7/19/2010. GoToWebinar Attendee Interface PRESENTED BY: MATTHIESEN, WICKERT & LEHRER, S.C. PRESENTED BY: MATTHIESEN, WICKERT & LEHRER, S.C.

Transcription

1 ADVANCED CONCEPTS IN WORKERS COMPENSATION SUBROGATION PRESENTED BY: MATTHIESEN, WICKERT & LEHRER, S.C. GoToWebinar Attendee Interface 1. Viewer Window 2. Control Panel 2 ADVANCED CONCEPTS IN WORKERS COMPENSATION SUBROGATION PRESENTED BY: MATTHIESEN, WICKERT & LEHRER, S.C. 1

2 WORKERS COMPENSATION SUBROGATION History Purpose Reduce Burden of Insurance on Public Prevent Double Recovery Place Ultimate Burden on Tortfeasor Created By Statute Entirely Dependent on State Law Extra-Territorial Subrogation 4 WORKERS COMPENSATION Socialist Concept Square Peg, Round Hole No-Fault Concepts Reciprocal: No-Fault vs. Reimbursement Equitable Considerations Don t Apply Trend Toward Equity Advantage: Employee Need for Education & Training of Judges 5 BUILDING BLOCKS OF W/C SUBROGATION Early Recognition of Subrogation Prompt Action on Subrogation Aggressive and Cost-Effective Pursuit of Subrogation 6 2

3 INVESTIGATION OF W/C CLAIM Course and Scope Extent of Injury Possible Claim Defenses 7 THREE LS OF SUCCESSFUL W/C SUBROGATION INVESTIGATION LIABILITY Understanding Tort Liability LAW Understanding Subrogation Law LABOR Taking the time and using the tools at your disposal to fully uncover, develop, and preserve third-party liability. SUBROGATION IS AN INVESTMENT 8 W/C SUBROGATION ANALYSIS Answer the following questions for every claim: What are your SUBROGATION RIGHTS? Which THIRD PARTIES can be sued? How is a recovery ALLOCATED? Are ATTORNEY S FEES/COSTS owed? Do we get a future CREDIT? 9 3

4 SUBROGATION RIGHTS Depends Totally on Statute Election by Worker Who can bring third-party action? When can third-party t action be brought? Rights of Intervention? Statutory Lien? Rights lost if not protected in suit? Examples of State Statutes: 10 ALABAMA Worker can pursue comp and 3P action. Carrier has lien on 3P recovery. Carrier has 6 months after SOL runs to file suit. Carrier can t file before SOL runs. Carrier may intervene into 3P action. If it can make substantial contribution to suit. Worker can t intervene into carrier s suit. Carrier can recover past AND future payments. 11 WISCONSIN Most Favorable Statute In U.S. Carrier Or Worker May File 3P Suit Equal Voice In Prosecution Of Suit Notice Must Be Given To Other Party Both Must Bring Suit Within 3 Year SOL Worker Can Intervene After SOL Carrier May Intervene Into 3P Action Subrogated Party Must Be Made A Party Carrier Can Recover Past and Future Payments 12 4

5 THIRD PARTY LIABILITY Recognizing Liability of 3P Tortfeasor Exclusive Remedy Rule Who can be sued? Co-Employee? UM/UIM Carrier? Subcontractor? Medical Malpractice? Legal Malpractice? Examples of State Statutes: 13 UTAH 34: Employer Immune Parent Corporation of Employer Also Protected Co-Employee Immune Unless Intentional Act Carrier NOT Subrogated to UM/UIM Recovery Carrier NOT Subrogated to Legal Malpractice Carrier is Subrogated to Medical Malpractice 14 INDIANA Employers and Co-Employee Immune Even if act is intentional Carrier Subrogated to UM/UIM Policy Carrier is Subrogated to Medical Malpractice Undecided if Carrier Subrogated to Legal Malpractice 15 5

