More recent developments for insurance case law: Blackburn v. Erie Insurance Group, 2009 Md. App. LEXIS 54 (May 11, 2009)

This is an important case addressing the reduction that a UIM carrier is entitled to for unreimbursed workers’ compensation benefits. It involved the proper interpretation of § 19-513(e) of the Insurance Article of the Annotated Code of Maryland: “(e) Reduction due to workers’ compensation benefits.— Benefits payable under the coverages described in §§ 19-505 and 19-509 of this subtitle shall be reduced to the extent that the recipient has recovered benefits under the workers’ compensation laws of a state or the federal government for which the provider of the workers’ compensation benefits has not been reimbursed.” Ultimately, the Court of Special Appeals agreed with the arguments presented by McCarthy Wilson when it ruled in Erie Insurance Company’s favor.

Michael Blackburn was injured as a result of a motor vehicle accident that was caused by another driver’s negligence. Blackburn maintained a personal automobile policy with Erie Insurance Company, which included UM/UIM benefits of $250,000 per person. At the time of the accident, Blackburn was acting within the scope of his employment with the United States government. Blackburn filed a claim for benefits under the Federal Employees Compensation Act and received benefits of $246,305.66, for which the United States Department of Labor subsequently asserted a workers’ compensation lien. The tortfeasor was insured with State Farm, which offered his liability limits of $100,000. Blackburn accepted the $100,000 in compliance with §19-511 of the Insurance Article of the Annotated Code of Maryland. Blackburn then paid $27,396.28 to the Department of Labor in reimbursement of the workers’ compensation lien. The government thereafter closed the lien.

The parties agreed that Erie was entitled to deduct $100,000 (the amount that Blackburn received from the tortfeasor’s insurer) from its UIM limits. The issue was whether the UIM carrier, Erie, was also entitled to a credit of the unreimbursed amount of the workers’ compensation lien. Blackburn argued that Erie was not entitled to any reduction for workers’ compensation benefits since the entire workers’ compensation lien ($246,305.66) was satisfied by Blackburn’s payment of $27,396.28. Erie argued that it was entitled to reduce from its UIM limits the entire amount of the workers’ compensation lien ($246,305.66) less the amount that Blackburn actually reimbursed the Department of Labor ($27,396.28).

Interpreting § 19-513(e), the Court of Special Appeals held that it was unambiguous and agreed with Erie and its attorneys, McCarthy Wilson, that the federal government was not reimbursed for more than $218,000 and Erie should be allowed to reduce the non-remibursed amount from its UIM limits. The Court agreed with Blackburn that the lien had been “satisfied” by a less than full repayment, but the language in § 19-513(e) refers to amounts reimbursed, not satisfied. Despite the majority opinion, there was a dissenting opinion filed by one judge in which he disagreed with the majority’s interpretation. The dissenting opinion would have disallowed any reduction for workers’ compensation payments, since the lien was fully satisfied.