A preschool’s insurance carrier is partly obligated to defend a child abuse negligence suit, despite alleged criminal acts. And an employer’s share of attorney fees must be deducted from the amount available from subrogation—not from the full settlement amount in a worker injury suit, the Kentucky Supreme Court decided in separate cases last week.
First, the subrogation case: A grocery store worker, Chantella Blackburn, was injured in 2022 when she stepped off a ladder onto a poorly placed vendor’s cart and fell. Through workers’ compensation insurance, she received temporary total disability and medical benefits totaling about $25,250.
Blackburn also sued the vendor for negligence and gained $295,000 in a settlement.
Her employer, Virginia-based K-VA-T Food Stores Inc., moved for subrogation, seeking to recover comp benefit costs from the vendor’s settlement payment. Kentucky law bars injured workers from collecting duplicate benefits from the employer and a third party, and allows employers to seek recovery of benefits through subrogation.
An administrative law judge subtracted the amount of the settlement that had gone toward pain and suffering, since that is not covered by workers’ compensation. The ALJ then subtracted the employer’s share of attorney fees in the suit against the vendor, leaving some $117,000 available for recovery in subrogation.
The injured employee’s legal team appealed, arguing that the employer should not be allowed recovery until the amount of benefits paid had exceeded the employer’s share of legal fees. The Court of Appeals in 2025 agreed.
The state Supreme Court, however, last week overruled the appellate court. The justices noted that in 2018, Kentucky lawmakers had changed the law, requiring employers to pay only a pro-rata share of the worker’s legal fees, not the full amount in the third-party tort suit, and did not predicate recovery on the payment of fees.
“Notably, there is no ‘fee-first’ threshold included in the statute – it does not state that subrogation is barred unless benefits paid exceed fees incurred,” the justices explained.
They also found that the employer’s share of attorney fees (two-thirds of the total fee amount) should be based on the subrogation amount available, not on the total settlement—a threshold that can result in lower fees paid by the employer-carrier.