November 21, 2023
Picture this – You’ve paid out a worker’s compensation claim with ongoing medical and indemnity benefits, provided continued notice to the injured employee’s counsel of the ongoing benefits paid and even had your counsel file a Notice of Lien related to these benefits. You now receive correspondence, or a copy of a Notice of Settlement recently filed in the injured employee’s lawsuit, that the case has settled – now what do you do? Can you receive a lien reimbursement if the worker’s compensation claim is still open? What about a credit towards future medical expenses and will you need court intervention? This is a brief rundown of how to obtain as much of your worker’s compensation lien back as possible by understanding both Fla. Stat. §440.39(3) and the Manfredo formula in the process.
Florida’s statute §449.39(3)(a) will set the tone for how a lien reimbursement must go. The statute provides two ways to recover: (1) the worker’s compensation carrier will receive 100% of their lien reimbursed if the injured employee recovered the full case value (what a case is worth without considering liability or other factors); or (2) the worker’s compensation carrier will receive a pro rata portion of their lien back if the injured employee does not receive the full case value.
But what about a carrier who is continuing to pay ongoing benefits to the injured employee? In this instance, the carrier will be entitled to receive a future credit, which the carrier can apply to medical benefits paid up to the net settlement that the injured employee received in their third-party settlement with the tortfeasors. However, if the first scenario laid out above is met, the carrier will not be entitled to receive any future credit because the entire lien is being reimbursed.
However, if the injured employee did not receive the full value of their case, how does the carrier determine what percentage of the lien is recoverable? Welcome to the Manfredo formula. In 1990, the Florida Supreme Court heard a case entitled Manfredo v. Employer’s Casualty Insurance Company, which determined the appropriate method of calculating a workers’ compensation carrier’s lien percentage from the third-party suit initiated by the injured employee.
When evaluating a third-party settlement and utilizing the Manfredo formula, the worker’s compensation carrier will need the following information –
(1) Settlement amount the injured employee received from the tortfeasors.
(2) The full value of the case.
(3) Breakdown of attorney’s costs and fees associated with the case.
(4) Documentation to evaluate the reasoning behind the full case value.
(5) The lien amount –
include medical/indemnity/settlement of the worker’s compensation claim.
The lien percentage is calculated by taking the net recovery (settlement proceeds and subtract attorney’s fees and costs) from the third-party settlement and dividing this by the full case value (“FCV”) to get the percentage of lien reimbursement. Once you have the percentage, take the full lien amount and multiply that by the percentage.
$300,000.00 (Net Recovery)/$2,000,000.00 (FCV) = 15% (percentage of lien reimbursement)
$150,000.00 (worker’s compensation lien) x 15% (percentage of lien reimbursement) = $22,500.00
If, in this example, the worker’s compensation claim was still open and paying benefits, the carrier would be entitled to receive a future credit of 15% for medical expenses up to the net recovery the injured employee received, in this case $300,000.00.
The only number that is not tangible in this calculation is the full case value. This number may be obtained by considering several factors, which include reviewing a Life Care Plan and Economist Report that was prepared for the third-party case, as well as the pain and suffering component of the injured employee, and potential future surgical interventions, to name a few.
When dealing with trying to understand why the injured employee’s counsel concludes a certain number for the full case value, the worker’s compensation carrier may need to hire a full case value expert, a person who has numerous years of experience in the personal injury field, to assist with establishing a full case value, if the one received by the injured employee seems “far-fetched.”
After reviewing the documents surrounding the case, evaluating the full case value, and utilizing the Manfredo formula, if the worker’s compensation carrier is nowhere closer to getting the lien resolved, court intervention may be the next step. Either party (the worker’s compensation carrier or injured employee) may file a Motion for an Equitable Distribution Hearing. At the hearing, both parties will present their evidence as to the full case value (remember this is the only number that is not concrete). The Judge will rule and provide the parties with what he/she determines the full case value to be, which will then provide the worker’s compensation carrier with their lien reimbursement figure.
Knowing what to expect early on when the injured employee’s third-party case is still in suit will assist with resolving your lien sooner once a settlement is reached. If you are an insurance company in need of assistance with filing lien notices and evaluating a lien reimbursement resolution, we are here to assist.
Florida Statue §440.39 – http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0400-0499/0440/Sections/0440.39.html
Manfredo v. Employer’s Casualty Insurance Company, 560 So. 2d 1162 (Fla. 1990).