NASP 2010 Subrogation Litigation: Skills & Management Conference Employer Negligence Issues

Larry Baill Tyrone Matthews

With or Without Employer’s Liability Considerations, Workers’ Compensation Subrogation is both Complex and Problematic Workers’ compensation is not first party. Rights vary considerably from state to state. The amount of the subrogation interest is not fixed. Results are difficult to track. The workers’ compensation carrier is not in control.

The Complexity of Recovery is Compounded in Employer’s Liability Cases The issues of employer negligence is further complicated by the fact that in some states the employer is not only a plaintiff but can also be made to be a third-party defendant under a contribution that requires the employer to pay a share of the damages sustained by the injured worker proportional to its share of fault in causing the injury. In such instances, the difficulties facing WC subrogation counsel is significantly compounded.

The Complexity of Recovery is Compounded in Employer’s Liability Cases Insured no longer insured by client. Employee no longer employed by insured. Insured and Defendant covered under OCIP/Wrap policy Defendant is an additional insured under insured’s GL policy.

Case Study Jerome Ruhland v. Classic Garden Ornaments Plaintiff Jerome Ruhland (“Ruhland”) was an employee of Heselton Construction (“Heselton”). Defendant Classic Garden Ornaments (“Garden Ornaments”) was the manufacturer and distributor of a 935-pound limestone planter. At the time of the subject accident, the planter was suspended in the air from a sling which was hung from the forklift operated by Heselton employee.

Case Study Jerome Ruhland v. Classic Garden Ornaments Installation of the planter required that three separate 1-inch in diameter plastic irrigation tubes be fed through 1 3/8” diameter irrigation holes in the bottom of the planter Ruhland got down on his hands and knees to manipulate the PVC pipe through each of the three holes. Unexpectedly, the planter slipped from the sling and crushed Ruhland’s hand.

Procedural Posture Jerome Ruhland v. Classic Garden Ornaments Ruhland filed a lawsuit against Garden Ornaments alleging that the system they designed for the installation of its planters was unsafe and dangerous and that the use of a forklift as a crane was prohibited by OSHA. Ruhland further claimed that he did not appreciate the risk that he was exposed to in acting as he did because he had only worked for Heselton for a couple of weeks and had been on the job site for one day prior to the accident.

Procedural Posture Jerome Ruhland v. Classic Garden Ornaments Heselton’s workers’ compensation insurance carrier (“Intervenor”) pays approximately $180,000 in benefits to Ruhland. Ruhland files suit against Garden Ornaments. Intervenor intervenes in the action to protect its lien interest. Garden Ornaments then sues Heselton for contribution.

Minnesota Law Jerome Ruhland v. Classic Garden Ornaments Assuming a $900,000 recovery and a jury finding that Garden Ornaments and Heselton are each 50% at fault. Intervenor is awarded $120,000 (2/3 of $180,000.) Heselton’s contribution requirement is $450,000 (50% of $900,000) plus PV of future credit payable by the employer. Assuming that the PV of future credit is $280,000, Heselton’s contribution would be capped at $400,000. ($120,000 plus $280,000)

California Law Jerome Ruhland v. Classic Garden Ornaments Assuming a $900,000 recovery and a jury finding that Garden Ornaments and Heselton were each 50% at fault. Intervenor’s subrogation threshold would be $450,000 and carrier’s reimbursement claim would be wiped out. Intervenor would also be required to continue to pay benefits on the WC case up to $270,000 ($450,000 - $180,000) before asserting a credit against its future obligation to pay benefits to Ruhland due to his $450,000 recovery against Garden Ornaments.

Discussion Points Jerome Ruhland v. Classic Garden Ornaments Confronted with the facts set forth hereinabove, in a jurisdiction such as Minnesota which provides for employer liability, what factors would a subrogation practitioner need to consider before deciding whether to put the claim in suit? Merits and value of Plaintiff’s claim. Merits and value of contribution claim. Attorneys’ fees likely to be incurred in pursuit of a subrogation claim and in defending a contribution claim.

Discussion Points Jerome Ruhland v. Classic Garden Ornaments Does the analysis change if the employer only has $100,000 in employer’s liability coverage? Can one attorney represent the employer on its subrogation claim and defend the employer against a third-party liability claim? What are the pros and cons of hiring subrogation counsel on a contingent fee basis?

Discussion Points Jerome Ruhland v. Classic Garden Ornaments How and who resolves conflicts between the employer as subrogor and the employer as third party defendant? So, for example, who decides whether to produce an IME that is detrimental to the Plaintiff’s case, but beneficial to the employer as a third party defendant What if the employer will not cooperate and/or insists that the accident was all the employee’s fault?

Thank You!