEY GRAVES SUSSEX COUNTY COURTHOUSE RESIDENT JUDGE ONE THE CIRCLE, SUITE 2 GEORGE TOWN, DE 19947 December 7, 2005 David A. Boswell Wachovia Bank Building 4602 Highway One, Second Floor Rehoboth Beach, Delaware 19971 Michael Silverman, Esquire Silverman & McDonald 1010 N. Bancroft Parkway, Suite 22 Wilmington, Delaware 19805 Bruce C. Herron 1220 N. Market Street, #300 P.O. Box 25047 Wilmington, Delaware 19899 Gregory A. Morris, Esquire Liguori, Morris & Redding 46 The Green Dover, DE 19901 Sean Dolan, Esquire Marshall, Dennehey, Warner, Coleman & Goggin P.O. Box 130 Wilmington, Delaware 19899 Cynthia G. Beam, Esquire Reger & Rizzo 1001 Jefferson Plaza, Suite 202 Wilmington, DE 19801 Michael Pedicone, Esquire 109 West 7th Street P.O. Box 1395 Wilmington, DE 19899 Robert J. Leoni, Esquire Morgan, Shelsby & Leoni 131 Continental Drive, Suite 206 Newark, DE 19713 RE: Allstate Insurance Company v. Sylvia Salem, Individually and as Parent/Guardian of Christian Marcelo Salem, Sofia Belen Salem and Silvia Daniela Salem ; Abraham Ismae l Sanchez-Caza, Gigi L. Gro ss Nationwide Mutual Insurance v. William C. Lloyd, Ann Schmittinger, as Personal Representative of the Estate of Susan Gordon Lloyd Whetstone, Sylvia Salem, as Personal Representative of the Estate of Luciano Salem, Gigi Gross Black, Abraham Ismael Sanchez-Caza, a minor by his Guardian, Rogelio Sanchez C.A. No. 02C-11-019 Date Submitted: October 11, 2005 Dear Counsel: This is the Court s ruling denying the application of St. Paul Travelers to intervene as a Party Plaintiff as subrogee of Sylvia Salem to enforce a workman s compensation subrogation lien. BACKGROUND Lucian o Salem died as a result of a head -on col lision c aused b y Susan Lloyd Whetsone. Ms. Whetstone, while under the influence of alcohol, attempted to pass three cars on a curve of a two-lane road. Mr. Salem was survived by his wife, Sylvia Salem, and three small children. Mr. Salem was employed by Children and Families First and was acting within the course and scope of his employment at the time of the accident. Thus, workmen s compensation death benefits began to accrue in accordance with 19 Del. C. § 2330. Mrs. Salem has received these compensation payments for herself and indirectly for her children. The tort feasers policy limits were interpled by the relevant liability insurers. The Salem children were later included in the interpleader ca se for their wrongful death claim s. The interpled funds were agreed to be split by and among the individual plaintiffs. A portion of the funds will be paid to the Salem children under a Court Guardianship and Sylvia Salem will receive none of the in terpled funds individually. The workmen s compensation carrier, St. Paul Travelers (St. Paul), seeks to place a subrogation lien on the payments made to the Salem children. St. Paul complains that by having the interpled tort feaser funds go directly to the children, the Salem family is attempting to defeat St. Paul s subrogation lien. St. Paul is correct. This is exactly what the Salem s attorney has structured, but it is permissible under the law, as will be discussed below. Separately, St. Paul is also trying to attach its workman compensation subrogation lien to any money award ed Mrs. Salem from the Salem s unde rinsured motorist funds. -2- Analysis Delaware s Workmen s Compensation Act constructed a system for an employee to compensate him if he is injured, or to compensate his dependants if he is killed while working within the scope of his employment.1 The act also creates a subrogation right for the employer to recover any money received by the employee or his dependants from a tort action against a third-party for an injury for which the employer paid workmen s compensation benefits. 2 Any recovery by the employee or his dependants against a thirdparty after deducting expenses of recovery, shall first reimburse the employer or its workers compensation insurance carrier for any amounts paid or payable under the Worker s Compensation Act .3 The employer s right of subrogation prevents double recovery by the employee.4 I. Subrogation of Children s Recovery for Wrongful Death of Their Father An employer can only seek subrogation against recoveries or awards from the person who actually received the compensatio n benefits. 