To subrogate or not to subrogate? That is the question for workers’ compensation insurers
Georgia Courts have held it is an abuse of discretion to deny the motion to intervene.
Often the question is asked by workers’ compensation clients whether they should pursue a subrogation lien or simply waive it as part of settlement. This commentary will pursue the pros and cons of the available remedy and whether it makes strategic sense to pursue same.
Workers’ compensation benefits are the exclusive remedy an employee has against his or her employer for an on-the-job injury. However, an employee injured in an accident arising out of and in the course of his employment through the negligence of a third-party has a potential claim against that party which is not impacted by his or her workers’ compensation claim. The employer and insurer have a potential subrogation right against the proceeds from the third-party claim.
Though it seems like this would be a great tool for recovery for employers and insurers, recovery can be a challenge. In fact, subrogation recoveries in Georgia are often greatly reduced because employers and insurers are governed by the “fully and completely” compensated standards with respect to subrogation liens. If the injured employee has not been “fully and completely compensated,” the subrogation lien is not recoverable.
While in other jurisdictions the subrogating employer/insurer receives dollar-to-dollar value for their lien and would collect first, in Georgia the fully and completely compensated standards allows the injured worker to assume that role and requires the lien of the employer/insurer be subjected to a fully and completely compensated standard. This doctrine requires the party claiming the subrogation lien to demonstrate the injured worker has been made “whole and complete” and has returned to the pre-accident state. Based on the severity of the accident and resulting injuries, this is a very difficult standard for the subrogating employer/insurer to meet.
Nothwithstanding the above, there is still value in pursuing subrogation as an employer/insurer has a right to do so as a matter of law in state, superior and federal court under Georgia law. The statute of limitation for personal injury actions in Georgia is two years. The injured worker may institute an action against a third-party tortfeasor at any time within the two-year statute of limitation. If no action is brought against the third-party in the first year after the loss, the employer and/or insurer may file suit, either in its own name or in the name of the employee, to enforce its lien. If a tort action is filed by the injured worker, the employer/insurer has a statutory right to intervene by filing a motion and seeking recovery of the income and medical benefits, as well as the amount of settlement of the workers’ compensation claim.
Georgia Courts have held it is an abuse of discretion to deny the motion to intervene. In spite of this, the motion is still sometimes opposed, and judges may delay in granting the motion. Once an order is entered by the trial judge, the clerk is advised to add the subrogating employer/insurer as a party. If the case does not settle, the subrogating employer/insurer would then take part as a party at trial and seek a verdict/judgement from the judge or the jury.
If intending to subrogate, it is important to intervene once a suit has been filed and the employer and insurer are aware of its existence. Several courts have strongly hinted one’s right to a subrogation lien may be forfeited if one does not properly intervene in the third-party case. It should be noted the employer and insurer’s right to intervene does not expire with the two-year statute of limitation.
When the employee has filed a timely claim within the statute of limitation, the employer and insurer may be able to intervene much later in the lawsuit. In Payne v. Dundee Mills, Inc., the Court of Appeals concluded when a motion to intervene is made prior to a final judgment, the intervention does not prejudice any of the parties’ rights, and if the denial of the intervention would dispose of the intervenor’s rights, the motion to intervene should be granted.
The statute of limitation does not control whether the intervener’s motion is timely. Rather, the timeliness of the intervention is something which should be determined on a case-by-case basis and within the discretion of the trial court judge.
If there is any recovery from settlement or a judgment, then the issue of whether an injured worker has been fully and completely compensated by the amount from settlement or trial will be addressed. Various courts have evaluated this issue on a case-by-case basis, looking at the amount recovered in the third-party claim and the amount paid by workers’ compensation.
Several cases have made the employer and insurer’s job of proving “full and complete compensation” even harder. The Court of Appeals has clarified the employer and insurer bear the burden of proving the employee has been fully and completely compensated. When determining this, “the trial court may not consider the affirmative defenses of contributory/comparative negligence/assumption of the risk . . . because the employee’s total economic and noneconomic losses make up the full and complete compensation unreduced by such defenses” under the statute.
As such, a jury verdict which has been reduced due to comparative negligence of the employee would almost certainly fail to “fully and completely” compensate the employee.
A more frequently encountered problem is when the employee settles the third-party claim and then takes the position her or she has not been completely compensated due to the fact he or she had agreed to compromise the claim. The courts have made this increasingly difficult for the employers and insurers. The federal court in the Northern District of Georgia weighed in on the issue in Smith v. Otis Elevator Company, where the federal district judge painstakingly documented the difficulties the employer and insurer have in trying to show full and complete compensation in the case which has been settled.
Liability releases do not contain breakdowns of the amounts being paid for each individual category of damages. Instead, a typical liability release includes broad language releasing the third-party tortfeasor from any and all damages, rights and causes of action of whatsoever kind and nature. In Smith, the employer and insurer attempted to introduce evidence of the employee’s cost versus prior assertions regarding past medical expenses and lost wages. However, the court found there was no evidence of exactly how the third-party tortfeasor intended its funds to be allocated in the settlement, so the employer and insurer could not carry their burden of proving full and complete compensation.
Though recovery may be tough, it is still a valuable tool for the insurer to pursue the subrogation lien, even though there must be a recognition of odds against recovery.
The reason is because the lien can be used by the insurer to leverage a more reasonable settlement under the workers’ compensation claim. Many times, the presence of the lien will provide an incentive to an injured worker to settle a case which otherwise may go unsettled for many years.
It may not be a windfall, but there is always a benefit to any amount which can be saved or recovered. The secret is looking at subrogation on a case-by-case basis and then being willing to consider different means of pursuing the claim based upon the circumstances.
Before taking any legal action, it is best to discuss your legal options with counsel and be realistic to your chances for recovery.
Marc E. Sirotkin is an attorney in Atlanta with Swift, Currie, McGhee & Hiers, representing employers and insurance carriers as an insurance defense attorney handling workers’ compensation claims.
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