A common phone call to our Charlotte personal injury attorneys deal with a individual injured in a car accident while on the job. In these types of cases the injured party has two distinct claims. The first, a workers compensation claim through their employer. The second a third party liability claim against the car insurance of the person who hit them.
The article today will address the interplay between the two insurance companies (workers comp and auto insurance). Specifically, the article will examine the law regarding paying back the workers comp insurance from the proceeds of the personal injury claim. The basic tenant regarding the interplay between the carriers is that any monies paid by workers comp must be paid back from any settlement received from the auto insurance. In other words, workers comp has a lien on the personal injury settlement. However, the lien is not absolute and an experienced personal injury attorney understands there are ways to reduce or eliminate the lien.
N.C.G.S. §97-10.2(j) gives the trial court discretion to determine how settlement proceeds are to be distributed. The trial court may reduce or completely eliminate a workers’ compensation lien, and appellate courts may not interfere with such an exercise of discretion except in extreme circumstances in which discretion has been abused. Allen v. Rupard, 100 N.C. App. 490, 495, 397 S.E.2d 330, 333 (N.C. Ct. App. 1990).
In deciding whether to reduce or eliminate a workers’ compensation lien, the trial court “is to make a reasoned choice, a judicial value judgment which is factually supported...[by] findings of fact and conclusions of law sufficient to provide for meaningful appellate review.” Id.
Our Supreme Court has often stated the test to be used when determining whether discretion has been abused:
Generally, ‘[t]he test for abuse of discretion is whether a decision’ is manifestly unsupported by reason.’ White v. White, 312 N.C.770, 777, 324 S.E.2d 829, 833 (1985), or, ‘so arbitrary that it could not have been the result of a reasoned decision[,] State v. Wilson, 313 N.C. 516, 538,330 S.E.2d 450, 465 (1985).’ Little v. Penn Ventilator Company, 317 N.C. 206,218,345 S.E.2d 204, 212 (1986). Frost v. Mazda Motor of America, 353 N.C. 188, 199, 540 S.E.2d 324,331 (N.C. 2000).
N.C.G.S. §97-10.2(j) provides:
The judge shall consider  the anticipated amount of prospective compensation the employer or workers’ compensation carrier is likely to pay the employee in the future,  the net recovery to the plaintiff,  the likelihood of the plaintiff prevailing at trial or on appeal,  the need for finality in the litigation, and  any other factors the court deems just and reasonable.
 The anticipated amount of prospective compensation the employer or workers’ compensation carrier is likely to pay the employee in the future
Imagine a plaintiff, named Mr. X, injured in a car accident while on the job. Assume Mr. X is currently being paid $248.19 a week ($12,905.88 a year), which is 2/3 of his weekly income ($372.29). Mr. X is forty eight (48) years old with a life expectancy of 31.1 years, according to N.C.G.S. §8-46 Mortality Tables. He has not received any vocational training or assistance in finding suitable employment from the Carrier since his release at MMI.
Assume Mr. X is currently under the care of his primary care physician and his condition has not improved over the past three years. It is in the best interests of the client to secure a life care plan which will detail the future medical bills and treatment necessary for his care.
 The net recovery to the plaintiff
Assume Mr. X settled his third party liability case for a total of $405,000.00. The most current lien amount is $169,000. Plaintiff’s counsel spent in excess of $7,564.33 over the prior three years prosecuting the third party claim, without help or assistance from the workers compensation carrier or employer. The Plaintiff has a contract with counsel specifying one-third contingency fee. Based on the statutory reduction Mr. X would receive only $151,460.65. As Mr. X is unable to work or receive Social Security Disability income this amounts to $5,048.68 a year for the remaining 30 years of his life expectancy.
It is typcially good practice to get a vocation expert to discuss the possiblity of future employement. While no one can look into the future a vocation expert can use statistics to determine the liklihood of employment in a certain field based on experience, education, and work history.
