State News : Texas

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The Dallas Court of Appeals Declines a Three-Way (Split)


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