Subrogation From a Different Perspective

Saturday, May 24, 2003 | 0

We have in the past presented articles on subrogation: Subrogation for the Claims Examiner parts One and Two; and Subrogation - I want my Money Back. However, we will look at subrogation from a slightly different perspective.

Subrogation involves certain elements to which the average workers' compensation claims specialist are unfamiliar - primarily the concepts of negligence or culpability, and damages.

In workers' compensation, liability is presumed. There is no question of negligence, and the standard of care to be attributed to a person in the same or similar circumstances. Also, in workers' compensation, there is no question of damages beyond the determination of wages and applicable disability level. Once those are determined, the "damages" are set by statute.

In civil personal injury actions, damages are much more ephemeral, with judgment calls being made by the trier of fact subject to the environment in which the action proceeds (juries in one county may be more liberal with damages against certain types of defendants than others). Nevertheless, there are certain safeguards in the analysis of a subrogation situation that will help in obtaining the best possible recovery.

More often than not, a carrier's subrogation actions arise after the injured worker has filed for a third party recovery against the person that ultimately was responsible for the injury. While it is certainly possible for the carrier to initiate a third party recovery against the tortfeasor on its own, this is rare. Usually a carrier will either file a lien, or initiate a Complaint in Intervention upon learning of the injured workers' third party case.

The gross recovery, or damages, that will be obtained by the plaintiff may be the single most important figure in preparing a case for negotiation and completing a recovery analysis. Look at the gross recovery as a pie, and your subrogation claim as a slice of that pie. The size of the pie is determined by the amount of cash that will be available, and any credits to which you may be entitled. The total size of the pie, and the composition of the pie (i.e., the blend of cash and credit) will affect your analysis and ultimate strategy on settlement and/or litigation.

Consider whether the gross recovery is the only source of recovery, or if there are other actions pending that are subject to your lien. In other words, there may be more than one pie. For instance, in a third party auto claim, there may be the primary coverage, the underinsured motorist coverage of the claimant's policy and the employer's fleet policy! Failure to inquire about the possibility of additional sources of recovery may leave a lot of potential money on the table, particularly if the initial gross recovery was not enough to satisfy the current lien or if there is a future or ongoing exposure, as in an Award with lifetime medical.

Too often, attention is paid to the reimbursement part of the recovery and either too little or no attention paid to the future lien. The total available credit should always be compared to future exposure because that is the slice of pie that you want to recover. That is, the projected future lien is equal to the future exposure up to the amount of the total available credit. If the workers' compensation case is still open or administratively closed, but is likely to be reopened, care should be taken in estimating future liabilities, and how credit will be handled.

Actually pursuing recovery of the subrogation lien is jurisdictionally dependent - the analysis for recovery purposes must include local knowledge of not only the laws, but juries and the courts in general; topics for another article.