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Iowa Workers’ Comp Subrogation

Iowa Workers’ Comp Subrogation

27 days ago , , , , , ,

The Iowa Subrogation Trap

Quick Takeaways

  • The Rule: Iowa Code § 85.22 gives you a lien on third-party recoveries, but only if you follow the 90-Day Demand Rule.
  • The Trap: If you want to sue the third party yourself, you must send a formal written demand to the employee first. If you don’t, you lose your subrogation rights.
  • The Move: 30-Day Alert. If the employee files a lawsuit, your carrier must file their “Notice of Lien” with the clerk of court within 30 days or the money is gone.

In Iowa, subrogation is a formal process with very strict deadlines.

Under Iowa Code § 85.22, if an employee is injured by a third party (like a negligent driver), the insurance carrier has a legal right to be reimbursed for every dollar of medical and wage benefits they paid out.

The 30-Day “Lien” Timer

If an employee hires a lawyer and files a lawsuit against the third party, they are supposed to notify you.

Once you receive that notice, your carrier has exactly 30 days to file a formal “Notice of Lien” with the clerk of the court where the suit was filed.

Many agents are used to states where a lien is “automatic” or can be filed any time before settlement. Not in Iowa. If your carrier misses that 30-day window, the lien may be waived and the court will enforce that outcome.

The 90-Day “Demand” Trap

In Iowa, the employer/carrier can take control and sue the third party directly. But there’s a catch.

Before you can file your own lawsuit, you must issue a formal Written Demand to the employee, requiring them to file the suit themselves. The employee then has 90 days to act.

If you file your lawsuit before the 90 days are up, or if you fail to send the formal demand at all, your case will be dismissed. I’ve seen carriers spend $20,000 on legal fees only to have the judge throw the case out because they didn’t wait the full 90 days.

Settlement Consent: The Deadlock

In Iowa, a third-party settlement requires the written consent of both the employee and the insurance carrier.

If the employee wants to accept a settlement that doesn’t pay back your lien, you can say “No.” If you can’t agree, the Iowa Workers’ Compensation Commissioner has to step in. This gives you leverage to ensure your Mod is protected.

Frequently Asked Questions (FAQs)

Does this apply to car accidents?

Yes. If your employee is hit while working, § 85.22 is the law of the land.

What about attorney’s fees?

Iowa law allows the employee’s lawyer to take their fee out of your recovery. Usually, the carrier’s reimbursement is reduced by a “reasonable” amount (often 1/3) to pay for the work done by the employee’s attorney.

The Technical Edge

Agents who want to help Iowa employers protect their subrogation rights will find tools and training at WorkCompProfessionals.com. Employers who want to understand Iowa’s subrogation deadlines can find practical guidance at ConquerCompCosts.com.