February 06, 2018 BY Ryan Hathcock
An Attempt to Break-Even: A Review of O.C.G.A. § 34-9-11.1, an Employer/Insurer's subrogation rights, and the ability to recover for benefits paid to an injured employee
Following an injury arising out of and in the course of employment, Georgia’s workers’ compensation laws require an employer/insurer to pay workers’ compensation benefits to any employee regardless of who may be at fault for the employee’s injury. “Subrogation” refers to the process by which the employer/insurer attempts to legally pursue a third-party responsible for causing the loss. Enacted by the legislature in 1992, O.C.G.A. § 34-9-11.1 both creates and limits an employer/insurer’s ability to pursue subrogation of workers’ compensation benefits.
Full and Complete Compensation
The Georgia Workers’ Compensation Act creates an exclusive remedy for an injured employee against his/her employer in the event of a work-related injury. However, this does not prevent the injured employee from filing a civil lawsuit against a negligent third-party, so long as the responsible third-party is not an employee of the same employer. While this appears to produce a situation involving a potential double recovery, O.C.G.A. § 34-9-11.1(b) creates the employer/insurer’s (i) right to intervene in the employee’s civil lawsuit to assert a workers’ compensation lien and (ii) the right to a enforce that lien to recoup amounts paid. Therefore, a successful subrogation lien can prevent the possibility of a double recovery. However, by statute, an employer/insurer may only recover its subrogation lien where the employer can prove the employee has been “fully and completely compensated.” A determination of full and complete compensation involves a review of both the workers’ compensation benefits and any recovery in a third-party claim. At what point an employee has been fully and completely compensated is the main question that plagues most employers when pursuing subrogation.
Section § 34-9-11.1 was enacted to allow an employer to recoup an amount equivalent to the amount of workers’ compensation benefits paid, but the primary legislative concern focused on first ensuring that the injured employee be made whole. The burden of proving full and complete compensation lies with the employer/insurer asserting its subrogation lien. Typically, that burden is difficult to satisfy because the term “fully and completely compensated” encompasses both economic and non-economic damages. While economic damages can generally be shown with empirical evidence and accompanying testimony, non-economic damages are more difficult to quantify.
The employer has no right to claim a subrogation lien against non-economic damages (such as pain and suffering). Further, O.C.G.A. § 34-9-11.1(b) does not permit consideration of any evidence of the injured employee’s comparative negligence or assumption of risk when determining whether the employee has been fully compensated for injuries sustained. Subrogation claims are also unavailable against the injured employee’s recovery from his/her own uninsured or underinsured motorist insurance coverage.
The statute does not specifically provide a method for the employer/insurer to establish that the injured employee has been fully and completely compensated by its recovery from a third-party. For instance, where an employee reaches a lump-sum compromise settlement with the at-fault party or obtains a general verdict absent a breakdown of categorized damages, it may be impossible for a court to determine what portion of the recovery was allocated to economic losses and what portion was meant to compensate for noneconomic losses. To ensure that its interests are protected, the employer or insurer should ask that the court use a special verdict form to determine what recovery is returned for medical expenses, lost income, and pain and suffering.
Paragraph (c) of O.C.G.A. § 34-9-11.1 dictates that a third-party action against a negligent third-party must be filed within the applicable two-year statute of limitations. It also maintains that the injured employee has an exclusive right to assert an action against a third-party at any time within the first year following the date of injury, while the employer/insurer acquires and shares the right to file an action in the second year. Whoever ultimately brings the suit, any third-party action under O.C.G.A. § 34-9-11.1 only survives two years after the date of injury at which point any cause of action ceases to exist.
If the employee fails to file a suit against the third-party tortfeasor within one year from the date of injury, then the employer or insurer may do so, and the employer can choose to file an action for its own subrogation interest or for the employee’s interest as well. When an employer files its own claim due to the employee’s failure to timely file a claim within the first year, the employer must immediately provide notice to the employee if it wishes to assert its subrogation lien, and the employee shall have a right to intervene. If the employer recovers more than the equivalent of its subrogation lien, then the excess amount must be paid to the employee.
The employer/insurer’s only remedies to enforce a subrogation lien are: (i) asserting a cause of action in the name of the employee; (ii) asserting a cause of action in the employer/insurer’s own name; or (iii) intervening in the employee’s initial lawsuit. If they employer/insurer is unable or fails to do one of the three, then the employer/insurer lacks the standing to appeal the dismissal of the action, because the employer/insurer was not a party to the suit.
One benefit of the Georgia worker’s compensation system is that it provides the injured employee with immediate benefits while the employee pursues the negligent third party via a civil lawsuit. Further, the ability of the employee to retain workers’ compensation benefits and pursue additional recovery via a civil lawsuit is also favorable to the employer/insurer because the employer/insurer remains able to recover the benefits paid to the injured employee if it can be shown employee has been fully and completely compensation.
In essence, O.C.G.A. § 34-9-11.1 protects an innocent employer/insurer by reserving the right of the employer/insurer to recoup workers’ compensation benefits paid to the employee. Although subrogation provides an avenue to protect the interests of an innocent employer and its insurer, the parties must be aware of the time constraints and procedures to effectively assert a lien under O.C.G.A. § 34-9-11.1. Further, the costs of intervening in the employee’s action and the difficult burden the employer/insurer must satisfy to show that the injured employee has been fully and completely compensated are additional factors that must be weighed when determining whether to pursue subrogation.
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.
H. Michael Bagley