In California, a workers’ compensation insurance carrier has no subrogation or reimbursement rights in a medical malpractice case. Pursuant to California Civil Code section 3333.1 — the Medical Injury Compensation Reform Act (MICRA) carve-out — when an injured worker recovers damages in a medical malpractice lawsuit, the collateral source provider (the workers’ compensation carrier) is explicitly barred from recovering its paid benefits through a lien or subrogation action. Carriers retain normal subrogation rights under California Labor Code sections 3850–3865 for other third-party torts, such as auto accidents, premises liability, or defective products — the bar applies specifically to malpractice claims against the treating physician.
However, does this prohibition on medical malpractice subrogation apply when the injured worker is employed not by a California employer, but by the federal government — for example, the FBI? The facts of a newly published California Court of Appeal decision in Godshall v. Peterson, No. D086572 (Cal. Ct. App., 4th Dist., Div. 1, August 2026), set the stage for that question, though the court’s actual holding turns on an unrelated statute-of-limitations issue and does not address subrogation at all.
In this medical malpractice action, Cecilia Godshall alleges Drew A. Peterson, M.D. and California Orthopaedic Institute Medical Associates, Inc. negligently performed carpal tunnel surgery on her in 2017. Godshall was an office support technician with the Federal Bureau of Investigation (FBI) whose job involved substantial typing duties, and her medical care was authorized by the U.S. Department of Labor through her employment with the FBI. The defendants moved for summary judgment, asserting Godshall’s claims were barred by the one-year statute of limitations under Code of Civil Procedure section 340.5. The trial court granted the motion. The Court of Appeal reversed, holding that triable issues of fact remained as to when Godshall discovered, or should have discovered, both her injury and its negligent cause, since the one-year limitations period does not begin to run until a plaintiff discovers both.
So assuming that, after remand, Godshall successfully litigates her case to a recovery by trial or settlement, may the federal government recover the payments it made for her industrial injury by way of subrogation? A review of the relevant statutes and case law does not rule out subrogation recovery in a malpractice case for a federal employer — and in fact points strongly the other way.
Because Godshall is a federal employee, her carpal tunnel injury would have been covered not by California workers’ compensation but by the Federal Employees’ Compensation Act (FECA), administered by the Department of Labor’s Office of Workers’ Compensation Programs (OWCP). FECA has its own third-party recovery scheme under 5 U.S.C. §§ 8131–8132 — a federal reimbursement mechanism that operates independently of California’s Labor Code §3852 subrogation lien process. When a federal employee’s FECA-covered injury subsequently becomes the subject of a third-party recovery — including a malpractice recovery against the treating physician — OWCP is entitled to reimbursement out of that recovery. This isn’t optional; the statute provides that the beneficiary “shall refund to the United States” the compensation paid.
This is confirmed by the Department’s own third-party liability training materials, which list “the claimant sues a surgeon for malpractice and wins a settlement (OWCP paid for surgery)” as a textbook example of a case that must be referred to the Solicitor’s Office for third-party recovery action. The governing federal regulation, 20 C.F.R. Part 10, Subpart H, goes further still, stating explicitly that “an injury caused by medical malpractice in treating an injury covered by the FECA is also an injury covered under the FECA,” so that any recovery in such a malpractice suit is treated as a “gross recovery” that must be reported to OWCP.
The Supreme Court has already held that state law can’t shrink this right — and the plaintiff was also an FBI agent. In United States v. Lorenzetti, 467 U.S. 167 (1984), an FBI special agent injured in a car accident argued that because Pennsylvania’s no-fault statute limited his tort recovery to non-economic losses like pain and suffering, the federal government’s §8132 reimbursement right — which attaches to compensation for medical expenses and lost wages — did not reach his settlement at all. A unanimous Court disagreed, holding that §8132 entitles the United States to reimbursement “out of any damages award or settlement made in satisfaction of third-party liability,” regardless of how state law characterizes or limits the underlying recovery. The Court’s reasoning rested on Congress’s intent in enacting FECA and on the principle that a state’s own damages taxonomy cannot be used to defeat a federal statutory reimbursement right.
California’s own MICRA architecture already assumes this. Civil Code §3333.1 bars “collateral sources” — including California workers’ compensation carriers — from asserting liens against a malpractice recovery, but California courts have already recognized that government payment programs sit outside that bar. In Brown v. Stewart (1982) 129 Cal.App.3d 331, the Court of Appeal held that Medi-Cal’s statutory lien survived §3333.1 precisely because Medi-Cal is a government-administered program, not an ordinary “collateral source” insurer covered by MICRA’s collateral-source bar.
Medicare’s own reimbursement right survives for a closely related reason: its federal Medicare Secondary Payer statute carries independent preemptive force, much as FEHBA’s express preemption clause does in the line of cases culminating in Coventry Health Care of Missouri, Inc. v. Nevils, 581 U.S. 87 (2017), where a unanimous Supreme Court held that a state anti-subrogation law could not override a federal employee health benefits carrier’s contractual subrogation right because doing so would interfere with “distinctly federal interests” in the uniform administration of a federal employee benefits program. FECA slots into that same category as an independent federal statutory scheme, not a state-law-created lien of the kind §3333.1 was written to reach.
No case squarely holds that “§3333.1 does not apply to a FECA lien.” The closest direct analogues are the Medi-Cal and Medicare carve-outs from §3333.1, and Lorenzetti itself, which involved a different type of state statute — a no-fault damages-limitation law, rather than a MICRA-style anti-subrogation provision. So the conclusion here is a strong doctrinal inference drawn from adjacent, well-settled law, rather than a question any court has decided on facts identical to Godshall’s. If Godshall’s case produces a recovery on remand, it could set up exactly the test case California law has not yet seen: whether the federal government’s FECA reimbursement right survives a state MICRA statute that would categorically bar the same claim by a private California carrier.