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Click here for the full text of this decision FACTS: Isabel Erivas was injured in a hit-and-run accident while using a company vehicle in the course and scope of her employment. Erivas filed a workers’ compensation claim against Association Insurance Co. and was paid more that $22,000. Erivas also received $5,000 in personal injury protection benefits from State Farm Mutual Automobile Insurance Co., who was her employer’s insurer for uninsured/underinsured motorist coverage. Erivas then filed suit against State Farm seeking UIM damages under its policy. In turn, State Farm filed a third-party action against Association on the ground that if State Farm were to be held liable to Erivas under the UIM policy, Association would be entitled to a statutory lien to recover the benefits it paid out for workers’ compensation. State Farm and Association reached a settlement whereby Association assigned its ownership and right of recovery on the lien to State Farm, and released State Farm from any other claims, in exchange for $2,500. Association was thus dismissed from the suit. A jury awarded Erivas $25,000, but the trial court entered a take-nothing judgment against her. The trial court found that as a matter of law, State Farm was entitled to an offset of more than $27,000 (for the PIP benefits it already paid, plus the statutory lien amount assigned by Association). Since the amount of offset exceeded the jury’s verdict, the trial court rendered judgment for State Farm. On appeal, Erivas claims Association had no right to subrogate benefits that would have been payable to her under the UIM policy. HOLDING: Affirmed in part; reversed and remanded in part. The court cites Labor Code �417.001, which says a workers’ compensation carrier has a statutory right to subrogation where a third party “is or becomes liable to pay damages” to an employee for an employee’s compensable injury, for which the employee receives worker’ compensation benefits. The court also cites �417.002(a), which says that the net amount recovered by a claimant in a third-party action “shall be used to reimburse the insurance carrier for benefits.” The court reviews several relevant opinions. In Employers Casualty Co. v. Dyess, 957 S.W.2d 884 (Tex.App.-Amarillo 1997, pet. denied), the court held that a workers’ compensation carrier’s statutory right of subrogation applies to any party liable for a claimant’s injuries, regardless of whether that liability arose in tort or contract. The court in Texas Workers’ Comp. Ins. Facility v. Aetna Cas. & Sur. Co., 994 S.W.2d 923 (Tex.App.-Houston [1 stDist.] 1999, no pet.), followed Dyess and held that a workers’ compensation carrier’s subrogation right extends to claims against a UIM insurance carrier. Next, the court reviews Liberty Mutual v. Kinser, 82 S.W.3d 71 (Tex.App.-San Antonio 2002, pet. withdrawn), which Erivas relies on. In that case, in which the workers’ compensation carrier asserted a subrogation right to the UIM benefits payable to the employee under the employee’s UIM policy, the court held that a workers’ compensation carrier had no subrogation right. The Kinser court read the term “third party” in �417.001 as being limited to a “third party who is or becomes liable to pay damages.” Consequently, the Kinser court concluded that “a carrier is only entitled to subrogation against damages paid to an injured employee by a third party who is or becomes liable to pay damages,” and that “damages” did not include UIM benefits. The court notes that the Kinser court was guided by what it found to be two competing public policies: the policy favoring personal UIM coverage, and the policy supporting the subrogation statute. The Kinser court found the former trumped the latter so as to avoid having the employee subsidize the insurance company. The court refuses to follow the Kinser opinion. The court finds the plain meaning of �417.001 creates a right of subrogation against a third part who is or becomes liable to pay damages, including an employer’s UIM insurance carrier found liable to pay damages. Unlike the facts in the Kinser case, in this case, the subrogated policy belonged to the employer, not to the claimant. Therefore, there are no competing public policies at issue here. The court thus confirms that Association had a right of subrogation, and as the owner of the subrogation lien, State Farm was entitled to an offset from the jury’s award. The court then addresses Erivas’ contention that State Farm is not entitled to the offset until it has first paid her attorneys’ fees, not to exceed one-third of the award. The court notes that under �417.002, “the net amount recovered by a claimant in a third-party action shall be used to reimburse the insurance carrier for benefits, including medical benefits, that have been paid for the compensable injury.” The court further reports that Texas appeals courts have interpreted the attorneys’ fees provision of �417.003 as providing three ways in which an attorney may recover fees based upon a subrogation recovery: “1. where the insurer has an attorney but he does not actively represent it; 2. where the worker’s attorney represents both the worker and the insurer; and 3. where the insurer has an attorney who actively represents it and participates in obtaining a recovery.” A review of the record shows the court that State Farm’s attorney did not actively represent its acquired subrogated interest in Erivas’ third-party action. Recovery on that lien was the result of work done by Erivas’ attorney. The court finds the trial court abused its discretion in allowing the offset without first following the dictates of the attorneys’ fees provisions of �417.003. OPINION: Chew, J.; Larsen, McClure and Chew, JJ.

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