1. Workers’ Compensation Subrogation Credits Gary L. Wickert Matthiesen, Wickert & Lehrer, S.C. Hartford, Wisconsin

2. Importance of Workers’ Compensation Subrogation Historical Significance Historical Significance Purposes Purposes Social Benefits Social Benefits Anti-Subrogation Movement Anti-Subrogation Movement Not True Subrogation Not True Subrogation Campion v. Montgomery Elevator, 493 N.W.2d 244 (Wis. App. 1992) Campion v. Montgomery Elevator, 493 N.W.2d 244 (Wis. App. 1992)

3. Credits / Advances Purpose and Function Generally Purpose and Function Generally Often More Important Than Lien Often More Important Than Lien Failure To Properly Document Failure To Properly Document Every State Applies Credit Differently Every State Applies Credit Differently Waiver Waiver Settlement of Third Party Cases Settlement of Third Party Cases Allocation of Damages Allocation of Damages Proper Retention of Future Credit Proper Retention of Future Credit Proper Documentation / Forms Proper Documentation / Forms

4. Calculating Future Credits Typical Calculation Typical Calculation $120,000 3P Settlement Less 40,000 Atty’s Fees / Costs 80,000 Net Recovery 80,000 Net Recovery Less 30,000 Lien Reimbursement $ 50,000 Worker’s Net Recovery (Credit) $ 50,000 Worker’s Net Recovery (Credit)

5. Future Credit Tips Do NOT Sign Release Unless It Preserves Future Credit Do NOT Sign Release Unless It Preserves Future Credit Be Careful When Settling W/C Claims Be Careful When Settling W/C Claims Be Specific About Past Liens / Future Credit Totals and Outstanding Bills Be Specific About Past Liens / Future Credit Totals and Outstanding Bills Watch Out for Gerrymandering Watch Out for Gerrymandering Always Document Your Credit With Appropriate Commission / Agency Always Document Your Credit With Appropriate Commission / Agency

6. Alabama Miller Formula (Elements of Damages Allocated By Court) Miller Formula (Elements of Damages Allocated By Court) 1. Calculate “Net Recovery” 2. Divide “Net Recovery” by Value of 3P Case 3. Multiply Actual Future Benefits by Fraction= “Gross Future Medical Expense Credit” 4. Reduce This By Carrier’s Pro Rata Share of Atty’s Fees (Fitch Formula) = “Net Future Medical Expense Credit” 5. Must Document on Form WC-4

7. Wisconsin $900,000 3P Settlement $900,000 3P Settlement Less 300,000 Atty’s Fees / Costs 600,000 Recovery 600,000 Recovery Less 200,000 1/3 to Worker (no credit) $ 400,000 Net Recovery $ 400,000 Net Recovery 250,000 Past Lien Reimbursement 250,000 Past Lien Reimbursement 150,000 Net to Worker (Credit) 150,000 Net to Worker (Credit) Must File Form WKC-170

8. Florida Manfredo Formula Manfredo Formula 1. Applies When No Full Recovery By P 2. Ratio Of Net Settlement To Full Value 3. Court Determines Full Value Of Case 4. Carrier Reduces Future Benefits By This Percentage File Form DFS-F2-DWC-4 If No Ct. Approval

9. Georgia Statute Reads: Statute Reads: “Insurer’s recovery under this section shall be limited to the recovery of the amount of benefits paid under this chapter…” § 34-9-11.1 No Future Credit No Future Credit “Payable Under This Chapter” Issue “Payable Under This Chapter” Issue

10. Illinois Employer Liability for Contribution Employer Liability for Contribution Limited to Past Lien & Future Liability (Kotecki Cap) Limited to Past Lien & Future Liability (Kotecki Cap) Baltzell v. R&R Trucking, 554 F.3d 1124 (7 th Cir. 2009) Baltzell v. R&R Trucking, 554 F.3d 1124 (7 th Cir. 2009) Waiver of Kotecki Cap Waiver of Kotecki Cap Def. Pays Verdict Then Seeks Contrib. From Employer Def. Pays Verdict Then Seeks Contrib. From Employer Employer Contributes Pro Rata To Defendant Employer Contributes Pro Rata To Defendant “Fresh Money” Liability or Credit To Defendant? “Fresh Money” Liability or Credit To Defendant? Contribution Liability vs. Reimbursement less 25% Contribution Liability vs. Reimbursement less 25% LaFever v Kemlite Co., 706 N.E.2d 441 (Ill. 1998). LaFever v Kemlite Co., 706 N.E.2d 441 (Ill. 1998). Need For Separate Subro & Employer Defense Counsel Need For Separate Subro & Employer Defense Counsel Future Credit – 75% of PCV Paid to Carrier Future Credit – 75% of PCV Paid to Carrier Future Benefits Paid at 25% Future Benefits Paid at 25%

11. Indiana Statute Reads: Statute Reads: When there is third party settlement the liability of the carrier to pay further compensation shall terminate… But It Doesn’t Mean What It Says. But It Doesn’t Mean What It Says. Smith v. Champion Trucking, 901 N.E.2d 260 (Ind. App. 2009) Smith v. Champion Trucking, 901 N.E.2d 260 (Ind. App. 2009) No Credit When Recovery Is Before Award And Is Less Than Anticipated Benefits No Credit When Recovery Is Before Award And Is Less Than Anticipated Benefits

