A Utah Supreme Court ruling has handed workers' compensation carriers a bigger legal cost bill – and they must pay it upfront.
On February 26, 2026, the Utah Supreme Court ruled against Auto Owners Insurance Company in a case that directly affects how workers' compensation carriers in the state calculate their share of legal costs when injured employees pursue third-party lawsuits.
The case traces back to 2013, when Eduardo Narciso, a worker employed by HB Construction, was knocked off a nine-foot concrete form at a job site and landed headfirst on the ground. He was left permanently and totally disabled and requiring constant care. Auto Owners, as HB Construction's workers' compensation insurer, began paying his medical and wage benefits.
Because other companies and individuals – separate from his employer – were also involved in the accident, Narciso sued them directly. In 2018, he settled that lawsuit for $5 million. More than $2.1 million of that went to his attorneys in fees and costs, with the remainder placed in a trust. Once the settlement was reached, Auto Owners stopped paying ongoing benefits entirely.
That decision set off a lengthy dispute over how the settlement money should be divided. Under Utah's Workers' Compensation Act, when a worker recovers money from a third-party lawsuit, the costs of securing that recovery must be split proportionately among all parties with a financial stake in it. The insurer is entitled to recover benefits it has already paid, and it can also use the settlement as a credit against future benefit payments it would otherwise owe.
The disagreement came down to one question: when calculating the insurer's share of the legal bill, does only what has already been paid count, or does anticipated future liability factor in too?
Auto Owners took the narrower position. Future costs are uncertain and may never materialize, it argued. Dividing only the $1,578,095.60 it had paid to date against the $5 million settlement, the insurer calculated its share of the legal costs at roughly 31.6 percent, or about $679,000.
Narciso pushed back. An independent medical panel had estimated his future care costs at more than $7 million over a projected forty-year life expectancy. Adding those anticipated future costs to past payments and dividing by the settlement total pushed Auto Owners' proportionate share well above 100 percent – making it responsible for the entire $2.1 million legal bill, not a fraction of it.
The Utah Supreme Court sided with Narciso. In a unanimous decision, the court found that when a carrier claims both reimbursement for past benefits and the right to offset future ones against a settlement, its stake in that settlement must be measured against both. The statute's language – that costs be charged proportionately as interests may appear – was designed to accommodate some uncertainty, the court said, not to demand the kind of precision Auto Owners was seeking.
The second issue was equally significant for the industry. Auto Owners objected to a $571,523.29 payment order, arguing it amounted to an improper advance of benefits not yet owed. The court rejected that framing entirely. Because Narciso had personally covered all the legal costs out of the settlement, and because Auto Owners' share of those costs exceeded what it was owed back in past benefits, it owed him the balance as a reimbursement. The court was firm: an insurer must clear its portion of the legal costs before it can use a third-party settlement to shield itself from future benefit obligations.
With those determinations made, Auto Owners' offset against future benefit payments was set at $3,421,904.31 – the amount it can draw down before it must resume paying Narciso's ongoing care costs out of pocket.
For workers' compensation carriers operating in Utah, the ruling draws a clear line: if you want the benefit of a third-party settlement – whether to recoup what you have paid or to reduce what you still owe – expect your share of the legal costs to reflect the full scope of your exposure, not just the portion you have already spent.
