Workers Compensation and Third Party Motor Vehicle Tort Claims

Transcription

1 Workers Compensation and Third Party Motor Vehicle Tort Claims Robert J. Zarbin, Esq. Zarbin Law Firm, LLC I. Personal Injury Protection A. MD Ann. Code, Insurance, Personal injury protection coverage--in general Individuals eligible for medical, hospital, and disability benefits (a) Unless waived in accordance with of this subtitle, each insurer that issues, sells, or delivers a motor vehicle liability insurance policy in the State shall provide coverage for the medical, hospital, and disability benefits described in this section for each of the following individuals: (1) except for individuals specifically excluded under of this article: (i) the first named insured, and any family member of the first named insured who resides in the first named insured's household, who is injured in any motor vehicle accident, including an accident that involves an uninsured motor vehicle or a motor vehicle the identity of which cannot be ascertained; and (ii) any other individual who is injured in a motor vehicle accident while using the insured motor vehicle with the express or implied permission of the named insured; (2) an individual who is injured in a motor vehicle accident while occupying the insured motor vehicle as a guest or passenger; and (3) an individual who is injured in a motor vehicle accident that involves the insured motor vehicle: (i) as a pedestrian; or (ii) while in, on, or alighting from a vehicle that is operated by animal or muscular power. (Additional language from the Statute redacted) B. MD Ann. Code, Insurance,

2 Personal injury protection coverage--when benefits payable, coordination of policies, and subrogation Benefits payable regardless of fault or collateral source of benefits (a) The benefits described in of this subtitle shall be payable without regard to: (1) the fault or nonfault of the named insured or the recipient of benefits in causing or contributing to the motor vehicle accident; and (2) any collateral source of medical, hospital, or wage continuation benefits. Coordination of benefits (b)(1) Subject to paragraph (2) of this subsection, if the insured has both coverage for the benefits described in of this subtitle and a collateral source of medical, hospital, or wage continuation benefits, the insurer or insurers may coordinate the policies to provide for nonduplication of benefits, subject to appropriate reductions in premiums for one or both of the policies approved by the Commissioner. (1) The named insured may: (i) elect to coordinate the policies by indicating in writing which policy is to be the primary policy; or (ii) reject the coordination of policies and nonduplication of benefits. (Additional language of the Statute redacted) Subrogation rights (d) An insurer that provides the benefits described in of this subtitle does not have a right of subrogation and does not have a claim against any other person or insurer to recover any benefits paid because of the alleged fault of the other person in causing or contributing to a motor vehicle accident. Analysis In Maryland, PIP insurers have no right of subrogation. Therefore if PIP pays before the workers compensation carrier, the PIP insurer does not have a claim to recover any money. The issue is one of timing. When possible, always file the PIP claim first. Be wary of the PIP carrier sending the medical bills to the WC carrier requesting it to make payment in an attempt to escape responsibility for paying benefits. Alert 2

3 WC carrier NOT to pay any benefits until YOU make such a request. II. Uninsured and Underinsured Motorist Coverage MD Ann. Code, Insurance, Uninsured motorist coverage--in general Uninsured motor vehicle defined (a) In this section, uninsured motor vehicle means a motor vehicle: (1) the ownership, maintenance, or use of which has resulted in the bodily injury or death of an insured; and (2) for which the sum of the limits of liability under all valid and collectible liability insurance policies, bonds, and securities applicable to bodily injury or death: (i) is less than the amount of coverage provided under this section; or (ii) has been reduced by payment to other persons of claims arising from the same occurrence to an amount less than the amount of coverage provided under this section. (Additional language of the Statute redacted) (c) In addition to any other coverage required by this subtitle, each motor vehicle liability insurance policy issued, sold, or delivered in the State after July 1, 1975, shall contain coverage for damages, subject to the policy limits, that: (1) the insured is entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injuries sustained in a motor vehicle accident arising out of the ownership, maintenance, or use of the uninsured motor vehicle; and (2) a surviving relative of the insured, who is described in of the Courts Article, is entitled to recover from the owner or operator of an uninsured motor vehicle because the insured died as the result of a motor vehicle accident arising out of the ownership, maintenance, or use of the uninsured motor vehicle. (Additional language of the Statute redacted) 3

