Memorandum
TO:
FROM:
RE: Short-term & long-term disability benefits
DATE: 6/19/2020
Summary of Issues and Answers
- Are there any circumstances in Iowa where the fact that a plaintiff has received short-term or long-term disability benefits for their accident related injuries is admissible at trial?
Yes, it is a generally accepted practice to admit in evidence the fact that the plaintiff who has received short-term or long-term disability benefits in Iowa. In the appellate case of John Giza vs. BNSF Railway Company No. 12-2023 decided by the Supreme Court of Iowa cited the case of Eichel, 375 U.S. at 255, 84 S. Ct. at 317, 11 L. ed. 2d at 309, stating in wise that, the goal in introducing disability payments in Eichel was to show that plaintiff was injured as badly as he claimed and was not motivated to go back to work. The Supreme Court noted that, there will generally be other evidence having more probative value and involving less likelihood of prejudice than the receipt of a disability pension. However, there is a significant danger of prejudice when the jury learns that the plaintiff is receiving other compensation arising from the same injuries for which the plaintiff is seeking compensation. Its admissibility in trial will likewise rule out that the plaintiff is merely malingering the extent of his disability.
- Are there any Iowa cases where the Court has ruled that entities who pay short-term or long-term disability benefits have a subrogation interest, lien or right to reimbursement in the proceeds of a plaintiff’s personal injury settlement or verdict?
Yes, disability payments whether long-term or short-term arising out of Personal Injury Protection (PIP) and Medical Payments (MedPay) paid for by an insurance company carries with it subrogation rights. In the case of Ludwig vs. Farm Bureau Mutt. Ins.Co., 393 N.W.2d 143 (Iowa 1986), the court ruled however that, absent the consent of insured/subrogor, a subrogated party that has paid only a portion of the entire loss has no right to a direct claim of subrogation against the tortfeasor in competition with the insured who is actively pursuing the entire claim. It therefore follows that consent has to be taken from the insured for subrogation to be made possible in full. Furthermore, in the case of Hopping v. Coll. Block Partners, 599 N.W.2d 703 (Iowa 1999) it was ruled that “Under Iowa law, a partially subrogated insurer may not pursue its subrogation claim directly against the tortfeasor at any time absent some inability or unwillingness of the subrogor to pursue the entire claim.”
- Does an attorney who has notice of the payment of short-term or long-term disability benefits to a client have any ability to release settlement/verdict money for those payments to the client or does the attorney have to hold the settlement/verdict money for those payments until there is a negotiated settlement or ruling on the issue of whether the entity who has made the payments has a subrogation interest, lien, or right to reimbursement?
The attorney must hold the disability benefits of his/her client until there is a ruling as to whether the worker’s compensation insurance carrier has a subrogation interest, lien or right to reimbursement. In the case of Fisher v. Keller Industries, Inc. 485 N.W.2d 626 (1992), the Supreme Court of Iowa reiterated that under Iowa Code section 85.22 (1) the employer or the employer’s insurer which paid the compensation, shall be indemnified out of the recovery of damages to the extent of the payment so made including legal interest, this will constitute a lien on the claim for such recovery and the judgment thereon for the compensation for which the employer or insurer is liable. When a third-party case is resolved, the carrier is entitled to first-money reimbursement and a future credit, less attorney’s fees to the employer’s attorneys.
- Does the attorney/firm open itself up to legal liability if we release the funds for the short-term or long-term disability payments to the client prior to a negotiated settlement or ruling on the issue?
Yes, in the case of First Bank of Burlington, Iowa v. Hawkeye Paving Corp., the court opined that the legislature intended in enacting the Iowa Code section 85.22 (1) that the employee or his attorney would provide the carrier all the information needed to comply with its obligation to give notice and intervene. In receiving a copy of the original notice, the employer would have the caption of the third-party suit, the county in which it was filed, and the assigned case number by the clerk of court. Everything needed in order to prepare a lien and file the same. The thirty (30) day period for filing the notice of lien would commence only when the original notice of the lawsuit has been provided with all the listed information.
Yes, Rule 32:1.15(d) of the Iowa Rules of Professional Conduct provides that “Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property.” Lawyers often receive funds from which the lawyer’s fee will be paid however he/she is not required to remit to the client funds that the lawyer reasonably believes represent fees owed.
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