THE INSURER'S RIGHT OF REIMBURSEMENT
WHEN DOES A WORKERS' COMPENSATION INSURER HAVE SUBROGATION RIGHTS?

 

By: Jeffrey A. Daxe
March 22, 2002

 

Georgia's workers' compensation subrogation recovery scheme gets its framework from the statute creating the right,1 and its practical implementation from the appellate cases2 attempting to get a handle on the various issues left untouched or unsettled by the statute.

 

I. The Statute, § 34-9-11.1:

Employee's or survivor's right of action against person other than employer; subrogation lien of employer; rights of employer or insurer upon failure of employee to bring action; attorney fees; retroactive application.

(a) When the injury or death for which compensation is payable under this chapter is caused under circumstances creating a legal liability against some person other than the employer, the injured employee or those to whom such employee's right of action survives at law may pursue the remedy by proper action in a court of competent jurisdiction against such other persons, except as precluded by Code Section 34-9-11 or otherwise.

 

(b) In the event an employee has a right of action against such other person as contemplated in subsection (a) of this Code section and the employer's liability under this chapter has been fully or partially paid, then the employer or such employer's insurer shall have a subrogation lien, not to exceed the actual amount of compensation paid pursuant to this chapter, against such recovery. The employer or insurer may intervene in any action to protect and enforce such lien. However, the employer's or insurer's recovery under this Code section shall be limited to the recovery of the amount of disability benefits, death benefits, and medical expenses paid under this chapter and shall only be recoverable if the injured employee has been fully and completely compensated, taking into consideration both the benefits received under this chapter and the amount of the recovery in the third-party claim, for all economic and noneconomic losses incurred as a result of the injury.

 

(c) Such action against such other person by the employee must be instituted in all cases within the applicable statute of limitations. If such action is not brought by the employee within one year after the date of injury, then the employer or such employer's insurer may but is not required to assert the employee's cause of action in tort, either in its own name or in the name of the employee. The employer or its insurer shall immediately notify the employee of its assertion of such cause of action, and the employee shall have a right to intervene. If after one year from the date of injury the employee asserts his or her cause of action in tort, then the employee shall immediately notify the employer or its insurer of his or her assertion of such cause of action, and the employer or its insurer shall have a right to intervene. In any case, if the employer or insurer recovers more than the extent of its lien, then the amount in excess thereof shall be paid over to the employee. For purposes of this subsection only, "employee" shall include not only the injured employee but also those persons in whom the cause of action in tort rests or survives for injuries to such employee.

 

(d) In the event of a recovery from such other person by the injured employee or those to whom such employee's right of action survives by judgment, settlement, or otherwise, the attorney representing such injured employee or those to whom such employee's right of action survives shall be entitled to a reasonable fee for services; provided, however, that if the employer or insurer has engaged another attorney to represent the employer or insurer in effecting recovery against such other person, then a court of competent jurisdiction shall upon application apportion the reasonable fee between the attorney for the injured employee and the attorney for the employer or insurer in proportion to services rendered. The provisions of Code Sections 15-19-14 and 15-19-15 shall apply.

 

(e) It is the express intent of the General Assembly that the provisions of subsection (c) of this Code section be applied not only prospectively but also retroactively to injuries occurring on or after July 1, 1992.

 

II. What Does The Statute Mean:

 

The Statute creates a lien in favor of the employer or insurer that paid workers' compensation benefits on behalf of an injured employee, for the amount of indemnity benefits, death benefits and/or medical expenses paid on behalf of that employee; so long as the employee's injury was caused by a third-party (an entity other than the employee or employer). Mechanically, either the employee or lienholder (employer or insurer) may file an action against the responsible third-party, so long as the action is filed within the statute of limitation period applicable to the particular tort (i.e. personal injury v. medical malpractice).

In the first year after injury, the employee has the sole right to file a claim against the tortious third-party. Once a year has passed, either the employee or the lienholder may file an action against the tortious third-party. In either case, the employee or lienholder may intervene once the other files their third-party action.

The lienholder is allowed to recover the full amount of (allowable) benefits paid to the employee; so long as the employee is fully and completely compensated for all economic and non-economic losses, taking both the third-party recovery and the workers' compensation benefits into consideration. Then, if the lienholder recovers, and has hired its own counsel to enforce and protect its subrogation rights, the court will apportion reasonable attorney's fees between the employee's counsel and the lienholder's counsel.

