Attorney's fees paid before carrier reimbursement in third-party action

In Texas, a carrier is entitled to reimbursement from the net amount recovered in a third-party action. A carrier whose interest is not actively represented by its attorney in a third-party action must pay a fee to the employee's attorney.

Case name: Delgado v. Texas Municipal League Inter-Governmental Risk Pool, No. 13-09-00126-CV (Tex. Ct. App. 08/31/09).

Ruling: The Texas Court of Appeals ruled that a workers' compensation carrier was liable for a share of the attorney's fees and costs incurred by an injured worker in his successful third-party claim.

Sub-subcontractor's employee not entitled to coverage from contractor (02/25/13)
Cleaner's use of helpers indicates independent contractor status (11/01/12)
Statement made weeks before termination moves claim forward (09/30/11)
Failure to rebut rehab counselor's report boosts driver's claim (04/19/12)
Hospital not subject to penalties for worker's fall in elevator shaft (04/19/12)

What it means: In Texas, a carrier is entitled to reimbursement from the net amount recovered in a third-party action. A carrier whose interest is not actively represented by its attorney in a third-party action must pay a fee to the employee's attorney. In the absence of an agreement, the court can award to the attorney: 1) a reasonable fee for recovery of the carrier's interest that may not exceed one-third of the carrier's recovery; and 2) a proportionate share of the expenses. These payments are payable from the carrier's recovery.

Summary: A city police employee was injured when his motorcycle was struck by another driver. The city's workers' compensation carrier paid his medical bills and indemnity benefits and asserted a subrogation claim to proceeds obtained in the employee's bodily injury suit against the other driver. The carrier asserted that it was entitled to the "first money" amount of the settlement proceeds and that the employee was not entitled to recover attorney's fees or costs associated with the third-party action. The employee argued the carrier was required to pay a share of his attorney's fees and expenses. The Texas Court of Appeals concluded that the carrier should be reimbursed up to the amount of benefits it paid from the net amount recovered by the employee in a third-party action. However, the employee's attorney was entitled to fees and a proportionate share of expenses for services rendered in obtaining the settlement. It also noted that the employee's attorney's fees and expenses could be awarded before the carrier's reimbursement.

The court pointed out that if the employee's attorney had not negotiated the settlement, the carrier would not have recovered anything from the bodily injury lawsuit. Thus, the employee's attorney clearly advanced the interests of the carrier. The attorney was entitled to reasonable attorney's fees not to exceed one-third of the settlement proceeds. Because the carrier's attorney did not actively participate in the third-party action, the employee's attorney was also entitled to a proportionate share of costs to be deducted from the carrier's net award. However, the court indicated the employee failed to substantiate the amount he requested and affirmed the lower court's determination of attorney's fees and costs.

Read more at the WORKERSCOMP Forum^TM homepage.

October 12, 2009

Newsletter Sign-up