 The likelihood of the plaintiff prevailing at trial or on appeal
Judges have seen hundreds if not thousands of trials. They are very aware of the risks of trial even in the clearest of cases. As such, this is an obvious arguemnt to make. It is a good idea to be candid and list the best arguments against revcovery.
 The need for finality in the litigation
The law likes finality. Typically by this point in a case many years have passed and the client has not received any settlement money as it is tied up in court. The court is not unsympathetic to this situation. As such, it is the attorneys job to explain why it is in the interest of justice to end this claim now.
 Any other factors the court deems just and reasonable
Within the above constraints, subsection(j) compels the trial court to use its broad discretion to fairly allocate proceeds that fall “short of being sufficient to reimburse the Plaintiff for his pain, suffering, and other losses” Allen at 332(quoting Pollard v. Smith, 90 N.C. App. 585, 369 S.E. 2d 84(1988), rev’d on other grounds, 324 N.C. 424, 378 S.E. 2d 771(1989)).
This section is a catch all and allows the attorney freedom to play on the heart strings of the judge. In essence, any money going to the insurance company is being taken out of the pocket of the client. It is the job of the attorney to make sure the judge understands that. These arguements should focus on any pain and limitations of the client.
Legal precedent supports significant reduction of the lien as well as elimination
In Wiggins v. Busranger Fence Co., 126 N.C. App. 74, 483 S.E.2d 450 (1997), Travis Wiggins was killed when a gate fell on him at the Raleigh-Durham International Airport. It was anticipated that Mr. Wiggins’ family would receive approximately $200,000.00 from his employer in workers’ compensation benefits. Mr. Wiggins’ estate sued two fence companies claiming that their negligence proximately caused Mr. Wiggins’ death. The case settled for $900,000.00 prior to trial. The trial court held that Mr. Wiggins’ employer could not recover anything from the settlement and had no lien on the third party settlement funds. The Court of Appeals found no abuse of discretion.
In United States Fidelity and Guar. Co. v. Johnson, 128 N.C. App 520, 495 S.E.2d 388 (1998), Melvin Johnson, an employee of the Department of Transportation, died in an automobile accident during the course and scope of his employment. The Department of Transportation provided workers’ compensation benefits to Mr. Johnson’s family totaling $148,955.00. Mr. Johnson’s estate filed suit against the third-party tortfeasor to recover damages for his wrongful death. Mr. Johnson’s estate received a total of $372,825.00 in settlement. At the time of the settlement, the Department had paid $47,045.51 in workers’ compensation benefits to Mr. Johnson’s family. The trial court completely extinguished the Department of Transportation’s lien, finding that it would be inequitable under the facts and circumstances of the case to allow the Department of Transportation to recover the workers’ compensation lien from the settlement proceeds. The Court of Appeals found no abuse of discretion.
In the case of In re Biddix, 138 N.C. App. 500, 530 S.E.2d 70 (2000), Kimberly Biddix was injured in an automobile collision caused by the negligence of a third party. Ms. Biddix received workers’ compensation benefits in the amount of $16,844.03 and temporary total disability benefits in the amount of $1,874.40. Ms. Biddix subsequently entered into a settlement with the third party tortfeasor for $25,000.00, which were the limits of the tortfeasor’s automobile liability insurance. The trial court entered an order finding that the settlement did not adequately compensate Ms. Biddix for her injuries and eliminated her employer’s lien. On appeal, the Court of Appeals found no abuse of discretion.
Elimination of the Lien will not result in a “double recovery”
Attorney fees and costs will be deducted from Plaintiff’s gross settlement, leaving him with a net settlement less than the gross amount. Plaintiff will not be the beneficiary of any double recovery.
However, even if waiving the lien it is entirety results in a “double recovery” that, in of in itself, is not grounds to argue against waiver. As our Court of Appeals stated in Wiggins v. Busranger Fence Co., 126 N.C. App 74, 77 483 S.E.2d 450, 452 (1997):
We are cognizant of the potential for Plaintiff to receive a double recovery via the operation of §97-10.2(j). However, this issue was raised in Pollard and in Rupard, and in those cases, we determined that the statute contemplated and allowed for such a recovery if justified by the equities of the case. Pollard, N.C. App 588,369 S.E.2d 85-86; Rupard, 100 N.C. App 494, 397 S.E.2d 332.
