It seems no one today is immune from the rising costs of health care. As a result, more and more insurers are seeking alternative ways in which to curb expenses and reduce
It seems no one today is immune from the rising costs of health care. As a result, more and more insurers are seeking alternative ways in which to curb expenses and reduce total exposure per claim. One common example is the increasing prevalence of actions by group health insurers seeking reimbursement for payments made to, or on behalf of, an injured worker, which arguably should have been the primary responsibility of a workers’ compensation insurance carrier or self-insurer. By the same token, there seems to be an increasing trend in workers’ compensation carriers looking to potentially liable third parties for reimbursement of wage and medical benefits paid as a result of on-the-job injuries. However, instead of contractual clauses and policy provisions, such actions arise solely by operation of statute.
O.C.G.A. § 34-9.11.1 was enacted by the legislature in 1992 and governs workers’ compensation subrogation in Georgia. The statute provides employers and insurers with a subrogation lien for workers’ compensation benefits paid to an employee who is injured by another person or party; however, subsection (b) provides that “the employer or insurer’s recovery under this Code section 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.” While simple enough in theory, the statute can be difficult to apply in practice.
Full and Complete Compensation
Undoubtedly the greatest barrier for employers and insurers seeking to recover under the subrogation statue is the so called “made whole” rule, that is, the requirement that an injured worker be fully compensated for all economic and noneconomic losses incurred as a result of the injury. Although the statute prescribes no method by which to make such determination, case law does provide some guidance.
It is well established that the employer/insurer has the burden of establishing full and complete compensation. Where a suit is filed by the employee against an alleged tortfeasor, the worker’s compensation carrier must intervene to protect and enforce its subrogation lien. Where there is an economic recovery, the trial court must determine if the benefits paid exceed the recovery or if there are remaining economic damages unrecovered. Neither the employer nor the insurer can assert a subrogation lien against noneconomic damages, i.e., pain and suffering. Furthermore, the Court of Appeals has held that no presumption of full and complete compensation arises merely from the fact that the award exceeds the amount of workers’ compensation benefits received or the amount of economic damages proven.
The Court of Appeals has held the that an employer/insurer does not have the right to a jury trial on the issue of full and complete compensation. The trial court alone must determine the issue and has the authority to reduce an employee’s general award including personal injuries to cover the subrogation lien where the court has determined that the employee has been made whole.
The Georgia Court of Appeals has more than once suggested that utilization of a special verdict form may be the most practical solution for determining full and complete compensation. A general verdict alone is likely to be inadequate because of the impossibility of determining what portion of the award applies to economic losses and what portion applies to noneconomic losses. As a result, the outcome in many such situations would be that a workers’ compensation subrogation lien could not be enforced. It is the responsibility of the workers’ compensation provider to protect its interest by intervention and special verdict requests. The Court of Appeals has approved of the bifurcation of the tort trial in subrogation cases, finding it appropriate to avoid revealing to the jury that the employee has already recovered from a collateral source.
Settlement of the Third-Party Suit
While utilization of a special verdict form may be helpful in determining full and complete compensation in those cases that actually reach a jury, the majority of cases will never get to that point, and may settle pre-trial or, in some instances, pre-suit. The Court of Appeals addressed the issue of pre-suit settlements in the case ofRowland vs. Department of Admin. Servs, 219 Ga. App. 899, 466 S.E.2d 923 (1996). There, the claimant was involved in a motor vehicle accident while in the course and scope of his employment for The Department of Administrative Services (DOAS). The parties stipulated that the injuries sustained by the employee were caused by defendant Rowland’s negligence. The DOAS paid the employee workers’ compensation benefits and then brought suit to recover the benefits paid from Rowland. The DOAS subsequently discovered that the employee had already settled his personal injury claim with Rowland without filing suit. The DOAS had no knowledge of the employee’s claim and Rowland had no knowledge of the workers’ compensation subrogation lien. Id. at 900. The court found that under the plain wording of O.C.G.A. § 34-9-11.1 the employer had no remaining right of action against the tortfeasor. However, the loss of the right to bring the cause of action did not extinguish DOAS’s lien on the recovery, now in the hands of the injured employee. Id. at 901.
Even in situations where the employer/insurer has given proper notice of their subrogation lien, a settlement between the injured worker and the third-party defendant can still have an adverse effect on the employer/insurer’s ability to recover, due primarily to the difficulties in proving full and complete compensation. This point is illustrated in the case of City of Warner Robins v. Baker. 255 Ga. App. 601, 565 S.E.2d 919 (2002). In Baker, the employee sustained a compensable injury while working for the City of Warner Robins. Id. at 601-602. He subsequently sued the party responsible for the accident and negotiated a settlement. The city notified the employee of its intent to file a subrogation lien against any settlement he might receive but did not intervene in the lawsuit. The employee accepted a settlement from the tortfeasor and the lawsuit was dismissed with prejudice. Shortly thereafter, the employee filed a motion to extinguish the subrogation lien arguing that the city had waived their lien or was estopped to enforce it and that he had not been “fully and completely compensated” as required by O.C.G.A. § 34-9-11.1(b). Id. at 602. The Court of Appeals found that the city’s lien survived the settlement, but that they were not entitled to any recovery as they had failed to show that the employee had been made whole. The court specifically noted that the a lump sum settlement is the same as a general verdict form, in that an appellate court cannot determine what portion of the award or recovery was meant to compensate the employee for economic losses and what portion was meant to cover economic losses. “The result is that the lien cannot be enforced, because full and complete compensation cannot be shown.” Id. at 604-605. Although this language appears to suggest that an employer/insurer would be unable to meet their burden in any case involving a lump sum settlement, the court nonetheless proceeded to analyze the facts of the case, following which they concluded that the trial court did not abuse its discretion in failing to find the employee had been fully and completely compensated. Id. at 605.
Regardless of the motives behind Georgia’s workers’ compensation subrogation statute, the reality is that it rarely affords any recovery due to the requirement that the claimant be “fully and completely compensated.” As a result, actions to recover on subrogation claims are often not worth the cost of litigation, and many such liens are ultimately settled for pennies on the dollar. The difficulty in obtaining recovery despite a statute specifically designed to accomplish this goal can be frustrating for both attorneys and their clients, especially those operating in other jurisdictions where subrogation statutes may be more favorable to employers and insurers. In some cases, an employer/insurer may want to consider waiving their statutory right to subrogation in exchange for a more favorable settlement of the underlying workers’ compensation claim. This option is appealing to the employee since it allows them to keep whatever they may recover in their third-party suit and also benefits the employer/insurer in that they are able to realize some recovery without having to overcome the often insurmountable burden of proving full and complete compensation.