5 The Workmen s Compensation Act states that children of the deceased employee cannot receive direct payment unless there is no widow.6 Even though compensation payments to a widow with children are higher than payments to a widow without children, the indirect benefit to the children does not trigger a subrogation claim against the children because the children never directly received the payments from workmen s compensation.7 1 2 3 4 5 6 7 19 Del. C. § 2330. 19 Del. C. § 2363 (a). 19 Del. C. § 2363(e). Moor e v. Gene ral Foo ds, 459 A.2d 126, 127 -128 (Del. Super. 1983). Welch v. S tate, 598 A.2d 684, 687 (Del. Ch. 1991). 19 Del. C. § 2330. Welch, 598 A.2d at 686-687. -3- In Welch, an employee was killed while working within the scope of his employment when he was hit by a car.8 The employee was employed by the State of Delaware at the time of his death.9 The employee was survived by his widow and minor children.10 In accordance with Delaware s Workmen s Compensation Act, the employer paid benefits to the widow, but not directly to the children.11 Subsequently, the widow and the dependent children won a wrongfu l death claim action against a third- party. 12 The Court had to decide if any portion of the wrongful death award to the children was subject to subrogation.13 The Court decided that there cannot be subrogation against the children s portion because they did not directly receive the workmen s compensation benefits, unlike the widow.14 Here, the facts are indistinguishable from the Welch case. Mr. Salem died as he was acting on behalf of his employer within the scope of his employment. The workmen s compensation carrier, as a result of Mr. Salem s death, began paying workmen s compensation benefits to his widow. Mr. Salem s dependent children did not receive directly any payments or benefits from the workmen s compensation carrier. The children did receive a wrongful death award. Therefore, their a ward is not subject to subro gation because they did not directly receive the workmen s compensation payments. There is no requirement to reimburse the workmen s compensation carrier for the award received by the children. 8 Id. at 684. Id. 10 Id. at 684. 11 Id. at 685. 12 Id. 13 Welch, 598 A.2d at 685. 14 Id. at 686-687. 9 -4- II. Subrogation of Und erinsured Motorist rec overy In Delaware, an employer has the right to impose a workmen s compensation statutory lien upon an employee or his dependants recovery under the employer s underinsured motorist coverage.15 However, when the employee has his own underinsured motorist coverage his employer does not have a right to place a workmen s compensation lien on a recovery by the employee or his dependants16 because the employee has given separate consideration for his or her own this protection.17 It is the public policy of the underinsured statute to allow people to co ntract for supplemen tal coverage to protect a gainst injury caused by underinsure d motorists. 18 Here, it is undisputed that the underinsured motorist policy in issue was a personal policy for the Salem family. Therefore, St. Paul cannot impose a subrogation lien on any recovery from the Salem s personal underinsured motor ist polic y. Conclusion St. Paul cannot place a lien on the Salem children s wrongful death recovery or Mrs. Salem s recovery from the personal underinsured motorist policy for the above stated reasons. Therefore, the application of St. Paul Travelers to intervene as a Party Plaintiff as subrogee of Sylvia Salem to enforce a workman s compensation subrogation lien is denied. Very truly yours, T. Henley Graves THG/jfg oc: Prothonotary 15 16 17 18 Harris v. N ew Castle County , 513 A.2d 1307 (Del. 1986). Adam s v. Delma rva Pow er & Light C o., 575 A.2d 1103 (Del. 1990). State v. Ca lhoun, 634 A.2d 335, 337 (Del. 1993). Adam s, 575 A.2d 1107-1108. -5-
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