4 Coverage in excess of other valid and collectible insurance or self-insurance (h)(1) A policy that, as its primary purpose, provides coverage in excess of other valid and collectible insurance or qualified self-insurance may include the uninsured motorist coverage provided for in this section. (2) The uninsured motorist coverage required by this section is primary to any right to recovery from the Maryland Automobile Insurance Fund under Title 20, Subtitle 6 of this article. (Additional language of the Statute redacted) Analysis UM/UIM benefits are first part contract benefits. Any statutory lien based on third party recovery does not attach to the recovery of first party benefits. However, due to the one recovery rule, there may be an adjustment on the total amount of UM/UIM coverage available. Erie Ins. Co. v. Curtis, 330 Md. 160, 623 A.2d 184 (1993). III. Coordination of Benefits MD Ann. Code, Insurance, Restrictions relating to recovery of benefits (Additional language of the Statute redacted) Reduction of benefits if benefits recovered under workers compensation laws (e) Benefits payable under the coverages described in and of this subtitle shall be reduced to the extent that the recipient has recovered benefits under the workers' compensation laws of a state or the federal government for which the provider of the workers' compensation benefits has not been reimbursed. Analysis As discussed, if PIP pays first, the money is not subject to subrogation. If workers compensation insurance pays before PIP insurance, PIP is reduced to the extent workers compensation insurer paid benefits. However, because most employees received the temporary total disability rate of 2/3 their average weekly wage and PIP pays 85% of the lost wage claim, you can make a claim under PIP for the 4

5 difference of the unpaid wages between the 85% PIP would pay and the 66.67% that workers compensation would pay. The UM/UIM benefits are reduced to the extent that the Claimant recovered money that was not reimbursed to the third party lienholder. The steps to determine how much UM/UIM coverage is available is: (1) the attorney can deduct the costs and expenses of the action; (2) the third party lienholder is reimbursed for compensation paid, medical services, and funeral expenses, and (3) the Claimant keeps the remainder. The lienholder is also responsible for their proportional share of the attorney s fee and expenses. Ross v. Agurs & Progressive Ins. Co., 214 Md. App. 152, 75 A.3d 1022 (2013). IV. Third Party Actions in Workers Compensation Injury Claims A. MD Ann. Code, Labor and Employment, Action against third party (a) If a claim is filed and compensation is awarded or paid under this title, a selfinsured employer, an insurer, the Subsequent Injury Fund, or the Uninsured Employers' Fund may bring an action for damages against the third party who is liable for the injury or death of the covered employee. (b) If the self-insured employer, insurer, Subsequent Injury Fund, or Uninsured Employers' Fund recovers damages exceeding the amount of compensation paid or awarded and the amount of payments for medical services, funeral expenses, or any other purpose under Subtitle 6 of this title, the self-insured employer, insurer, Subsequent Injury Fund, or Uninsured Employers' Fund shall: (1) deduct from the excess amount its costs and expenses for the action; and (2) pay the balance of the excess amount to the covered employee or, in case of death, the dependents of the covered employee. (c)if the self-insured employer, insurer, Subsequent Injury Fund, or Uninsured Employers' Fund does not bring an action against the third party within 2 months after the Commission makes an award, the covered employee or, in case of death, the dependents of the covered employee may bring an action for damages against the third party. (d) The period of limitations for the right of action of a covered employee or the 5

