Jeffrey P. Gale, P.A. /// Scrutinize Workers’ Compensation Carrier’s Paylog to Reduce WC Lien Amount

It is not uncommon for an individual hurt in a work-related accident, for which workers’ compensation benefits are due, to also have a liability case against a negligent third party. Where compensation is recovered in both cases, the injured party may have to give some of the third-party recovery to the workers’ compensation insurance carrier to satisfy its workers’ compensation lien. See section 440.39(2), Florida Statutes.

There is a formula, commonly referred to as the Manfredo Formula, used for establishing the amount of the lien recovery. However, before getting to the formula, it is necessary to determine the amount of recoverable expenditures to plug into the formula.

440.39(3)(a) identifies recoverable expenditures:

Upon suit being filed, the employer or the insurance carrier, as the case may be, may file in the suit a notice of payment of compensation and medical benefits to the employee or his or her dependents, which notice shall constitute a lien upon any judgment or settlement recovered to the extent that the court may determine to be their pro rata share for compensation and medical benefits paid or to be paid under the provisions of this law….

“Compensation” benefits, indemnity or wage loss benefits, are paid in accordance with section 440.15. “Medical benefits” are covered by section 440.13.

In Associated Home Health Agency, Inc. v. Lore, 484 So.2d 1389 (Fla. 4th DCA 1986), the appellate court upheld the trial court’s refusal to include in the amount recoverable under section 440.39, the amount paid by the carrier for rehabilitative services authorized by section 440.49(1)(a) [now, 440.491]. The Court explained:

The vocational rehabilitation of an injured employee, while mutually beneficial to both the employee and the employer, is intended primarily to enhance the wage earning capacity of the injured employee, thereby reducing (if not eliminating) the employee’s wage loss. Thus, rehabilitative services, at least to the extent that such services accomplish this intended purpose, provide a direct monetary benefit to the employer/carrier. Additionally, section 440.39(3)(a) is explicit in granting to the employer/carrier a pro rata recovery (against a judgment or settlement received by the employee against the third party tort-feasor) “for compensation and medical benefits paid or to be paid… .” The expense incurred by the employer in providing to the employee vocational rehabilitation is neither compensation nor medical benefits, each of which is clearly defined in the statute.

Additional benefits falling into this category of excluded expenditures include investigative costs, nurse case management expenses, and vocational rehabilitation expenses.

Other excluded expenses are carrier-paid attorney’s fees and costs. When carriers are forced to pay wrongly denied benefits, they must pay the claimant’s attorney’s fees and costs. See section 440.34(3). These fees and costs are not compensation or medical benefits and to allow the carrier to recoup some of the money would be against public policy. In contrast, carriers can recover under 440.39 for fees and costs claimants pay to their attorneys. The fees and costs are typically paid in conjunction with the settlement of the workers’ compensation case and are based on private attorney/client compensation agreements. Washout settlements of this nature are essentially considered the payment, in the form of a lump sum, of compensation and medical benefits, hence, the reason why the claimant-paid fee can be applied to the carrier’s lien.

This blog illustrates why it is important to carefully study the carrier’s paylog to filter out inapplicable payments. Carriers will not do the job for claimants’ attorneys and will laugh all the way to the bank if they make a windfall recovery.