March 26, 2010

“Show Me the
Subrogation Lien
Money!”

By Kevin L. Connors

Recently, our Subrogation Practice Group (“SPG”) recovered a boatload of money (close to $1,000,000), for one of our priceless clients, in an extraordinary case involving the assertion of a subrogation lien for workers’ compensation benefits against a seven figure third-party settlement.

Although our portal to this claim was through the workers’ compensation matrix, our SPG’s innate understanding and appreciation of third-party premises liability principles set a dark psychological backdrop for our negotiations with the injured workers’ personal injury and workers’ compensation attorneys, who, to their credit, were responsible enough to have reported that the liable third-party, through its insurer, had made a settlement tender offer of all available insurance policy limits relative to the injured worker’s personal injury claim.

This claim involved very significant injuries, catastrophic in nature and extent, resulting in permanent disability, and necessitating lifetime care for the injured worker. That care further involved the injured worker requiring in-patient assisted living, with the injured worker having an unrated life expectancy exceeding 25 years.

Eighteen months into the workers’ compensation claim, the compensation carrier, requesting anonymity, and having paid almost $1.2 million in indemnity and medical compensation benefits, received notification from the injured worker’s personal injury attorney, that the injured worker that had been tendered a policy limit settlement offer by the liable third-party’s liability insurance carrier.

The personal injury attorney proposed division of the personal injury settlement proceeds along the scripted paradigm of one-third to each the comp carrier, the injured worker, and the personal injury attorney.

Per the subrogation playbook, the personal injury attorney proposed division of the personal injury settlement proceeds, along the scripted paradigm of one-third to each, the comp carrier, whose right all practitioners, both in workers’ compensation and personal injury, should respect as being “primary”, the injured worker, and the personal injury attorney, who was successful in securing the liability insurance carrier’s agreement to tender the liability insurance policy limits, without having formally filed suit, and/or having secured any expert reports, either as to liability or damages, a feat that all of us would regard as either being a chest-thumper for the personal injury attorney, or a knee-trembler for the liable third-party and his liability insurer.

Referring the subrogation lien recovery negotiations to our Subrogation Practice Group, our entire firm dedicated its team intellect and resources to counsel the workers’ compensation insurer through the potential minefield of securing the subrogation lien recovery.

This process not only involved factoring in all of the possible permutations affecting the subrogation lien calculations, but also included the not uncomplicated evaluation of the potential third-party liability, based not only upon a factual evaluation of the claim, but also taking into account jurisdictional issues that would necessarily impact on a potential jury verdict.

Uur savvy client stood firm in the face of the injured worker’s negotiation bluff, as the workers’ compensation insurer was absolutely certain that the injured worker, and his attorney, could never “walk away” from that third-party settlement offer.

With the injured worker indicating that he would formally reject the third-party settlement offer, if the workers’ compensation insurer would not agree to the proposed one-third distributions, all credit must then go to our savvy client, which stood firm in the face of the injured worker’s negotiation bluff, as the workers’ compensation insurer was absolutely certain that the injured worker, and his attorney, could never “walk away” from that third-party settlement offer, which, if rejected, might well result in a jury trial that could potentially result in the injured worker receiving no third-party verdict monies, due to the trial jurisdiction, and certain liability facts, which might well have resulted in the jury finding that the injured worker’s injuries were caused by his own negligence, and not by the negligence of any third-party.

Yes, we know and appreciate that our carrier client bore the same potential risk of no subrogation recovery if the third party case tried to a defense verdict, but our client was willing to roll that dice, believing, as became true, that the injured worker could not assume the risk of that trial.

The insurance carrier’s subrogation rights were absolute and primary, under a well-established body of Pennsylvania Workers’ Compensation Subrogation Law.

Calling the injured worker’s settlement negotiations bluff, we responded by making it perfectly clear to the injured workers’ personal injury attorney, that the insurance carrier’s subrogation rights were absolute and primary, under a well-established body of Pennsylvania Workers’ Compensation Subrogation Law, most notably under PMA v. Wolfe, 626 A.2d 522 (Pa. 1997), and that the workers’ compensation insurance carrier would not play the 1/3 – 1/3 – 1/3 subrogation monopoly roulette, seemingly regarded as the subrogation template for settlement/reduction of subrogation liens asserted by workers’ compensation insurance carriers against third-party settlement proceeds, as though there is an unwritten rule, that is not only the way that it is done, but it is the way that it must be done, irrespective, or perhaps regardless, of the fact that every case and settlement is not only different, factually, legally, emotionally, and administratively, with our client, a tenaciously tough-minded insurance carrier standing firmer than the Americans stubborn defense of the German war machine at the 1944 Battle of the Bulge, and doing what most parents find hardest to do, being to simply say “No!”.

It became a battle of the wills, and penalty shots were awarded for excessive blinking.

Convinced that there was no way that the injured worker would walk away from the third-party settlement offer, particularly when the injured worker would then have to litigate his personal injury claim in a very conservative jurisdiction more famous for defense verdicts than personal injury awards, particularly awards in the seven figure category, notwithstanding the injured workers’ self-defeating apology that his personal injury claim would likely be successfully defended, with the Plaintiff’s comparative negligence exceeding any alleged negligence of the property owner, it was really almost too easy for the workers’ compensation insurance carrier to dispassionately demand full payment of its subrogation lien, while also demanding that the injured worker agree to waive any future rights to indemnity workers’ compensation benefits, in exchange for the insurance carrier agreeing not to assert its statutory credit, for any recovery left to the injured worker, after deduction of the subrogation lien, against the injured workers’ future medical care needs, which would likely continue indefinitely for the remainder of the injured workers’ life expectancy, rated as of the settlement as being over 20 years.

This case illustrates that critical and tough-minded decision making is necessary to re-balance the imbalances inherent in the the workers’ compensation of personal injury system.

The battle of the bluff and wink that it might have been, this case illustrates that critical and tough-minded decision-making is necessary to re-balance the imbalances inherent in the interplay between the workers’ compensation of personal injury system, with the personal injury system not giving the recognition that the workers’ compensation system so richly deserves, as it pre-pays for liabilities created by third parties, who then contend that workers’ compensation should not be entitled to any recovery, as the third party attempts to extinguish its own common law liability for negligence.

Questions

Questions concerning casualty litigation practice and procedures, can be directed to our general litigation department attorneys.

Questions concerning issues with regard to workers’ compensation litigation, can be directed to our workers’ compensation attorneys.

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