 

III. Isn't There More?

 

Not in the Statute. Aside from the basics described above, practitioners in this area must rely on a growing body of case law for interpretation and guidance in the application of the statute. Fortunately, enough time has passed since the enactment of the statute so that it is possible for anyone who encounters workers' compensation subrogation issues to make some sense of how to practice and serve the best interests of their clients.3

THE CASES THAT REALLY HELP INTERPRET THE STATUTE4
Dept of Admin. Services v. Brown, 219 Ga. App. 27, 464 S.E.2d 7 (1995)

 

Procedural History:

 

Brown filed suit against a third party tortfeasor for job related injuries. Pursuant to O.C.G.A. §34-9-11.1, Brown's employer moved to intervene in that action. The trial court denied the employer's intervention, and the employer appealed.

 

Rationale & Holding:

 

The employer argued that O.C.G.A. §34-9-11.1 gave the employer an unconditional right to intervene to protect its subrogation lien. The employer also argued that intervention was warranted based on O.C.G.A. 9-11-24(a)(2) because of the employer's inability to protect its interests if left out of the litigation. The Court held that 34-9-11.1 gives the employer the right to intervene if it chooses to do so, and reversed.

 

Dicta & Important Stuff:

 

The Court went on to say that the employer's right would be impaired such that intervention pursuant to 9-11-24(a)(2) would be warranted had 9-11-24(a)(1) intervention not been appropriate. Additionally, the Court suggested that the use of a special verdict form would suit the employer's interests while a general verdict form would be most suited to the injured employee's needs. This case stands for the proposition that the employer can intervene as a matter of right, and also that special verdict forms can be utilized in these cases to assist the court in determining whether an injured employee has been fully and completely compensated.

Rowland v. Dept. of Admin. Services, 219 Ga. App. 899, 466 S.E.2d 923 (1996)

Procedural History:

 

Injured employee Young filed suit against third party tortfeasor Rowland for job related injuries. Young's employer DOAS began paying workers' compensation benefits to Young. Young settled his third-party claim against Rowland, (without filing suit) and without informing DOAS. Rowland was likewise never informed of DOAS's workers' compensation payments. DOAS filed suit against Rowland pursuant to O.C.G.A. 34-9-11.1, for recovery of its subrogation lien. Rowland and DOAS filed cross motions for summary judgment. Rowland's motion was denied, and the appeal ensued.

 

Rationale & Holding:

 

Rowland argued that because DOAS had a derivative right released by Young , DOAS's rights against Rowland were released as well. DOAS argued that even if Rowland had no actual knowledge of the workers' compensation lien, it had constructive knowledge based on the fact that the injury took place while Young was working. The Court held that so long as Rowland had no actual knowledge, then DOAS's claims against Rowland were released by Young. Additionally, the Court held that the mere occurrence of a work related injury would not create constructive knowledge of a workers' compensation lien. Therefore, judgment was reversed.

 

Dicta & Important Stuff:

 

While the holding of this case is confined to the situation where neither the tortfeasor nor lienholder have knowledge of the other's claims, the Court goes on to say that its holding would differ and DOAS would have been able to pursue its recovery from Rowland, has Rowland known of the payment of workers' compensation benefits.5 Additionally, the Court stated that DOAS was free to pursue its subrogation lien against Young, because Young settled his third-party claim without informing DOAS. However, DOAS will still be required to prove that Young was fully and completely compensated before DOAS would be allowed to recover on its lien.

Bartow Co. Bd. of Ed. v. Ray, 229 Ga. App. 333, 494 S.E.2d 29 (1997)

Procedural History:

 

Ray was injured by a tortfeasor while in the scope of her employment with Bartow County. Ray filed suit against the tortfeasor, and Bartow County intervened for the recovery of its subrogation lien for all benefits paid. At trial, Ray put up evidence of $53,000 in special damages. Bartow also put up evidence that its lien amounted to $40,000. Ray ultimately requested over $900,000 in total damages, and the jury returned a general verdict of $175,000.