6 CALIFORNIA Either Carrier or Claimant Can File Suit Carrier Has Three Choices: Bring Action Directly Join as Party Plaintiff Allow Plaintiff to Prosecute and Then Urge Lien Notice of lien Where Intervention Not Cost-Effective Same Effect as Simply Giving Written Notice Plaintiff Can Settle Around Carrier Complex Credit Issues See Navigating The Storm Article at Employer Negligence Issues Employer s Credit Threshold 16 EMPLOYER CONTRIBUTION Minnesota, Illinois Kotecki Contribution; Lambertson Contribution Alaska, et. al. Only If Employer 100% at Fault Arizona, California, a, Kansas, Texas Proportional Reduction (If Verdict) Idaho Contribution Bars Subro; Lien Offsets Recovery New York Only If Grave Injury Utah Only If Contribution is 40% or More 17 ALLOCATION OF THIRD-PARTY RECOVERY How and when does carrier recover lien? Does carrier recover past AND future payments? Is there a special formula used? Does employer s negligence reduce recovery? Will Made Whole Doctrine be applied? Subrogated to all elements of damages? Economic vs. Non-Economic Examples of State Statutes: 18 6

7 ARIZONA (C) Carrier Has Lien On Any Recovery Even Extends To Loss Of Consortium Recovery Carrier s Lien Reduced By Proportionate Share of Employer s Negligence Only If There Is Jury Verdict/Not Settlement Carrier May Challenge % of Employer s Negligence Carrier Must Approve Settlement Carrier Does Not Act In Bad Faith By Refusing To Approve Settlement 19 GEORGIA Made Whole Doctrine Is Codified Contribution Not Considered Re: Made Whole Must Request Special Verdict Otherwise Can t Tell If Worker Made Whole Court Hearing May Be Required Burden of Proof Is On Carrier No Subrogation If Benefits Paid In Foreign State 20 EVALUATING W/C SUBRO FILES Liability Comparative Fault / Contributory Negligence Look At Law of State Where Suit To Be Filed Cost / Fees Correct Fee Structure Likely Costs / Experts Fees, Etc. Correct Subrogation Strategy Notice of Lien Intervention Prosecute independently Subrogation Counsel 21 7

8 ATTORNEY S FEES/COSTS Can Plaintiff s Attorney Recover Fees? Can Plaintiff s Attorney Recover Costs? Recover Fees Based On Past Only? Recover Fees Based On Future Payments? Which Costs Can Be Recovered From Carrier? What If Carrier Has Active Subro Counsel? Example Of State Statutes: 22 ATTORNEY S FEES/COSTS Arizona: No Attorney s Fees Owed Arkansas: Carrier Must Intervene California: Court May Apportion If Carrier Is Actively Represented Colorado: If Carrier Acts On Own No Fees Illinois: Pro-Rata Up To 25% Tennessee: If ActiveParticipation,ThenFees Are Apportioned Wisconsin: Formula Followed - No Fees Owed 23 TYPICAL THIRD-PARTY DISTRIBUTION (Texas Law - $10K Lien) $ 90,000 Gross Recovery P= $53K - 30,000 Fees (P Atty) INS= $6,700+53c $ 60,000 Net Recovery Atty= $30K - 6,667 Lien (less 1/3 Fee) $90K $ 53,333 Net Recovery to P (Credit) 24 8

9 RECOVERY OF ATTORNEY S FEES BY CARRIER Statute provides that carrier be apportioned part of fees if it joined in pressing action (Wisconsin). Court MUST allocate somefees to INS when Subro Attorney participate. Attorney s fees recovered means 100% recovery by carrier. 25 FEES RECOVERED BY CARRIER (Wisconsin Law - $10K Lien) $ 90,000 Gross Recovery P= $50K - 30,000 Fees (20-P, 10-INS) INS= $20K+30c $ 60,000 Net P Atty= $20K - 20, /3 to P $90K $ 40,000 Subject to Lien - 10,000 Carrier Reimbursed $ 30,000 Net Recovery to P (credit) 26 IF CARRIER PROSECUTES 3P ALONE (Wisconsin Law - $10K Lien) $ 90,000 Gross Recovery P= $30K - 30,000 Fees to INS INS= $40K+30c $ 60,000 Net P Atty= N/A - 20,000 1/3 to P $90K $ 40,000 Subject to Lien - 10,000 Carrier Reimbursed $ 30,000 Net Recovery to P (Credit) 27 9

