Paying Back Workers’ Compensation from an Injury Settlement (Florida)

In Florida, if an employer pays an employee compensation under Florida Workers’ Compensation law, the employer is entitled to get paid back from the settlement with a third-party tortfeasor, for compensation benefits paid.¹

Employee Must Pay Workers’ Compensation Insurer from 3rd Party Settlement

A workers’ compensation carrier is entitled to a lien on third-party settlement proceeds for both past workers’ compensation benefits paid and those to be paid in the future.  Payless Oil Co. v. Reynolds, 565 So.2d 737, 737 (Fla. 2nd DCA 1990).

There Are Exceptions

Remember: Every state has different laws.  Florida’s laws are unique.

What Benefits Does a Workers Comp Lien Apply To?

The workers’ compensation lien is against:

• medical expenses
• lost wages (indemnity)
• the spouse’s loss of consortium claim.  City of Tallahassee v. Chambliss, 470 So. 2d 43 – Fla: Dist. Court of Appeals, 1st Dist. 1985.

Amount to Be Paid Back to Workers’ Comp is Reduced by Attorney’s Fees and Costs

The workers’ compensation insurer’s recovery is reduced by the amount of all costs spent in the third-party claim, including reasonable attorney fees for the claimant’s attorney.

This large reduction is one of the many benefits of hiring an attorney if your employer paid you workers compensation (“workers comp”) benefits and you have a third party case.

Below is an actual case example that shows an employer’s right to recover workers’ compensation benefits that it paid.  It also shows how the workers compensation lien (pay back amount) is reduced by the claimant’s attorney’s fees and costs.

Example – Reducing Workers Compensation Lien By Attorney’s Fees and Costs

A man was rear ended by a tractor trailer while he was also driving an 18 wheeler.  He injured his shoulder.  Months later, he had shoulder surgery.

I determined that his personal injury case value was $210,000.  Thus, we settled his for $210,000.

As with many injury claims, most of the settlement was for his pain and suffering.  He also claimed that the accident caused his herniated disc.

$200,000 of that settlement was against the 3rd party tortfeasor.  $10,000 was with my client’s personal uninsured motorist insurer, Progressive.

My client was working at the time of the crash.  The personal injury settlement was with Crowley (the at fault trucking company) and its bodily injury (“BI”) liability insurer.

Travelers Insurance was its BI liability insurer.

A quick bit about Travelers…

They are an average insurance company.  Travelers is about the same quality as GEICO when it comes to paying injury claims.

However, Travelers pays better than Progressive, State Farm and Allstate.  On the other hand, Travelers currently pays worse than USAA.

Ok. Back to the case.

My client had arthroscopic surgery on his shoulder joint tear (glenoid labrum tear).  My client’s employer paid about $88,430 in medical and lost wage benefits.

His employer was required to reduce its $88,430 lien by my pro-rata attorney’s fees and costs.  For purposes of its workers’ compensation lien reduction, this is the “net settlement”.

My attorney’s fees were 33 1/3% of the total settlement.  Thus, the employer was required to reduce its lien by 33 1/3%.

Its lien was reduced to about $60,000 (net settlement).

This resulted in a savings to my client of about $30,000.  I was also able to get the lien much further reduced, which I’ll talk about further below.

Warning! If you settle your personal injury case while your workers’ compensation case is still open, your workers compensation insurer will workers compensation pay my medical bills after i settle my personal injury case

Federal Employees Are Subject to a Different Workers’ Comp Lien Law

Florida’s workers compensation laws don’t apply to federal employees.  Examples of federal employees are USPS employees, US customs and border agents, and much more.

The Federal Employees’ Compensation Act (FECA) says that claimants must, for any injury caused by a person other than the United States (a “third party”), make a claim against the third party and attempt to recover compensation.

Any recovery must be reported to determine if a portion of the recovery is required to be paid to the United States as reimbursement for the FECA benefits that have been paid because of that injury.

Here, I’m not going to talk any more about paying the United States as reimbursement for workers comp benefits.  I just wanted to point out that federal employees are subject to a different law.