 

Bartow County argued that it was entitled to recovery on its subro lien because the jury returned a verdict that exceeded Ray's special damages, but it did not put up any additional evidence supporting its argument that Ray was fully and completely compensated. The trial court denied Bartow County's right to subrogation recovery on the grounds that Bartow failed to carry its burden, and that absent use of a special verdict (which was not requested by any party at trial)the court was unable to determine whether Ray was fully and completely compensated. Bartow appealed the trial court's ruling.

 

Rationale & Holding:

 

The workers' compensation statute clearly provides that it is the employer's duty to carry the burden of proof regarding whether the employee was fully and completely compensated. The Court opined that with only a general verdict, they could decide the issue if the jury verdict was less than the special damages proved at trial (not fully compensated), or when the jury verdict was exactly the same as the special damages proved at trial (fully compensated). The Court affirmed the trial courts ruling on the ground that a general jury verdict in excess of the workers' compensation lien or special damages proven was insufficient to carry the employer's burden that the verdict completely compensated the employee.

 

Dicta & Important Stuff:

 

The Court went on to say that a special verdict would be of great assistance on these issues because, the Court would know whether the jury reduced its award due to prior injury (and presumably contributory negligence). Additionally a special verdict would enable the Court to determine if the jury gave the employee the full value of her special damages and intended the remainder to serve as general damages. With only a general verdict, it would be possible for the jury to have awarded less than the full amount of the special damages while giving greater value to the general damages. In such a circumstance, the employee would not be found fully and completely compensated for her economic losses.

Sommers v. State Comp. Ins. Fund, 229 Ga. App. 352, 494 S.E.2d 82 (1997)

Procedural History:

 

Sommers was injured by a tortfeasor while in the scope of her employment with SCIF. Sommers filed a claim against the tortfeasor, and SCIF moved to intervene. Although SCIF moved to intervene after the applicable statute of limitations, the trial court granted SCIF's motion on the condition that the parties find a way of protecting SCIF's subrogation lien while still keeping collateral source evidence from the jury. The parties agreed that SCIF would not participate at trial or be named as a party, but would be allowed to present evidence of its lien outside the presence of the jury. The jury returned a special verdict in favor of Sommers, and the court reconvened for a hearing on the subrogation lien issues. After a hearing on the fully and completely compensated issue, the court granted the subrogation lien. The court then heard evidence on the apportionment of attorney's fees, and rendered a decision granting the attorneys for SCIF approximately 1/3 of the amount they recovered on the lien. Sommers then appealed.

 

Rationale & Holding:

 

The Court of Appeals addressed three issues relevant to workers' compensation subrogation. First, was the intervention untimely? Second, did the employer prove the employee was fully and completely compensated? And third, was the court's apportionment of fees reasonable? First, the Court held that intervention after the expiration of the statute of limitation was not per se untimely, and that the trial court's discretion would not be disturbed. Second, the Court held that the court considered the damages evidence presented at trial, in addition to the special verdict, and therefore, had considered sufficient evidence to render an opinion that the employee was fully and completely compensated by the jury verdict. Therefore, the Court upheld the trial court's award granting the subrogation lien. Finally, the Court determined that apportionment of attorney's fees was allowed by the statute, but that the employee could not make a claim for all of the attorney's fees on the basis that the employer did not participate at trial. This was so, because the parties agreed that the employer would not participate at trial; but the employer did have counsel who worked to advance its interests throughout the litigation. The Court held that the trial court's apportionment was reasonable under the circumstances.

Stewart v Auto Owners, 230 Ga. App. 265, 495 S.E.2d 882 (1998)

Procedural History:

 

Injured employee Stewart sued Auto Owners, her workers' compensation insurer, for declaratory relief to determine whether Auto Owners had a right to recovery of its subrogation lien when she had recovered a policy limits sum from the tortfeasor, and a more substantial sum from her own underinsured motorist (UM) carrier. Auto Owners counterclaimed for recovery of its subrogation lien. Auto Owners then moved to dismiss, and the court granted Auto Owners motion, from which Stewart appealed.

 

Rationale & Holding:

 

O.C.G.A. §34-9-11.1 gives insurers a right to subrogation recovery of monies an employee recovers from a third-party tortfeasor, so long as the employee has been fully and completely compensated. The statute does not authorize a subrogation recovery against the injured employee's UM benefits. Stewart recovered UM benefits pursuant to a contractual obligation between her and her UM carrier, and thus, she did not recover from a third-party tortfeasor. Therefore, Auto Owners is not entitled to assert a subrogation lien against UM benefits recovered by Stewart.

