FIFTH CIRCUIT REVERSES DISTRICT'S DENIAL OF ACQUIRED SUBROGATION RIGHTS
Last week, the Fifth Circuit Court of Appeals reversed a federal district court’s granting of summary judgment holding that a settlement agreement precluded an insurance company from enforcing subrogation rights that had been assigned to it. In Cont'l Ins. Co. v. Dawson, 2016 WL 1055371, at *1 (5th Cir. Mar. 15, 2016), a Hill International employee was severely burned from dangerously hot water while taking a shower in his assigned living quarters in Baghdad, Iraq. Continental Insurance was Hill’s workers’ compensation carrier and was required to pay for the injured employee’s medical expenses. The employee was transported and treated in Germany, and the expenses for his injuries were billed to Aetna, rather than Continental. Aetna paid $282,774.51 to overseas medical providers on behalf of the employee. Continental paid for the employee’s subsequent treatment.
Later, the employee filed a lawsuit in Texas state court against Fluor International which managed the employee’s living quarters in Iraq. Both Continental and Aetna intervened asserting liens on any settlement or judgment. Continental and the employee executed a settlement agreement that was approved by the Department of Labor that provided: 1) Continental would pay the employee a lump sum of $260,759.68 in exchange for a complete discharge of liability; 2) Continental would continue to assist in payment of future treatment; and 3) Continental asserted a lien upon any settlement or judgment in favor of the employee in the lawsuit against Fluor. Pursuant the Settlement Agreement, Continental’s lien amounted to $388,457, and after the employee entered into a confidential settlement with Fluor, the employee paid Continental the full amount of the lien under the agreement.
Afterward, Aetna filed a claim with the Department of Labor against Continental for reimbursement of the medical benefits paid on the employee’s behalf in Germany. Aetna and Continental settled the claim in exchange for $219,000 from Continental to Aetna. Importantly, Aetna assigned to Continental its subrogation and reimbursement rights connected with the employees’ treatment.
Continental sought a stipulation regarding its newly acquired subrogation rights in the amount of $282,774.51 and the employee refused. Continental filed suit, and the district Court granted summary judgment in favor of the employee holding that that settlement agreement Continental entered with the employee precluded Continental from enforcing the subrogation rights that Aetna had assigned to it.
On appeal, the Fifth Circuit carefully analyzed the settlement agreement entered between Continental and the employee and concluded that the Settlement Agreement did not require Continental to repay Aetna for employee’s past medical treatment and, in turn, it did not preclude Continental’s recovery of the subrogation and reimbursement rights that Aetna had assigned to it. Continental was entitled to subrogation for the past medical treatment Aetna paid while the employee was treated in Germany. As such, the Fifth Circuit reversed the district court’s judgment.