PERSONAL INJURY CLAIMS AND WORKERS’ COMPENSATION LIENS:
THE FLY IN THE OINTMENT
By Robert P. Byelick,
Esq. & Allison G. Mawhinney, Esquire
Esq. & Allison G. Mawhinney, Esquire
Published in March 2014 Edition of Paraclete
For injury litigation professionals, a workers’ compensation lien might be viewed as complicating factor to the resolution of your case. As a result, there may be a tendency to ignore the lien until a case is on the verge of settlement or trial. However, all sides would be better served to address the lien from the get-go. Of course, work comp liens arise when a plaintiff is injured in the course and scope of employment. The workers’ compensation carrier is required to provide benefits to the injured employee in the form of lost wages and medical care. When such benefits are provided, a lien arises upon the plaintiff’s tort claim.
The
basis for a workers’ compensation lien is found in section 440.39, Fla. Stat. In the event an employee brings a personal
injury claim for his or her injuries, this statute requires the employee /
plaintiff to notify the workers’ compensation carrier of same so that the
carrier can protect its lien rights.
Specifically, section 440.39(3)(a), Fla. Stat., provides that “[n]otice
of suit being filed shall be served upon the employer and compensation carrier
and upon all parties to the suit or their attorneys of record by the employee.”
basis for a workers’ compensation lien is found in section 440.39, Fla. Stat. In the event an employee brings a personal
injury claim for his or her injuries, this statute requires the employee /
plaintiff to notify the workers’ compensation carrier of same so that the
carrier can protect its lien rights.
Specifically, section 440.39(3)(a), Fla. Stat., provides that “[n]otice
of suit being filed shall be served upon the employer and compensation carrier
and upon all parties to the suit or their attorneys of record by the employee.”
Once
the statutory notice is provided, the burden shifts to the workers’ compensation
carrier to put the litigants on notice of its lien pursuant to section
440.39(3)(a), Fla. Stat. Then, as the
parties to the lawsuit negotiate and proceed toward trial, this lien hangs over
them. The question then becomes: what portion of its payments is the carrier
entitled to recoup? Certain parameters
for the recovery are also provided by section 440.39(3)(a), Fla. Stat. That provision states that the workers’ compensation
carrier should share in the costs and attorneys’ fees incurred by the plaintiff
in an amount equal to the percentage of his or her recovery after costs and
attorneys’ fees are subtracted. Subject
to that deduction, the employer/carrier may recover 100% of the benefits it has
paid in the past as well future benefits to be paid. However, there is a significant exception to
this rule: If the plaintiff can
demonstrate that he or she did not recover the full value of his or her damages,
the carrier’s recovery is limited proportionally by the plaintiff’s net
recovery.
the statutory notice is provided, the burden shifts to the workers’ compensation
carrier to put the litigants on notice of its lien pursuant to section
440.39(3)(a), Fla. Stat. Then, as the
parties to the lawsuit negotiate and proceed toward trial, this lien hangs over
them. The question then becomes: what portion of its payments is the carrier
entitled to recoup? Certain parameters
for the recovery are also provided by section 440.39(3)(a), Fla. Stat. That provision states that the workers’ compensation
carrier should share in the costs and attorneys’ fees incurred by the plaintiff
in an amount equal to the percentage of his or her recovery after costs and
attorneys’ fees are subtracted. Subject
to that deduction, the employer/carrier may recover 100% of the benefits it has
paid in the past as well future benefits to be paid. However, there is a significant exception to
this rule: If the plaintiff can
demonstrate that he or she did not recover the full value of his or her damages,
the carrier’s recovery is limited proportionally by the plaintiff’s net
recovery.
For example,
assume a plaintiff is injured on-the-job by a tortfeasor with low policy limits
such as $10,000.00. Assume that a verdict
is returned for $20,000.00. As a
practical matter, the collectible portion of that recovery may be limited by
the $10,000 policy limits. Under this
hypothetical, the workers’ compensation carrier’s recovery likewise is limited
as follows:
assume a plaintiff is injured on-the-job by a tortfeasor with low policy limits
such as $10,000.00. Assume that a verdict
is returned for $20,000.00. As a
practical matter, the collectible portion of that recovery may be limited by
the $10,000 policy limits. Under this
hypothetical, the workers’ compensation carrier’s recovery likewise is limited
as follows:
Case value: $20,000.00
Actual Recovery by Plaintiff: $10,000.00
–
Fees and Costs: $4,000.00
Fees and Costs: $4,000.00
= Net recovery: $6,000.00
$ 6,000.00 net recovery ÷ $20,000.00 case value = .3, or 30%
In this example,
if the workers’ compensation carrier paid out $5,000.00 for indemnity and
medical benefits, its lien on the plaintiff’s recovery (for past benefits) is
worth only 30% of that amount, i.e. $1,500.00. Theoretically, that same
percentage applies to future benefits.
if the workers’ compensation carrier paid out $5,000.00 for indemnity and
medical benefits, its lien on the plaintiff’s recovery (for past benefits) is
worth only 30% of that amount, i.e. $1,500.00. Theoretically, that same
percentage applies to future benefits.