10 FUTURE CREDIT/OFFSET Connecticut: No Credit-Must Recover Future Payments Out of Recovery. Georgia: No Future Credit. Texas: Credit For Entire Recovery By Worker Wisconsin: Fees Off Top; 1/3 To Worker (No Credit); Balance To Carrier; If Any Left, It Constitutes Credit. Document Your Credit With Comp Commission 28 CREDITS / ADVANCES Purpose and Function Generally Often More Important Than Lien Failure To Properly Document Every State Applies Credit Differently Waiver Settlement of Third-Party Cases Allocation of Damages Proper Retention of Future Credit Proper Documentation / Forms 29 CALCULATING FUTURE CREDITS Typical Calculation $120,000 3P Settlement Less 40,000 Atty s Fees / Costs 80,000 Net Recovery Less 30,000 Lien Reimbursement $ 50,000 Worker s Net Recovery (Credit) 30 10

11 FUTURE CREDIT TIPS Do NOT Sign Release Unless It Preserves Future Credit Be Careful When Settling W/C Claims Be Specific About Past Liens / Future Credit Totals and Outstanding Bills Watch Out for Gerrymandering Always Document Your Credit With Appropriate Commission / Agency 31 ALABAMA Miller Formula (Elements of Damages Allocated By Court) Calculate Net Recovery Divide Net Recovery by Value of 3P Case Multiply Actual Future Benefits by Fraction = Gross Future Medical Expense Credit Reduce This By Carrier s Pro Rata Share of Attorney s Fees (Fitch Formula) = Net Future Medical Expense Credit Must Document on Form WC-4 32 WISCONSIN $900,000 3P Settlement Less 300,000 Attorney s Fees / Costs 600,000 Recovery Less 200, /3 to Worker (No Credit) $ 400,000 Net Recovery 250,000 Past Lien Reimbursement 150,000 Net to Worker (Credit) MUST FILE FORM WKC

12 FLORIDA Manfredo Formula Applies When No Full Recovery By Plaintiff Ratio of Net Settlement To Full Value Court Determines Full Value of Case Carrier Reduces Future Benefits By This Percentage File Form DFS-F2-DWC-4 If No Ct. Approval 34 GEORGIA Statute Reads: Insurer s recovery under this section shall be limited to the recovery of the amount of benefits paid under this chapter No Future Credit Payable Under This Chapter Issue 35 ILLINOIS Employer Liability for Contribution Separate Subro and Limited to Past Lien and Future Liability (Kotecki Cap) Baltzell v. R&R Trucking, 554 F.3d 1124 (7 th Cir. 2009) Waiver of Kotecki Cap Def. Pays Verdict Then Seeks Contrib. From Employer Employer Contributes Pro Rata To Defendant Fresh Money Liability or Credit To Defendant? Contribution Liability vs. Reimbursement Less 25% LaFever v. Kemlite Co., 706 N.E.2d 441 (Ill. 1998) Need For Employer Defense Counsel Future Credit 75% of PCV Paid to Carrier Future Benefits Paid at 25% 36 12

