Lien on me… and on Scott & Andy for a Section 2363 Holiday Insight

Today we have two very special guest bloggers, Andy Carmine and Scott Mondell, who — if they were holiday figurines — would be The Elf on the Shelf and the Mensch on the Bench (can’t you just see Andy in tights and Scott in a tallit?) So join us for a very special analysis below one of the most recent rulings from our Supremes - ACW Corp. v. Maxwell - which addresses the interplay between the commutations under Section 2358 and subrogation and lien reimbursement entitlement under Section 2363.

Once every several years the Delaware Supreme Court renders a decision that causes the workers’ compensation community to re-think a certain aspect of its practice. Cases like Duvall (do most of you even recall the usual exertion doctrine?), Cephas (do you recall thinking that every Delawarean would go out on a stress claim, collapsing the local economy and the workers’ compensation system?) and Watson (would this be the end of Labor Market Surveys?) come to mind. Each of these cases seems to have resulted in a temporary Chicken Little “The sky is falling, the sky is falling!” moment.

After a thorough read of the Supreme Court’s decision in ACW Corp. v. Maxwell, it is our conclusion that the same will hold true after our community has had a moment to review and reflect upon the Court’s holding. In other words, as in the cases of Duvall, Cephas and Watson, the way we practice lien and subrogation law will not be substantially effected by and will essentially return to the stasis that existed prior to the Supreme Court’s decision.

This blog submission will address (1) what the Supreme Court’s decision did not do and (2) what the Supreme Court’s decision did.

The following have not been affected by the Supreme Court’s decision:

1. There has been no effect at all on the fact that an employer/carrier may collect its lien in its entirety against a claimant’s third-party recovery (subject to the PIP carve out clause) and such lien recovery includes “any amounts paid or payable under the Workers’ Compensation Act.”

2. The employer/carrier’s PIP carve out recovery against the liability carrier has not been affected at all. Under the PIP carve out clause, an employer/carrier cannot collect such portion of its lien directly against the claimant, but can collect that portion of its lien against the liability carrier (only if there are available liability limits left). This is because, by definition, any benefits the employer/carrier paid that could have been paid under available Delaware PIP coverage are, by definition, wage loss and medical bills, i.e., benefits recoverable “in an action in tort.”

3. In a subrogation action against the liability carrier, the employer/carrier can still recover any benefits recoverable “in an action in tort.” Therefore, an employer/carrier’s recovery of previously paid medical bills and wage loss against a liability carrier has not been affected at all.

4. Similarly, in a subrogation action against the liability carrier seeking to recover commuted benefits that are identified as future medical bills or wage loss, the employer/carrier can still recover any such benefits (with appropriate evidence).

To the extent an employer/carrier previously paid permanency or disfigurement benefits or to the extent a commutation is comprised of specific permanency or disfigurement benefits, it might still be able to recover such benefits from a liability carrier in a subrogation action if the employer/carrier is able to convince the trier of fact with appropriate specific testimony, that such benefits are recoverable “in an action in tort,” even if not called “permanency” or “disfigurement” in the tort context.

To reiterate the foregoing, the employer/carrier retains all lien recovery rights against a claimant for any benefits paid under the Workers’ Compensation Act (i.e., specifically to include permanency, disfigurement and benefits paid pursuant to a commutation).Thus, it is our opinion that the impact of the Supreme Court’s decision is very narrow since it does not impact lien rights, nor the vast majority of subrogation rights. The very narrow impact is upon an employer’s/carrier’s ability to pursue subrogation rights against a liability carrier for benefits payable under the Workers’ Compensation Act, but not recoverable “in an action in tort.” Arguably, those benefits include permanency and disfigurement and some benefits paid pursuant to a commutation.

So, the question remains: what can a workers’ compensation carrier do to lessen the impact of the ACW Corp. v. Maxwell decision. Of course, the decision only impacts cases in which there is a potential third-party recovery. In such instances, one obvious strategy is for a carrier to refuse to waive its lien against the claimant’s third-party recovery in cases in which it has paid permanency or disfigurement or in which a commutation includes a component representing same.

The Supreme Court’s decision makes clear that a lien remains recoverable in full from a claimant, whereas a subrogation interest may be only partially recoverable against a liability carrier. Thus, it is the authors’ belief that any impact as a result of this case will be felt primarily by claimants since workers’ compensation carriers may be reluctant to commute cases with lien waivers.

Ultimately, it is our belief that, as history has shown following other Supreme Court decisions, our community and practice will find a reasonable stasis.

Scott Mondell & Andy Carmine