Articles Posted in Personal Injury

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dollars.jpgThe Medicare Secondary Payer Act of 1980 (“MSP”) — Link to the MSP Manual — was enacted to limit the financial burden on taxpayers for the medical expenses of Medicare beneficiaries whose medical needs are the primary responsibility of some other source.

Until 2010, the MSP’s main focus was on workers’ compensation cases. (Florida’s workers’ compensation laws are contained in Chapter 440 of Florida’s statutes.) Injured workers who receive a lump sum settlement in a workers’ compensation case are required to pay all or a portion of those proceeds for the medical care related to their job accident injuries before Medicare will pay penny-one. While third-party civil liability plaintiffs have always been expected to reimburse Medicare for benefits paid in the past, the same regulations with regard to future coverage was never applied. In other words, Medicare was not expecting these Medicare beneficiaries to cover the expenses of future medical care resulting from their accidents from settlement proceeds.

For some time, The Centers for Medicare and Medicaid Services (“CMS”), the federal agency responsible for administering Medicare and Medicaid (as well as a host of other federal programs ) within the Department of Health and Human Services, has been hinting that the Medicare Secondary Payer Act applied to future medical services in third party liability cases, pointing out that the statutory language is the same for workers’ compensation and liability cases. With regard to liability cases, Barbara Wright of CMS stated: “So where future medicals are a consideration in arriving at the settlement, appropriate arrangements should be made for appropriate exhaustion of the settlement before Medicare is billed for related services.”

One consequence of this new thinking is that insurers and self-insured entities are currently required to report claims made by Medicare-eligible claimant/plaintiffs to the Centers for Medicare and Medicaid Services (“CMS”). This suggests that “appropriate exhaustion of the settlement before Medicare is billed for related services” is required “before Medicare is billed for related services” in personal injury cases. Interestingly, as of the posting of this blog, Medicare has not taken the next step of denying the payment of bills where the care is related to injuries sustained in an accident for which future medicals were considered in arriving at a settlement.
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us supreme court.jpgMedicaid will sometimes pay the medical expenses incurred by a person injured in an accident, albeit at rates substantially below the medical provider’s usual and customary charges. When Medicaid does pay, beneficiaries must reimburse Medicaid from third party payments for medical care. See section 409.910(11)(f), Florida Statutes (2013). The goal of the statute is to protect tax dollars while preventing Medicaid beneficiaries from receiving a windfall. Tristani v. Richman, 652 F.3d 360, 370, at 372 (3d Cir. 2011).

In Arkansas Department of Health & Human Services v. Ahlborn, 547 U.S. 268 (2006), the U.S. Supreme Court confirmed that the Medicaid lien was limited to payments for medical care. Id. at 284. At issue in Ahlborn was a North Carolina Medicaid lien statute similar to Florida’s.

In spite of Ahlborn, AHCA, which administers Florida’s Medicaid system, insisted that its payments could be recovered from the entire settlement without regard to the various other damage elements typically constituting the basis of a settlement. (In addition to incurred medical expenses, personal injury cases usually also involve claims for lost wages, future medical expenses, mental anguish, and pain. According to Ahlborn, Medicaid’s lien only attaches to the payments made for medical care.) Moreover, ACHA refused to negotiate or even concede that any court had a say in the matter. AHCA’s brazenness was challenged.

In Roberts v. Albertson’s Inc., 37 Fla. L. Weekly D2515 (Fla. 4th DCA Oct. 24, 2012), reh’g and reh’g en banc denied, modified on reh’g, No. 4D10-2313 (Fla. 4th DCA June 26, 2013), the Fourth District Court of Appeal issued a decision authorizing the trial court to conduct a hearing to determine the Medicaid lien. The court could consider evidence of payments for such other damages as lost wages, pain, and mental anguish, as well as determine how much less the case settled for than its full value. (Cases are often settled for less than full actual damages due to a variety of factors including comparative fault and limited insurance coverage.)
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law books.jpgFlorida employees injured at work may be able to bring a valid claim for damages against a third party. For purposes of this blog, a third party means an entity, including an individual, other than the employer or other entity entitled to workers’ compensation immunity. A third party case may exist if the work related injury was caused by the negligence or intentional act of the non-exempt entity. A simple example is where a deliveryman is injured in a motor vehicle accident by a negligent non-exempt third party. Because the accident happened in the course and scope of the employment, the worker would is eligible to recover both workers’ compensation benefits and personal injury damages.