Employer Is Also Required to Reduce Workers Comp Lien by Other factors

If your third party settlement was for less than the full value of your case, your employer is required to reduce its lien by the factors that caused you to accept a smaller settlement.²  

3 common factors that require the workers compensation insurer to reduce their lien are if there is:

• Comparative fault on the injured person
• Limits of insurance coverage and collectability

However, your difficulty proving that the tortfeasor was negligent is not a factor that can reduce the workers’ comp lien.  City of Tallahassee v. Chambliss

Formula To Calculate Workers’ Comp Lien if Employee Hasn’t Received Full Value of Damages

The language of Florid Statute 440.39(3)(a) creates an equitable distribution formula to be applied when an employee has not received the full value of his damages because of comparative negligence or the limits of insurance coverage and collectability.

The formula for the equitable distribution rate is net settlement (gross settlement — attorney’s fees and costs) divided by the total value of the employee’s claim. Reynolds, 565 So.2d 737, 738.

The result of this formula is the equitable distribution rate which is then multiplied by the workers’ compensation benefits to determine the amount of the workers’ compensation carrier’s equitable distribution lien.

Example of Pay Back Formula if Employee Hasn’t Received Full Damages

In addition to reducing the workers’ compensation lien by the claimant’s attorney fees and costs, the carrier has to further reduce its lien if the claimant didn’t get full value for the case.

In my earlier example, I settled my client’s 3rd party case for $200,000.  The workers’ compensation insurer was required to reduce its lien by my attorney’s fees and costs.

I argued to them that they needed to further reduce their lien because my client didn’t get full value for his case.  We settled for a discount for several reasons that I explain in my article on this $210,000 settlement for my client’s shoulder injury.

I negotiated with his employer’s workers compensation insurer.

Workers Comp Carrier Accepted $19,250; Lien Was $88,430

I got them to accept $19,250, when their claimed lien was $88,430.

This means that the workers comp insurer was OK putting the full settlement value of the personal injury case at $606,767 for purposes of the comp lien.

Tip: Before settling your Florida personal injury case with the third party tortfeasor, get them to agree that the settlement release will state the full value of the case.  The responsible party should agree.

This can help you prove the full value to the workers’ compensation carrier (and judge if necessary).  Here’s how we got to this $19,250 pay back amount.

The formula is:

Pay Back Rate = (Net Settlement)/Full Value of Case

Pay Back Rate = (Gross settlement — Attorney’s fees and costs)/Full Value of Case

Tip: The workers’ compensation insurer doesn’t have a lien on your uninsured motorist settlement.  I discuss this further below.

Just plug in the 3rd party settlement amount.  You do not plug in the uninsured motorist claim settlement amount.

In this case, the 3rd party settlement amount is $200,000. My fees on the 3rd party settlement were $66,666.  Costs were $1,249.  My combined fees and costs were about $67,915.

Plug In the Amounts Like This

To get the pay back rate, let’s plug in the numbers, using the above formula.

= (Gross settlement — Attorney’s fees and costs)/Full Value of Case

= ($200,000 — $67,915)/$606,767

= $132,085/$606,767

= 27.77%

Thus, the pay back rate is 27.77%

You multiply the 27.77% times the workers’ compensation benefits ($88,430) to determine the amount of the workers’ compensation carrier’s equitable distribution lien.

Pay Back Amount = 27.77% x $88,430

Pay Back Amount = $19,250

Example – Reducing the Work Comp Lien by Other Factors – Truck Crash

In the above case, my client’s orthopedic surgeon said that he did not have a torn labrum in his shoulder.  The doctor also said that my client’s surgery was not caused by this truck accident.  There were also gaps in medical treatment.

These factors reduced the full value of the case, and result in a lower settlement value.  I argued to the employer’s Miami, Florida workers comp attorney that we settled the personal injury case for less as result.

Delivery Worker Gets $215K Settlement, Workers’ Comp Insurer’s Lien is Limited to Net Settlement

This isn’t my case.  In Luscomb v. Liberty Mut. Ins. Co., 967 So.2d 379, 380 (Fla. 3d DCA 2007), Luscomb worked for Raven Transport Company.

Raven Transport’s workers’ compensation coverage was provided by Liberty Mutual.  Luscomb’s right foot and ankle were badly injured as he delivered goods to BJ’s Wholesale Club in Miami.

Ultimately Luscomb’s right foot was amputated.  BJ’s defended the case by arguing that the Luscomb was at fault for causing the accident because of his decision to walk in the muddy water in the rain-soaked loading dock.

Since Luscomb was working at the time of the accident, Liberty Mutual paid compensation and benefits of $1,120,408.

Luscomb sued BJ’s for personal injury.  His claims against BJ’s settled at mediation for $215,000.