6 dependents of the covered employee against the third party does not begin to run until 2 months after the first award of compensation made to the covered employee or the dependents under this title. (e) If the covered employee or the dependents of the covered employee recover damages, the covered employee or dependents: (1) first, may deduct the costs and expenses of the covered employee or dependents for the action; (2) next, shall reimburse the self-insured employer, insurer, Subsequent Injury Fund, or Uninsured Employers' Fund for: (i) the compensation already paid or awarded; and (ii) any amounts paid for medical services, funeral expenses, or any other purpose under Subtitle 6 of this title; and (3) finally, may keep the balance of the damages recovered. (f) In an action brought by a covered employee or the dependents of the covered employee under subsection (c) of this section, the covered employee or the dependents of the covered employee, the self-insured employer, the insurer, the Subsequent Injury Fund, and the Uninsured Employers' Fund shall pay court costs and attorney's fees in the proportion that the amount received by each bears to the whole amount paid in settlement of any claim or satisfaction of any judgment obtained in the case. B. MD Ann. Code, Labor and Employment, Receipt of amount in suit (a) Except as provided in subsection (b) of this section, if a covered employee or the dependents of a covered employee receive an amount in an action: (1) the amount is in place of any award that otherwise could be made under this title; and (2) the case is finally closed and settled. (b) If the amount of damages received by the covered employee or the dependents of the covered employee is less than the amount that the covered employee or dependents would otherwise be entitled to receive under this title, the covered employee or dependents may reopen the claim for compensation to recover the difference between: (1) the amount of damages received by the covered employee or dependents; and 6

7 (2) the full amount of compensation that otherwise would be payable under this title. Analysis If you know that the Claimant will be pursuing a third party claim, it is best practice to contact the workers compensation insurance adjuster about that claim. Obviously, you want to try and negotiate the lien prior to filing to action. Additionally, you want to try and coordinate with the adjuster so as not to create evidence that will ultimately hurt the potential third party recovery. For example, a workers compensation insurer s defense medical evaluation may be used by the third party s insurer to defend against your third party claim as well as video surveillance. In essence, the insurer is creating potential evidence to harm its own recovery. V. Election of Remedies MD Ann. Code, Labor and Employment, Choice of proceeding When a person other than an employer is liable for the injury or death of a covered employee for which compensation is payable under this title, the covered employee or, in case of death, the personal representative or dependents of the covered employee may: (1) file a claim for compensation against the employer under this title; or (2) bring an action for damages against the person liable for the injury or death or, in case of joint tortfeasors, against each joint tortfeasor. Analysis If you can, file and collect benefits under the Personal Injury Protection (PIP) portion of the governing policy before filing and/or collecting WC benefits. After you have exhausted the PIP benefits, then file the Workers Compensation Claim. If the third party action is against a tortfeasor, then exhaust your WC remedy first before pursuing that cause of action. On the other hand, if your third party action is against a UM/UIM carrier, then wait to pursue PPD benefits until you resolve the UM/UIM cause of action. The UM/UIM cause of action is offset by the amount of the recovery from the WC carrier while the WC gets no such offset/credit from the UM/UIM carrier. 7

8 VI. Issues Raised by Statues and Case Law A. If the Claimant settles the third party action prior to filing the workers compensation claim, election of remedies will bar the workers compensation claim. Saadeh v. Saadeh, Inc., 150 Md. App. 305, 819 A.2d 1158 (2003); Central GMC, Inc. v. Lagana, 120 Md. App. 195, 706 A.2d 639 (1998). B. If the Claimant settles the third party action without the authorization of the lien holder, the Claimant s future workers compensation rights are forfeited. However, if the lienholder has not suffered a material prejudice, then the underlying compensation claim can continue. It is the burden of the lienholder to establish that the reasonable dollar value of the third party action was greater than the amount of the settlement. The money received by the Claimant is credited toward the payment of any future benefits that would have otherwise have been paid by the lienholder. From Ankey v. Franch: Where prejudice cannot be shown, the proceeds of the unauthorized settlement must be distributed according to the terms of the Act: the employer is entitled to reimbursement from the proceeds; see LE 9 902, and the claim will not be terminated or payment suspended if the sum of the credits to the employer, i.e., the amount of the unauthorized settlement and the settlement against [Attorney], is less than the compensation that the employee would otherwise be entitled to receive. LE In a case in which material prejudice is shown, the employer is also entitled to a credit for the amount of the prejudice. The employee's claim may not be abated on account of the prejudice unless the amount of the unauthorized settlement and the settlement against [Attorney], plus the amount of any prejudice shown, is equal to or greater than the compensation awarded. In the case of a lump-sum payment for a temporary-total or temporarypartial disability, if the credits to the employer exceeded the amount of the lump-sum award, the claim would be abated accordingly. In Ankney's case, future benefits to be received by Ankney pursuant to the Commission's award must be abated where the credits due the employer exceed the amount already received by Ankney, subject to a motion to reopen the case at the point in time when the credits have been exhausted, i.e., the compensation due Ankney equals the proceeds received by her from her unauthorized settlement, her settlement with [Attorney], and the amount computed as the prejudice resulting from the unauthorized settlement. The net effect is 8