12. Iowa § 85.22(1) Does Not Provide For Credit When Worker Prosecutes 3P Action § 85.22(1) Does Not Provide For Credit When Worker Prosecutes 3P Action § 85.22(2) Allows Carrier To Take Credit When Carrier Prosecutes 3P Action § 85.22(2) Allows Carrier To Take Credit When Carrier Prosecutes 3P Action Courts Read Credit Rights Into § 85.22(1) Courts Read Credit Rights Into § 85.22(1) WARNING: Carrier Must File Notice of Lien WARNING: Carrier Must File Notice of Lien WARNING: § 85.35 Settlement Of A Contested W/C Claim Bars § 85.22(1) Subrogation And Credit Rights WARNING: § 85.35 Settlement Of A Contested W/C Claim Bars § 85.22(1) Subrogation And Credit Rights

13. California § 3858 Carrier Gets Credit For Net Recovery § 3858 Carrier Gets Credit For Net Recovery Medical Malpractice Exception Medical Malpractice Exception Workers’ Compensation Board – Jurisdiction Workers’ Compensation Board – Jurisdiction No Employer Negligence – Simply Take Credit No Employer Negligence – Simply Take Credit Employer Negligence – File Petition For Credit Employer Negligence – File Petition For Credit File In Civil Case If Possible (WCAB Prejudice) File In Civil Case If Possible (WCAB Prejudice) When Third Party Case Settles – 3 Choices When Third Party Case Settles – 3 Choices Recover Lien and Enter C&R Of Comp Claim Recover Lien and Enter C&R Of Comp Claim Recover Past Lien and Stipulated Credit Amount Recover Past Lien and Stipulated Credit Amount P Contests Everything – Trial Ct. Decides Employer Negligence In Trial And Decides Lien Reimb and Credit P Contests Everything – Trial Ct. Decides Employer Negligence In Trial And Decides Lien Reimb and Credit

14. California (cont’d) If Case Settles, Trial Court Out Of Picture If Case Settles, Trial Court Out Of Picture Workers’ Compensation Appeals Board (WCAB) Workers’ Compensation Appeals Board (WCAB) Not Good Option For Carrier Not Good Option For Carrier Threshold Of Employer Negligence Threshold Of Employer Negligence $1 Million Verdict X 20% ER Negligence = $200K $1 Million Verdict X 20% ER Negligence = $200K Lien Is Reduced by Employer Negligence Lien Is Reduced by Employer Negligence Next, Credit Reduced by Employer Negligence Next, Credit Reduced by Employer Negligence Carrier Must Meet Threshold Before It Gets Either! Carrier Must Meet Threshold Before It Gets Either! Common Mistake: ER Negligence = No Credit Common Mistake: ER Negligence = No Credit Credit Delayed Until Threshold Met Credit Delayed Until Threshold Met Continue Making Benefit Payments Until Then Continue Making Benefit Payments Until Then

15. California Hypothetical FACTS $340,000 3P Settlement 75,000 Workers’ Compensation Lien 75,000 Workers’ Compensation Lien 194,000 Net Recovery To Worker 194,000 Net Recovery To Worker 25% Employer Negligence (Judge) 25% Employer Negligence (Judge) $500,000 Value of 3P Case (Judge or WCAB Decide) (Judge or WCAB Decide)

16. California Solution Employer’s Threshold = $125,000 Employer’s Threshold = $125,000 ($500,000 x 25%) ($500,000 x 25%) Employer Future Credit = $69,000 Employer Future Credit = $69,000 ($194K Net Recovery - $125K) ($194K Net Recovery - $125K) Credit Delayed Until Threshold Met Credit Delayed Until Threshold Met Carrier Must Contribute Additional $125K Before It Can Start Claiming Credit Carrier Must Contribute Additional $125K Before It Can Start Claiming Credit Southern Cal. Edison Co. v. WCAB (1997) Southern Cal. Edison Co. v. WCAB (1997) Goal = Reach Stipulation With P Attorney Goal = Reach Stipulation With P Attorney Settlement vs. Jury Verdict Settlement vs. Jury Verdict Total Tort Damage Determination Total Tort Damage Determination Employer Negligence % Employer Negligence % Subrogation Counsel Necessary – P Can Settle Around Subrogation Counsel Necessary – P Can Settle Around

17. Summary Credit Rights Vary Greatly Among States Credit Rights Vary Greatly Among States Know The Law Know The Law When In Doubt – Document Your Credit When In Doubt – Document Your Credit Know When Subrogation Counsel Involvement Will Save/ Increase Recovery Know When Subrogation Counsel Involvement Will Save/ Increase Recovery Be Aware Of Problem States Be Aware Of Problem States Illinois, Minnesota, California, etc. Illinois, Minnesota, California, etc. Beware Of Waiver of Past Lien To Close Out Pending Compensation Claim Beware Of Waiver of Past Lien To Close Out Pending Compensation Claim Stepping Over Dollars To Pick Up Dimes Stepping Over Dollars To Pick Up Dimes

18. NATIONWIDE SUBROGATION Gary L. Wickert Matthiesen, Wickert & Lehrer, S.C. 1111 E. Sumner Street Hartford, WI 53027 (800) 637-9176 www.mwl-law.com