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Subrogation (Money you need to repay)

St. Louis Workers' Compensation Lawyers

What Is Subrogation?

Black’s Law Dictionary defines subrogation as, “The lawful substitution of a third party in place of a party having a claim against another third party. Insurance companies, guarantors and bonding companies generally have the right to step into the shoes of the party whom they compensate and sue any party whom the compensated party could have sued.”

In plain language, if you are injured in an accident and recover money from another party, sometimes you need to pay back some of your winnings. Common examples of this include repayment to an ERISA health insurer (a qualifying plan that paid your medical bills may have a right to get back money from your verdict or settlement), or your workers' compensation insurer. Your Workers' compensation insurance plan has a right to recover money if they pay your medical bills, lost wages, and a lump sum of money and then you sue and successfully recover from another party. The most common example is a car accident while working. You do not get to fully collect money twice, and if you win your workers' compensation case and then secure a payment from another party, the right of the workers' compensation carrier to recover money is called subrogation.

Mark Cantor published an article on subrogation that was printed in the Missouri Bar Journal. A brief summary of his article is below.

Workers’ Compensation Subrogation is set out in section 287.150 RsMo as follows:

1. Where a third person is liable to the employee or to the dependents, for the injury or death, the employer shall be subrogated to the right of the employee or to the dependents against such third person, and the recovery by such employer shall not be limited to the amount payable as compensation to such employee or dependents, but such employer may recover any amount which such employee or his dependents would have been entitled to recover. Any recovery by the employer against such third person shall be apportioned between the employer and employee or his dependents using the provisions of subsections 2 and 3 of this section.

2. When a third person is liable for the death of an employee and compensation is paid or payable under this chapter, and recovery is had by a dependent under this chapter either by judgment or settlement for the wrongful death of the employee, the employer shall have a subrogation lien on any recovery and shall receive or have credit for sums paid or payable under this chapter to any of the dependents of the deceased employee to the extent of the settlement or recovery by such dependents for the wrongful death. Recovery by the employer and credit for future installments shall be computed using the provisions of subsection 3 of this section relating to comparative fault of the employee.

3. Whenever recovery against the third person is effected by the employee or his dependents, the employer shall pay from his share of the recovery a proportionate share of the expenses of the recovery, including a reasonable attorney fee. After the expenses and attorney fee have been paid, the balance of the recovery shall be apportioned between the employer and the employee or his dependents in the same ratio that the amount due the employer bears to the total amount recovered if there is no finding of comparative fault on the part of the employee, or the total damages determined by the trier of fact if there is a finding of comparative fault on the part of the employee. Notwithstanding the foregoing provision, the balance of the recovery may be divided between the employer and the employee or his dependents as they may otherwise agree. Any part of the recovery found to be due to the employer, the employee or his dependents shall be paid forthwith and any part of the recovery paid to the employee or his dependents under this section shall be treated by them as an advance payment by the employer on account of any future installments of compensation in the following manner:

(1) The total amount paid to the employee or his dependents shall be treated as an advance payment if there is no finding of comparative fault on the part of the employee; or

(2) A percentage of the amount paid to the employee or his dependents equal to the percentage of fault assessed to the third person from whom recovery is made shall be treated as an advance payment if there is a finding of comparative fault on the part of the employee.

4. In any case in which an injured employee has been paid benefits from the second injury fund as provided in subsection 3 of section 287.141, and recovery is had against the third party liable to the employee for the injury, the second injury fund shall be subrogated to the rights of the employee against said third party to the extent of the payments made to him from such fund, subject to provisions of subsections 2 and 3 of this section.

5. No construction design professional who is retained to perform professional services on a construction project or any employee of a construction design professional who is assisting or representing the construction design professional in the performance of professional services on the site of the construction project shall be liable for any injury resulting from the employer's failure to comply with safety standards on a construction project for which compensation is recoverable under the workers' compensation law, unless responsibility for safety practices is specifically assumed by contract. The immunity provided by this subsection to any construction design professional shall not apply to the negligent preparation of design plans or specifications.

