New Plumbing Contractors, Inc. v. Nationwide Mutual Insurance

In this case we are asked to consider whether an employer who has assigned its subrogation rights to its workers’ compensation insurance carrier has a cause of action against the carrier for negligence or breach of the implied covenant of good faith and fair dealing when the carrier does not actively pursue those subrogation rights. We conclude it does not.

New Plumbing Contractors, Inc., appeals a judgment dismissing its complaint against its workers’ compensation insurance carrier, Nationwide Mutual Insurance Co., following the trial court’s order sustaining Nationwide’s demurrer without leave to amend. It contends it stated causes of action for breach of the implied covenant of good faith and fair dealing and negligence arising out of Nationwide’s failure to pursue its subrogation rights against a third party.

Nationwide issued a workers’ compensation insurance policy to New Plumbing for a term from September 1, 1985, to September 1, 1986. The policy provided that New Plumbing’s employer subrogation rights were granted to Nationwide stating, “We [Nationwide] have your rights, and the rights of persons entitled to the benefits of this insurance to recover our payments…