Nebraska County Courts Lack Jurisdiction to Determine Comp Insurer’s Subrogation Interest

A Nebraska county court lacked subject matter jurisdiction when it conducted a subrogation hearing to determine a workers’ compensation insurer’s interest in a wrongful death settlement that had been reached between a deceased employee’s estate and an alleged negligent third party. Sole jurisdiction was with the state’s district court, held the Supreme Court of Nebraska [see Travelers Indem. Co. v. Wamsley (In re Estate of Evertson), 295 Neb. 301, 2016 Neb. LEXIS 179 (Dec. 16, 2016)]. Moreover, since the parties could not confer subject matter jurisdiction upon a judicial tribunal either by acquiescence or consent, lack of subject matter jurisdiction could be raised at any time by any party or by the court sua sponte.

Background

The employee died in a motor vehicle accident while acting in the course and scope of the employment. Travelers, the employer’s insurer for workers’ compensation purposes, began paying the employee’s widow $728 per week, an amount that would continue to be paid until the widow died or remarried. The county court appointed a personal representative to pursue a wrongful death claim for the estate. In the county court proceeding. Travelers asserted its subrogation right to the widow’s distribution from the settlement against the third-party tortfeasor. Specifically, Travelers claimed a lien for $26,208 in indemnity payments made to widow and $10,000 in funeral expenses. It wanted the remaining balance distributed to the widow as “future credit” against the remaining benefits it owes the widow.

The personal representative filed a petition to settle its wrongful death claim against the tortfeasor’s insurance carrier. The insurance carrier paid its policy limit of $1 million, of which $500,000 was paid to the employee’s estate and the other $500,000 was paid to the estate of an occupant in the employee’s vehicle who was also killed in the accident. The county court approved the settlement’s distribution to the employee’s dependents as follows: $125,000 to each of the employee’s two adult children and $250,000 to the employee’s widow. Travelers was awarded $0 of the proceeds and was given no consideration for payments that may be due in the future. Travelers appealed.

Court of Appeals Decision

The Court of Appeals affirmed the county court’s subrogation distribution as fair and equitable. It also agreed that Travelers was not entitled to future credit. Regarding future credit, the Court of Appeals interpreted the second paragraph of Neb. Rev. Stat. § 48–118 as inapplicable in the case, because it states that an employer is entitled to future credit when there is a “recovery by the employer against [a] third person” and here it was the employee’s estate that made the recovery.

Supreme Court Decision

The high court observed that county courts were statutorily created courts with limited jurisdiction, that they could acquire jurisdiction only through a specific legislative mandate, and that nowhere in the Nebraska Workers’ Compensation Act’s statutes on subrogation of rights against third-party tortfeasors did the Legislature provide a specific mandate of jurisdiction to the county courts. Instead, multiple statutes referred to the state’s district court as having jurisdiction to determine such matters. The high court would not read a mandate into § 48–118.04 that county courts also had jurisdiction over fair and equitable distribution hearings by the Legislature’s use of the phrase “the court.”

The Supreme Court concluded that because the county court lacked jurisdiction over the subrogation matter, the Court of Appeals also lacked subject matter jurisdiction to hear the merits of the appeal. Accordingly, the Court vacated the judgment of the Court of Appeals and remanded the cause to the Court of Appeals with directions to vacate the order of the county court which determined the fair and equitable distribution of the widow’s settlement proceeds.

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