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PENNSYLVANIA WORKERS’ COMPENSATION
SUBROGATION LIEN OUTLINE
By: Kevin L. Connors, Esquire
Recently presenting at a reinsurance conference on the issue of Pennsylvania workers’ compensation subrogation liens, one that all of us probably think about every day, being that not insignificant monies have been expended in paying for workers’ compensation benefits, in the form of wage loss and medical compensation benefits, it occurred to us that the thrill of recovering those monies, through the perfection and prosecution of subrogation lien claims, continues to astonish, dumbfound, and dazzle our claims consciousness, as we simply demand, what we affirmatively believe, are our statutory entitlements.
Obviously, this outline is simply a function of Section 319 of the Pennsylvania Workers’ Compensation Act, setting forth:
“Where the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right of the employee, his personal representative, his estate or his dependents, against such third party to the extent of the compensation payable under this article by the employer; reasonable attorney’s fees and other proper disbursements incurred in obtaining a recovery or in effecting a compromise settlement shall be prorated between the employer and employee, his personal representative, his estate or his dependents. The employer shall pay that proportion of the attorney’s fees and other proper disbursements that the amount of compensation paid or payable at the time of recovery or settlement bears to the total recovery or settlement. Any recovery against such third person in excess of the compensation theretofore paid by the employer shall be paid forthwith to the employee, his personal representative, his estate or his dependents, and shall be treated as an advance payment by the employer on account of any future installments of compensation.”
When workers’ compensation benefits have been paid, and the tantalizing thought exists that a third party is responsible for having caused those payments, in which case the following calculations come into play, in the event that the person that you have paid workers’ compensation benefits to, proves that a third party was responsible for those benefits, to include:
Total amount of third party recovery;
Accrued workers’ compensation lien, for both wage and medical benefits;
The expenses of recovery;
The balance of recovery.
With the above cha-ching dollars in play, proceeds must now be distributed, and that requires that the proceeds be distributed, with the following being calculated:
1) Accrued lien expense reimbursement rate, requiring division of the accrued lien by the total amount of the third party recovery;
2) Expenses attributable to accrued lien, requiring multiplication of the expenses of recovery by the accrued lien expense reimbursement rate;
3) Net lien (amount employer to receive in satisfaction of lien), requiring that the expenses attributable to the accrued lien be subtracted from the accrued lien, leaving a net lien.
Hold on now, because that might not be the end of our lien calculations.
No less true, there might still be future benefits that are payable, potentially empowered by the third party recovery and lien issues, and that future liabilities will require calculations as to the future distribution of proceeds.
This requires that we apply the reimbursement rate on future compensation liability, requiring that the expenses of recovery be divided by the total amount of the third party recovery, resulting in the employer/insurer being responsible for paying a percentage of future weekly benefits and medical expenses, to satisfy its obligation to reimburse its pro rata share of the attorney’s fees and expenses that were incurred in securing the carrier’s lien recovery, with that percentage being paid by the employer/insurer until its subrogation interest is exhausted.
Upon exhaustion of the subrogation lien interest, compensation liability again attaches at the 100% rate, subject to the wonderful defenses that the Pennsylvania Workers’ Compensation Act provides, whatever they might be on any given day.
As for all of these delightful calculations, there are, nevertheless, other considerations, necessitating the statutory purposes for subrogation, being threefold, the first being, prevention of double recoveries, and the second being avoidance of the employer/insurer paying compensation caused by someone else’s fault, and the third being to make the responsible party pay, redistributing liability in reliance upon life as we know it.
So what else do we need to know about subrogation?
Well, it is an absolute primary right, that attaches upon there being a third party recovery, either through settlement or verdict.
It is a right that, unbelievably, is not negated by the employer/insurer’s failure to cooperate in the prosecution, of the third party case, to secure that third party recovery.
No less magically, this right is not negated by the injured employee’s comparative negligence.
It is an all-inclusive right, meaning that it encompasses all past, present, and future workers’ compensation benefits, although it does not include your administrative claim expenses.
As for enforcement issues, therein lies the rub, although workers’ compensation has exclusive jurisdiction over subrogation lien issues, these issues typically arise in the interplay between workers’ compensation and civil litigation, and a workers’ compensation judge’s order, enforcing subrogation, and requiring distribution of third party settlement proceeds in satisfaction of a subrogation lien, might have little effect outside the workers’ compensation province, as a workers’ compensation judge’s order cannot be used as an order of attachment against the corpus, being the body of funds, on deposit in some account somewhere, presumably either counsel’s or the employee’s, such that it might be necessary to seek civil remedies, to enforce attachment via a judgment against the proceeds.
So, what else should be considered?
Well, subrogation liens cannot be asserted against recoveries that are triggered by ADA-type litigation, as they are regarded as being separate and distinct from the liabilities typically associated with causing the physical/mental injury, that results in the payment of workers’ compensation benefits.
Third-party recoveries cannot be re-apportioned, in avoidance of satisfying the lien, in order to try to assign proceeds to spousal consortium claims, and/or to re-allocate the recovery, in satisfaction of non-economic claims for pain and suffering, etc.
Subrogation liens are absolutely applicable to legal and medical malpractice claims, although the liens might be limited to benefits paid after the actionable malpractice, and might not, therefore, be all-inclusive, in terms of all benefits paid under the workers’ compensation claim.
Moreover, if a workers’ compensation claim is being settled, with the settlement being perfected under a Compromise & Release Agreement, it is necessary that the Compromise & Release Agreement reflect the parties’ agreement, with respect to the subrogation lien issues, and, obviously, any satisfaction of a subrogation lien requires that the parties prepare and submit a Third-Party Settlement Agreement to the Bureau, reflecting the satisfaction of the lien, and setting forth all applicable calculations as to the third party recovery, the applicable lien amounts, the net lien recovery, and the reimbursement rate, in the event that compensation benefits are being suspended, during the period that the employer/insurer would be re-paying its pro rata share of the fees and expenses attributable to its recovery of its subrogation lien.
As an absolute matter of practice, every workers’ compensation claim should be viewed through the Newtonian prism of the potential involvement of third party liability, and employers and insurers should be encouraged to place Claimants and counsel on notice of subrogation lien rights as early as possible, in avoidance of being left on the dance floor in between song selections.
Trust us, we just get it! It is trust well spent!
Defending workers’ compensation claims throughout Pennsylvania for employers, self-insureds, insurance carriers, and third party administrators, our 100+ years of cumulative experience defending our clients against compensation-related liabilities, empowers our workers’ compensation practice group attorneys to be more than mere mouthpieces claim denials, entrusting us to create the factual and legal leverage to expeditiously resolve claims, in the course of limiting/reducing/extinguishing our clients’ liabilities under the Pennsylvania’s Workers’ Compensation Act.
With every member of our workers’ compensation practice group being AV-rated, our partnership with the National Workers’ Compensation Defense Network (www.nwcdn.com) magnifies the lens through which our professional expertise imperiously demands that we always be dynamic and exacting advocates for our clients, businesses, corporations, and insurance carriers, seeking our trial and compensation acumen, navigating the frustrating and form-intensive minefield pervasive throughout Pennsylvania workers’ compensation practice and procedure.
Questions that might arise in the context of workers’ compensation claims can be directed to Kevin L. Connors at email@example.com (Phone: 610-524-2100 Ext. 112).