assignment of workers compensation lien

Managing workers’ compensation liens in third-party actions

Here are strategies when your case has both workers’ compensation and third-party pi claims.

An individual who is injured on the job typically receives workers’ compensation benefits, which includes disability payments and medical care related to the work injury. Although the injured employee is generally barred from suing the employer due to the workers’ compensation exclusive remedy rule (Lab. Code, § 3602, subd. (a).), the employee may bring a personal injury claim against a third party who shares responsibility for the injury. (Lab. Code, § 3852.) To prevent a double recovery, the employer has the right to be reimbursed for the workers’ compensation benefits it has previously provided to the employee from their third-party recovery. (Lab. Code, §§ 3852, 3853, 3856, subd. (b).) This is known as a workers’ compensation lien.

There are special considerations and procedural requirements related to workers’ compensation liens, which are very different than with private health insurance, medical providers, MediCal, and Medicare. Therefore, when representing a client in a third-party personal injury lawsuit, it is important to know your client’s legal obligations to protect the employer’s lien and the ways in which you can reduce or extinguish the lien to maximize your client’s recovery.

Notice of third-party action

The employee is required to notify the employer “forthwith” of their third-party lawsuit by serving the employer and workers’ compensation carrier with a copy of the complaint by personal service or certified mail. (Lab. Code, § 3853.) Although not specifically required by the code, it is advisable to also attach the answers filed by the defendant(s) to the notice and explicitly state that the employer’s negligence is at issue in the action. Defendants commonly plead employer negligence or fault of others generally. By providing this additional information, the employer can make an informed decision regarding how to proceed. This also prevents the employer from later claiming that it did not have notice that its fault was at issue.

The employer (actually, the WC insurance carrier) then has a choice of filing a notice of lien, bringing an action directly against the third party, or intervening in the plaintiff’s case any time before trial to protect its right to be reimbursed for workers’ compensation benefits it paid. (Lab. Code, §§ 3852, 3853, 3856, subd. (b).) When the employer merely files a lien and the settlement was achieved solely by plaintiff’s counsel’s efforts, the most the employer will be able to recover is the lien amount minus its pro rata share of costs and attorney fees. (Lab. Code, § 3860, subd. (c).)

More than a lien is required

Filing a lien is insufficient to protect the employer’s right to reimbursement when there are allegations of employer negligence. Instead, the employer must file a complaint in intervention before trial or dismissal of the action. ( Ibid. ; American Home Assurance Co. v. Hagadorn (1996) 48 Cal.App.4th 1898, 1906.)

If the employer has intervened, it is a party to the case and is entitled to participate in all activities in the litigation. The employer may propound written discovery and notice depositions, but it is also required to respond to discovery propounded on it by the plaintiff or defendant.

During litigation, the interests of the plaintiff and the employer-intervenor are essentially aligned. They share the common goal of establishing and maximizing the defendant’s fault, which is the only way that the plaintiff can recover their damages and the only way the employer can get reimbursed for the benefits it has paid. The employer can thus become an ally against the defendant in discovery and in opposing a motion for summary judgment.

Settling the third-party action

When the employer has not intervened, the plaintiff may settle their case without the consent of the employer as long as it is exclusive of the amount of workers’ compensation benefits paid. ( American Home Assurance Co. v. Hagadorn (1996) 48 Cal.App.4th 1898, 1904.) Such settlements do not eliminate the employer’s right to reimbursement. (Lab. Code, § 3859.) The plaintiff must give the employer notice of an impending settlement to allow it a reasonable opportunity to file a complaint in intervention to try to recover the benefits it has paid. (Lab. Code, § 3860, subd. (a); American Home Assurance Co. , supra , 48 Cal.App.4th 1898 at 1908; O’Dell v. Freightliner Corp. (1992) 10 Cal.App.4th 645, 657.) If the employee fails to provide sufficient notice to enable the employer to timely assert its claim, the employer can sue the employee for breach of the duty to notify. ( American Home Assurance Co. , supra , 48 Cal.App.4th 1898 at 1907.)

There are no bright line rules as to how much notice is appropriate. What is reasonable notice will depend on the circumstances. Thirty days’ notice before dismissal is probably reasonable if you had already given proper notice of employer fault being at issue early in the litigation. If earlier notice had not been given, you will want to allow more time before dismissing the action. For example, in O’Dell v. Freightliner Corp. (1992) 10 Cal.App.4th 645, the court found that seven weeks’ notice was insufficient when the plaintiff failed to provide the employer notice at the outset of litigation, failed to notify it of the settlement, and then dismissed the action one week before trial.

It is generally a good practice to serve a formal notice of settlement by personal service or certified mail to the employer and workers’ compensation carrier stating that the plaintiff claims that their employer is not entitled to reimbursement of compensation benefits paid on behalf of plaintiff due to its own negligence in contributing to plaintiff’s injury based on Witt v. Jackson (1961) 57 Cal.2d 57. Although not required, you may want to state in your notice the earliest date by which the plaintiff intends to dismiss the action with prejudice so that it is clear how time sensitive the matter is for the employer to respond. After receipt of the notice of settlement, the employer must then intervene before the entire third-party action is dismissed or the lien will be extinguished. (Lab. Code, § 3853.)