Hence, in negotiations,
plaintiffs’ attorneys commonly attempt to maximize their clients’ recovery as
follows: To the tortfeasor, the attorney might push for a higher recovery,
advocating that the plaintiff has a serious claim. To the workers’ compensation carrier, the
attorney might downplay the value of the case in an effort to limit any lien. In
short, plaintiff’s attorneys have an incentive to argue that the full value of
the case is substantial, but the recovery is limited due to various factors
such as policy limits, collectability, comparative negligence and the like.
plaintiffs’ attorneys commonly attempt to maximize their clients’ recovery as
follows: To the tortfeasor, the attorney might push for a higher recovery,
advocating that the plaintiff has a serious claim. To the workers’ compensation carrier, the
attorney might downplay the value of the case in an effort to limit any lien. In
short, plaintiff’s attorneys have an incentive to argue that the full value of
the case is substantial, but the recovery is limited due to various factors
such as policy limits, collectability, comparative negligence and the like.
In light of
these complicating factors, parties should consider including the attorney for
the workers’ compensation carrier in the mediation of the tort claim. Providing
the workers’ compensation carrier with necessary factual information prior to
the mediation will allow the carrier to be better prepared to negotiate its
lien. Problems arise when the plaintiff
and defendant negotiate and make a demand upon the workers’ compensation
carrier out of the proverbial blue. Workers’ compensation adjusters may not be
versed in evaluating personal injury claims.
Therefore, they may be reluctant to reduce their lien. Hence, such liens become a sticking point at
mediation. Thus, taking the workers’ compensation
lien into account by providing thecarrier with information necessary to
evaluate and potentially reduce its lien ahead of settlement negotiations may
benefit both sides.
these complicating factors, parties should consider including the attorney for
the workers’ compensation carrier in the mediation of the tort claim. Providing
the workers’ compensation carrier with necessary factual information prior to
the mediation will allow the carrier to be better prepared to negotiate its
lien. Problems arise when the plaintiff
and defendant negotiate and make a demand upon the workers’ compensation
carrier out of the proverbial blue. Workers’ compensation adjusters may not be
versed in evaluating personal injury claims.
Therefore, they may be reluctant to reduce their lien. Hence, such liens become a sticking point at
mediation. Thus, taking the workers’ compensation
lien into account by providing thecarrier with information necessary to
evaluate and potentially reduce its lien ahead of settlement negotiations may
benefit both sides.
If the parties
are unable to agree on the amount of a workers’ compensation lien, section 440.39,
Fla. Stat., provides that the trial court judge in the tort action has
jurisdiction to settle such dispute. If a lawsuit has not been filed, the
statute provides that jurisdiction lies the Circuit Court of the county in which
the cause of action arose. Thus, the plaintiff,
defendant/tortfeasor or the workers’ compensation carrier can file a motion for
equitable distribution of the proceeds of litigation. Typically, the Circuit Court Judge would then
convene an evidentiary hearing to enable the court to rule on the appropriate
amount of the workers’ compensation lien. The burden of proof at such hearing is on the
plaintiff to show that the full value of the case was not recovered. The burden of proof is upon the workers’ compensation
carrier to establish that it has a lien and paid benefits that are reimbursable
under the statute.
are unable to agree on the amount of a workers’ compensation lien, section 440.39,
Fla. Stat., provides that the trial court judge in the tort action has
jurisdiction to settle such dispute. If a lawsuit has not been filed, the
statute provides that jurisdiction lies the Circuit Court of the county in which
the cause of action arose. Thus, the plaintiff,
defendant/tortfeasor or the workers’ compensation carrier can file a motion for
equitable distribution of the proceeds of litigation. Typically, the Circuit Court Judge would then
convene an evidentiary hearing to enable the court to rule on the appropriate
amount of the workers’ compensation lien. The burden of proof at such hearing is on the
plaintiff to show that the full value of the case was not recovered. The burden of proof is upon the workers’ compensation
carrier to establish that it has a lien and paid benefits that are reimbursable
under the statute.
It should be
noted that the plaintiff might prefer to negotiate the lien after a settlement
is reached. But, as indicated in section
440.39(3)(b), Fla. Stat., it is the tortfeasor who is responsible for
satisfying the lien and therefore should consider negotiating the amount of the
lien before a settlement is otherwise reached.
noted that the plaintiff might prefer to negotiate the lien after a settlement
is reached. But, as indicated in section
440.39(3)(b), Fla. Stat., it is the tortfeasor who is responsible for
satisfying the lien and therefore should consider negotiating the amount of the
lien before a settlement is otherwise reached.
Finally, section
440.39(7), Fla. Stat., requires the
plaintiff, employer and the carrier to cooperate one another in investigating
and pursuing claims against tortfeasors in various manners. In turn, subsection (3)(a) allows the trial
court to consider any party’s failure to cooperate in determining the amount of
the carrier’s lien. Personal injury
litigants would therefore be well-served by recognizing the issue of a workers’
compensation lien at the outset, keeping the carrier informed, and avoiding any
appearance of non-cooperation. In the
end, this will limit the potential for a workers’ compensation lien to become a
“fly in the ointment” and all sides would benefit.
440.39(7), Fla. Stat., requires the
plaintiff, employer and the carrier to cooperate one another in investigating
and pursuing claims against tortfeasors in various manners. In turn, subsection (3)(a) allows the trial
court to consider any party’s failure to cooperate in determining the amount of
the carrier’s lien. Personal injury
litigants would therefore be well-served by recognizing the issue of a workers’
compensation lien at the outset, keeping the carrier informed, and avoiding any
appearance of non-cooperation. In the
end, this will limit the potential for a workers’ compensation lien to become a
“fly in the ointment” and all sides would benefit.