 

Dicta & Important Stuff:

 

The case has been interpreted broadly in seminar materials as providing a blanket prohibition on workers' compensation subrogation recovery against UM benefits. However, the case can be read more narrowly to prohibit a subro lien on only those UM benefits provided under a UM policy owned by the injured employee. Because the Court used contract obligation analysis in its rationale, the question remains whether an employer can recover on its subro lien for UM benefits the employee recovers against the employer's (or a third-party's) UM policy.

Payne v. Dundee Mills, Inc., 235 Ga. App. 514, 510 S.E.2d 67 (1998)

Procedural History:

 

On the two year anniversary of Payne's injury in the course of his employment, his insurer Dundee Mills filed its claim for subro recovery against the tortfeasor. Sometime thereafter, Dundee notified Payne of the action, and Payne moved to intervene. Before the court ruled on Payne's motion, Dundee dismissed its action. The trial court then denied Payne's motion to intervene as moot. Payne appealed.

 

Rationale & Holding:

 

While Dundee had the statutory right to file its subrogation claim against the tortfeasor prior to the expiration of the statute of limitation, it also had a duty to immediately notify Payne of same. Payne moved to intervene after notice of the action, and his right to intervention depends on the timeliness of his motion. Where the motion is filed prior to judgment, and where denying the motion would dispose of the movant's cause of action, the Court held that it was abuse of discretion to deny the intervention.

 

Dicta & Important Stuff:

 

Although this case concerns an employee's right to intervene in the employer's action, the same arguments would presumably apply if the employer had sought to intervene in the employee's action. Furthermore, filing a motion to intervene after the expiration of the statute of limitations is not fatal, so long as the motion was timely (based on the diligence the movant used once it learned of the pending action). Left unsaid, is whether a motion to intervene would be untimely if it came after the statute expired, and also came long after movant was notified of the pending action.

North Bros. Co. v. Thomas, 236 Ga. App. 839, 513 S.E.2d 251 (1999)

Procedural History:

 

Injured employee Thomas filed an action against the tortfeasor, and his workers' compensation insurer North Brothers intervened. The jury heard evidence that medical damages were approximately $60,000; and then rendered a special verdict awarding $25,000 for medical expenses and $25,000 for pain and suffering. The trial court heard evidence that North Brothers' subro lien for medical expenses was approximately $63,000. The trial court then denied the subro lien on the grounds that the $50,000 recovery did not leave Thomas fully and completely compensated. North Brothers appealed.

 

Rationale & Holding:

 

The Court looked at each separate category of damages and determined that because the comp insurer had not made any payments for pain and suffering, it could not attach its lien to that amount. Then the Court looked specifically at the medical expenses and found that the $25,000 jury verdict for same left Thomas completely compensated because he only claimed $60,000 in medical expenses, and North Brothers provided evidence that it paid $63,000 in medical expenses. Therefore, the Court held that North Brothers had a valid subro lien as to the medical expense portion of its lien because Mr. Thomas was fully compensated for his medical expenses. However, North Brothers was only able to collect its lien out of the $25,000 that the jury specifically apportioned for medical expense damages.

 

Dicta & Important Stuff:

 

Apparently Thomas also recovered some amounts from his own UM carrier. The Court cited approvingly to Stewart v Auto Owners, 230 Ga App 265, 495 SE 2d 882 (1998) in stating that no subro recovery was possible against UM benefits Thomas received from his own UM policy. Additionally, the Court cited approvingly to the use of a special verdict form in order to assist the court in determining whether an employee has been fully compensated by a jury verdict.

Homebuilders Assoc. of Ga. v. Morris, 238 Ga. App. 194, 518 S.E.2d 194 (1999)

Procedural History:

 

Morris was injured by a tortfeasor in the scope of his employment with Homebuilders. Morris sued tortfeasor and Homebuilders intervened. Prior to trial, tortfeasor settled with Morris for $200,000, and tortfeasor was dismissed from the case. The court then allowed the case to proceed to trial on the subrogation issues with only Morris and Homebuilders as parties. Prior to trial, Morris moved in limine to exclude evidence of contributory negligence from the jury. The court granted Morris' motion in limine, and the jury awarded Morris damages of $925,000 using a special verdict. The court then ordered that Homebuilder's take nothing on its $180,000 subrogation lien, holding that the $200,000 settlement had not completely compensated Morris. Homebuilders appealed, assigning as error, the court's exclusion of the contributory negligence evidence.