Where workers’ compensation benefits have been furnished, Section 440.39 Florida Statutes creates a lien against the compensation the injured worker receives from a third party. In other words, the employer or its insurance carrier have the statutory right to be repaid from the money paid to the injured worker by the third party. “The lien statute has a straightforward and appropriate objective–the prevention of double recoveries by injured employees who have recovered statutory benefits under the workers’ compensation law but also have claims against responsible parties other than the employer. Jones v. Martin Elecs., Inc., 932 So.2d 1100, 1108 (Fla.2006). The statute allows the employer or insurer to be subrogated to the proceeds of such third-party tort recoveries to the extent of the amounts paid or to be paid by the employer or insurer.” Luscomb v. Liberty Mut. Ins. Co., 967 So.2d 379 (Fla. 3rd DCA 2007). Importantly, the workers’ compensation lien is capped at the claimant’s net recovery. City of Hollywood v. Lombardi, 770 So.2d 1196, 1202 (Fla.2000), and Aetna Insurance Co. v. Norman, 468 So.2d 226, 228 (Fla.1985).

The lien can be waived by the employer or carrier. However, this will typically come at the cost of the workers’ compensation case settling for less than if the lien remained in place.

When the lien isn’t waived, how is the claimant’s net recovery determined?

The formula, as set forth in the statute, can be difficult to comprehend. Extensive litigation has ensued over its meaning and application, with many appellate decisions attempting to explain the issues. In my opinion, the best play to start to understand the formula is the Florida Supreme Court case Manfredo v. Employer’s Casualty Insurance Company, 560 So.2d 1162 (Fla 1990).

This is the so-called “Manfredo Formula”: Third party settlement/recovery amount less (-) attorney fees and costs divided by (/) full case value = the % value of the wc lien.

Here’s the formula by way of a hypothetical example:

  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 was for less due to tough liability, coverage limits, etc.)
  4. $ 135,000 divided by $ 1,000,000 = 13.5%
  5. 13.5% of $ 100,000 = $ 13,500.

Hence, the workers’ compensation employer/carrier recovers $ 13,500, 13.5%, of its $100,000 lien from the $250,000 personal injury recovery.

Resolving the WC lien is not always this simple. In the Aetna case, the Florida Supreme Court noted some complicating factors. In speaking of 440.39, the court wrote:

This very logical process, and the statute describing it, becomes more complicated because of the broad array of circumstances that may occur with the third-party claims and recoveries. They may be brought by the employee, employer, or insurer (based on the one-year windows described above), and the attorneys prosecuting the claims may therefore be compensated by the employee, employer, or insurer. The employee may have settled all the workers’ compensation medical and indemnity claims for a lump sum (as here), or the benefits may continue to be payable into the future. The third-party recoveries may exceed the total benefits paid and to be paid by the employer or its insurer, or they may be less than that total (as here). There may be multiple third-party claims and recoveries, and therefore multiple computations of the lien, and the recoveries may occur at different times. A particular recovery may be less than the “full value” of the third-party claim for a variety of reasons: other third-party tortfeasors may be responsible for some of the damages, the employee may have been comparatively negligent, or the plaintiff and counsel for the plaintiff may discount the value of the claim in order to avoid the risk and delay inherent in any lawsuit.

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dollars.jpgFew personal injury lawyers have degrees in tax law or accounting. While having advanced knowledge of tax law is not a requisite to the proper handling of a personal injury case, having a basic understanding of potential tax consequences is. To perform up to par, the personal injury lawyer must know which elements of a settlement may be taxable and address the issues accordingly. Anything less falls below the professional standard of care and may have serious negative consequences.

CAVEAT: We do not give tax advice to our clients and we are not giving it in this blog. The information contained in this blog should be used for guideline purposes only rather than as definitive tax advice. For definitive advice on these issues, consult a tax lawyer or accountant.

There are numerous areas in personal injury settlements with potential income tax consequences: 1) punitive damages; 2) damages for emotional distress; 3) the consideration paid for a confidentiality agreement; (4) money paid to compensate for lost income; and (5) money paid to compensate for medical expenses.

