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In Hartford Accident & Indem. Co. v.
Francois, decided May 23, 2023, the Dallas Court of Appeals spells
out how to allocate a third-party settlement between the workers’ compensation
carrier, injured employee, and injured employee’s attorney. These
calculations are a source of continuing confusion for some despite the plain
language of the statute and the case law applying it.
The Dallas Court of Appeals’ decision also dispels the notion that the law
requires the parties to split a settlement three ways: one-third to the
carrier, one-third to the claimant, and one-third to the claimant’s attorney.
This idea refuses to die despite the fact that there is no support for it
in the law. As a result, some carriers still give up much more than they
should.
Janery Francois sustained a work injury for which Hartford paid her $356,669.73
in workers’ compensation benefits. Francois sued the third-party property owner
of the building where she was injured and recovered $150,000. Hartford argued
that under the Texas Workers’ Compensation Act’s subrogation statute, it was
entitled to $95,206.03 of Francois’s $150,000 recovery.
However, Judge Martin Hoffman, a former personal injury attorney, agreed with
the interpretation of the statute offered by Francois’s attorney and found that
Hartford was only entitled to $57,088.04 and that Francois and her attorney
were entitled to $92,911.96. Of this amount, $4,793.97 was for expenses
and the remaining $88,117.99 was for attorney’s fees for Francois’s attorney.
Judge Hoffman also awarded Francois’s attorney an additional $10,000 in fees
under the Uniform Declaratory Judgment Act (UDJA) which allows the trial court
to award fees that are equitable and just.
The Dallas Court of Appeals reversed Judge Hoffman’s decision and rendered
judgment that Hartford was entitled to $95,206.03 of the third-party
settlement. The court of appeals also found that Judge Hoffman abused his
discretion by awarding Francois’s attorney an additional $10,000 in attorney’s
fees under the UDJA because the award violates the Workers’ Compensation Act
and is not equitable or just.
Francois’s attorney argued at trial that the award is equitable and just
because Hartford refused to agree to a three-way split of the settlement which
would have provided $50,000 to Hartford, $50,000 to Francois, and $50,000 to
Francois’s attorney. This approach would have resulted in Hartford
recovering $45,206.03 less than it was entitled. The Dallas Court of
Appeals rejected this argument:
According to Francois’s counsel, the carrier, employee, and employee’s counsel “always” agree to split a settlement three ways, and he has entered into those agreements “dozens of times.” But Francois cites no authority to support an argument that Hartford was under any obligation to reduce its lien and accept a three-way split.
The Dallas Court of Appeals held that Hartford has a statutory right to recover
its entire lien amount and it should not be penalized for asserting its rights.
The court found that Judge Hoffman abused his discretion by awarding additional
attorney’s fees to Francois’s attorney when “Hartford was well within its right
to seek the full amount of reimbursement permitted under Chapter 417.”
Hartford Accident & Indemnity Co. v. Francois, No.
05-21-00981-CV (Tex. App—Dallas, May 23, 2023).
Copyright 2023, Stone Loughlin & Swanson, LLP