Worker's compensation benefits are the exclusive remedy
of an employee for an industrial injury against the
employer, any other employee of the same employer and
the worker's compensation insurer. There are very
limited exceptions, usually involving an action against
a co-employee for an assault intended to cause bodily
harm, or against a co-employee for negligent operation
of a motor vehicle not owned or leased by the employer.
No employee of a temporary help agency who makes a claim
for compensation may make a claim or maintain an action
in tort against any employer who compensates the
temporary help agency for the employee's services. Wis.
Stat. § 102.29(6)-(7).
Bauernfeind v. Zell, 190 Wis.2d 701, 713, 528 N.W.2d 1
(1995); Kopfhamer v. Madison Gas & Electric Co., 258
Wis.2d 359, 654 N.W.2d 256 (Ct. App. 2002).
The term "third party claim" is frequently used to
describe a tort claim by a worker against a person other
than the employer or a co-employee. An injured employee,
the employer or worker's compensation insurer may sue a
third party tortfeasor who is responsible for the
employee's injuries. The employee claims damages for
injuries above and beyond worker's compensation
benefits. Such damages include pain and suffering,
mental anguish, and derivative claims for loss of
society and companionship. The employer or worker's
compensation insurer seeks reimbursement of amounts paid
for such items as medical bills or disability. Each has
an equal voice in the claim under Wisconsin law. A
workers' compensation insurer may seek to recover
damages for an injured employee’s pain and suffering
against third party, even though injured employee elects
not to participate in third-party action.
Thresherman’s Mut. Ins. Co. v. Page, 217 Wis.2d 451, 577
N.W.2d 335 (1998).
An
adjuster that administered claims for an employer's
workers' compensation insurer was held immune from a
third party negligence action brought by employee for
damages he allegedly sustained as a result of adjuster's
delay in authorizing his neck surgery for his
work-related injury, based on exclusive remedy provision
of Workers' Compensation Act. The court said that
the because the adjuster was an agent of insurer, and
because the exclusive remedy doctrine applied to agents
and representatives of employer, in order to be
consistent, it also applied to representatives of the
insurer. Walstrom v. Gallagher Bassett Services,
Inc., 239 Wis.2d 473, 620 N.W.2d 223 (Ct. App. 2000).
Any recovery from a third party must be shared according
to the formula of Section 102.29, Wis. Stats. The
formula provides that costs of collection (attorneys'
fees and disbursements, usually about one third of the
gross) are deducted off the top of the recovery. Meyer
v. Michigan Mut. Ins. Co., 233 Wis.2d 493, 609 N.W.2d
167 (Ct. App. 2000). From the balance remaining, the
employee receives one third. From the balance remaining,
the worker's compensation insurer is reimbursed up to
the amount it has paid. If there is any balance
remaining, it belongs to the employee. However, the WC
insurer is entitled to a "cushion" out of the remaining
balance for future payments it might have to make.
Richtman v. Honkamp, 245 Wis. 68, 13 N.W.2d 597 (1944).
If the cushion is paid to the employee, it is a credit
against future worker's compensation payments. If it is
escrowed or reserved by the worker's compensation
insurer, the insurer keeps the interest as part of the
cushion. Sutton v. Kaarakka,168 Wis.2d160, 483 N.W.2d
259 (Ct. App. 1992)(over 1 million dollars was escrowed
in a trust account for the cushion and all the interest
was applied to the cushion).
Assume $25,000 is paid by the worker's compensation
insurer. Three examples are listed below of the
distribution of third party settlement proceeds under
the formula based on differing settlement amounts:
Gross Recovery
|
$100,000
|
$50,000
|
$25,000
|
Cost of Collection
|
$33,333
|
$16,667
|
$8,333
|
Remainder
|
$66,667
|
$33,333
|
$16,667
|
1/3 to Employee
|
$22,222
|
$11,111
|
$5,555
|
Remainder
|
$44,445
|
$22,222
|
$11,112
|
Reimbursement to Worker's Comp.
|
$25,000
|
$22,222
|
$11,112
|
Balance to Employee
|
$19,445
|
$-0-
|
$-0-
|
Sometimes there is not enough money from the settlement
of the third party claim to reimburse the worker's
compensation carrier in full, or to provide a cushion to
the employee against future worker's compensation
benefits. A settlement of any third party claim is void
unless the settlement and distribution of proceeds is
approved by the Circuit Court or Department of Workforce
Development.
Problems may arise when the employee or worker's
compensation insurer seeks to maximize their share to
the prejudice of the other.
The costs of collection sometimes include the worker's
compensation insurer's attorney fees. When a worker's
compensation insurer hires its own attorney, who
prosecutes the case along with the employee's attorney,
the attorneys must share the "costs of collection" in
the first part of the formula of Section 102.29, based
on their mutual efforts. The insurer still is entitled
to recover back its lien under the formula without
deducting its lawyer's fees out of its share. Zentgraf
v. Hanover Ins. Co., 250 Wis.2d 281, 640 N.W.2d 171 (Ct.
App. 2001); Diedrick v. Gehring, 62 Wis.2d 759, 216
N.W.2d 193 (1974).
An injured employee's spouse and children have third
party tort claims for loss of society and companionship.
