November 2002
Table of Contents
Mahoney, Dougherty and Mahoney, P.A. distributes this newsletter to its clients and others to keep them informed about developments in the area of tort and insurance law. The articles are not intended to be legal advice and should not be relied on without counsel.
WORKERS' COMPENSATION IN UNINSURED/UNDERINSURED MOTORIST CLAIMS
Patrick E. Mahoney
The court of appeals has affirmed a longstanding rule that workers' compensation carriers do not have a subrogation right under Minn. Stat. § 176.061 in uninsured or underinsured motorist claims. The court found that the insurer's rights under Minn. Stat. § 176.061 are based on tort liability and do not extend to sums for which a third party is contractually liable. Minnesota courts have consistently held that an employer and a workers' compensation carrier do not have subrogation rights against benefits paid by an uninsured or underinsured motorist insurer to or on behalf of an injured employee. In the Matter of the Appointment of Trustee for the Next-of-Kin of Steven Michael Freitag , (Minn. App. 4/2/02, Court File No. C9-01-1727).
STATE MEDICAL ASSISTANCE LIEN FOUND PREEMPTED BY FEDERAL LAW
Patrick E. Mahoney
The Minnesota Supreme Court has found that the state medical assistance lien is preempted by the federal Medicaid anti-lien provision in a case involving a significant injury to a person who received Medicaid assistance through the state medical assistance program. Martin v. The City of Rochester , 642 N.W.2d 1 (Minn. 2002). In addition, the supreme court found that the state medical assistance assignment has to be construed so that the medical assistance recipient assigns to the state only the claims for reimbursement of medical care and medical expense claims that the state may have paid under the medical assistance program. Further, the state's medical assistance subrogation provision is preempted by the anti-lien provision of the Federal Medicaid Statute.
In a rather lengthy discussion of the interaction of state and federal law, the court found that medical expenses are one of a "bundle of sticks" that an injured party has, with the "bundle of sticks" representing all claims that the injured party might be able to bring. By assigning to the state the right to recover expenses, a necessary prerequisite to receipt of Medicaid assistance under the state and federal provisions, the injured party extinguishes its rights to that stick and takes that stick out of the injured party's bundle and gives it to the state. Through this assignment, the state then has its independent right to recoup from the liable third parties the medical benefits paid out by the state.
The court found that the state medical assistance lien provision and the state medical assistance subrogation provision are preempted by federal law in that these provisions are an attempt by the state to attach other claims (or "sticks") out of the "bundle of sticks" that federal law has specifically indicated are not lienable.
In this particular case, the underlying settlement did not clearly define what part of the settlement was attributable to the medical expenses incurred by the injured party and what part of the settlement was for other causes of action that the injured party might have, i.e., pain and suffering, loss of earning capacity, etc. Thus, the supreme court remanded the case back to the district court for determination of apportionment of the settlement proceeds.
From a workers' compensation perspective, this should not affect the day-to-day operation of cases. The Department of Human Services (the state agency overseeing the Medicaid, medical assistance and general assistance programs) typically intervenes for both general assistance and medical assistance. Under the Workers' Compensation Act, the Department has the right to recoup as a third-party payor from any employer and insurer found responsible for payment of benefits just as would any other third-party payor or health care provider with an outstanding claim. Given the statutory workers' compensation scheme, the anti-lien provisions of the Federal Medicaid Act would not foreclose that right. Nor would the anti-lien provision foreclose the right of the Department to recoup general assistance benefits for a period of time contemporaneous with a period of time of temporary total disability claimed by an injured employee.
More impact would be felt in civil litigation where it would be necessary, especially in settlement, to apportion part of the settlement to deal with the medical assistance lien if that lien is not settled separately.
The case really shows that the state has no right to impose a lien on the balance of the injured party's claims, and that its only remedy is to recoup from medical expenses awarded by the trier of fact, either as part of the injured party's case in chief or in a separate suit brought by the state under the assignment provisions.
