Employers and employees are always seeking to reach a resolution with the best result as quickly as possible. This model is encouraged by the Virginia Workers’ Compensation Act. Workers’ compensation is a form of insurance designed to streamline the recovery process for employees who are injured while acting in the course of their employment. In exchange for the employee’s release of claims against the employer for the injury, the employer agrees to pay the employee a lump sum settlment that may or may not reflect the actual benefits one could be entitled to under the Virginia Workers’ Compensation Act.
Workers’ Compensation Liens
The insurer in workers compensation cases may obtain a lien on verdicts or settlements obtained by an employee against a third party other than company. A lien is a legal right that a person or entity has against the property of another. For instance, employee A is injured in a car accident while riding as a restrained passenger on the job. He sues the other driver—who is not employed by the same employer—for personal injuries to recover the medical expenses, lost wages, and pain and suffering that result from his injury. Although A’s employer pays the medical bills and wages up front, it may also claim a right to some of the money that A recovers from the other driver’s insurance company upon settlement or verdict under Virginia Code Section 65.2-309.
Liens on verdicts and settlements are controversial because a lien removes some incentive to litigate a claim. Lawsuits are expensive and time-consuming, and if an insurance company or an employer has a claim to a substantial portion of the verdict or settlement, it is possible that the employee will not be adequately compensated for his or her trouble—especially in light of insurance premiums or wage negotiations that take workers compensation benefits into account.
The Workers’ Compensation Lien Formula
The Virginia General Assembly passed several code sections creating the lien and then clarifying how to calculate an employer’s lien. The formula that they created is simple in theory—subtract the employee’s proportionate expenses and attorney’s fees from the amount of compensation and medical benefits that the employer has paid in the past.
At the heart of the controversy is whether, in addition to what the employer has paid in the past, the employer should obtain a lien on any lump sum compromise settlement payments that the employee receives. Often times, the employee will settle for a lump sum with the workers’ compensation insurance carrier for a specific amount of money, and the employer will pay this amount up front. Then, the employee no longer has any claim against the employer for benefits in the future. What employers and insurance carriers frequently argue is that this amount should be included in the amount that the expenses and fees are subtracted from.
Spicer v. Robinson
The Buckingham County Circuit Court disagreed with the employer and insurance carrier in a case called Spicer v. Robinson. The decision was handed down in July, 2018, specifying that the lien that an employer owns over third-party settlements does not include the amount voluntarily paid in a lump sum to the employee regarding future benefits.
Spicer was an employee for a Richmond company called “Never Dark Whole House Generators.” Spicer was involved in a car accident in 2014 on the job. After Spicer filed a lawsuit against Robinson, he settled his claim for future benefits for a total of $182,500 with his employer. Within a few months, Spicer settled his claim against Robinson for $1.8 million.
The employer argued that the lump sum settlement it agreed to with Spicer was included in the lien that the employer owned over his settlement with Robinson. On the other hand, Spicer argued that the settlement for future benefits was not compensation, but a countermeasure to avoid future compensation on the part of the employer. The court held in Spicer’s favor—the settlement for future benefits was an amount voluntarily paid and did not constitute a part of the lien assigned to the employer.
What does this mean for me?
We here at Osterbind law handled a similar case before the Spicer decision was reached. One of our clients was involved in a car accident while on the job. After settling for a lump sum workers compensation compromise, and then settling the personal injury case in our client’s favor, our client’s employer claimed a lien that included the settlement amount. After litigating and briefing the issue extensively, we were able to reach a compromise with our client’s employer.
Although the Spicer decision is only persuasive authority, its reasoning has a substantial impact on workers compensation plaintiffs. It means that recovery from the defendant is not as obstructed by what he or she agrees to in compromise with the employer.
If you’ve been injured at work and would like a free strategy session to determine how to proceed with your case, contact us when you get a chance. Remember that you should always give your employer written notice of any injury within 30 days of the injury and you have to file your claim for benefits form within 2 years of the injury.