• Louisiana Workers' Compensation Subrogation Law Overview
  • February 14, 2014 | Author: Trenton J. Oubre
  • Law Firm: Breazeale, Sachse & Wilson, L.L.P. - Baton Rouge Office
  • I.    Subrogation-The Basics
          La. R.S. 23:1101

    In Louisiana, when an employee is injured in a work-related accident under such circumstances where a third-party (not a co-employee or the employer of the employee) caused the employee’s injuries or aggravated the employee’s existing work-related injury, the employee is entitled to Louisiana Workers’ Compensation benefits from the employer and can also file a tort suit against the third party for the same injuries. An employer who is obligated to pay workers’ compensation benefits to its employee due to a third party’s fault is also entitled to bring a tort suit against the third party to recover amounts it has paid, or becomes obligated to pay, to the employee. These tort suits are heard in the judicial district courts in Louisiana, not in the workers’ compensation courts. The workers’ compensation courts are limited in jurisdiction and, for subrogation purposes, can only hear disputes regarding the amount of credit the employer is entitled against the employee’s future workers’ compensation benefits.

    II.    Prescription, Filing Suit and Putting on Notice
           La. C.C. art. 3492; La. R.S. 23:1102(A)

    The employee/employer generally has one (1) year from the date of the work-related accident to file a tort suit against the third party. If either fails to do so, the employee’s/employer’s claim against the third party will prescribe, and they will be precluded from bringing a tort suit against, or recovering from, the third party. If the employee files a workers’ compensation suit in workers’ compensation court against the employer within one (1) year of the work-related accident, the time period for filing the tort suit against the third party for the workers’ compensation amount of recovery is interrupted until the workers’ compensation suit is dismissed by the court. If either the employee or employer files suit against the third party, they MUST notify the other in writing that suit has been filed. The non-filing party may then intervene into the existing suit against the third party.

    While the employer is not required to notify the third party of the workers’ compensation benefits paid to the employee, it is common practice to put the third party on notice of the workers’ compensation lien to ensure the third party is aware of the lien and that the employer must approve any future personal injury settlement.

    III.    Apportionment of the Recovery from a Judgment for Damages
            La. R.S. 23:1103(A)

    In the event a court awards the employee or employer damages in a third party tort suit, the employer will be reimbursed IN FULL prior to the employee recovering any damages. If the award is insufficient to compensate both the employer and employee, the employer shall recover the entire proceeds from the damages award. If the proceeds are more than sufficient to reimburse the employer, the employee will receive the excess amount of the proceeds; however, the employer will receive a credit towards future workers’ compensation owed to the employee. This credit will be reduced by the amount of the employee’s attorneys’ fees and costs paid in prosecuting the third party suit.

    The employer’s percentage of recovery for comparative fault purposes regarding the accident will be identical to the employee’s percentage of recovery. According to Louisiana law, every party at fault for the accident, including the employer, is assigned a percentage of fault, even though the employer is immune from tort liability as the employee’s exclusive remedy against the employer is workers’ compensation benefits. If the employee and/or employer are assigned a percentage of fault by the court, the amount of the workers’ compensation benefits (the lien) that the employer can recover is reduced by that same percentage. For example, if the court determines that the employee is 40% at fault and the employer is 35% at fault for the work-accident, the employer’s recovery for the workers’ compensation benefits paid to the employee is reduced by the total 75%. In cases where there are significant concerns of comparative fault on behalf of the employee and/or employer, and a substantial exposure for future workers’ compensation benefits exists, a strategic tactic we use for settlement is to waive the workers’ compensation lien in return for a full release of any future workers’ compensation benefits.

    For example, if the employee is 75% at fault for the work accident, the maximum amount the employer can recover is 25% of the past workers’ compensation benefits paid to the employee. That 25% is further reduced by the employee’s attorney’s fees and costs in the tort suit (up to a maximum of one-third of the 25%). Thus, in this example, the employer’s recovery would be minimal. However, the employer could still be responsible for future workers’ compensation benefits, which could be costly. Therefore, rather than be reimbursed a nominal amount in the settlement with the third party, it would be of greater benefit to waive the lien to eliminate any potential exposure for future workers’ compensation benefits.

    IV.    Obtaining the Required Written Approval from the Employer Before Settlement/ Employer’s Credit
            La. R.S. 23:1102(B&C)

    The employee must notify the employer in writing, and obtain the employer’s written approval, prior to any settlement with the third party, whether a tort suit is filed or not. If the employee notifies the employer in writing of the settlement with the third party, and the employer approves of the settlement prior to the settlement, the employer is only responsible for any future workers’ compensation benefits which are in excess of the full amount paid by the third party, less the amount of attorneys’ fees and costs paid by the employee in prosecuting the third party suit. Thus, the employer will receive a “dollar-for-dollar” credit for future workers’ compensation benefits up to the full amount of the settlement after the employee’s attorneys’ fees and costs are deducted.

    If the employee fails to notify the employer or workers’ compensation insurer of the pending suit against the third party, or fails to obtain prior written approval of the settlement with the third party, the employee forfeits the right to any and all future workers’ compensation benefits, including medical benefits. However, the employee may “buy-back” and reserve this right to future workers’ compensation payments by reimbursing the employer for all prior workers’ compensation benefits paid to the employee up to a maximum of 50% of the settlement proceeds, after deducting the amount of the employee’s attorneys’ fees and costs. Thereafter, the employer is only liable to pay the employee any future workers’ compensation benefits which are in excess of the full amount paid by the third party (the dollar-for-dollar credit), after the employee’s attorneys’ fees and costs are deducted.

    In reality, the forfeiture penalty only applies when the employee settles or obtains a final judgment from the court without the employer’s prior written approval; it is rarely, if ever, applied when the employee only fails to notify the employer of the pending suit against the third party.

    When suit has been filed against a third party in which the employer has intervened, if (1) the third party fails to obtain prior written approval from the employer of the settlement with the employee and (2) the employee fails to reimburse the employer (from the settlement proceeds) the total amount of benefits that the employer previously paid to the employee, the third party will be required to reimburse the employer the total amount of the workers’ compensation benefits not reimbursed by the employee.

    V.     Employee’s Attorneys’ Fees
            La. R.S. 23:1103(C)
            This statute codified the “Moody” case

    If the employer intervenes into the employee’s suit against the third party, or there is a settlement reached and the proper written approval from the employer is obtained, the employer is only responsible for a share of reasonable legal fees and costs incurred by the employee’s attorney in prosecution of the third party suit, which shall not exceed one-third of the employer’s recovery. The amount of attorney’s fees will be determined by the district court based upon the proportionate services of the attorneys which assisted in the recovery of damages from the third party. The one-third amount is the maximum, not the mandatory, amount in reducing the employer’s recovery. However, in reality courts frequently reduce the employer’s recovery by the one-third maximum amount.

    When a claim against a third party is settled without the need for filing suit, the employer is responsible for reasonable legal fees and costs incurred by the employee’s attorney, also not to exceed one-third of his recovery. The employer is only responsible for this amount if the employer approved of the settlement in writing.

    These subrogation claims and recoveries are unique to each set of facts and require flexible and dynamic analysis in reaching the best possible resolution for employers.