9 to shift the loss resulting from an unreasonable or de minimis settlement from the employer to the employee. Ankey v. Franch, 103 Md. App. 83, 652 A.2d 1138 (1995). However, if there are other potential third party defendants after an unauthorized settlement, the workers compensation claim might not be extinguished. Saadeh v. Saadeh, Inc., 150 Md. App. 305, 819 A.2d 1158 (2003). C. Can a Claimant really recover nothing from a third party action? Absolutely possible. The Employer, Insurer, Subsequent Injury Fund and/or Uninsured Employer s Fund s subrogation rights are secondary in any recovery only behind the attorney s fees and expenses and/or possibly a governmental liens such as taxes. Once the Claimant recovers damages from the third party, the Claimant shall reimburse for prior compensation paid, even if that means the Claimant ultimately recovers nothing from the third party action. The made whole doctrine does not apply. Podgueski v. OneBeacon Ins. Co., 375 Md. 133, 821 A.2d 400 (2003). D. What part of the third party recovery does the lien attach? Any amount recovered by the Claimant that would also be benefits payable through the Workers Compensation Act. If the judgment details damages that would not constitute a worker s compensation benefit, the lien would not attach to that amount. For example, if the judgment is for non-economic damages or past medical payments, the lien would attach. If the judgment is for future lost earnings or loss of consortium the lien would not attach to that amount as these special damages are not a workers compensation benefits. The amount over the lien would be subject to a future holiday as discussed below. Chesapeake Haven Land Corp. v. Litzenberg, 141 Md. App. 411, 785 A.2d 859 (2001); Maryland Sound Industries, Inc. v. Simmons, 845 So.2d 922, 28 Fla. L. Weekly D904 (2003) (Florida court interpreting the Maryland third party statutes). Brocker Mfg. & Supply Co., Inc. v. Mashburn, 17 Md. App. 327, 301 A.2d 501 (1973). (If a spouse recovers for a loss of consortium claim, the third party lien does not attach). Analysis Trial counsel should consider the possibility of not introducing medical costs for reimbursement if the amount of the medical bills is low, but the injuries and losses are much greater. (Reptile method). If this decision is made, inform the workers 9

10 compensation carrier of your intention to proceed to trial without the introduction of the medical costs and file a motion in limine to shield the medical bills from being introduced into evidence. E. What about settlements and damages from derivative third party actions? No. The lien only attaches to the Claimant s recovery. F. Does the WC lienholder recover the first party uninsured or underinsured motorist benefits? How are any credits applied in UM/UIM claims? Example 1. The WC lienholder cannot recover any money from the first party contract claim. However, the available UM/UIM coverage is reduced by the amount of unreimbursed benefits received by the Claimant. For example, assume these illustrative facts: (1) $30, WC lien; (2) $60, third party coverage, (3) $100, in UIM coverage, (4) $5, in trial expenses and (5) 1/3 attorneys fee agreement. In this example, the lien is less than the third party recovery. The 1/3 attorneys fee deducted from the $60, tortfeasor recovery equals $20, The $30, WC lien is reduced by 1/3 ($10,000.00) to account for the lienholder s responsibility for the 1/3 overall attorney s fee. Thus, the Claimant and the WC lienholder are both responsible for $10, of the $20, total attorneys fee. The WC lien s value is now $20, The $20, WC lien is also reduced by its proportional share of the expenses; 1/3 of the $5, trial expenses is $1, Thus, the final reimbursable amount payable to the WC carrier will be $18, ($30, $10, $1,666.67). $18, constitutes payment in full for the WC lien. $30, Lien ($10,000.00) -Attorney s fee contribution ($1,666.67)- Trial expenses contribution $18, Net reimbursable lien The Claimant would receive the remaining $16, from the tortfeasor recovery. $60, Third party recovery ($18,333.33) Net reimbursable lien ($10,000.00) WC lienholder s attorney fee contribution ($1,666.67) WC lienholder s trial expenses contribution 10