A starting point for the legal authority on this topic is Section 104 of the Internal Revenue Code, which reads as follows:

§ 104. Compensation for injuries or sickness.

(a) In general. Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 [IRC Sec. 213] (relating to medical, etc., expenses) for any prior taxable year, gross income does not include–

(1) amounts received under workmen’s compensation acts as compensation for personal injuries or sickness;

(2) the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness;

(3) amounts received through accident or health insurance (or through an arrangement having the effect of accident or health insurance) for personal injuries or sickness (other than amounts received by an employee, to the extent such amounts (A) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (B) are paid by the employer);

(4) amounts received as a pension, annuity, or similar allowance for personal injuries or sickness resulting from active service in the armed forces of any country or in the Coast and Geodetic Survey or the Public Health Service, or as a disability annuity payable under the provisions of section 808 of the Foreign Service Act of 1980 [22 USCS § 4048]; and
(5) amounts received by an individual as disability income attributable to injuries incurred as a direct result of a terroristic or military action (as defined in section 692(c)(2) [IRC Sec. 692(c)(2)]).

If the IRS decides to scrutinize a settlement for tax consequences, the taxpayer bears the burden of proving what aspects of a personal injury settlement are non-taxable. See Internal Revenue v. Schleier, 515 U.S. 323 (1995). Relevant evidence may include the pleadings, discovery in the case, and the settlement agreement. While it may be good practice for the Plaintiff to have an allocated agreement, meaning one in which the settlement proceeds are broken into component parts for the various damage elements (e.g., personal injuries; economic losses (wages and medical), punitive damages), the exercise is not dispositive of the issue. See Bagley v. Commissioner of Internal Revenue, 121 F.3d 393 (8th Cir. 1997) (The court held: “when assessing the tax implications of a settlement agreement, courts should neither engage in speculation nor blind themselves to a settlement’s realities”) and Delaney v. Commissioner, 99 F.3d 20, 23-24 (1st Cir. 1996) (court must look beyond language of settlement to determine ‘in lieu of what’ for damages paid”).
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worker2.jpgPre-Jeb Bush, Florida construction subcontractors were held liable in tort for damages caused by their negligence when the party harmed was an employee of a subcontractor with whom legal vertical privity was not shared. This powerful threat caused subcontractors to pay heightened attention to workplace safety. When subcontractors fell short of being reasonably safe and the result was bodily injury, they paid the cost.

This did not sit well with Governor Bush and his Republican cohorts who controlled Florida’s legislature. Profits were at stake. Action was taken to eliminate this bothersome “loophole.” Legislation was passed granting “horizontal immunity” to construction subcontractors without any contractual or other legal connection to employees of other companies. See Florida Statute § 440.10(1)(e)(2). See also § 440.11(1)(b)(2).

Thankfully, the immunity is not absolute. § 440.10(1)(e)(2) provides that gross negligence is excepted from the workers’ compensation exclusivity provision. To establish gross negligence, a Plaintiff must show (1) a composite of circumstances which, together, constitute a clear and present danger; (2) an awareness of such danger by the subcontractor; and (3) a conscious voluntary act or omission by the subcontractor that is likely to result in injury. See Pyjek v. Valleycrest Landscape Development, Inc., So.3d , 38 FLW D1064 (Fla. 2nd DCA 5-15-2013); and Villalta v. Cornn Int’l, Inc., 109 So. 3d 305 (Fla. 1st DCA 2013) (citing Glaab v. Caudill, 236 So. 2d 180, 185 (Fla. 2d DCA 1970)); cf. Merryman v. Mattheus, 529 So. 2d 727, 729 (Fla. 2d DCA 1988) (explaining that mere knowledge of vulnerability of employee to the possibility of injury is insufficient to amount to gross negligence; there must be a likelihood of injury from employee’s vulnerability greater than mere danger, rising to a “clear and present danger”).
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worker3.jpgMost Florida employees injured at work will be limited to receiving compensation through the state’s workers’ compensation system as laid out in Chapter 440 of the Florida Statutes. The main reason for this limitation is that employers and fellow-employees are immune from being sued for simple negligence. See F.S. 440.11.

