Wickert: What “benefits” of workers’ compensation can be subrogated? Workers’ Compensation News


Through Gary L. Wickert

Wednesday October 13, 2021 | 0

This is the question that all claims professionals and prosecutors claim to know, but few fully understand it.

Gary Wickert

In addition to paying for medical expenses, death benefits, funeral expenses and / or compensation for lost wages resulting from a compensable injury, workers’ compensation insurance companies also spend considerable sums on the costs. case management fees, medical bill verification fees, independent medical examination (IME), expert fees, rehabilitation benefits, third-party provider costs, nurse case management fees, attorneys’ fees for industrial accidents, etc. They pay substantial attorney fees on tenure pay and incur other expenses in conjunction with processing and adjusting workers’ compensation claims.

Which of these benefits is recoverable under a workers’ compensation subrogation remains a point of considerable confusion and controversy, and an article that discusses the nuances of this issue can be viewed here.

Subrogation professionals, lawyers, judges and administrative judges are all equally confused about the law in this area, and very little clear guidance can be found one way or the other.

This issue has only been decided in a handful of jurisdictions. Judges like things that fit neatly into legal categories and clearly established rules. When such things are not available, the best argument usually wins. We are the ones who have to establish it.

The first place to look is the underlying workers compensation law and its wording. While rarely determinative of the problem, it can often provide fulcrums that can allow us to make compelling legal and public policy arguments as to why costs other than medical bills and allowances should be reimbursable under of a state’s workers’ compensation law.

Take, for example, the Texas law (VTCA Labor Code § 417.002), which reads:

… The net amount recovered by a claimant in a warranty claim must be used to reimburse the carrier for the benefits, including medical benefits that were paid for the compensable damage.

The question is whether items such as case management fees and medical bill verification fees are considered benefits or medical benefits that have been paid “for the compensable injury”. Each state must be assessed and argued differently because the status of each state is different.

Another interesting and compelling argument is an analogy with the right to future credit. When an employee recovery is performed, the carrier receives credit for future “benefit” payments. A close examination of this law reveals that “medico-legal” costs should be costs against which a carrier can claim credit, implying that they constitute “indemnification” under California law and should be recovered. by a workers compensation carrier (Adams v. WCAB, 18 Cal.3d 226 (1976)).

Arguments in every state where there is no clearly established rule on this issue should be shaped from the only tools available: statutory language and common sense. In North Carolina, for example, the workers’ compensation law provides for reimbursement to the carrier for “all benefits in the form of compensation or medical expenses paid or payable” (NCGSA § 97-10.2).

Further legal archeology reveals the definition of compensation as follows:

The term “compensation” means the monetary allowance payable to an employee or his dependents in accordance with this article, and includes the funeral benefits provided for therein ”(NCGSA § 97-2).

North Carolina case law does not reveal any further clarification on what exactly “medical compensation costs” refer to, but the door seems open enough to include some of the case management costs mentioned above, but not enough to include interest (Buckner v. City of Asheville, 438 SE2d 467 (NC App. 1994)).

A few states have decided the issue, and not always in favor of the subrogation industry. For example, Illinois totally ignored the cost savings to the claimant from such case management fees and expenses. He declared these items unrecoverable because these medical rehabilitation services provided by the claims coordinator under the direction of the insurance company were presumably provided for the benefit of the carrier and were not reimbursable necessary medical or rehabilitation services (Cole v. Byrd, 656 NE2d 1068 (Ill. 1995)).

The particular expense involved was the medical rehabilitation coordinator services of a registered professional nurse provided by Professional Rehabilitation Management (PRM).

Allocated and unallocated fees, costs and expenses

Fees and costs for services such as nursing case management, medical bill checks, vocational rehabilitation, usage reviews, independent medical exams, and social worker nurses are commonly referred to as allocated claims settlement costs. (ALAE). ELAs are allocated to processing a specific workers’ compensation claim, as opposed to unallocated claims settlement costs, which are the overhead costs of an insurance company, such as salaries and wages. benefits of adjusters.