6. Any provision in any contract or subcontract, where one party is an employer in the construction group of code classifications, which purports to waive subrogation rights provided under this section in anticipation of a future injury or death is hereby declared against public policy and void. Each contract of insurance for workers' compensation shall require the insurer to diligently pursue all subrogation rights of the employer and shall require the employer to fully cooperate with the insurer in pursuing such recoveries, except that the employer may enter into compromise agreements with an insurer in lieu of the insurer pursuing subrogation against another party. The amount of any subrogation recovery by an insurer shall be credited against the amount of the actual paid losses in the determination of such employer's experience modification factor within forty-five days of the collection of such amount.

WORKERS’ COMPENSATION SUBROGATION MADE EASY

  1. Take the total amount paid in Worker’s Compensation ________________________
  1. Total amount paid in civil claim ________________________
  1. Divide line 1 by line 2 to get a number and write that ________________________

number here

  1. Take line 2 and subtract attorney’s fees and also subtract ________________________

Costs; write here

  1. Multiply the number on line 3 by the number on line 4;

This is the amount of subrogation owed. ________________________

Please note that this is an oversimplification of the basic rule of subrogation. For specific details, please reference the Missouri Workers’ Compensation Handbook, First Edition, published in 2003 by the Bar Association of Metropolitan St. Louis, page 60, entitled An Overview of Missouri Workers’ Compensation Subrogation, by Mark Cantor and Christopher Archer.

The most salient of those points are:

  1. Comparative Fault is not considered by this formula.
  2. The Workers’ Compensation claim should be settled first, as it mathematically works better for your client.
  3. I recommend that all expenses be taken from the civil case, as it reduces the Workers’ Compensation subrogation.
  4. Be aware of loss of consortation claims and ERISA issues.

Keep in mind that in MIGA (Missouri Property & Casualty Insurance Guarantee Association) that no one may recover the subrogation amount from an insolvent insurer, pursuant to MIGA

1.) When a third party case is identified in addition to a workers’ compensation, the workers’ compensation claim must be settled first.

2.) The formula for calculating an employer’s subrogation interested shields the Claimant’s attorney fees and expenses. Therefore, the employer’s subrogation interest is reduced if your contract provides that all expenses which are applicable to both the workers’ compensation claim and the civil claim are to be paid from the civil claim. Additionally, depending on the complexity of the civil case, it may be fair to charge one third of the amount recovered if by settlement but forty percent if suit is filed. This may act as an incentive for the Employer/Insurer to voluntarily reduce their subrogation interest and it will reward your additional efforts if they choose not to.

3.) The Employer/Insurer’s subrogation interest includes the amount paid in medical. If the Claimant prefers to choose their own health provider and has private health insurance that will pay for that care without seeking reimbursement, the overall subrogation interest of the Employer/Insurer is decreased. This should be done cautiously because if the health insurer is an ERISA plan they will have their own subrogation interest as a matter of law. Many other health insurance plans have subrogation language which should be explored prior to electing to use private health insurance instead of workers’ compensation for medical care.

4.) A spouse’s loss of consortium settlement arising out of the third party claim can be protected from subrogation. The Court of Appeals approved a third party wrongful death settlement where $2,000.00 was for the Claimant’s death count and $166,000.00 was for the pre-death loss of consortium claim of Claimant’s widow. See Bridges v. Van Enterprises, 992 S.W.2d 322 (Mo.App. S.D. 1999). Be certain that any independent settlement is proportionate and reasonable or you may run the risk of subrogation applying to the proceeds of that settlement. In the Bridges case, the settlement was equitable because the Claimant died after 2 ½ years in a coma and left a spouse and nine year old child.

5.) When calculating subrogation, comparative fault must be determined by the trier of fact and a settlement for an amount less than a verdict annuls the entire verdict including findings of comparative fault. Kerperien v. Lumberman’s Mutual Casualty Co., Missouri Court of Appeals, ED. 79296, June 2002. The Employer’s subrogation interest is determined by the amount actually received in the third party action, not the amount of the judgment.

6.) Practitioners should be aware of the Missouri Property and Casualty Insurance Guaranty Association set out in section 375.776.2 RSMo as it relates to subrogation. In a nutshell, when a tortfeasor’s insurer is insolvent, any insurer who has paid a claim that would ordinarily entitle it to subrogation will not be reimbursed by MIGA and …no one may recover the subrogation amount from the tortfeasor of the insolvent insurer.

You need aggressive representation to recover the money you deserve for any workers compensation claim. Our calls are professionally answered by a live person 24/7. Please call Cantor Injury Law at (314) 485-4005 or send us an email and our attorneys will personally contact you immediately.

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