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Workers' Compensation Subrogation Claims From The Perspective Of A Liability Carrier

March 03, 2013 BY Emily Shuman

          This paper is intended to be a refresher on workers’ compensation subrogation claims in the context of liability cases.  While the issues are fairly straightforward, there are several practical considerations to remember in a case where your insured is sued by someone who has been paid workers’ compensation benefits.  For example, consider a case where you insure ABC trucking company.  One of its drivers was in an accident with the driver of XYZ company in the course and scope of employment.  The driver for XYZ is injured and receives workers’ compensation benefits.  He files suit in Georgia against ABC.  What must you take into consideration during defense of the suit?

(1)        Who Has a Lien and What Does It Cover?

•           The employer or its workers’ compensation insurer “shall have a subrogation lien, not to exceed the actual amount of compensation paid pursuant to this chapter, against such recovery” if the employee has a right of action against a proper party (e.g., not the employer) and workers’ compensation benefits are being paid.  O.C.G.A. § 34-9-11.1(b).

•           Recovery on the lien “shall be limited to the recovery of the amount of disability benefits, death benefits, and medical expenses paid under this chapter and shall only be recoverable if the injured employee has been fully and completely compensated, taking into consideration both the benefits received under this chapter and the amount of the recovery in the third-party claim, for all economic and noneconomic losses incurred as a result of the injury.”  Id.

(2)        What Must The Employer/Workers’ Compensation Insurer Do To Protect Its Lien Against A Tortfeasor?

A lien on the recovery in the hands of the employee exists even before suit.  In practice, the employer/workers’compensation insurer will put the tortfeasor and its insurer on notice of the lien by certified mail and will also copy the employee, even before suit. 

•           The case law provides, however, that to protect and enforce its lien against the tortfeasor, the employer/workers’ compensation insurer must intervene in the case once the employee files suit or, if the employee does not file suit within one year of the date of the injury, sue the tortfeasor pursuant to the statute.  Canal Ins. Co. v. Liberty Mut. Ins. Co., 256 Ga. App. 866 (2002).

•           The employer/workers’ compensation insurer must wait one year from the date of the injury to see if the employee files suit against the tortfeasor.  O.C.G.A. § 34-9-11.1(c).  If the employee wishes to do so, the action must be filed within the applicable statute of limitations.  Id.  If the suit is filed one year after the injury, the employee must notify the employer/workers’ compensation insurer of the suit, because the employer/workers’ compensation insurer has a right to intervene.  Id.  (The holding of Canal seems to imply that even if the employee files suit within one year of the injury, the employer/workers’ compensation insurer must intervene to protect its lien against the tortfeasor.).

•           If, however, the employee does not bring a case within one year, the employer/workers’ compensation insurer can file suit against the tortfeasor, in its name or the employee’s name.  O.C.G.A. § 34-9-11.1(c).  It must notify the employee it has done so, because the employee has a right to intervene. Id.  A suit by the employer/workers’ compensation insurer (like one by the employee) must be filed within the applicable statute of limitations.  Newsome v. Dep’t of Admin. Servs., 241 Ga. App. 357 (1997). 

•           If the employee filed the case, practically, an employer/workers’ compensation insurer intervenes by filing (and the Court granting) a motion.  It appears the motion can be made at any time, although at least one case has indicated the courts’ reluctance to allow intervention after a judgment is entered. See Dep't of Admin. Servs. v. Brown, 219 Ga. App. 27 (1995).  The case law also suggests the Court has little, if any, discretion to deny a timely motion when certain facts exist.  See Payne v. Dundee Mills, 235 Ga. App. 514 (1998).  Therefore, even a motion to intervene filed after the statute of limitations expired for the underlying case might be considered timely.

(3)        Has The Employer/Workers’ Compensation Insurer Intervened (or brought a case)?

If no:

•           If the employer/workers’ compensation insurer never properly intervenes in the employee’s case (or files suit) it has no viable lien against the tortfeasor, but it may have a viable lien “against the recovery in the hands of the employee after he has been made whole.”  Canal, 256 Ga. App. at 869.  The same is true if the case is settled pre-suit and the tortfeasor does not know about the lien.  Rowland.

If yes, what issues should I consider?

•           How will your case be disposed (e.g., settlement, trial)?  One reason an employer/workers’ compensation insurer intervenes is to protect its interest during settlement negotiations, such as at mediation.  So, practically, if a motion to intervene is granted and settlement negotiations occur, you must factor the lien into settlement efforts.

•           To whom do you plan to pay any settlement money?  If you pay any settlement to Plaintiff without paying the employer/workers’ compensation insurer, the employer/workers’ compensation insurer could possibly seek the lien amount from you, potentially requiring a double payment of at least part of the settlement.  In other words, you should make certain that the lien is resolved as part of the settlement.

•           Are you considering a lump sum settlement (e.g., does not distinguish economic from non-recoverable non-economic damages or compensates the employee as well as a loss of consortium claim by the spouse)?  If so, could a court find you are colluding with Plaintiff to suggest that he or she is not fully and completely compensated so that a subrogation lien could not be enforced?

•           Is your case going to trial?  If so, you obviously will not be able to negotiate the amount of any award to Plaintiff.  However, a special verdict form may be prepared and proposed to assist the judge’s determination of whether Plaintiff was fully and completely compensated since it breaks down the award.

•           Were the workers’ compensation benefits paid under Georgia law?  If not, a subrogation claim against the tortfeasor asserted in Georgia is probably not enforceable even if the tort occurred in Georgia, if the state law under which the benefits were paid conflicts with Georgia law (e.g., does not require the employee to be fully and completely compensated like Georgia requires).  See Liberty Mut. Ins. Co. v. Roark, 297 Ga. App. 612 (2009); Tyson Foods, Inc. v. Craig, 266 Ga. App. 443 (2004).  If there is no conflict of laws between states, perhaps a Georgia court would give full faith and credit to the other state’s laws and find the subrogation claim enforceable in Georgia.

•           Is your insured a third party defendant?  Consider a case where an employee sues the tortfeasor, who files a third party claim against your insured (Plaintiff’s employer) pursuant to a valid contractual indemnity claim.  The tables will then have turned.  As the employer, your insured may have a subrogation lien against the tortfeasor (Defendant), as if your insured had intervened in the underlying action filed by the employee, despite not filing a motion to intervene nor asserting a cause of action on behalf of the employee.  In such a situation, the workers’ compensation insurer for the employer may want to become involved.

The Journal is a publication for the clients of Drew Eckl & Farnham, LLP. It is written in a general format and is not intended to be legal advice to any specific circumstance. Legal Opinions may vary when based upon subtle factual differences. All rights reserved. 

Editorial Board:

H. Michael Bagley