When settlement proceeds or a money judgment is recovered from a third party, N.C.G.S. §97-10.2(f) sets out the manner and priority of the disbursement of the third party proceeds. That statute provides that the litigation costs will be paid first; the attorney fees will be paid second; then the employer will be reimbursed its lien; and finally, the employee will receive any remaining money. N.C.G.S. §97-10.2(f) also provides for the apportionment between the employer/compensation carrier and the employee of the attorney fee charged the injured worker.
N.C.G.S. §97-10.2(f)(1)(j) bestows exclusive authority upon the Superior Court to determine the manner and priority of disbursements of third party settlement proceeds upon the happening of either of two events: 1. a judgement is entered which is insufficient to compensate a subrogation claim of the workers’ compensation insurance carrier, or, 2. a settlement.
As explained by the Court of Appeals in the case of Hieb v. Lowery:
Under Subsection (f), therefore, the Commission is specifically granted exclusive authority to distribute third party proceeds subject to Subsection (j) which, when applicable, accords that authority to the Superior Court (citation omitted). Further, as noted earlier, ‘the two events which trigger the authority of a judge to exercise discretion [under Subsection (j)] in determining or allocating the amount of ...disbursement are (1) a judgement insufficient to compensate the subrogation claim of the workers’ compensation insurance carrier or,(2) a settlement. (Emphasis added.) Hieb v. Lowery, 134 N.C. App. 1, 14, 516 S.E.2d 621, 629(1999)
Our Court of Appeals held in Wiggins v. Busranger Fence Co., that the 1991 amendment to Subsection (j) made clear the legislature’s intent that subsection (j) is independent from the other § N.C.G.S. §97-10.2 subsections..., and...that the Superior Court has discretionary authority to determine the lien amount. (Emphasis added.) Wiggins v. Busranger Fence Co., 126 N.C. App. 74, 77, 483 S.E.2d 450, 452 (N.C. Ct. App. 1997).
N.C.G.S. §97-10.2(j) provides specifically that one of the things the judge “shall determine, in his discretion” is, “the amount of cost of the third party litigation be shared between the employee and the employer.” Cost is not defined in the statute. However, it is not unreasonable to conclude that “cost” as used in subsection (j) includes attorney’s fees, since attorney fees are mentioned in other sections of the statute.
In Hogan v. Johnson Motor Lines, 32 N.C. App. 288, 248 S.E.2d 61 (1978), the workers’ compensation carrier appealed an Industrial Commission order directing disbursement of settlement proceeds, whereby the employee and the employer shared proportionately in the payment of attorney fees. The employer and the insurance carrier argued that N.C.G.S. §97-10.2(f) as then written was unconstitutional because it abrogated the employer’s freedom to contract and deprived him of property without due process of law. The Court of Appeals rejected the employer/insurance carrier’s arguments and found that the statute was constitutional in directing apportionment of the attorney’s fees. The Hogan Court adopted an Illinois Supreme Court decision which held that not to require the employer to share in the fee charged to recover money from which the employer would be paid would bestow an unfair unjust enrichment upon the employer.
And finally, it is clear that N.C.G.S. §97-10.2(f) grants the Industrial Commission the authority to disburse by order third party settlement proceeds in situations where the jurisdiction of the Superior Court does not attach. Subsection (f) specifically provides for the payment of the employee’s attorney fees by both the employer and the employee.
Too often attorneys make the mistake of settling the underlying car accident claim without dealing with the worker compensation lien. This can have disastrous effects on the client. Our experienced attorneys account and plan for the workers compensation lien through the course of you claim. We are experienced in dealing with lien through negotiation or the courts. We have successfully reduced and eliminated liens. To discuss your case please contact us at your convenience. You will speak with a lawyer who will discuss all of your rights and options.