‘”[S]imple negligence is that course of conduct which a reasonable and prudent man would know might possibly result in injury to persons . . ..”‘ Carraway v. Revell, 116 So. 2d 16, 22 (Fla. 1959) (quoting Bridges v. Speer, 79 So. 2d 679, 682 (Fla. 1955)).

Negligence cases and workers’ compensation cases are different creatures subject to their own set of laws with regard to compensation for injuries. One of the main differences is that the workers’ compensation system does not authorize compensation for pain and suffering. (No Compensation for Pain & Suffering Under Florida’s Workers’ Compensation System.)

Chapter 440 is a no fault system for the provision of benefits. In theory, at least, the worker’s compensation statutes provide a system of compensation for injured workers in which the worker receives the guarantee of rapid compensation for work related injuries. Reality is often a different story. Even when the system works as designed, its shortcomings are many. Read these blogs:

In some instances, injured workers would be more fairly compensated through the civil justice system (negligence) than through the workers’ compensation system. Unfortunately, due to a number of factors, including employer and fellow-employee immunity (see above), and a lack of fault (i.e., all but the injured worker are blameless for the accident), injured workers infrequently have the option of seeking a civil rather than a workers’ compensation remedy.
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Shaking hands.jpgEvery case is different. From accident to injuries, no two cases are ever exactly alike. That said, certain common elements do run through every case. From time to time I will be posting about some of the cases our firm has resolved. The common elements should become apparent in these blogs.

This first example involves a 2011 premises liability accident. Our client slipped in wet paint as she was descending a stairway after work. The property owner had hired an unlicensed and inexperienced recent Cuban immigrant to improve the appearance of the premises for a December holiday party. The painter failed to place warnings signs around the stairwell. It was night time and the outside stairwell was poorly lit. The accident happened in the blink of an eye. There was nothing our client could do to prevent the fall.

Our client, who was wearing flat-soled shoes, landed squarely on her rear-end. She felt immediate pain. Grey paint stained her pants and blouse. She called a co-worker, who assisted her in receiving medical care at a clinic located in her building. Within days she was receiving medical care under the workers’ compensation system from doctors hand-picked by the WC insurance carrier.

Because the building owner was not her employer, she was free to pursue a premises liability case against the owner. (See this blog on the law of non-delegable duty and Florida Statute 440.11, Florida’s workers’ compensation immunity statute.) However, she was unaware of this right, and the workers’ compensation attorney she hired did not consider the option. Within months, our client became disenchanted with her workers’ compensation attorney and came to our law firm for a consultation.

Our law firm handles workers’ compensation and premises liability cases. We quickly recognized that she also had a viable personal injury case. We agreed to handle both cases. This was seven months after the accident.

Our first course of business was to request a slew of records, including medical and employment documents from the workers’ compensation insurance carrier. This was quicker, easier, and cheaper than requesting each set of records individually from the various entities. Within thirty days we had the records and were able to review them to get a clearer picture of the cases.

Among other things, we learned that she had undergone a 3-level spine fusion surgery in early 2012. We also learned that, in 2007, she had another, albeit less intrusive, back surgery. The prior surgery turned out to play a prominent role in the premises liability case.
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scales.jpgA few months ago our law firm, working with the Domnick & Shevin, PL law firm, settled a difficult liability case against an insurance agency arising out of a catastrophic motorcycle crash.

Our client had been hospitalized for two months. Medicaid paid his substantial hospital bill. After the case settled, Medicaid came to us demanding to be repaid in full from the settlement proceeds.

We disputed Medicaid’s claim to be repaid in full. Instead, we offered the agency a small portion of the settlement to go away. Medicaid rejected the offer. Unwilling to give in, we filed a Motion to Reduce Medicaid Lien with the court that handled the underlying liability case. (We reserved jurisdiction with this court by including language In the Order of Voluntary Dismissal that it retained jurisdiction “to determine liens and reductions of liens based on equity or any other basis, including, but not limited to, Medicaid’s interest in any recovery.”)

Medicaid countered with a number of arguments. Among them: The court did not have jurisdiction to entertain the dispute. In its view, the Plaintiff was required to file a separate lawsuit, a dec action, against Medicaid; and Florida Statute 409.910 authorized a full recovery.
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Rodin2 Thinker.jpgExperienced personal injury attorneys consider many factors in judging how to manage their cases. While common elements are present from case to case, no two cases are ever completely alike. Both subjective and objective considerations must be taken into account to reach decisions most beneficial to client and attorney alike. The decisions are always consequential. The best personal injury attorneys are the best decision makers.