11 ($10,000.00) Claimant s attorney fee contribution ($3,333.33) Claimant s trial expenses contribution $16, Net payable third party settlement to Claimant Assuming the UIM policy was offered to resolve that portion of the claim that coverage would be reduced by the amount that the Claimant received from any other source that has not been reimbursed. Here, the total amount of UIM coverage would be $28, $100, UIM coverage ($60,000.00) Third party recovery ($11,666.67) Unreimbursed part of WC lien, which is its share of the attorney s fee and costs. $28, Available UIM coverage Example 2. If the lien is greater than the third party recovery, then the total lien cannot be repaid. For this example, assume these illustrative facts: (1) $60, WC lien; (2) $30, tortfeasor coverage, (3) $100, in UIM coverage, (4) $5, in trial expenses, and (5) 1/3 attorneys fee agreement. In this example, the lien is greater than the third party recovery. Because this $60, lien is more than 100% of the third party recovery of $30,000.00, the lienholder is responsible for 100% of the attorney s fee and expenses ($15, total). $30, Third party recovery ($10,000.00) Attorney s fee ($5,000.00) Trial expenses $15, Net reimbursable lien The UIM coverage would be reduced by the amount that the Claimant has received from other sources that has not been reimbursed. Therefore, the total amount of UIM coverage would be $25, $100, UIM Coverage ($30,000.00) Third party recovery ($45,000.00) Unreimbursed part of the lien $25, Net UIM coverage available. Example 2 - An Alternative Argument for Negotiation Purposes

12 Again, if the lien is greater than the third party recovery, then the total lien cannot be repaid. For this example, assume these illustrative facts: (1) $60, WC lien; (2) $30, tortfeasor coverage, (3) $100, in UIM coverage, (4) $5, in trial expenses, and (5) 1/3 attorneys fee agreement. In this example, the lien is greater than the third party recovery The 1/3 attorneys fee deducted from the $30, tortfeasor recovery equals $10, The WC lien is reduced by 1/3 (attorneys fee) so its value is $40, Because this $40, recovery amount is more than 100% of the third party recovery the lienholder s recovery is reduced by $11, (1/3 of the remaining $20, for the attorneys fee plus $5, for expenses) and its net recovery would be $8, The remaining unreimbursed lien is $51, ($60, $8,333.33). Claimant would receive $6, from the tortfeasor recovery unless his attorney were to equitably divide the fee with him. (See Attorney Grievance Commission v. Harlan, 320 Md. 571, 578 A.2d 1196 (1990)). The UIM coverage would be reduced by the amount that the Claimant has received from other sources that has not been reimbursed. Therefore, the total amount of UIM coverage would be $18, ($100, $30, $51,666.67). Reality Check The problems arise when the WC lien is greater than either the tortfeasor or first party coverage. When this occurs, pursuing any action outside the workers compensation claim is one of coordinating with the lienholder over the amount of the repayment of the lien. If the WC carrier agrees to reduce its lien the first party benefit is still reduced because the amount of the unpaid lien is still counted against the Claimant. Creativity may need to come into play. Ross v. Agurs & Progressive Ins. Co., 214 Md. App. 152, 75 A.3d 1022 (2013); Parry v. Allstate Ins. Co., 408 Md. 130, 968 A.2d 1053 (2009); Blackburn v. Erie Ins. Group, 185 Md. App. 504, 971 A.2d 368 (2009). G. A formal workers compensation claim does not have to have been filed as a condition precedent for the creation of a third party lien. Even if the Claimant only pursues the third and/or first party claims, if the workers compensation insurer paid any reimbursable compensation or medical payments then the lien is created and must be honored. Parry v. Allstate Ins. Co., 408 Md. 130, 968 A.2d 1053 (2009). H. What constitutes the third party lien? 12

