Workers Comp Subrogation: AIK SELECTIVE SELF-INSURANCE FUND V. MINTON (SC; 5/18/2006)

TORTS – Attorney Fees Offset of Subrogation Claim
DATE:  5/18/2006

In this case the Workers Compensation carrier intervened in the tort action to recover its subrogation claim.  KRS 342.700(1) provided for a reduction of that subrogation claim based upon the claimant’s attorneys expenses in seeking that tort recovery.  In this case the attorneys fees to be paid by the plaintiff exceeded the amount of the workers compensation claim and effectively wiped it out.  Trial judge ruled that insurer was not entitled to recovery since claimant’s attorney fees and expenses exceeded subrogation claim and the insurer appealed.  Affirmed.

SCOKY did not buy appellant insurer’s argument that KRS 342.700(1) is unfair because a portion of those legal fees and expenses may be attributable to recovering tort damages (namely, pain and suffering) which are not duplicative of and are unrelated to the workers’ compensation benefits it previously paid and that this Court should interpret KRS 342.700(1) so as to deduct only those legal fees and expenses that may be attributable to the recovery of tort damages which duplicate the workers’ compensation benefits previously paid by the employer/insurer.

It is not absurd or wholly unreasonable to accord the language of KRS 342.700(1) its literal and plain meaning. Tort claims involve a significant risk and require substantial energy in pursuing recovery. It is only fair to require employers/insurers benefiting from the fruits of such an endeavor to share in its costs. Stacy v. Noble, 361 S.W.2d 285, 289 (Ky.1962) (“We have concluded that regardless of the facts of the initial employment of counsel, if the employee’s counsel actually bears the burden of obtaining recovery from the third party, then whoever takes the money is chargeable with a share of the fee.”). Moreover, it is not arbitrary that the entire cost of pursuing the tort award (including those portions which do not duplicate the benefits paid as workers’ compensation) should be deducted from an employer/insurer’s subrogation credit.

BY THE NUMBERS. If you have $100,000 settlement, $30,000 workers compensation subrogation claim, then the W.C. subro claim is ‘wiped out’ if the contingent fee is 1/3 of recovery which is greater than the W.C. subro lien. 

by Michael Stevens

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