When Luscomb’s attorney’s fees of $86,000 (a 40% contingent fee) and $47,252 in costs were subtracted, the net settlement proceeds payable to Luscomb were $81,748.

Workers’ Comp Lien Can’t Be Greater Than Net Settlement

The appeals court said that Liberty Mutual’s lien on the personal injury settlement cannot be greater than the net compensation, $81,748.

The appeals court also said that the trial court needs to determine of the full value of Luscomb’s damages.  The trial court should then divide the amount of $81,748 by that full value.

The resulting percentage is to then be applied to compute Liberty Mutual’s lien and to pay those proceeds.

For example, if the trial court determines that the full value of the damages suffered by Luscomb was $5 million, the percentage would be 1.635% and the Liberty’s lien amount would be $18,318.

The percentage would be 1.635% because the net settlement, $81,748, divided by $5 million is 1.635%.

Liberty’s lien amount (that Luscomb would need to pay) would be$18,318 because 1.635% multiplied by $5,000,000 is $18,318.

Does a Workers’ Compensation Carrier Have to Pay Future Benefits if an Employee Settles a Case Against a Third Party?

Yes, but the workers’ compensation carrier gets an offset (credit).

The workers’ compensation carrier can set off the recovery obtained by an injured employee from a third party tortfeasor against compensation benefits due the injured employee. See § 440.39(1), Fla. Stat.

Section 440.39 limits the amount of the compensation carrier’s set-off to its pro rata share of the compensation and medical benefits paid or to be paid, less its pro-rata share of all court costs and reasonable attorney fees expended by the claimant in the claim against the third party tortfeasor.

The carrier can subtract its future payments by a ratio of net recovery to the full value of the third-party claim.

Will PIP Pay a Workers’ Compensation Lien from a Car Crash?

Maybe.  See if Florida Personal Injury Protection (PIP) insurance will pay off a workers’ compensation lien in a car accident case.

Workers’ Compensation Insurer Doesn’t Get Paid From Any Uninsured Motorist Settlement

A workers compensation insurer doesn’t have a right of subrogation against a uninsured motorist (UM) bodily injury liability settlement.

Under F.S. 627.727(1), uninsured motorist coverage shall be “over and above, but shall not duplicate, the benefits available to an insured under any workers’ compensation law, PIP benefits, disability benefits law, or similar law.”

Section 627.727(1), Florida Statutes, says that workers’ compensation “coverage shall not inure directly or indirectly to the benefit of any workers’ compensation … carrier …

Section 627.727(1) prevents uninsured motorist benefits from benefiting any workers’ compensation carrier.  Uninsured motorist proceeds do not benefit the workers compensation insurer.  Volk v. Gallopo, 585 So. 2d 1163 – Fla: Dist. Court of Appeals, 4th Dist. 1991.

Workers’ Comp Liens for Florida Residents Who are Hurt Out of State

A Florida resident may get hurt in an out of state car accident.  The Florida resident may get paid workers’ compensation benefits according to the other states’ law.

If so, the other states workers’ comp lien law may apply to the workers’ compensation lien.  Some other states have workers’ compensation lien laws that are more favorable to an injured worker than Florida’s law.

For example, Georgia Code O.C.G.A. § 34-9-11.1, Georgia’s workers’ compensation subrogation statute, hardly ever allows the workers comp insurer to get a recovery because of the law that the claimant be “fully and completely compensated.”

Thus, claims to recover on Georgia workers comp subrogation claims are often not worth the cost of a lawsuit.  Many of these liens are settled for a fraction of the comp lien (pennies on the dollar).

The injured person should ask the workers’ comp insurer to state, in writing, under which state’s law is the workers comp benefits being paid.

Bottom Line

I normally don’t give a hard sell to potential clients to hire me.  However, hiring a lawyer is a no-brainer if you’re seriously hurt while working and a third party caused your accident.

It’s almost always a good idea to hire a lawyer for an injury case.  But if you’re working and injured, it’s all the more reason to hire an injury lawyer.

Right off the bat, your employer needs to reduce its lien by your attorney’s fees and costs.  In addition, they may also be required to significantly reduce your lien for many other factors.

And that is just one of the many benefits of hiring an injury attorney.

Footnotes 

[1] Florida Statute 440.39(2)

[2] Manfredo v. Employer’s Cas. Ins. Co., 560 So. 2d 1162 – Fla: Supreme Court 1990.

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