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Claimant attorneys’ attempts to negate a carrier’s subrogation interest are to
be expected but their methods of bilking carriers out of the amounts they are
due can get as convoluted and Machiavellian as this year’s election. The Tyler
Court of Appeals recently reaffirmed the importance of ensuring that carriers
receive “first money reimbursement” in Old Republic Ins. Co. v. Debra Morris, et al.
The plaintiffs in that case had attempted an end-run around the first money
rule by settling with most of the third-party defendants pre-trial, and
subsequently obtaining a verdict apportioning most of the responsibility to the
employer. The plaintiffs argued that the “employer responsibility offset”
(ERO)* should apply to all the funds received, including the pre-trial
settlements, which in this case wiped out the carrier’s lien of more than $3
million. In a tremendous win for Old Republic, the appellate court held that
the reduction of the carrier’s subrogation interest is limited to the amount
that the employer’s fault actually costs the claimant after applying sections
33.012(b) and 33.013(a) of the Texas Civil Practice and Remedies Code.** In
this particular case, that meant that the carrier’s subrogation lien was
reduced by only $33,967.20.
*Texas Labor Code section 417.001 provides that a carrier’s subrogation
interest is reduced by the amount by which the court reduces the judgment based
on the percentage of responsibility for the injury that the jury/judge
attributes to the employer. This is known as the “Employer Responsibility
Offset” (ERO).
**Section 33.012(b) of the Texas Civil Practices and Remedies Code requires the
court to reduce the amount of the claimant’s damages by a percentage equal to
the claimant’s percentage of responsibility for the claimant’s injuries.
Section 33.013(a) limits the claimant’s damages recovery from a particular
defendant to the “percentage of the damages found by the trier of fact equal to
that defendant’s percentage of responsibility” for the claimant’s injuries.
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