 

Rationale & Holding:

 

O.C.G.A. 34-9-11.1 specifically instructs courts to only look at the workers' compensation benefits paid plus the amount the employee receives in damages from the tortfeasor in determining whether an employee has been fully compensated. Therefore, because all other considerations are specifically excluded, traditional tort principles such as contributory negligence and assumption of the risk are not appropriate bases for a court's determination of subro recovery. Therefore, the trial court's decision was affirmed.

 

Dicta & Important Stuff:

 

Because the statute calls for the subro lien analysis to focus solely on benefits paid plus damages received, is an injured employee always fully compensated when those amounts exceed the total amount of special damages proven? What if the jury reduces its award by a percentage for contributory negligence, but the total of the award plus the benefits received still exceeds the total special damages proved? I'd guess that the employee could still be found fully compensated.

Liberty Mutual Ins. Co. v. Johnson, 244 Ga. App. 338, 535 S.E.2d 511 (2000)

Procedural History:

 

Injured employee Johnson was paid nearly $500,000 in workers' compensation benefits by Liberty Mutual before dying from injuries caused by a third-party tortfeasor. His estate sued the tortfeasor, and made a settlement demand which included $1,900,000 in special damages. The estate and the tortfeasor settled for $3,200,000, which the court approved after a hearing. Subsequently, Liberty Mutual moved to intervene in order to pursue its subrogation lien. The court allowed the intervention. Liberty Mutual then requested a jury trial on the subrogation issues, which the court denied. At a hearing on the subrogation lien, the court found that the $3,200,000 settlement did not render Johnson fully and completely compensated. Liberty Mutual appealed both the verdict and the jury trial issue.

 

Rationale & Holding:

 

Because Georgia's constitutional right to a jury trial only guarantees rights that were previously given at common law, since the workers' compensation statute does not provide for a right to jury trial, and the right did not exist at common law, then disputes over subrogation liens created by the statute likewise enjoy no jury trial right.

 

The trial court heard evidence that the settlement amount would not have completely compensated the plaintiff for his injuries. Liberty Mutual could not simply rely on the settlement total ($3.2M) and the amount claimed in the demand ($1.9M) to per se give it the right to the subrogation lien. Because Liberty Mutual had the burden of proof, the court's finding supported by some evidence from the record, will not be reversed.

 

Dicta & Important Stuff:

 

The Court denied the right to a jury trial on the issue of the insurer's right to a subrogation lien in this case. However, this ruling does not seem to alter the practice commonly employed by courts deciding these issues; such as bifurcating the case and allowing the jury to hear the subro lien issues after deciding liability, or simply allowing the case to continue to the jury once the tortfeasor settles out.

Hammond v. Lee, 244 Ga. App. 865, 536 S.E.2d 231 (2000)

Procedural History:

 

Injured employee Hammond sued tortfeasor Lee for injuries suffered in the scope of his employment. Workers' compensation insurer Travelers, paid indemnity benefits of $74,000 for lost wages, and medical expense benefits of $58,000. Travelers intervened in Hammond's third-party action. The court bifurcated the trial into a liability phase followed by a subro lien phase. The first phase was conducted without reference to collateral source, and a special verdict form was utilized. The jury returned a verdict for Hammond of: $3,300 for medical expenses, $2,100 for lost wages, and $2,500 for pain and suffering.

 

In the second phase, the jury heard evidence of the subro lien and the amount of benefit payments. It also heard evidence concerning the total medical specials (less than the total medical benefits) and lost wages (of approximately 1/3 Hammond's prior weekly wage, or $128 per week). The jury reached a verdict that Hammond was completely compensated, and the trial court entered judgment that Travelers was entitled to satisfaction of its subro lien from all sums collected by Hammond against Lee.

