Victorious plaintiffs will repay less money to workers’ comp insurers.
By Thomas B. Scheffey
For years, it’s been a sore point for plaintiffs’ attorneys. A client has been hurt in a workplace accident and is collecting workers’ compensation benefits. The worker may have a good case against the third-party responsible for his injury – perhaps a careless motorist who crashed into a delivery driver’s van.
But under current law, any money recovered in a settlement must first be used to fully repay the workers’ comp insurer for all benefits provided to the injured worker. Often, the sum of the workers’ comp lien and potential attorney fees exceed any potential settlement total, leaving the injured plaintiff no reason to sue.
However, under legislation recently approved by the General Assembly, that 100 percent of workers’ comp lien has been reduced. In the future, injured workers will have to repay only two-thirds of the benefits they’ve received, leaving more for settlements and attorney fees.
“It was a big win,” said David Cooney, a partner at Hartford’s RisCassi & Davis and the president of the Connecticut Trial Lawyers Association. “The bill reduces the amount that the workers’ comp insurance company gets back by one-third. So essentially, the insurers are sharing in [paying] the attorneys’ fees.”
It was one of two big legislative wins for trial lawyers. The other victory makes it easier for plaintiffs’ attorneys to make offers of compromise in medical malpractice cases.
As for the workers’ comp liens, business advocates don’t like the change, arguing that it could lead to more litigation that would draw in employers. Kia F. Murrell, labor and employment counsel for the Connecticut Business and Industry Association, said the CBIA opposed the legislation.
“We recognize that the employee and plaintiff’s counsel may feel the employer is getting the benefit of their hard work” when verdict or settlement money is repaid to the employer’s workers’ comp insurer, Murrell said. “But the notion that employers are riding for free couldn’t be further from the truth.”
She said the current system benefits both employer and employee. Under the workers’ comp bargain, employees have no right to sue employers for workplace injuries, but instead gain the right to collect quickly for on-the-job injuries and lost income.
Because benefits are paid quickly, Murell said the view of the business community is that “the workers’ comp claimant has already been made whole. The employee doesn’t have to sue” a third party, but does so primarily for non-economic “pain and suffering” damages.
In the small percentage of cases where that happens, Murell said the employer often hires its own counsel to protect its trial interests. Further, she said, in reality, the 100 percent repayment has been negotiable. As a practical matter, insurers often voluntarily reduce that lien amount to promote settlement, Murell said.
But CTLA president Cooney said that with a 100 percent lien, employees and their lawyers often have little incentive to pursue third-party actions. That’s because there’s a good chance that – after paying attorney fees and the workers’ comp lien – they would be left with little or nothing even if they emerged victorious in court.
He gave the example of a worker who is injured on the job by a motorist who has $100,000 in liability insurance. The injuries well exceed that amount. “If there were $60,000 in workers’ comp benefits paid out for medical expenses and time out of work, under the old formula the plaintiff would recover virtually nothing” even if he got the whole $100,000, Cooney explained. The lawyer would recover one-third of whatever the recovery is and the workers’ comp insurer would get $60,000. With the lien reduced by a third, or $20,000, he said, “at least the person has an incentive, something to recover, and a reason to pursue the case.”
It’s hard to calculate how many lawsuits and settlements were never pursued due to the 100 percent lien rule, but Cooney predicts a significant increase in litigation efforts and a new stream of reimbursement revenue for workers’ comp insurers.
The other legislation gives plaintiffs in medical malpractice actions the ability to file offers of compromise within a year after a lawsuit is filed. Most critically, according to the plaintiffs’ bar, it stops a delaying tactic used by defense attorneys.
In most civil suits, if plaintiffs formally offer to settle a case for a certain amount, the defense has 30 days to respond. If the defense does not accept the offer, and the plaintiff later wins at trial, the defense must pay interest if the court award exceeds the offer of compromise.
However, in the medical malpractice context, the law was changed in 2005. Cooney said that change allowed the defense to request extensive disclosures of information before the plaintiff could file an offer of compromise. “It had become virtually impossible to ever file one” in a malpractice case, Cooney said, “because attorneys for the doctors and hospitals could request everything you could possibly imagine.”
Delays stretched on interminably, he said. As an example, Cooney cited a client who had a severe orthopedic injury. Cooney was about to file an offer of compromise when opposing counsel “said we still need to get the dental records for this person — and records from the pediatrician. This is somebody who’s in their 50s. They took the position that until they got those records, they did not have all the information that we were required to give them, [in order to] file an offer of compromise at that point.”
The philosophy behind the new bill, he said, is that defense attorneys who “exercise due diligence…should be able to get everything you need in one year.
Murrell, the CBIA lawyer, said the business community also opposed the offer of compromise legislation. “I understand [the CTLA’s] perspective, wanting a date certain and some predictability as to when things can move forward. But you have to look to courts to decide when something’s unreasonable or egregious,” she said.
“We believe each case should be judged on its merits,” Murell added, “and anything that limits the judge’s discretion, we think, has a slippery slope where you’re codifying everything. The whole basis for having judges and courts is to have an arbiter decide what the gray matter should be.”