            TEIEATCORNEYGENERAI.
                    OFTEXAS




Hon. Joe P. Gibbs
Casualty Insurance      Commissioaer
Board of Insurance      Commissioners
Austin, Texas

                              Opinion       NO. V-807

                              Re:     Legality    of a waiver   of
                                      Subrogation    Endorsement”
                                      .uaaer Art. 0307, Sec. 6a,
                                      Revised Civil    Statutes
                                      of     Texas

Dear Commissioner      Gibbs:

            Your    request     for     an opinion        is   in part   as
follows:

              “This Department has reoeived      several
       requests    for approval   of the following    or a
       similar    endorsement   to be attached   to Work-
       men’s Compensation     policies:

             “‘It   is understood   and agreed that
                the company hereby waives the right
                of subrogation    under the policy    to
                which this endorsement     is attached   I
                against  the                             .1
                                 Name of Employer

             “In view of the section     of the’ Worknea~s
       Compensation  statute    quoted above,    can the
       Board of Insurance     Commissioners   legally   ap-
       prove a ‘Waiver   of Subrogation     Endorsement
       for attachment ~to Texas Standard Workmen’s
       Compensation  policies?”

            Your request  indicates     that              you are concerned
solely with the legality    of the above                  endorsement    as test-
ed by Article   8307, Sec. 6a,      V.C.S.                 This opinion,    there-
fore deals only with that question.

            Art.iele-8307,       Sec.      .6a,      V.C.S.,   ,~ provides:

             “Where the injury for which compensation  is
       payable under this law was caused under circum-
Hon.   Joe P. Gibbs,      Page 2, V-807



       stances     creating      a legal    liability     in some person
       other than the subscriber              to pay damages in re-
       spect thereof,         the employee may at his option
       proceed     either     at law against        that person to re-
       cover damages or against             the association       for com-
       pensation      under this law, but not against              both,
       and if he elects          to proceed at law against           the
       person other than the subscriber,                 then he shall
       not be entitled         to compensation         under this law.
       If compensation         be claimed under this law by the
       injured     employee or his legal beneficiaries               ,then
       the association         shall    be subrogated       to the rights
       of the injured         employee,     insofar     as may be neces-
       sary,     and  may    enforce,    in   the   name  of the injured
       employee or of his legal beneficiaries                  or in its
       own name and for the joint               use and benefit      of: said
       employee or beneficiaries              and the association;         the
       liability      of said other person,           and in base the
       associatioa       recover      a sum greater      than that paid
       or assumed by the association                to the employee-or
       his legal      beneficiaries,        together     with a reasona-
       ble cost of enforcing            such liability,       which shall
       be determined         by the court trying         the case,    then
       out of the sum so recovered               the association       shall
       reimburse      itself     and pay said cost,         and the excess
       so recovered        ahall be paid to the injured             employee
       or his beneficiaries.             The association       shall    not ~
       have the right         to adjust or compromise such lia-
       bility     against     such third person without           notice     to
       the injured       employee or his beneficiaries,              and the
       approval      of the Board, upon a hearing             thereof~.?’


            The procedure      contemplated     by this statute        is that
the employee has a choice         of remedies.      In the event such
employee proceeds      against   the association      and receives       ~,com-
pensa tioa , the cause of action       remains alive.         He may then
proceed   against    a third party based upon such third, party’s
liability   irrespective      of whether or not the association
chooses   to exercise     its right of subrogation.           In ~the, ease
of Galveston,     H, and S. A. Railwav Comoanv v. Wells,             15
S.Wrb6.        53. affirmed     121 Tex. m.        50 S . W. 2d I?4”f.i’~the
plaintiff   alleged    a cause of action       for damages, it appear-
ing that the plaintiff        had already    received     compensation
under the Workmen’s Compensation          Act.     The Court held:

              “It is now well-settled         law that, when an
       employee’s     representatives      accept    compensation
       for death under the Workmen’s Compensation
       Statute     (Rev. St. 1925, arts.        8306-8309) , they
       are not precluded       from recovering       against  aeg-
       ligeat    third persons,      though the compensation
Hon.   Joe P.    Gibbs,     page 3, V-SO7



       insurance   company which carried        the risk              re-
       fuses or ,fails.  to prosecute      such~sui
       the’:r$ ~& ~~b*~‘>tf++
                            &.k$$+    t,b; & a*rr,
       the- riRBtW~Of=~tZle l%pres~entaltlvaa.. .Qf...
                                                    tha...aa-
       ceased: emoLayee’- is “for ,the insurer!.a.  henaflt
       to the extent   of sums advanced to such repre-
       seatatives;   and that any excess      of any reeov-
       ery had in such suit is to be for the benefit
       of such representatives     .“-’ ‘(Rmphas~is supplied)

              Again,   in Sbhaic&~~,v., @orria~;“~24 S.W,.a491,~4?7                      A   :,
 ITex’
 .~ ~~ i ‘
         Cfvi  ADD.   1929.error    ref.‘].   the Co~ui% in iateroret-
lag the rights       of suirogatioh      provided  under Art; 8367,
Sec. 6a , declared:

