Satisfying the Workers’ Compensation Lien in Florida – The Manfredo Formula

Frequently, employees hurt on the job can be compensated for their damages by third persons (i.e., someone other than the employer). This is so when the employee is injured or killed in the course of his or her employment by the negligence or wrongful act of a third-party tortfeasor.

Regardless of fault, Florida employees hurt while working are entitled to receive workers’ compensaiton benefits. Typically, those benefits, medical and indemnity (i.e., lost wages), are furnished by a workers’ compensation insurance company or a self-insured employer. When they are, Section 440.39(2) Florida Statutes gives the provider subrogation rights against the third party tortfeasor to the extent of the amount of compensation benefits paid. This is commonly referred to as a workers’ compensation lien.

Very rarely is the amount recovered through the lien equal to 100% of the benefits paid. The lien formula, outlined in 440.39(3)(a), is explained in Manfredo v. Employer’s Casualty Insurance Company, 560 So.2d 1162 (Fla 1990).

Here is the formula in a nutshell, along with an example: Third party settlement amount less (-) attorney fees and costs divided by (/) full case value = the % value of the wc lien.

Example:

  • WC lien (medical, indemnity, settlement, etc.): $ 100,000
  • $ 250,000 third party settlement less fees (40%) and costs = $ 135,000
  • Full case value: $ 1,000,000. (Settled for less due to tough liability, coverage limits, etc.)
  • $ 135,000 divided by $ 1,000,000 = 13.5%
  • 13.5% of $ 100,000 = $ 13,500.


Here is more information for understanding the “Manfredo Formula,” outlined expertly by Maitland attorney Michael Bailey:

  1. First thing to do is get the printout of total benefits paid by the comp carrier and go through it with a fine tooth comb. Weed out anything that is not medical or indemnity (wage loss). Investigative expenses, copy charges, payments to case managers, etc. are not items that are subject to the lien. Rehab benefits intended to get the claimant back to work should also be excluded per Associated Home Health v. Lore.
  2. Once you have a “clean” itemization of benefits subject to the lien, determined the net recovery to the client, after fees and costs. This becomes the numerator of a fraction that determines the lien payback amount under Manfredo (e.g., if total recovery is $10,000, fee is $4,000, and costs are $1,000, use a $5,000 number here).
  3. Then determine the theoretical “full value” of the claim, but for considerations of comparative negligence, limitations of coverage, difficult liability, causation problems, etc., etc. – under 440.39 any factor that mitigates against the claimant’s full recovery of damages in the third party case can be considered in reducing the payback. Say your case is worth $100,000 in a perfect world. This is the denominator of your Manfredo fraction, so you have 5,000/$100,000, or 5% payback on the lien.
  4. Obviously, the comp carrier isn’t going to just accept your “perfect world” theoretical value, so this is where the fight is. You will need an expert – a well-respected lawyer familiar with handling PI cases and the considerations that are involved in resolving them, to provide opinion testimony at an equitable distribution hearing, if it comes to this (which it rarely will – most comp carriers will ultimately back down). I usually try to get an opinion about a range of value and come up with an associated range of payback.
  5. The fractional payback percentage represents your client’s pro-rata share of the responsibility for the lien (in this example, 5%) – the balance of the percentage (in this case 95%) represents the comp carrier’s pro-rata share under Manfredo. But this only determines what you pay back on the past benefits – just multiply your client’s percentage by the lien amount. In the future, the same percentages of pro-rata share would apply under Manfredo – so your client would be responsible for 5% of his medical bills and the carrier would be responsible for 95%. The payback formula remains in place until the comp carrier recoups up to the net amount of the tort recovery (in this example, $5,000). Problem is that divvying up the responsibility for payment of future benefits is an accounting nightmare for the comp carrier and the providers if the client is continuing to receive future medical, and you wind up with the comp carrier wanting the client to come to the bargaining table on the comp claim to talk about washing out the future medical (which is another chapter . . . )

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Jeffrey P. Gale, P.A. is a South Florida based law firm committed to the judicial system and to representing and obtaining justice for individuals – the poor, the injured, the forgotten, the voiceless, the defenseless and the damned, and to protecting the rights of such people from corporate and government oppression. We do not represent government, corporations or large business interests.