A PUNCH IN THE FACE ISN'T AN ACCIDENT
Victor Lund
The last newsletter reported that the Minnesota Supreme Court had decided a case, American Family v. Walser , 628 N.W.2d 605 (Minn. 2001), which may have expanded the scope of the term "accident" in liability insurance policies. However, a recent decision by the court of appeals makes it plain that the scope of accident is not broad enough to include an intentional punch in the face. Illinois Farmers Insurance Co. v. Klinkhamer , (unpublished, Court of Appeals May 7, 2002). Klinkhamer punched Faber in the face in some kind of street party in downtown Minneapolis. The incident involved a confrontational atmosphere and threats. The blow was severe enough to break facial bones and to deform Faber's left eye socket. Klinkhamer tried to get coverage under his homeowners policy after Faber brought suit. The insurer moved for a declaration of no coverage after depositions. The Walser court had held that an incident can be an accident if it involves either unintentional conduct or an unintended result. Unfortunately for Klinkhamer, punching somebody in the face is neither unintended conduct nor an unforeseen result. The court found that the record did not support a claim that there was a confrontational atmosphere which led to the punch in the face as a reflex to a perceived threat. Nor did the record show that it was merely a matter of harmless taunting which negligently increased the general level of hostility which further negligently led to violence. The argument may have been creative, but it was not good enough. The intentional act exclusion applied as a matter of law.
SUPREME COURT GIVES MINORS A LOT LONGER TO SUE FOR SEX ABUSE
Victor Lund
In June, the Minnesota Supreme Court issued its first opinion since 1998 on the delayed discovery statute of limitations for claims alleging sexual abuse. Although the opinion does not explicitly overrule any prior decisions, it changes what had been settled law on the question. DMS v. Barber , 645 N.W.2d 383 (Minn. 2002). Barber was a foster parent supervised by Professional Association of Treatment Homes (PATH). DMS was placed in the Barber home in 1992 when he was 13. Barber began to touch him in an inappropriate manner. DMS complained to his mother and to a social worker about the abuse, which led to his removal from the house in February 1993. DMS turned 18 in 1997. He sued PATH and Barber after his 19th birthday. The trial court found that the action was untimely based on the precedential case law existing as of then. The court of appeals affirmed, but the supreme court reversed. The supreme court held categorically that minors are incapable of understanding that they have been sexually abused. Consequently, DMS was incapable of understanding that he was the victim of sexual abuse at age 13 when the abuse was going on. Consequently, his claim did not accrue until his 18th birthday. He had six years after his 18th birthday to sue the case. The supreme court also held that any claim for respondeat superior arising out of sexual abuse is subject to the same statute of limitations as the claim against the abuser. The court of appeals had held in Oelschlager v. Magnuson , 528 N.W.2d 895 (Minn. App. 1995) that respondeat superior was subject to a two-year statute of limitations, and that the claim accrued on the date of abuse. The DMS opinion does not specifically overrule Oelschlager , but it plainly has that effect.
We question this decision. First, it seems to be an unwarranted stretch to state that no minor is capable of understanding sexual abuse. DMS, after all, complained about Barber's abuse of him. The supreme court states that its earlier decisions on this statute implicitly embodied the same holding. Lots of attorneys have read those opinions for almost a decade now without seeing that holding in them. Secondly, it seems equally implausible to hold that an abused minor, who had no idea during minority that he or she had been abused, all of a sudden realizes everything about the abuse on the 18th birthday. The court was interpreting § 541.073 which states that a cause of action for sex abuse does not accrue until the plaintiff recognizes a connection between injuries and the abuse. Apparently the court now finds that there can be no cases where the plaintiff first recognizes a connection between abuse and injuries after his or her 24th birthday. All claims accrue on the 18th birthday and expire six years later.
Justices Stringer and Anderson dissented. They were of the view that the majority was ignoring the statute in order to impose its own view of proper public policy. Maybe the majority's view is good policy, but it is not the policy which the legislature chose.
Gregory A. Zinn
The Minnesota Court of Appeals recently clarified claims for damages by an injured person under the liquor act, also known as the civil damages act or dram shop act. In Britamco Underwriters, Inc. v. A & A Liquors of St. Cloud , 649 N.W.2d 867 (Minn. App. 2002), an individual claiming to have been injured by the illegal sale of intoxicating beverages by Britamco's insured liquor vendor, claimed that he was entitled to recover not only for his "bodily injury" under one limit of the dram shop insurance policy, but also for his own "loss of means of support" under a separate limit. The court of appeals refused to allow him both claims, concluding that the claim for bodily injury encompassed all of the claimant's damages, including his own claim for lost wages and diminished earning capacity. The "loss of means of support" claim under the statute and coverage is limited to dependents of a person injured as a result of an illegal sale. The court interpreted the statute to mean that "loss of means of support" includes the "requirement that a claimant be a dependent." The court of appeals made reference to the language in the insurance policy defining bodily injury broadly to include economic damages. It would be prudent to have every policy make that distinction. However, since the court of appeals construed the statute to limit the injured person's claims to bodily injury, existing policy language should be sufficient under the court's interpretation of the law.