The ALAE, along with the Unallocated Claims Adjustment Fee (ULAE), represents a carrier’s estimate of the money it will pay in claims and expenses. Certain commercial civil liability policies contain endorsements which oblige the policyholder to reimburse his insurance company for the costs of settling claims (ALAE or ULAE).

The terms “nurse case management” and “use review” are often mistakenly confused. “Nursing case management” is the coordination and organization of medical care to expedite an employee’s return to work. This is usually the responsibility of the nurse case manager.

“Usage review”, on the other hand, is the review of the actual medical services provided to the employee to determine if it is medically necessary and appropriate for the injury. The use review is carried out by a nurse who has a physician in charge of the use review for medical advice and guidance.

Recovery of legal fees

In addition to allotted fees and costs, workers’ compensation companies also pay significant legal fees to attorneys representing injured employees when a disability compensation claim is settled or compromised. These charges are sometimes paid out of the employee’s settlement and other times assigned independently and paid by the carrier outside of the settlement.

Equally confusing and unclear is whether these attorneys ‘fees can and should be reimbursed to the carrier as part of its workers’ compensation subrogation privilege when a third party case is resolved. most states.

The fees paid to a lawyer to represent an injured employee in a workers’ compensation claim vary by state and are generally governed by state laws or regulations. In most states, the attorney represents the employee on a contingent basis. Although not technically a “compensation”, these costs are often paid directly out of the disability benefits paid to the employee and, in such cases, should be considered part of the privilege of the employee. subrogation of the carrier.

In New York, for example, a workers’ compensation judge is responsible for setting the fees to be awarded to the employee’s lawyer. These costs are deducted from the benefits granted to the injured employee (Workers’ Compensation Law (WCL) § 24 and Title 12 NYCRR 300.17).

In Texas, an employee’s lawyer is paid by the carrier on the income benefits received by the employee. This means benefits that the employee received as part of a settlement or reward after a disputed case hearing, not to mention the value of any treatment benefits or uncontested benefits paid without the assistance of the lawyer. .

Lawyers ‘fees must be approved by the Workers’ Compensation Division and are determined by the time and expenses of the lawyer. Once the division approves attorney fees, the insurance company is ordered to deduct the amount of the employee’s benefits fee, up to 25% of the recovery amount (Texas Labor Code § 408.221 (b), 28 Texas Administrative Code § 152.5 (2019)).

When attempting to recover costs or expenses beyond the basic allowance and medical benefits, the first strategy of a subrogation practitioner should be to examine the law of the state concerned, to determine exactly what the law of subrogation allows the carrier to collect and draft an argument accordingly.

For example, if this allows for the recovery of “benefits” or “compensation” paid, then definitions of these terms in other areas of workers’ compensation law should be determined and an argument made that these definitions include case management fees and expenses.

If this turns out to be a dead end, a logical argument should be made that by discouraging the spending of such amounts, the subrogation privilege will in fact increase and the injured worker’s recovery will decrease. Such spending actually helps keep the cost of workers ‘compensation insurance premiums low, and any incentive to withhold privileges and reduce fraud will make workers’ compensation systems more profitable and affordable for businesses. .

As a last resort, simply include these reasonable fees in the privilege totals provided to plaintiffs’ counsel, placing the onus on them to affirmatively contest these expenses. A tribunal can be called upon to decide, and voila: we have a precedent, good or bad.

Where the recovery of these costs is not prohibited, it is reasonable to expect reimbursement of expenses and costs that meet the definition of the recoverable amount under the workers’ compensation law. applicable or that actually benefit the employee by keeping total benefits to an absolute minimum.

If the totals are not called into question, there is no fault. If so, remember Mark Twain’s words: “Whatever you say, say it with conviction. “

For a table that provides definitions, explanations and arguments that can be used when the question of which “benefits” can be overridden has not been established, click here.

Gary Wickert is a partner at the law firm Matthiesen, Wickert & Lehrer in Hartford, Wisconsin. This blog post is reprinted with permission.


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