13 Any compensation, medical benefits or funeral expenses paid by the workers compensation insurer. This includes all indemnity payments (TTD, TPD, PPD, PTD, VR/TTD) and all medical expenses. It does not include any expenses bourn by the WC carrier as part of their defense. Neither is the Clamant responsible for reimbursing the WC carrier for their defense medical evaluation fees, nurse case manager fees, outside review fees or surveillance. I. Can the Claimant return to the Commission for additional workers compensation benefits even after the third party claim and/or first party claims are concluded? Absolutely. However, if the Claimant received any money from the third party, the workers compensation insurer is allowed a holiday on its payments until the amount that the Claimant received is reached. For example, should the Claimant receive $5, from a third party action, the workers compensation carrier is entitled to receive a credit toward any future workers compensation benefit up to this amount. This credit may be creatively avoided, for example, if the WC carrier were to accept their portion of the settlement with the understanding that the Claimant would agree to the total settlement only if his net recovery were applied to future indemnity benefits and not medical treatment. Because LE only impacts third party claims, the workers compensation carrier does not receive a holiday for any first party benefits recovered by the Claimant. The statutory language found in LE 9-902, et. seq. only deals with third party claims. Erie Ins. Co. v. Curtis, 330 Md. 160, 623, A2.d 184 (1993). J. Can the Employer, Insurer, Subsequent Injury Fund, or Uninsured Employer s Fund bring its own third party action? Yes, provided it does so within the first 60 days of the claim. Under LE 9-902, all of these entities have the exclusive right to bring a third party action for the first two months of an Award from the Commission. Once the two months have expired with no suit being filed, then the Claimant may bring his own third party action. The action by the Employer, Insurer, SIF or UEF is a derivative action and does not exist without the Claimant. If a third party action is brought on behalf of the Claimant, that entity bears a fiduciary duty to recover as much for the Claimant as possible because any money recovered over and above the statutory lien must be paid to the Claimant. Podgurski v. OneBeacon Ins. Co., 374 Md. 133, 821 A.2d 400 (2003); Franch v. Ankey, 341 Md. 350, 670 A.2d 951 (1996); Erie Ins. Co. v. Curtis, 330 Md. 160, 623, A2.d

14 (1993); Hayes v. Wang, 107 Md. App. 598, 669 A.2d 771 (1996) (Claimant is allowed three years and two months to timely file a third party action). VII. Contacts For Lien Negotiations A. Always try to negotiate the lien. Never accept No as an answer unless the lien holder can provide either a statutory basis for denial or a copy of the governing contractual agreement. B. Blue Cross: Generally, Eugene A. Seidel, Seidel Subrogation Associates, LLC, Ste Boulevard Cir.Owings Mills, MD , Phones: (410) Fax: (410) C. Medicaid: Maryland Department of Health and Mental Hygiene, 201 W. Preston Street, Baltimore, MD 21201, Phones: (410) Fax: COMAR (B)(8) D. Department of the Army: Angela Coppedge-Jackson, Dept. of the Army, Office of the Judge Advocate, 4217 Morrison Street, Suite 5030, Fort George G. Meade, MD Phones: (301) Fax: (301) E. US Postal Service: Sheila R. Smith, HRM, Injury Compensation Control Office, USPS, 900 RE. Fayette Street, Room 217, Baltimore, MD Phones: (410) FAX: (410)