Driver's legal expenses in 3rd-party suit reduce employer's credit
Case name: C.A. & I., Inc. v. Cook, No. 2010-CA-001306-WC (Ky. Ct. App. 04/08/11, unpublished).
Ruling: In an unpublished decision, the Kentucky Court of Appeals held that the Workers' Compensation Board properly calculated the employer's subrogation credit by deducting amounts for pain and suffering, attorney's fees, a Medicaid lien, and expenses from a third-party settlement.
What it means: In Kentucky, an employee's entire legal expense is deducted from the employer's subrogation credit.
A coal truck driver was injured when the coal truck that he was driving was struck by another vehicle. The driver sought workers' compensation benefits and was awarded temporary total disability benefits. Later, he received benefits based on a permanent disability rating of 19 percent whole person impairment. The driver sued the driver of the other vehicle involved in the accident. He received a settlement of $25,000. His employer claimed entitlement to a subrogation credit. The Kentucky Court of Appeals held that the employer's subrogation credit was properly calculated by the Workers' Compensation Board by deducting amounts for pain and suffering, attorney's fees, a Medicaid lien, and expenses from the settlement.
The court explained that the driver's entire legal expense should be deducted from the employer's subrogation credit. It was only fair to require employers to share in the costs of pursuing an action against a third party. The employer argued that the deduction was unfair and would result in employers failing to pursue subrogation for small workers' compensation claims. The court rejected the argument because it would not be unreasonable to deny subrogation credits where the attorney's fees and costs from a third-party suit exceed the amount of the subrogation claim.
The court also said the "made whole" doctrine -- that requires an injured person to be "made whole" before the employer recovers a subrogation credit -- applies in workers' compensation cases.
The employer argued that the board's calculations resulted in double recovery by subtracting pain and suffering damages from the settlement and then subtracting attorney's fees that were incurred in pursuing the pain and suffering damages. The court disagreed, stating it was not a double recovery.
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May 16, 2011
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