These claims are not subject to the formula for
distribution under Section 102.29. DeMuelenaere v.
Transport Ins. Co., 116 Wis.2d 322, 342 N.W.2d 56 (Ct.
App. 1983); Kottka v. PPG Industries., Inc.,130 Wis2d
499, 388 N.W.2d 160 (1986). The same is true for claims
of loss of society and companionship in wrongful death
third party cases, but all proceeds for pecuniary loss,
including loss of support and loss of services are
included in the amounts subject to the worker's
compensation insurer's lien. Johnson v. ABC Insurance
Company, 193 Wis.2d 35, 532 N.W.2d 130 (1995).
The worker's compensation insurer may participate in a
settlement even if there are insufficient liability
insurance proceeds to compensate all claimants or to
make the employee whole. Martinez v. Ashland Oil, Inc.,
132 Wis.2d 11, 390 N.W.2d 72 (Ct. App. 1986). When there
are multiple claimants against insufficient liability
insurance funds, either the parties will negotiate an
agreement or the Court will hold a hearing to:
1.
determine the value of each claim;
2.
prorate the settlement proceeds among the claims;
3.
distribute the amounts allocated to claims not subject
to Section 102.29;
4.
distribute the amounts allocated to claims subject to
Section 102.29 according to the formula.
Brewer v.
Auto-Owner's Ins. Co., 142 Wis.2d 864, 418N.W.2d 841
(Ct. App. 1987).
There are ways to minimize the reimbursement to the
worker's compensation insurer when the employee is
married. Assume a $60,000 settlement and $25,000
worker's compensation lien. If the employee is single,
the worker's compensation insurer gets full
reimbursement. If the employee is married and one third
of the claim is assigned to the spouse for loss of
society and companionship, the worker's compensation
insurer receives less than full reimbursement and the
employee and spouse increase their net from $15,000to
$22,221.
|
Single Employee
|
vs. Husband
|
and Wife
|
Gross Recovery
|
$60,000
|
$40,000
|
$20,000
|
Costs of Collection
|
$20,000
|
$13,333
|
$6,667
|
Balance
|
$40,000
|
$26,667
|
$13,333
|
1/3 to Employee
|
$13,333
|
$8,888
|
|
Remainder
|
$26,667
|
$17,779
|
|
Reimbursement to Worker's Comp.
|
$25,000
|
$17,779
|
|
Balance to Employee
|
$1,667
|
$ -0-
|
|
Total
|
$15,000
|
$22,221
|
|
Both the employee and worker's compensation insurer can
recover interest on the verdict and judgment when a
third party case is tried. Hauboldt v. Union Carbide
Corp., 160 Wis.2d 662, 467 N.W.2d 508 (1991). Interest
is prorated between the employee's claim and the
worker's compensation insurer's claim.
A worker's compensation insurer is entitled to
reimbursement of its lien out of the lump sum portion of
a partially structured settlement and cannot be forced
to accept delayed payments. Skirowski v. Employers
Mutual Cas. Co., 158Wis.2d 242, 462 N.W.2d 245 (Ct. App.
1990); Simanek v. Miehle-Goss-Dexter,113 Wis.2d 1, 334
N.W.2d 910 (Ct. App. 1983).
A worker's compensation insurer may participate in an
employee's medical malpractice claim which aggravates an
industrial injury, Sutton v. Kaarakka,159 Wis.2d 83, 464
N.W.2d 29 (Ct. App. 1990), but not a legal malpractice
claim, Smith v. Long, 178 Wis.2d 797, 505 N.W.2d 429
(Ct. App. 1993).
An insurer may seek reimbursement under Section 102.29
from the entire proceeds of an injured employee's
liability claim against the responsible third party,
including proceeds attributable to the aggravation of a
pre-existing injury, even if such aggravation was not
considered when the worker's compensation case was
compromised. Nelson v. Rothering, 174 Wis.2d 296, 496
N.W.2d 87 (1993).
A worker's compensation insurer cannot seek
reimbursement from the proceeds of an injured employee's
uninsured motorist claim, because it is based on
contract, not tort. Berna-Mork v. Jones, 174 Wis.2d 645,
498 N.W.2d 221(Ct. App. 1993). However, an automobile
insurance policy providing uninsured or underinsured
motorist coverage may exclude amounts paid or payable
under worker's compensation law, pursuant to the 1995
amendments to Section 632.32, Wis. Stats. The statutory
amendments supercede prior case law that barred such
exclusions.
Although worker's compensation benefits are the
exclusive remedies of an employee against an employer,
the employee may bring a third party action against the
parent corporation of his employer-subsidiary if the
parent corporation is responsible as a third party tort
feasor acting in a manner other than a shareholder.
Miller v.Bristol-Meyer Co., 168 Wis.2d 863, 485 N.W.2d
31 (Ct. App. 1992). However, if an employer or insurer
has an enforceable indemnification agreement with a
third party tort feasor, and ends up paying the tort
damages along with the worker's compensation benefits,
the worker's compensation insurer is entitled to share
in the recovery of the tort damages along with the
employee. Houlihan v. ABC Ins. Co., 198 Wis.2d 133, 542
N.W.2d 178 (Ct. App. 1995).