Background
Jose Reza Villegas died on November 16, 2021, when a tree fell on him while working on a bridge project near Orleans, Nebraska, within the scope of his employment with Bridges, Inc. Zurich American Insurance Co., the workers’ compensation carrier, paid death benefits to his widow, Adriana Martinez Villegas. Adriana, as administrator of Jose’s estate, pursued a third-party wrongful death claim against Adams Construction Co., the responsible party.
After an initial settlement demand of approximately $4,950,000, the claim settled for $3,000,000 on July 14, 2023. From that settlement, Adriana’s attorneys received one-third ($1,000,000) in fees, the adult children received $1,000,000 combined, and $100,000 was placed in trust pending determination of the workers’ compensation insurer’s subrogation claim. The remaining funds went to Adriana. The insurer sought to enforce its statutory subrogation interest under Nebraska Revised Statutes § 48-118.04, which requires “fair and equitable division” of settlement proceeds when parties cannot agree.
The Court’s Holding
The Nebraska Court of Appeals affirmed the district court’s distribution, finding no plain error. The district court awarded the insurer $27,612.21 for benefits already paid and $47,891.22 as a credit for future benefits, leaving $72,387.79 in trust for Adriana. The appellate court rejected two main challenges: (1) that the $3,000,000 settlement was not substantially undervalued, and (2) that the wrong weekly benefit rate was used in calculations.
On valuation, the court found no plain error in the district court’s finding that Adriana settled for approximately 30–40 percent of the claim’s actual value. An economist had calculated $2,707,181 in economic losses alone, and a reasonable demand could have reached $10,000,000. The court credited evidence that Adriana settled for less due to “political climate and other factors”—specifically, her testimony about racial discrimination and language barriers affecting her settlement decision. On the benefit rate, the court found no error in using $266.04 (the rate actually paid to Adriana weeks before trial) rather than $610 (a rate the insurer claimed was correct but had never actually paid).
Key Takeaways
- Fair and equitable distribution of third-party settlement proceeds under § 48-118.04 does not require the employee to be “made whole” or proceeds to be split proportionately.
- Courts may consider the actual economic value of a claim and the extent to which a settlement represents a compromise, even when the claimant cites discrimination or other barriers as reasons for accepting a lower settlement.
- A workers’ compensation insurer’s statutory subrogation right is substantial but must be balanced against the employee’s recovery, including consideration of attorney fees and the insurer’s obligation to share in the cost of litigation that secured the recovery.
- Appellate review of settlement distribution proceeds involves a plain-error standard when the appellant fails to properly assign errors in its brief.
Why It Matters
This decision provides Nebraska practitioners clear guidance on applying the “fair and equitable” standard under § 48-118.04. Rather than mechanically calculating subrogation based on amounts paid, courts will examine whether a settlement was substantially discounted and apportion that discount equitably between the claimant and insurer. Notably, the court recognized that settlement decisions driven by discrimination or language barriers—factors beyond the claimant’s control—are relevant to a court’s equitable calculus. This approach protects widows and dependents from bearing the full burden of settlements made under systemic disadvantage.
The decision also clarifies that insurers cannot simply assert a higher benefit rate than the rate actually paid; they must provide evidence supporting their claim. Finally, by requiring insurers to contribute proportionately to attorney fees when they benefit from the recovery, the court prevents insurers from obtaining a windfall by piggy-backing on work done and paid for by the claimant’s counsel.