Many of us are asked to represent a potential client who has been injured on the job in order to pursue a personal injury (or “third-party”) claim against the person or entity responsible for the accident. Workers’ compensation payouts are frequently insufficient, especially in cases of catastrophic damage and long-term impairment, and people are rightfully seeking full financial restitution from the individual who caused their injury.
Things to Examine
Before agreeing to prosecute a personal injury claim on behalf of a worker receiving workers’ compensation benefits, you must examine the case carefully to ensure that it is in the client’s best interests. There are always “no-brainer” scenarios in which a third-party lawsuit will surely benefit the wounded worker financially. However, there are times when it may not be in the client’s best interests to pursue the third-party action; possibly more than people might believe.
This article delves into some of the complications and traps to be aware of the next time you get a call like this. Before bringing suit and prosecuting a third-party case on behalf of an injured worker currently receiving workers’ compensation benefits; below are some of the more prevalent difficulties and scenarios to consider.
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Credit
Personal Injury Attorney Oklahoma says before bringing a third-party case on behalf of a worker who is getting workers’ compensation benefits, this is something that should always be considered. What exactly is “credit”? If you are successful in prosecuting the personal-injury lawsuit and achieve a monetary settlement or judgment on your client’s behalf; the employer will apply a credit to the ongoing workers’ compensation claim in the amount of your client’s net recovery. After litigation expenses, attorney’s fees, and any repayment to the employer for benefits paid, your client’s “net recovery” is what he keeps in his pocket.
Example:
As an example, consider the following scenario. When your client is going to a work appointment, another car runs a red light, causing a collision. The personal injury case is settled for $100,000. The company has paid $25,000 in workers’ compensation payments, $5,000 in litigation expenses, and $33,000 in attorney’s fees at the time of the settlement. The employer wants all $25,000 of its money back and full payment for its provided benefits because there is no employer fault to restrict the employer’s claim to reimbursement (see below). Your client’s net recovery, in this case, is $37,000.
The employer then files a Petition for Credit with the Workers’ Compensation Appeals Board after the $100,000 settlement is paid out and the client receives his net portion of $37,000. The Petition is granted since the employer was not responsible in causing the damage. The company now has a $37,000 credit, which means it will not have to pay the next $37,000 in workers’ compensation benefits it would otherwise be compelled to pay for the same injury. In this case, however, your client has had an accident that resulted in a permanent disability rating of 30%, or $30,130.
In addition, your client will require continuing medical treatment and care for the injury, such as physical therapy and injections, which will cost thousands of dollars. Your client’s continued permanent disability benefits and medical treatment are wiped away due to the employer’s credit. The employer terminates any existing permanent disability benefits and refuses to provide medical treatment for the injury. Is the client better off as a result of the third-party case, even if the lawyer who resolved the matter earned a fee and the client received a $37,000 net settlement?
What to do in case of no Health Insurance
Of course, it’s possible that your client has other options for receiving medical care. But what if your customer has been laid off and has no health insurance? How will he cover the costs of his treatment?
In other cases, evidence of employer negligence can be used to challenge an employer’s credit rights. In many circumstances (such as the one described above); however, the employer did nothing wrong and will be given full credit.
Before pursuing the third-party claim, credit must be examined, addressed, and discussed with the client; or you risk having a very unhappy client on your hands (one who is not hesitant to contact a lawyer to investigate claims of malpractice).
Reimbursement
When an employee receives workers’ compensation benefits or benefits are supplied on his behalf (such as medical treatment), the employer has the right to seek reimbursement from the liable party for the number of benefits previously paid.
This is referred to as “subrogation.” Employers are seeking methods to earn cash in these difficult economic times; and actively pursuing subrogation is one way they believe they may do so. Recently, I’ve found that employers have been more active in requesting full reimbursement. There are a few things you should consider about reimbursement before taking on a third-party case.
The first point to remember is that you must inform your employer about your claim or lawsuit.
If you fail to properly tell the employer and the third-party matter is settled, the employer may sue your client for equitable indemnification. If that happens, I’m sure you’ll get a call from your client or his new attorney!
Of course, there are ways to avoid repayment. The employer’s right to payment may be diminished or deleted if the employer or a coworker was negligent in contributing to the harm. For this, the law has developed the following formula: The total civil damages multiplied by the percentage of blame attributed to the employer equals the threshold. The threshold is the point at which the employer begins to receive reimbursement.
Illustration
Here’s an illustration: Let’s say your client’s total civil damages; (without regard to culpability or collectability) are $250,000, and the employer paid $50,000 in workers’ compensation benefits but is 50% at blame for the injury. The limit is $125,000 (or half of $250,000). Because the firm must pay $125,000 in workers’ compensation benefits before being reimbursed, yet has only paid $50,000 so far, it must still pay $75,000 in future payments and is not eligible for reimbursement. So, no money back to the employer, which is fantastic. However, if the company has significant exposure to future workers’ compensation payouts, the employer may be entitled to a credit. If your client receives an additional $75,000 in workers’ compensation benefits; the employer will claim a credit for the amount of his third-party recovery. This is always an issue in disastrous situations.
Insufficient funds to fulfill the client
Why pursue the litigation if your client will not be better off as a result of it; as I stated at the outset? In many instances, the client’s net recovery will be insufficient to justify the time and expense of pursuing a case; for example, cases with evident liability but little insurance coverage, no employer negligence, and high workers’ compensation payments paid. Consider a rear-end incident that results in catastrophic injuries and a large amount of workers’ compensation claims; but is caused by a driver who has a minimum liability limit of $15,000. Your client will get very little if anything at all; (unless he was smart enough to have a large uninsured motorist policy). Why would you pursue such a matter solely to benefit your employer?
If you’re involved in a legal matter in Oklahoma our Tulsa Oklahoma attorneys at Boettcher, Devinney, Ingle & Wicker, can help. We have a team of attorneys that practice law in those areas that people need. For more info call us at 918-728-6500.
The same can be said in a more serious case; an auto collision while on the job, with the negligent driver having $250,000 in coverage. The injuries, however, are serious, and the company has paid $75,000 in medical bills and $50,000 in temporary disability benefits; and the client is currently receiving treatment for his injuries. If there is no employer negligence; you don’t want to settle the case to get a credit; It’s possible that this case isn’t worth pursuing.