The elements influence everything from: whether the law firm accepts a case; whether a lawsuit will be filed versus simply trying to resolve the case pre-suit; settlement amount; whether to go to trial; whether the case is declined after it has been accepted by the law firm. Since every case has many moving parts, these and other case management decisions are adjusted frequently.

COMMON CONSIDERATIONS
Insurance coverage. There are many different types of liability insurance to cover for losses caused by negligence. The more common are homeowners, premises liability, bodily injury (BI), and medical malpractice. Most individuals and businesses with sizable unprotected assets have strong liability insurance coverage. A fair percentage with weaker financial positions have coverage, although usually with lower policy limits. Some have no coverage at all. The state of Florida has few requirements for maintaining liability insurance. (One exception is for tractor trailers/18-wheelers. The owner is required to maintain $750,000 in coverage. Unfortunately, laws are often violated, including as to maintaining insurance. Surprisingly, doctors are not required to maintain malpractice insurance.) It is mostly left as a personal choice. No matter how significant the damages, no financial means plus no insurance usually means no recovery. Few lawyers will accept a case under these circumstances. Coverage that is available but limited under the circumstances can influence a lawyer’s decision to take the case, or how hard and far to push it.

Negligence. Florida operates a fault-based civil liability system. (The workers’ compensation system, covered in Chapter 440 of the Florida Statutes, is not fault-based. Benefits, rather than damages, are recoverable under Chapter 440. These benefits are much different than the damages recoverable under the civil liability system.) Only conduct which falls below a reasonable standard is punished. Fault can be shared by various individuals and entities, including the aggrieved party. This is the concept of comparative fault. Fault can be clear, it can be gross, it can be illusive. These fault considerations (and more) influence the course and outcome of every negligence case. Fault must be proved by the aggrieved party to recover damages (e.g., medical bills, lost wages, pain and suffering).

Injuries. Other factors aside, the worth of any personal injury case is always capped by the extent of the injuries. Put another way, an accident without injuries is an accident without value. Individuals can be compensated for the aggravation of pre-existing injuries. See Florida Standard Jury Instruction 501.5(a). This is a frequent battleground issue. Our firm is in suit for a woman involved in a slip and fall accident. Within months of the accident, she underwent a 3-level spine fusion surgery. Because of a relatively minor back surgery 7 years before and some evidence of normal preexisting degeneration, the Defendant is trying to avoid blame for her injuries. It has even hired a notorious insurance company “whore” doctor to support its position. (Mediation is scheduled.)

Medical Treatment. Medical conditions must be documented to be proven. Receiving consistent care from reputable doctors is an important component. Insurance companies know the players, juries are good at recognizing the good and the bad. Delaying the receipt of care or gaps in care make a difference. While there are reasonable explanations for inconsistent care — the most common being the inability to pay — a good personal injury attorney can help make arrangements for timely, steady, and quality care to be provided.
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worker2.jpgBefore Florida adopted a workers’ compensation system, in 1935, for workers injured on the job to recover medical expenses and lost wages, or be compensated for non-economic damages, like pain and suffering, they had to prove that the accident resulted from negligence on the part of the employer or some third party. Further complicating their path to recovery was the legal principle known as contributory negligence, which acted as a complete bar to recovering benefits if the injured worker contributed in any way to causing the accident, even by as little as 1%. Few workers were able to overcome these two burdens. And for those few who succeeded, the slow grind of justice often left them broken and destitute.

The new system created an immediate sea change of good for Florida’s workers. No longer would they be forced to fight, usually unsuccessfully, for every needed benefit. So long as the injury happened in the course and scope of the employment, medical and lost wage (indemnity) benefits would be furnished, contributory negligence notwithstanding. It was the declared ideal of the system to be self-executing, meaning benefits would come without a fight, and, where there was a dispute, the worker received the benefit of any doubt.

In exchange for this no-fault system, injured workers were forced to give up the right to seek common law civil remedy damages, like pain and suffering, from the employer. (They could still seek these damages from third parties.) In other words, employers were immune from civil lawsuits. See,

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