Why Kansas Employers Should Utilize Statutory Assignment to Litigate Against Third Parties Who Injure Their Employees

ABSTRACT: Employers must carefully monitor injured workers' potential claims against third parties who caused workplace injuries, and proactively manage the litigation process.

Actions against Third Parties for Workplace Injuries

Under the Kansas Worker’s Compensation Act, injured workers receive worker’s compensation benefits for workplace injuries in lieu of damages from common law actions against their employers. Injured workers cannot sue their employers for workplace injuries, but they retain the right to sue third parties who caused the injuries.

The worker’s right to sue third parties for negligence benefits both the worker and the employer. The worker may receive a jury award or settlement greater than the workers compensation benefits. The employer has a subrogation interest so that it can recover the amount spent on workplace injuries that it did not cause.

The subrogation interest by itself is not enough to protect the employer, however. If the employer only has a subrogation interest, the employer’s ability to recover funds caused by third parties is dependent on whether the injured worker decides to file a lawsuit. If the injured worker does not pursue litigation against the third party, the employer would not have a chance for recovery.

Statutory Assignment under K.S.A. § 44-504(c)

The Kansas legislature enacted K.S.A. § 44-504(c) in recognition that the employer must be able to protect its interests when the worker chooses not to sue a third party. The statute requires that the injured worker file a lawsuit against the third party within one year of the injury to control the litigation. If the injured worker files during that first year, the employer has a subrogation interest, but ultimately plays a passive role in the litigation.

If the injured worker does not file a lawsuit, the worker’s cause of action against the third party is statutorily assigned to the employer one year from the date of the injury. In other words, the employer (or the employer’s worker’s compensation insurer) controls the lawsuit against the third party and may settle or go to trial without the worker’s consent. For an example of statutory assignment in action, see the Kansas Supreme Court’s recent opinion in Continental Western Ins. Co. v. Shultz, 297 Kan. 769, 304 P.3d 1239 (2013). The employer must bring the action in its own name or in the worker’s name “for their benefit as their interests may appear.”

The Judicial Exception to K.S.A. § 44-504(c)

Kansas courts have created a judicial exception to the statutory assignment provision in K.S.A. § 44-504, though the courts do not refer to the exception as such. In leading case Lady v. Ketchum, the employer did not bring a wrongful death action against a third party after the statutory assignment occurred. The worker’s widow filed a wrongful death action just four days before the two-year statute of limitations period expired altogether. The Court of Appeals held that the widow could pursue the lawsuit. As the employer chose not to file, barring the widow would essentially shorten the statute of limitations and relieve the third party from liability. Statutory assignment was created to protect the interest of employers who had fulfilled their worker’s compensation obligations, not to benefit negligent third parties.

Conclusion

Employers should actively monitor whether their workers file actions against third parties for their workplace injuries to protect their interests and avoid the judicial exception to statutory assignment. If the employee does not file within the first year, employers should quickly file after the one-year deadline has passed and statutory assignment has occurred, to gain control of the cause of action. The judicial exception will be unnecessary because the negligent third party is held accountable for the entire statute of limitations period. Statutory assignment keeps negligent third parties accountable for the injuries that they inflict on working people. Statutory assignment protects the interests of employers who have paid worker’s compensation benefits for injuries caused by third parties.