13 INDIANA Statute Reads: When there is third party settlement the liability of the carrier to pay further compensation shall terminate But It Doesn t Mean What It Says Smith v. Champion Trucking, 901 N.E.2d 260 (Ind. App. 2009) No Credit When Recovery Is Before Award and Is Less Than Anticipated Benefits 37 IOWA 85.22(1) Does Not Provide For Credit When Worker Prosecutes 3P Action 85.22(2) Allows Carrier To Take Credit When Carrier Prosecutes 3P Action Courts Read Credit Rights Into 85.22(1) WARNING: Carrier Must File Notice of Lien WARNING: Settlement of a Contested W/C Claim Bars 85.22(1) Subrogation and Credit Rights 38 CALIFORNIA 3858 Carrier Gets Credit For Net Recovery Medical Malpractice Exception Workers Compensation Board Jurisdiction No Employer Negligence Simply Take Credit Employer Negligence File Petition For Credit File In Civil Case If Possible (WCAB Prejudice) When Third-Party Case Settles 3 Choices Recover Lien and Enter C&R of Comp Claim Recover Past Lien and Stipulated Credit Amount P Contests Everything Trial Ct. Decides Employer Negligence In Trial And Decides Lien Reimb and Credit 39 13

14 CALIFORNIA (CONT D) If Case Settles, Trial Court Out of Picture Workers Compensation Appeals Board (WCAB) Not Good Option For Carrier Threshold of Employer Negligence $1 Million Verdict X 20% ER Negligence = $200K Lien Is Reduced by Employer Negligence Next, Credit Reduced by Employer Negligence Carrier Must Meet Threshold Before It Gets Either! Common Mistake: ER Negligence = No Credit Credit Delayed Until Threshold Met Continue Making Benefit Payments Until Then 40 CALIFORNIA HYPOTHETICAL FACTS $340,000 3P Settlement 75,000 Workers Compensation Lien 194,000 Net Recovery To Worker 25% Employer Negligence (Judge) $500,000 Value of 3P Case (Judge or WCAB Decide) 41 CALIFORNIA SOLUTION Employer s Threshold = $125,000 ($500,000 x 25%) Employer s Future Credit = $69,000 ($194K Net Recovery - $125K) Credit Delayed Until Threshold Met Carrier Must Contribute Additional $125K Before It Can Start Claiming Credit Southern Cal. Edison Co. v. WCAB (1997) Goal = Reach Stipulation With P Attorney Settlement vs. Jury Verdict Total Tort Damage Determination Employer Negligence % Subrogation Counsel Necessary P Can Settle Around 42 14

15 CREDIT SUMMARY Credit Rights Vary Greatly Among States Know The Law When In Doubt Document Your Credit Know When Subrogation Counsel Involvement Will Save/Increase Recovery Be Aware of Problem States Illinois, Minnesota, California, etc. Beware of Waiver of Past Lien To Close Out Pending Compensation Claim Stepping Over Dollars To Pick Up Dimes 43 OTHER W/C SUBRO ISSUES Discovery Protecting Claim File Experts Product Liability Law Hiring Subro Counsel? Intervention? Conversion of Subrogation Monies Settlement When Claim Is Open Borrowed Servant Doctrine Dual Capacity Doctrine Indemnity Construction Litigation 44 W/C SUBROGATION IN CONSTRUCTION SETTING History General Contractor/Subcontractor Liability AIA Contracts Waivers of Subrogation Statutory Employer Status OCIP Wrap-Around Policies Investigation of Construction Losses SEE CHART FOR SUMMARY OF ALL 50 STATES ON

16 EXTRA-TERRITORIAL TERRITORIAL SUBRO Definition: Any effort to subrogate outside the boundaries of the state where benefits are being paid ( enabling state ). More common than 20 years ago National/Global Economy Is primarily concerned with which state s subrogation laws apply (enabling state s or forum state s) COMP CLAIMS INVOLVING MULTIPLE STATES Issues/Variables To Be Considered: Where was Claimant hired? Where will Claimant file claim? Where was Claimant injured? Where is Employer principally located? Where is third-party lawsuit filed? Where is tortfeasor located? 48 16