               “This ~,assignmeat       is    (tirectea      at the cour$‘s
       overruling        appellant’s       plea in abatement,             and is .-
       ba,sed on article         8307, Seo. 6a, R. S.                 We think
       the assignment         should be overruled.               The Texas
       Workmen’s Compensation Law, the provision                          of which
       is invoked by appellant,               evidently        contemplates
       that the injured          employee is the real beneficiary
       in cases where the damages suffered                      exceed,     as’
       they most always do, the amount received                         by the
       employee from the indemaifying                   association.           It
       has been frequently           held that in equity the real
       beneficiary        may always be permittea               to sue for
       the protection         and enforcement           of his right where
       the party having the ‘mere legal                   title     or right
       fails     or refuses      to do so.. . .The statute              invoked
       does not destroy          or abrogate         appellee’s        cause ef
       action,      and it is well settled              that when the i$-
       demnifying        association      fails      to sue, es it aidhere,
       the injured        employee,     or his beneficiary,              may do so,
       although      compensation       under the law may havs~bpen
       claimed     and.
           ..‘~Fb,“.rl.‘  received.
                       ~:W~~19            GalMst;on”
                                 fT(br. .,c  ‘v. $&@a,~ R;      &s S.   A. Rail-
                                                                     ;w~a,2d
                                                                                  .53.
       wv’ appe rant says %he-right.
       But                                           of the indemnifying
       association        is absolute.          Under the statute            it
       has an absolute          right to institute             suit,    but such
       right is not exclusive.                The cause of action              14,
       jointly      owned by the injured             employee or his ben-
       eficiaries~,aad        the insurance          carrier.         The right
       of the insurer         to be subrogated           to the rights
       of the injured         employee is for the insurer’s
       benefit      to the extent only of the sums paid by
       it to the injured           employee or his benefi~iarles,
       while the excess of any recovery                     had in euoh suit
       against      the negligent       third party is for’the                 ben-
       efit    of the injured        employee aad’his             beaeficiar-
       ies’.    .The, statute      exprwsaly ~provides~ that, where
Hon. Joe P. Gibbs)        psge   4,   V&SO7



        the association        brings    the suit,   it ‘shall    not
        have the right to adjust            or compromise such
        liability      against    such third person without
        notice     to the injured       employee or his beaefici-
        aries     end the approval       of the board,    upon a
        hearing thereof 0 ) This recognizes            in and pre-
        serves     to the injured       employee or his beaeficiar-
        ies a continuing        right to assert      a claim for
        damages against        the negligent     third person caus-
        ing the injury,        over end above the compensation
        claimed end received          from the insurance      essocia-
        tioa.     . .n

             Based upon the above authorities,          it is clear
that the employeevs      rights    are not impaired by the action
or inaction    of the association,       but rather    that the em-
ployee,   though in receipt      of his compensation,       can sue in
his own name end recover        amounts greater     than that received
under the Workmen’s Compensation          Law, regardless     of the po-
sition   of the association,        Furthermore,    the right of, sub-
rogation    of the association      is a property    right that can
be waived or otherwise       contracted    away.

                The case of   Foster v. Langstoa,        170 S .W.a      e56,
(Tex.    Civ.    App. 1943)   held that:

               “The right ‘o,f.,the Insurance   Association     to
        subrogation     or the right of the injured       employee
        to any excess     recovery  over against   a third per-
        son for injuring      him, above the’ amount of compea-
        satfen   received    by him, is   ro ert
        action   and is subject    to?&&&~i~&%%~                !n.”
        (Emphasis supplied)

            It follows     that the “waiver     of subrogation     ea-
dorsemeatW under consideration         here does not and could not
affect  the rights    of the employee.        The only rights    changed
are those existing     between the association        and the third
party.   This right     of subrogation     is one that may be sold
or assigned 0 It is within       the rights     of the association      to
waive it if it sees fit o The statutory           language   declaring
“the Association     shall   not have the right to adjust        or
compromise such liability       against    such third party.      . .”
does not invalidate      such weiver beoause the employee may
proceed   under the statutes     exactly     and with the same effect
as if there were no such waiver of subrogation             endorsement.
Hon. Joe P. GibBs , pagb 11, V-807




             The Board of Iqsurance    Commissioners
      may legally     approvp a wqiver of subrogation
      endorsement becausd the .rsnployee,        under A*+
      tide    0307, Sec. 6ij may rpaeive        compensa-,
      tion from the assobjati0n~Cnd       still    prooebd
      against    a third person foS'damag8.8,~ Galv
      H. & S. A. Ry. Co. v. We        + 13 s.k;2a48(
      Civ. APP.),     ami    ed 121   x. q10, 50 s.
      247.    A waiver o?subrofiation      by the asso-
      ciation    does not i$terfere   with this right,
      such waiver being 8 property       right oi the
      association     that may be waived.

                                    Ypurs ‘very   truly

                                ATTORNBYGXRERAL OF TEXAS




                                      Assistant



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