Trial within a Trial: Proving Tennessee Workers’ Compensation Benefit Entitlement to Obtain a Setoff of UIM Coverage

by Christina S. Stapleton, Esq. and Daniel I. Hall, Esq.

When it comes to auto accidents on the job, the dynamic between workers’ compensation and uninsured motorist insurance policies can be confusing at times. The typical rule is that if a setoff provision exists in the insured’s policy that reduces UIM coverage by the amount the insured has collected or could collect under workers’ compensation law, the UIM carrier is entitled to rely upon that setoff. Moreover, Tennessee law provides that when an employee who is aware of their right to proceed under workers’ compensation coverage voluntarily refuses to assert a claim, the UIM carrier still is entitled to a setoff against potential workers’ compensation benefits. But what about a claimant who pursues only some of the workers’ compensation benefits that are potentially available?

In Jones v. Craddock, No. M2023-01034-COA-R3-CV, 2024 Tenn. App. LEXIS 304 (Ct. App. July 17, 2024), the plaintiff sued the defendant following an auto accident, and also served his own uninsured motorist carrier. The UIM carrier filed for summary judgment, noting that the plaintiff was injured while in the course and scope of his employment, that the work injury was accepted as compensable by the employer and workers’ compensation carrier, and that a few weeks of workers’ compensation benefits had been paid. Unbeknownst to the employer or workers’ compensation carrier, however, the plaintiff had continued to treat outside of the workers’ compensation program and incurred medical bills.

The UIM policy stated that the policy limits would be reduced by amounts either paid or payable under workers’ compensation law. The trial court granted summary judgment, finding that the amount of workers’ compensation benefits payable, if the plaintiff had pursued the workers’ compensation claim, far exceeded the UIM policy limits, so no additional exposure existed under the UIM policy. The Court of Appeals reversed, holding that if a claimant has filed a claim and received workers’ compensation benefits, a setoff against additional benefits cannot occur without a showing that the claimant was entitled to those additional benefits. Relying upon an affidavit by the workers’ compensation carrier stating that the plaintiff had “received all benefits to which he was entitled under the Workers’ Compensation Statute,” the appellate court reversed the grant of summary judgment and remanded the case for trial to determine what benefits the plaintiff was entitled to under the Tennessee Workers’ Compensation Law.