Third DCA: Amount of WC Carrier's Lien Depends Upon the "Full Value" of the Employee's Third Party Claim
Although the benefits provided by the Florida Workers' Compensation Act ordinarily are a Florida employee's "exclusive remedy" against his employer for workplace injuries, the employee retains his right to bring a tort action against any "third party tortfeasor" whose wrongful conduct caused those same injuries. In order to prevent the employee from recovering twice for the same injuries in such cases, §440.39, Fla. Stat., provides that the employer (or its workers' compensation carrier) may assert a lien against the proceeds of any employee verdict against or settlement with the third party. Determining the amount of the carrier's lien in such cases - particularly in cases where the third-party action is settled before trial - often leads to confusion.
Luscomb v. Liberty Mutual Insurance Company, decided by the Third DCA on 10/17/ 2007, provides a good example. Here's what happened: Luscomb was seriously injured in an on-the-job accident while working for Raven Transport Company. Liberty Mutual (Raven's workers' compensation insurance carrier) provided benefits to and on behalf of Luscomb on account of the accident. In July 2003, Luscomb filed a tort claim against BJ's Wholesale Club and BJCR, Ltd., contending that their negligence was responsible for his injuries. As it is required to do, Liberty Mutual filed a notice in that case of its workers' compensation lien.
Eventually, the third-party case settled at mediation for $215,000. Out of that amount, Luscomb had to pay his attorney a fee of $86,000 (40% of the settlement amount), along with costs of $47,252, so that his "net settlement" was $81,748. Meanwhile, Liberty Mutual had paid a total of $1,120,408 to and on behalf of Luscomb, including payments made to Luscomb for a "washout" of his claim. When Liberty Mutual and Luscomb couldn't agree on the amount of Liberty's lien, they went to a hearing. The trial court determined that the amount of Liberty's lien should be $132,410 - more than the net amount of $81,748 that Luscomb recovered from the third party. How did the trial court arrive at this figure? The opinion doesn't say.
What the opinion does say, however, is that in order to calculate the amount of the lien properly, the trial court should have first determined the "full value" of Luscomb's third party claim. And in making that determination, the court should not consider the relative fault of the parties. Once the "full value" is known, it's a simple process. Here's the formula: (Gross settlement - attorney's fees and costs) ÷ "full value" = lien ratio. The lien ratio is then multiplied by the amount of benefits provided by the carrier to arrive at the carrier's total lien for benefits paid to date.
Luscomb presented evidence at the hearing that the "full value" of his case was between $5M and $6M. If $5M in fact were correct, then the calculations would look like this: [$215,000 - ($86,000 + $47,252)] ÷ $5,000,000 = 0.01635 or 1.635%. Therefore, since Luscomb would have recovered 1.635% of the "full value" of his claim, Liberty Mutual would recover 1.635% of the value of the benefits which it had paid, or $18,318.67 ($1,120,408 x 1.635%). The Court sent the case back down to the trial court for it to determine the "full value" of Luscomb's damages.
Actually, Liberty Mutual had filed a cross appeal in this case. Because the trial court determined that the amount of the lien was $132,410, and Luscomb's net recovery was only $81,748, Liberty argued that Luscomb's attorneys should have to disgorge the $50,662 deficiency from their fees and pay it to Liberty. The Third District rejected that argument, making it clear that in no case may the amount of Liberty's lien exceed $81,748, the amount of Luscomb's net recovery.
