Court of Appeals Concludes that Subrogation Controlled by South Dakota Law

In Moad v. Libby and Dakota Truck Underwriters, No, 14-0290 (Iowa App. March 11, 2015), a case decided on the same day as the decision in Moad v. Gary Jensen Trucking, the Court of Appeals concludes that a subrogation lien filed by the workers' compensation insurer was effective under South Dakota law.

Claimant was a resident of South Dakota, employed by a South Dakota trucking company. He was paid workers' compensation benefits voluntarily under South Dakota law for an injury that occurred in Iowa.  Following claimant's death, his wife sought benefits under Iowa's workers' compensation laws.  Claimant's wife settled the personal injury claim and the parties agreed that there was a right to subrogation if South Dakota law controlled, and no right to subrogation if Iowa law controlled.  The district court found that Iowa law governed and extinguished the lien.

The case came to the Iowa Supreme Court in Moad v. Dakota Truck Underwriters, 831 N.W.2d 111 (Iowa 2013).  The court ordered the district court to apply Section 185 of the Restatement on Conflict of Laws.  On remand, the court concluded that section 185 of the Restatement was applicable to the case.  That section provides that the local law of the state under whose workers' compensation benefits are paid governs the subrogation question.  The court concluded that since benefits were paid by South Dakota, there was a right to subrogation.

Claimant contended on appeal that an "award" of workers' compensation benefits could only be paid pursuant to an adjudicative determination of benefits, and that a voluntary payment was not sufficient.  The Court of Appeals concludes that claimant's claim is incorrect, and that voluntary payment is all that is necessary to conclude that benefits were paid pursuant to South Dakota law.  Because of this, the subrogation provisions of South Dakota law prevailed and claimant's recovery in the personal injury action was subject to subrogation.  The case was remanded for a decision concerning the amount of the subrogation lien.

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