By: LeRyan Lambert, Associate, Atlanta

“Is it worth the costs to protect our subrogation rights?” This is a universal client inquiry when an employee initiates civil litigation against a third party for work injuries and medical costs paid in a workers’ compensation claim. The response is never easy, and unfortunately, is analogous to winning the lottery. You have to play to win — all the while knowing someone else will likely cash in your hopes.

O.C.G.A. § 34-9-11.1 purports to provide employers/insurers with subrogation rights in third party civil actions for paid workers’ compensation benefits. However, this lien is only recoverable if the injured employee has been fully and completely compensated with regards to all economic and non-economic damages. This made-whole analysis considers the amount of workers’ compensation benefits, all special and general damages incurred, and the employee’s recovery. Not only is this standard extremely vague, but employers/insurers also have the burden of proof. City of Warner Robins v. Baker, 255 Ga. App. 601 (2002).

Georgia decisions have made clear that the only practical way to meet this burden is through a special jury verdict allocating medical costs. However, reaching this is like winning the lottery. By some estimates, trials resolve less than 5% of civil actions. Most are resolved by way of settlement. Moreover, where liens exist, non-lien holding parties’ interests align. Plaintiffs wish to pocket maximum recovery, defendants want to settle for as cheap as possible, and neither want intervenors interfering in discovery or at trial. Thus, plaintiffs and defendants unfailingly cast aside all differences and mutually strategize around the lien by settling with unspecified damages and “not made whole” language.

As a consolation, Georgia courts have assured employers/insurers the absolute right to actively intervene. See Dept. of Admin. Svcs. v. Brown, 219 Ga. App. 27 (1995); Canal Ins. Co. v. Liberty Mut. Ins. Co., 256 Ga. App. 866 (2002); City of Warner Robins v. Baker, 255 Ga. App. 601 (2002); Kroger v. Taylor, 310 Ga. App. 298 (2013). This theoretically allows employers/insurers to push a case to trial if the parties will not honor their liens. Yet, the Georgia Court of Appeals in Best Buy Co. v. McKinney, 334 Ga. App. 42 (2015) evidenced that these rights are illusory.

In the Best Buy v. McKinney matter, despite Best Buy’s intervention and active engagement, the other parties attended mediation, secretly settled, and dismissed the action without its consent. Best Buy demanded an evidentiary hearing to prove that the plaintiff was made whole. It introduced testimony regarding the workers’ compensation benefits paid in addition to expert testimony concluding that the plaintiff received at least 30% more than a jury would have awarded. This novel evidentiary strategy was in response to multiple decisions indicating that the amounts of medical costs and civil recovery cannot sufficiently prove an employee was made whole without additional evidence. See Paschall Truck Lines v. Kirkland, 287 Ga. App. 497 (2007); Austell Healthcare v. Scott, 308 Ga. App. 393 (2011); Georgia Elec. Membership Corp., 266 Ga. App. 452 (2004). Of note, the plaintiff introduced no contrary evidence.

The trial court not only found that Best Buy failed to meet its burden, but admitted that it could not find a single case in the history of the statute where an employer/insurer recovered on its subrogation lien after a settlement. The Georgia Court of Appeals affirmed the lower court’s decision without guidance.

The McKinney decision makes clear that unless a case proceeds to a jury trial between the employee and civil defendant, an employer/insurer cannot merely intervene to assure a special verdict form and to present evidence at a hearing to protect its lien. It apparently must also conduct extensive discovery and depositions, retain expert testimony, and force its issue to be heard by a jury despite having no such right. This is unquestionably expensive and may still fail since the burden of employers/insurers continues to be vague and ever increasing. Yet, there is always a chance that a case will proceed to a jury trial which can effectively enforce the lien. Additionally, intervention can also be used to drive up costs and create risks for the parties and lure them into a contractual agreement to protect a lien.

While securing subrogation is grim, intervention can otherwise be used strategically. Waiver of a lien can also be used to reduce the value of the workers’ compensation claim. Participation in civil litigation can create discovery and impeachment opportunities that might otherwise be unavailable in the workers’ compensation claim. Finally, ongoing intervention with varying litigation tactics may eventually lead to guidance and enforcement from the courts.

Ultimately, the question of worth is difficult to quantify. There is no easy answer. With the exception of alternative strategic uses, subrogation efforts are like playing the lottery.