17 THIRD PARTY CONSIDERATIONS Worker usually won t consider subrogation rights Unless a lawyer is looking ahead to 3P action May choose state which limits subrogation Example: TX worker injured in GA. You re the lawyer: Should worker choose GA or TX benefits? GA benefits - Claimant has right to file suit for 1 yr GA benefits Made whole rule codified TX benefits - First money right of recovery GA benefits Plaintiff s attorney can recover costs TX benefits - No subro rights if 3P suit in GA! 49 WHICH STATE S SUBRO LAWS APPLY? 1. LEX LOCI DELECTI (The Place Of The Wrong) Applies Law Of Forum State (Accident Occurred) Is The Minority Rule Only 12 States 2. LARSON RULE (Restatement 185) Applies Law Of Enabling State (Benefits Paid) 3. MOST SIGNIFICANT CONTACTS Applies Law of State With Most Significant Relationship To the Incident Is Majority Rule Replacing Lex Loci 4. LEX FORI (Law of Forum If Different from No. 1) 50 CONFLICTS PROCEDURE Determine All the Variables/Factors. Determine Subro Law of Both States. Is There a Conflict? Conflict = Difference In Laws Results In Two Different Outcomes If There Is a Conflict, Apply the Conflict Rule of The Forum State (Where Suit Filed)

18 EXAMPLE #1 1. DETERMINE THE VARIABLES/FACTS Employee Injured In Car Accident In GA With Third Party Who Has Minimum Limits Employer Is Based In Wisconsin Employee Resides In Wisconsin Benefits Paid Under Wisconsin Act Suit Filed In Georgia Employee Settles Case But Is Not Made Whole 52 EXAMPLE #1 2. DETERMINE LAW OF BOTH STATES Both States Allow For Subrogation WI Subro Law Allows Recovery If Not Made Whole GA Subro Law Requires Claimant Be Made Whole GA Law Requires Carrier To Prove Made Whole 53 EXAMPLE #1 3. IS THERE A CONFLICT? Under WI Law = Carrier Makes Partial Recovery Under GA Law = Carrier Recovers Nothing CONCLUSION: DIFFERENT OUTCOMES THERE IS A CONFLICT! 54 18

19 EXAMPLE #1 4. APPLY CONFLICT RULE OF FORUM STATE (STATE WHERE SUIT IS FILED) Georgia Conflict Rule = Lex Loci Delecti (Law of State Where Loss Occurred = GA) Outcome = No Recovery For Carrier 55 EXAMPLE #2 1. DETERMINE THE VARIABLES/FACTS Employee Slips And Falls At Work In Illinois Employee s Work Related Injury Is Worsened Due To Medical Malpractice In Illinois Employer Is Based In Iowa Employee Resides In Iowa Benefits Paid Under Iowa Law Suit Filed In Illinois 56 EXAMPLE #2 2. DETERMINE LAW OF BOTH STATES IL law allows for subrogation recovery in medical malpractice cases. IA law does not allow for such subrogation

20 EXAMPLE #2 3. IS THERE A CONFLICT? Under IA Law = Carrier Cannot Recover Under IL Law = Carrier Can Recover CONCLUSION: DIFFERENT OUTCOMES THERE IS A CONFLICT! 58 EXAMPLE #2 4. APPLY CONFLICT RULE OF FORUM STATE (STATE WHERE SUIT IS FILED) Illinois Conflict Rule = Larson Rule (Apply subrogation law of state paying benefits) Result: Carrier Cannot Subrogate Against Medical Malpractice Recovery

21 Listen. Understand. That Terminator is outthere.itcan'tbereasonedwith,it can't be bargained with...it doesn't feel pity of remorse or fear... and it absolutely will not stop. Ever. The Terminator ADVANCED CONCEPTS IN WORKERS COMPENSATION SUBROGATION PRESENTED BY: MATTHIESEN, WICKERT & LEHRER, S.C. 21