Articles Workers' Compensation Law
| Jurisdiction | Colorado,United States |
| Citation | Vol. 38 No. 1 Pg. 41 |
| Pages | 41 |
| Publication year | 2009 |
2009, January, Pg. 41. Articles Workers' Compensation Law
January 2009
Vol. 38, No. 1 [Page 41]
Workers' Compensation Subrogation Rights Against Worker Recoveries From Third-Party Tortfeasors
Workers' Compensation articles provide information about topics of interest to workers' compensation practitioners and updates on Colorado case law.
Coordinating Editors
Thomas L. Kanan, Jr., Denver, of McElroy, Deutsch, Mulvaney & Carpenter, LLP-(303) 293-8800, tkanan@mdmlawco.com; Ralph Ogden, Denver, of Wilcox & Ogden- (303) 399-5005, irishcorky@aol.com
About the AuthorAshley Scott Kane is an instructor for the Legal Writing, Research, and Advocacy Program at Emory University School of Law, in Atlanta, Georgia-(404) 510-5517, ashleyscottkane@yahoo.com.
This article addresses the subrogation rights of a workers' compensation insurer to monies that a worker recovers in tort from a third party when (1) the third party injured the worker while the worker was on the job; and (2) the insurer paid workers' compensation benefits under the Workers' Compensation Act prior to the worker's recovery in tort.
Workers' compensation subrogation is a confusing area of law that the courts and legislature recently have attempted to clarify. The subrogation issue arises when a worker is injured on the job by someone other than his or her employer or co-employee. Under Colorado's Workers' Compensation Act,(fn1) the worker may opt to receive workers' compensation benefits and bring a legal action against the third-party tortfeasor for his or her injuries.(fn2) If the worker chooses to receive workers' compensation benefits and pursue tort recovery from the third party, the workers' compensation insurer obtains a right of subrogation against any recovery from the third party for the workers' compensation benefits already paid to the worker. The workers' compensation insurer also has the right to offset any benefits it may be obligated to pay in the future against the proceeds of the worker's recovery from the third-party tortfeasor.(fn3)
Problems arise when the worker settles his or her case against the tortfeasor for less than his or her total damages, or when the recovery in a settlement or a lawsuit is less than the benefits already paid by workers' compensation. The worker may settle for less than the total workers' compensation benefits already received only if the worker has attained written approval from the workers' compensation insurer.(fn4) When the settlement is more than the amount of benefits already paid, but less than the actual damages suffered by the worker, the question becomes how the settlement proceeds will be divided, because the worker will not be compensated fully for his or her loss, and the insurer is entitled to reimbursement for its payments.
In Colorado Compensation Insurance Authority v. Jorgensen,(fn5) the Colorado Supreme Court recognized the doctrine of judicial apportionment, under which district courts have jurisdiction to divide the settlement and/or judgment to ensure that the insurer has subrogation rights to a proper portion of the settlement. Additionally, the Colorado General Assembly recently amended CRS § 8-41-203 (the subrogation statute) to clarify the Jorgensen rule regarding the proceeds of a settlement or recovery against which the insurer may exercise its subrogation right and the duties of the worker and insurer as to each other when seeking recovery from a tortfeasor. The subrogation statute allows the insurer to seek subrogation from the apportioned proceeds for past benefits paid, and to "contribute (in future benefits) only the deficiency, if any, between the amount of recovery . . . actually collected and the compensation provided. . . ."(fn6)
This article explores judicial apportionment of recoveries from third-party tortfeasors and the types of recoveries against which insurers have rights; how attorney fees are divided between the insurer and the worker; and the duties of workers and insurers to each other in giving notice and obtaining approval when seeking recovery from a third-party tortfeasor. The article also identifies issues yet to be addressed by the courts or the legislature in the workers' compensation subrogation context. Examples are provided throughout the article to illustrate various mathematical calculations used to determine subrogation rights.
Judicial Apportionment
Outside the workers' compensation context, a person who is injured by another's negligence may recover (1) economic damages, which include fee-scheduled medical expenses, lost income, and other out-of-pocket expenses; (2) noneconomic damages, which include pain and suffering, inconvenience, emotional stress, and impairment of enjoyment of life; and (3) physical impairment and disfigurement damages.(fn7) On the other hand, workers' compensation benefits, which compensate for lost income and a modest sum for disfigurement, are limited to payment for medical expenses, costs incidental to medical care, temporary disability, and permanent impairment. Workers' compensation benefits do not include payment for noneconomic injuries, such as pain and suffering.(fn8) Except for disfigurement benefits, workers' compensation benefits are properly categorized as payments to a worker for his or her economic damages.(fn9)
The Jorgensen and Jones Cases
Prior to Jorgensen, the Workers' Compensation Act provided that the workers' compensation insurer could not recover:
any sum in excess of the amount of compensation for which said carrier is liable under said articles to the injured employee, but to that extent said carrier shall be subrogated to the rights of the injured employee against said third party causing injury.(fn10)
In Jorgensen, the worker opted to receive workers' compensation benefits and, along with his wife, to bring suit against the third-party tortfeasors.(fn11) The workers' compensation insurer intervened, and the parties reached a lump-sum settlement. The worker moved for an evidentiary hearing to apportion settlement proceeds among economic, noneconomic, and loss of consortium damages. He also argued that the insurer was allowed to seek reimbursement only from the portion of the settlement that constituted economic damages, because workers' compensation insurance pays only for economic damages.(fn12) The trial court denied the motion and held that the insurer had subrogation rights to reimbursement from the entire lump-sum settlement.(fn13)
The Colorado Court of Appeals reversed, and the Colorado Supreme Court affirmed.(fn14) The Supreme Court held that the trial court had jurisdiction and a duty to apportion a settlement or an unreasonable jury award into damage categories based on Colorado case law.(fn15) The Court also held that a workers' compensation insurer's subrogation rights are not absolute and do not extend to every right that the claimant or his or her dependents have against the third-party tortfeasor; rather, the insurer only has a right to reimbursement from the portion of the recovery that constitutes the worker's economic damages.(fn16)
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