Jeffrey P. Gale, P.A. // Florida Workers’ Compensation Liens — 440.39, the Manfredo Formula, etc.

dollars.jpgMaximizing the client’s net recovery should be a primary focus in every case. Court costs, litigation and medical expenses, and insurance liens are elements often charged against the gross recovery.

One of the insurance liens is a creature of Florida Statute 440.39(2). This lien comes into play when a person injured in the course and scope of employment receives both workers’ compensation benefits and compensation from a third-party tortfeasor. 440.39(2) provides that a portion of the proceeds received from the tortfeasor must be reimbursed to the employer or its workers’ compensation insurance company.

The starting point for resolving the workers’ compensation lien is the formula set forth in 440.39(3)(a), explained in Manfredo v. Employer’s Casualty Insurance Company, 560 So.2d 1162 (Fla 1990) as

the third party settlement/recovery amount less (-) attorney fees and costs divided (/) by full case value = the % value of the wc lien.

Here’s a simple hypothetical:

  1. WC lien (medical, indemnity, settlement, etc.): $100,000
  2. $250,000 third party settlement less fees (40%) and costs ($35,000) = $135,000
  3. Full case value: $1,000,000. (The case could settle for less than full value due to a variety of factors, including tough liability, coverage limits, etc.)
  4. $135,000 divided by $1,000,000 = 13.5%
  5. 13.5% of $100,000 = $13,500.

The policy behind 440.39 is to prevent double recoveries in third party actions. See Jones v. Martin Electronics, 932 So. 2d 1100 (Fla 2006). The Jones court observed that the notice of lien filed by the workers’ compensation carrier operates as a lien to the extent the recovery includes “damages of the same type of benefits paid under the workers’ compensation plan.”

Florida’s workers’ compensation system (Florida Statutes Chapter 440) and its civil liability system differ in numerous respects. One major difference is that while both compensate for medical expenses and lost wages, albeit at different levels, the civil justice system recognizes noneconomic (pain and suffering) damages, while the workers’ compensation system does not.

A reasonable conclusion from a read of the Jones case language is that the workers’ compensation lien does not attach to pain and suffering damages. The argument has been tested and has failed. Aetna v. Norman, 468 So. 2d 226 (Fla 1985) and American States v. See-Wai, 472 So. 2d 838 (Fla 5th DCA 1985) say that the comp lien attaches to the full amount of the net third-party (tort) settlement proceeds. When the Norman court says, “the statute , 440.39 (3)(a) does not permit the trial court to offset or prorate the value of pain and suffering or derivative claims from the net recovery from a third party tortfeasor,” it means just that – that the comp lien attaches to the entire net fund, and that the court cannot carve out a piece of the net tort settlement for P&S or derivative claim value and thereby “exempt” this portion from the comp lien. This concept is spelled out even more directly in the Maryland Sound v. Simmons case, which holds that creative deals to protect any of the net tort settlement funds from the comp lien – fancy apportionments between economic and noneconomic damages, sweetheart release deals with the tort defense lawyer to characterize the settlement funds a certain way, etc. – cannot be done.

This is not to say that every workers’ compensation expense must be included in the lien. Things such as defense attorney fees, IME and EMA charges, and vocational reassessment fees — See, Associated Home Health Agency, Inc. v. Lore, 484 So. 2d 1389 (Fla 4th DCA 1986) (The vocational rehabilitation of an injured employee, while mutually beneficial to both the employee and the employer, is intended primarily to enhance the wage earning capacity of the injured employee, thereby reducing (if not eliminating) the employee’s wage loss. Thus, rehabilitative services, at least to the extent that such services accomplish this intended purpose, provide a direct monetary benefit to the employer/carrier) — are not lien items. For this reason, the workers’ compensation payout must be scrutinized closely with an eye towards carving out charges not recognized by 440.39.

When in doubt, argue that the charges do not apply.

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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.

While prompt resolution of your legal matter is our goal, our approach is fundamentally different. Our clients are “people” and not “cases” or “files.” We take the time to build a relationship with our clients, realizing that only through meaningful interaction can we best serve their needs. In this manner, we have been able to best help those requiring legal representation.