 

Hammond moved for a new trial, and the court gave Travelers the ultimatum of releasing its lien on the $2,500 pain and suffering amount or risk a new trial. Travelers released its lien as to the $2,500 pain and suffering portion of Hammond's verdict. The trial court then modified its verdict, granting Hammond's counsel 1/3 of the total verdict for attorney's fees, giving Hammond 2/3 of the pain and suffering award, and giving Travelers 2/3 of the remaining lost wages and medical expenses award. Hammond appealed.

 

Rationale & Holding:

 

Because Hammond only received 2/3 of his lost wages in workers' compensation benefits, he had a 1/3 shortfall. Because the jury verdict of $2,100 for lost wages does not make Hammond whole as to lost wages, Travelers can not recover its lien as to the lost wages portion, as Hammond was not fully and completely compensated. However, because the evidence showed that Traveler's medical benefit payments were greater than the total amount Hammond claimed in medical expenses, it stands to reason that an award of $3,300 for medical expenses would have made Hammond whole. Therefore, Travelers can recover its subrogation lien against the $3,300 medical expense recovery. Travelers can not take its lien against the pain and suffering portion because Travelers did not make any payment compensating Hammond for non-economic damages.

 

Dicta & Important Stuff:

 

The Court of Appeals found no error with the trial court's use of a bifurcated jury trial proceeding that properly limited the introduction of collateral source evidence. Left unsaid, was why the court awarded Hammond's attorney 1/3 of the entire recovery from Lee, instead of apportioning the attorney's fee between counsel for Hammond and counsel for Travelers. Presumably, Traveler's counsel failed to ask for apportionment.

Anthem Casualty Ins. Co. v. Murray, 246 Ga. App. 778, 542 S.E.2d 171 (2000)

Procedural History:

 

Injured employee Murray sued tortfeasor GMH for injuries Murray suffered in the course of his employment. Workers' compensation insurer Anthem paid $390,000 in disability benefits to Murray, and benefits were still being paid as the third-party suit went to trial. Anthem and Murray agreed that Anthem would not intervene, and that Murray would not settle with GMH without Anthem's approval.

 

At trial, the jury awarded $1,500,000 to Murray, after finding Murray 20% contributorily negligent. GMH satisfied the judgment for Murray of $1,500,000; and neither Murray nor GMH paid any amounts to Anthem. Anthem sued Murray and GMH to satisfy its subrogation lien; arguing that Murray breached the agreement, and that GMH paid the judgment even though it had notice of Anthem's subro lien. Both Murray and GMH moved for summary judgment, which the court granted. Anthem appealed both orders.

 

Rationale & Holding:

 

Although a general verdict was used that did not separate out Murray's economic and non-economic damages, Murray testified and provided some evidence that it would take $1,875,000 to fully compensate him for his injuries. Anthem had already paid $390,000 in benefits, which when added to the $1,500,000 verdict would give Murray a recovery greater than the amount he claim would fully compensate him. Therefore, because there is an issue of fact for the court to determine as to whether Murray was fully compensated for his economic damages, the Court reversed and remanded for a hearing on those issues.

 

With regard to GMH, the Court reasoned that since Anthem chose to stay on the sideline instead of intervening, it relinquished its statutory right to protect its lien. Additionally, unlike the situation in Rowland v. DOAS, Anthem had knowledge that Murray's claim was going forward against GMH. In Rowland, the injured employee settled without notice to the workers' compensation insurer. Here, the insurer had notice and chose not to participate. Moreover, GMH's knowledge of Anthem's lien is not determinative because a subro lien only arises when the injured employee has been fully compensated. The Court refused to hold that GMH should have known that Anthem had a viable subro lien. Therefore, the trial courts granting of GMH's summary judgment was affirmed.

 

Dicta & Important Stuff:

 

Before Anthem, it seemed as if the tortfeasors settlement of a claim with actual knowledge of the subrogation lien would be enough to subject the tortfeasor to possible double liability; to the tortfeasor and then again to the subro lienholder for paying out a claim without the involvement of the subro lien holder. Anthem cuts a portion out of that prior rule, and it appears that the rule at this point only creates double liability on the part of the tortfeasor if it settles its case when the subro insurer has no knowledge of the claim pursued by the injured employee, where workers' comp benefits have already been paid, and the tortfeasor has actual knowledge of the subro lien.

