Insurance Carrier Covering Worker’s Initial Injury Wage-Loss Benefits May Apportion Liability for Wage-Loss Benefits With Insurance Carrier Covering Worker’s Second Disabling Injury Suffered While the Employee was Performing “Reasonable Employment” Work

In a published opinion after a remand order from the Michigan Supreme Court, the Court of Appeals has ruled that under the Workers’ Disability Compensation Act (WDCA), an insurance carrier responsible for paying worker’s compensation (wage-loss benefits) for an employee’s initial disabling injury, may apportion its liability for wage-loss benefits with the insurance carrier covering the employee when he incurred a separate disabling injury, which was suffered by the employee during his performance of light-duty “reasonable employment” work as the result of the initial injury.

“[W]hen a partially disabled employee suffers another injury while performing reasonable employment” within the meaning of MCL 418.301(5), allocation among or reimbursement by and between insurance carriers separately covering the two risks may occur.  Slip Op. at 3.

After remand from the Supreme Court, the Court of Appeals holds that an insurance carrier originally covering an employee’s worker’s compensation benefits, and who was liable for wage-loss benefits based on an initial 1993 injury, and after the employee returned to reasonable employment, could not be stuck with 100 percent of the costs of covering the employee’s total wage-loss benefits based on his original wages, after the employee suffered a subsequent, totally disabling back injury in 1998 while covered by another insurance carrier and while working at a lower wage.

The Michigan Compensation Appellate Commission (the Commission) originally ruled that the initial insurance carrier, Pacific, was responsible for the total wage-loss benefits and could not offset or receive allocation from American (which insured the employee when he suffered a totally disabling 1998 back injury) based on the difference between the original wages and the lower reasonable-employment wages he was earning at the time of his second injury.

This is a significant decision because it answers a question left open by the Supreme Court’s opinion interpreting MCL 418.301(5) in Arnold v. GM, 456 Mich. 682 (1998), which generally confirmed that an employee suffering a disabling injury after returning to reasonable employment work was entitled to the wage-loss benefits based on his or her original wage at the time of the initial injury.

Arnold, as the COA points out here, did not address the situation present in the instant case concerning whether the carrier covering the risk during the initial injury, who is required by MCL 418.301(5) to pay benefits on the basis of the original wage, not the favored work wage, could seek apportionment and/or reimbursement if a second, subsequent carrier happened to be “on the risk” when the employee suffered a second, disabling injury while performing the reasonable work employment at a lower wage.

Here, instead of Pacific, the initial carrier, being liable for 100 percent of the wage-loss benefits for the employee based on the employee’s wages at the time of his 1993 injury, American, the subsequent carrier is required to pay Pacific a differential based on the wages being earned by the employee during the reasonable work employment and at the time of his second, totally disabling injury in 1998.

This creates a very important avenue in the relevant case to seek apportionment and reimbursement where a second, subsequent insurer is on the risk at the time an employee suffers a second, disabling injury while performing the reasonable employment work within the meaning of MCL 418.301(5) and MCL 418.301(5)(e).

As the COA panel notes in this opinion, general principles of worker’s compensation law require employers to pay only their share of an employee’s wage-loss during the time a partially disabled employee is earning post-injury wages.  The COA reasoned that even though MCL 418.301(5), nor the WDCA in general, contained explicit statutory  bases to apportion liability among carriers in this situation, the result would be unjust to require the initial carrier to pay 100 percent of the subsequent wage-loss benefits suffered as the result of the second, disabling injury suffered while the employee was covered by a subsequent workers’ compensation insurance carrier.

The opinion is attached here:  Nichols v. Howmet Corp., et al. (After Remand) (for Publication)

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