A workers’ compensation insurer’s attempt to recover benefits paid to an injured worker was dismissed last week, when the Iowa Court of Appeals ruled that it failed to comply with the state’s statutory notice requirement for asserting subrogation rights. The July 23, 2025, decision in Midwest Builders’ Casualty Mutual Company and Iowa Trenchless, L.C. v. RP Constructors, LLC reaffirms the procedural conditions insurers must meet before stepping into a worker’s legal shoes to pursue third-party claims.
The dispute stems from a 2020 workplace injury during a highway project in Sioux City. An employee of Iowa Trenchless, L.C. was injured after two employees of RP Constructors, LLC mistakenly informed him that a hose was not under pressure. When the employee attempted to handle the hose, it discharged and knocked him onto a steel H-beam, causing injury. Iowa Trenchless’s workers’ compensation insurer, Midwest Builders’ Casualty Mutual Company, paid out benefits to the employee.
Roughly two years later, the insurer and employer sent a letter to the injured worker, stating they intended to file a negligence lawsuit against RP Constructors because the employee had not done so. Forty-one days after sending the letter, the suit was filed.
RP Constructors moved for summary judgment, arguing that Midwest Builders failed to satisfy Iowa Code § 85.22(2). That provision permits an employer or insurer to initiate a third-party claim only if the employee does not file suit within ninety days after receiving written notice from the employer or insurer directing the employee to act. Because Midwest Builders did not wait the required ninety days after giving notice to the employee, the district court granted summary judgment in favor of RP Constructors – a decision now upheld on appeal.
Midwest Builders argued that the statute either only requires thirty days’ notice, or that no written notice was needed unless the third party was a city or municipal entity. It relied in part on language paraphrased in the Iowa Supreme Court’s 1986 decision in Mata v. Clarion Farmers Elevator Coop., which suggested a shorter notice period.
The Iowa Court of Appeals rejected that reading, citing nearly a century of state precedent – beginning with S. Sur. Co. of N.Y. v. Chicago v. Chicago, R.I. & P. Ry. Co. (1932) and reaffirmed in later decisions like Armour-Dial, Inc. v. Lodge & Shipley Co. - which held that ninety days’ notice to the employee is a necessary condition before any subrogation rights can attach. The court emphasized that it was not free to overturn those precedents and that Mata did not address or overrule the long-standing rule.
Because Midwest Builders failed to provide ninety days for the employee to sue before initiating its own claim, the court found that the insurer never acquired the legal right to bring the action. The appellate panel did not consider the sufficiency of the letter’s contents, stating that the failure to satisfy the ninety-day notice period was dispositive.
The decision did not involve any interpretation of insurance policy clauses or exclusions. Instead, it focused entirely on statutory procedure under Iowa’s workers’ compensation framework.
For claims handlers and insurance counsel, especially in the workers’ comp space, the ruling highlights a crucial point: subrogation is only available when the process is strictly followed. Missing even one statutory step – like the full ninety-day notice – can eliminate the insurer’s recovery path altogether.
