Florida Workers’ Compensation Liens — The “Manfredo” Formula Made Simple

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.

Provided here are helpful tips, from esteemed Maitland, Florida attorney Michael Bailey, for resolving workers’ compensation liens:

  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, determine 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 . . . )

Contact us toll-free at 866-785-GALE or by email to learn your legal rights.

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.

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