Judicial Apportionment of Personal Injury Claims

• Publication year: 2000
• Pages: 77
• Citation: Vol. 29 No. 5 Pg. 77

29 Colo.Law. 77 Colorado Lawyer 2000.

2000, May, Pg. 77. Judicial Apportionment of Personal Injury Claims

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77

Vol. 29, No. 5, Pg. 77

The Colorado Lawyer
May 2000
Vol. 29, No. 5 [Page 77]

Specialty Law Columns
Workers' Compensation Report
Judicial Apportionment of Personal Injury Claims
by Mark R. Gordon

Workers injured on the job by someone other than their employer may pursue workers? compensation claims against their employers while simultaneously pursuing personal injury claims against third-party tortfeasors. To prevent an injured worker from recovering twice for the same injury, the Workers? Compensation Act1 ("Act") provides the employer?s insurer2 with certain rights concerning the worker?s recovery, if any, from the third party

Apportionment is the process of distinguishing between those portions of recoveries from third-party tortfeasors subject to the rights of insurers and those portions not subject to the rights of insurers. Apportionment is always an issue when injured workers accept workers? compensation benefits and simultaneously pursue personal injury claims against third-party tortfeasors

In Colorado Compensation Insurance Authority v. Jorgensen,3 the Colorado Supreme Court recently held that trial courts have jurisdiction to perform the apportionment. Before Jorgensen, workers and insurers had to negotiate an apportionment, a zero-sum dilemma with little more than mutual loss for leverage. Now, both workers and insurers have new leverage? judicial intervention governed by principles of fairness and reasonableness under the totality of the circumstances. This article explains apportionment of recoveries from third-party tortfeasors and identifies various issues arising in the context of apportionment by trial courts

Subrogation and Offset

The Act establishes the extent to which injured workers subrogate insurers to claims against third-party tortfeasors.4 The Act assigns to insurers any cause of action for past workers? compensation benefits paid to or on behalf of workers. In addition, insurers may offset future benefits against the "amount" the worker "actually collected" from a third party.5 Workers retain the amount of the "recovery" of damages exceeding the benefits provided by the Act. Insurers have no cause of action against third parties to recover future benefits, but workers cannot settle for less than the compensation provided by the Act without insurers? written approval.6

For example, a worker injured at a job site by the negligence of a third party can seek workers? compensation benefits, such as lost wages and medical expenses, while at the same time pursuing a negligence claim against the third party. As the negligence claim progresses, the insurer may pay workers? compensation benefits and remain liable for benefits to be paid in the future. If the insurer pays $10,000 in benefits, the insurer acquires a claim against the third party for $10,000. The insurer may pursue its claim directly against the third party, intervene in the worker?s claim against the third party, or wait for the worker to recover from the third party and assert its statutory rights against the worker?s recovery.

If the worker settles the claim against the third party for $25,000, the worker ordinarily must repay to the insurer the $10,000 received in benefits, and the insurer may offset the remaining $15,000 against future benefits by refraining from paying for additional benefits to the worker until the value of such benefits reaches $15,000. If the worker becomes entitled to benefits equal to more than the $25,000 recovered from the third party, the insurer must resume paying for benefits to the worker.

This basic formula for reimbursing the insurer applies regardless of whether the worker commences an action against the third party or settles before commencing an action. However, the insurer is not entitled to assert its statutory rights against all recoveries by the worker. The Act does not require an insurer to compensate a worker for pain and suffering; the worker can recover damages for pain and suffering from the third-party tortfeasor.

The Colorado Supreme Court?s decision in Jorgensen holds that the insurer is not entitled to assert its statutory rights against the portion of recovery attributed to pain and suffering.7 Likewise, the insurer has no rights against a loss of consortium claim brought by the worker?s spouse. Therefore, in the example above, if the same $25,000 settlement is apportioned $12,500 to lost wages and medical expenses and $12,500 to pain and suffering and loss of consortium, the insurer would receive $10,000 for the past benefits already paid and a $2,500 offset against future benefits. In this way, apportionment would reduce the insurer?s offset from $15,000 to $2,500 and reduce the insurer?s total recovery from $25,000 to $12,500.

Neither the Director of the Division of Labor nor the Industrial Claim Appeals Office can apportion amounts collected from third parties.8 Until Jorgensen, apportionment generally required an agreement between workers, insurers, and tortfeasors. A tortfeasor could insist on receiving a release of both the worker?s and insurer?s claims before agreeing to pay any amount. An insurer could insist on asserting its statutory rights against the entire settlement. If the insurer?s rights would consume the worker?s entire recovery, the worker may prefer to abandon the claims against the tortfeasor, forcing the insurer to proceed on its own and preventing the insurer from receiving an offset against future benefits. Stubbornness could prevail, leading to a poor result for both the insurer and the worker.

In Jorgensen, the Colorado Supreme Court held that trial courts have jurisdiction to apportion recoveries from third parties after conducting an evidentiary hearing,9 creating a new impetus for workers, insurers, and tortfeasors to be reasonable with each other when negotiating apportionment.

The Jorgensen Hearing

In Jorgensen, the Colorado Supreme Court affirmed the Court of Appeals? decision in Jorgensen v. Colorado Compensation Insurance Authority,10 which held that trial courts had jurisdiction to apportion settlement proceeds among the workers? compensation insurer, the injured worker, and the injured worker?s spouse. Jorgensen suffered a compensable injury caused by a third-party tortfeasor. He accepted workers? compensation benefits while simultaneously pursuing a personal injury claim against the tortfeasor for pain and suffering, lost wages, and past and future medical expenses. In addition, Jorgensen?s wife brought a loss of consortium claim. Having paid substantial workers? compensation benefits, the CCIA intervened to protect its subrogation rights. In sum, Jorgensen involved an action combining claims assigned to the insurer, claims subject to future offsets, claims for damages in excess of the benefits under the Act, and a claim for loss of consortium.11

Before trial, the parties reached a settlement, although the CCIA, Jorgensen, and his spouse only partially agreed on how to apportion the settlement. They reached an agreement among themselves addressing all claims except the CCIA?s right to offset its obligation to pay future medical expenses. Their agreement neither allocated a portion of the settlement to future medical benefits nor distinguished between "economic damages, non-economic damages or otherwise."12

By requesting that the trial court...