Simpson v Southwire, 249 Ga. App. 406, 548 S.E.2d 660 (2001)

Procedural History:

 

Injured employee Simpson sued a tortfeasor for injures incurred while working in the scope of his employment with Southwire. Southwire intervened. Prior to trial, tortfeasor settled with Simpson for $300,000. Southwire's request for recovery on its subrogation lien was denied, but the court granted Southwire's request for apportionment of attorney's fees, awarding $12,000. Simpson appealed.

 

Rationale & Holding:

 

A plain reading of O.C.G.A. §34-9-11.1(d) allows for the court to apportion attorney's fees between counsel for the injured employee and counsel for the subro lienholder, upon request for same. However, three conditions precedent must be met before an apportionment is allowed: first, the injured employee must recover economic and non-economic damages such that he is found fully compensated so that the lienholder is entitled to recovery of some amount; second, the lienholder must have engaged its own counsel to pursue recovery of the lien; and third, the lienholder must request an apportionment by the court. Because the trial court's ruling gave Southwire an attorney's fee recovery ($12,000) greater than its subro lien recovery ($0), the judgment was reversed.

 

Dicta & Important Stuff:

 

Apparently, a proper approach to handling a subro lien at trial would be a bifurcated trial first dealing with third-party liability and damages, followed with arguments by the subro lienholder on the fully compensated issue, followed by a hearing on attorney's fees. With each phase only proceeding if the result of the prior phase was favorable to the lienholder.

Hartford Ins. Co. v. Federal Express Corp.,
559 S.E.2d 530, 2002 Ga. App. LEXIS 112, 02 Fulton County D. Rep. 387 (2002)

Procedural History:

 

Injured employee Binyard sued tortfeasor Federal Express for injuries sustained in the course of his employment. Workers' compensation insurer Hartford paid $29,000 in indemnity benefits, $16,000 in medical benefits, and $20,000 in settlement of the workers' compensation case. Hartford intervened in the Fed Ex action, but Fed Ex settled with Binyard for $75,000 before the case reached trial. In a bench trial that followed, Hartford put up evidence that Binyard was fully compensated because he had overstated his injuries. Binyard put up contradictory evidence that he had not been fully compensated. The trial court ruled that Hartford had not carried its burden, and that Hartford was to take nothing on its lien. Hartford appealed.

 

Rationale & Holding:

 

Although the parties argued whether or not Binyard had recovered from his injuries, the trial court heard that evidence and ruled in favor of Binyard. The only guidance the statute gives, is that both the amount of the recovery plus the amount of benefits are to be considered in evaluating whether an employee has been fully and completely compensated. Hartford's argument that delineation of the damages proves Binyard was completely compensated for certain economic injuries is undermined by the $20,000 settlement that is not apportioned between damage categories. Because there was enough evidence to support the trial verdict, it was affirmed.

 

Dicta & Important Stuff:

 

This case presents an issue that had not arisen in prior reported cases. Namely, in what manner will a workers' compensation settlement be apportioned in attempting to determine the lienholder's right to subro recovery. A crafty attorney will argue that the full amount of the settlement is either entirely for indemnity benefits or medical benefits, depending on his needs in a particular case. Therefore, in settling workers' compensation cases, it might favor the lienholder to apportion the largest share of the settlement to the weakest aspect of the claimant's case.

 

Footnotes

 

1 O.C.G.A. § 34-9-11.1

2 Georgia reported decision from 1922 - 1972 may give some guidance on current subrogation issues, but only those cases after the enactment of the statute (July 1, 1992) actually interpret the current statute.

 

3 For additional resources on workers' compensation subrogation, see Subrogation Under Georgia's Workers' Compensation Act, Georgia Bar Journal, August 1999, page 18; and Georgia Workers' Compensation Subrogation, Workers' Compensation Law Section Newsletter, Winter 2001, page 16.

 

4 Cases Shepardized as of 3/19/02.

 

5 Curiously, the court in Georgia Star Plumbing, Inc., v. Bowen, 225 Ga. App. 379, 484 S.E.2d 26 (1997) drew a narrow exception when it held that the workers' compensation insurer had no claim against the released tortfeasor where the workers' compensation insurer had not actually paid any benefits prior to the third-party settlement, even though the third-party claim settled with the tortfeasor's knowledge of the subrogation lien. (This is probably due more to the requirement that a lienholder only recover benefits actually paid, that a result based on the tortfeasor's knowledge of the subro lien claim.)