Where the employer has intervened, you can still settle around the employer, but you will need to protect the lien until it is resolved and agree to defend, indemnify, and hold harmless the third-party defendant against the employer’s claim.

Litigating the lien

The plaintiff has an equitable right to litigate the issue of employer fault as an offset to the intervenor’s right of reimbursement. ( Witt v. Jackson (1961) 57 Cal.2d, 57; see also, Rosales v. Thermex-Thermatron, Inc. (1998) 67 Cal.App.4th 187, 197, noting modification of Witt per Prop. 51.) Plaintiff’s right to litigate against the intervenor continues despite any settlement with a defendant and even where the defendant is dismissed. (See, Ellis v. Wells Manufacturing, Inc. (1989) 216 Cal.App.3d, 312.)

The value of the lien is governed by comparative fault principles. ( Associated Construction & Engineering Co. v. WCAB (1978) 22 Cal.3d 829, 842-843.) When evaluating an employer’s claim of reimbursement and credit, the amount of settlement is irrelevant to the determination of the employee’s actual total damages. ( Id. at 843.) Total damages means all of the economic and non-economic damages that the plaintiff has suffered from the incident regardless of settlement amount. The employer’s claim for reimbursement may be defeated if the employer’s proportionate share of compensation owed due to its own fault exceeds the reimbursement value.

For example, suppose the plaintiff’s total damages are $1 million, the employer has paid $300,000 in benefits, and the employer is found to be 20 percent at fault, i.e., responsible for $200,000 in damages. Under this scenario, the employer would be entitled to recover $100,000, which is the amount that exceeds the employer’s percentage share of the plaintiff’s total damages. If the employer was found to be 30 percent or more at fault, the employer would receive no reimbursement on its lien. However, the employer maintains the right to make a petition for credit in the Workers’ Compensation Appeals Board, which would be relief against future liability for benefits once it has paid its percentage share of plaintiff’s damages.

To maximize your client’s recovery from the third-party settlement, you will want to demonstrate as much employer fault and as much damages as the evidence will allow to greatly reduce or even eliminate the lien. It is helpful to understand the general duties that all employers have to their employees under the Labor Code to develop a theory regarding employer fault in your case.

Employers have a duty to provide employees with a safe place to work. ( Levels v. Growers Ammonia Supply Co. (1975) 48 Cal.App.3d 443, 451-452; Lab. Code, § 6400.) An employer’s duty to maintain a safe workplace encompasses many responsibilities, including the duty to periodically inspect the workplace to discover and correct dangerous conditions and to adequately train and warn of their existence. ( Bonner v. WCAB (1990) 225 Cal.App.3d 1023.) Every employer is required to provide all necessary safety devices and safeguards for their employees. (Lab. Code, §§ 6401, 6402, 6403.) Employers are required to develop and implement an Injury and Illness Prevention Program. (Lab. Code, § 3203.) The employer’s statutory duty under the Labor Code is greater than the duty of care imposed under common law principles. ( Conner v. Utah Construction and Mining Co. (1964) 231 Cal.App.2d 263, 271-272.)

Review the OSHA records for the incident to find citations showing the employer’s safety violations and other evidence of employer fault. Borrow the evidence and arguments that the defendant used during the litigation to support employer fault. Because the employer has many safety-related duties under the Labor Code, you should be able to find violations to establish some level of employer fault in most cases. If you are headed towards trial, you will also want to retain a workplace safety expert to bolster your position.

Frequently, the employer (normally, its workers’ comp carrier) is not interested in going to trial over its lien. You should have greater leverage because you know the evidence better, you are a more experienced trial lawyer, the employer has the burden of establishing its reimbursement claim, and the employer does not want to spend money on trial. To expeditiously resolve the employer’s claim, send its attorney a letter explaining how the lien has no monetary value due to the amount of plaintiff’s total damages and the employer’s percentage of fault that you expect to prove at trial. Propose that you settle the employer’s claim with a waiver of costs and a dismissal as well as an agreement that the settlement would not prejudice the employer’s ability to have the credit issue resolved before the Workers’ Compensation Appeals Board.

Understanding the mechanics of workers’ compensation liens is key to protecting your client from being sued for breach and maximizing your client’s net recovery from a third-party settlement. Be sure to give the employer notice that its fault is at issue as early as possible in the litigation and when settlement is impending. Then, after settling with the third-party defendant, use your superior bargaining position to persuade the employer to walk away from its lien.

Kimberly Wong

Kimberly Wong is a partner and litigation manager at Coopers LLP in San Francisco where she litigates and manages personal injury cases involving negligence, premises liability, wrongful death, products liability, and industrial injuries. Kimberly is a frequent lecturer and author of published articles on various topics related to personal injury litigation. She has been selected by her peers to the Northern California Super Lawyers Rising Star list each year from 2012 to 2017 and the Northern California Super Lawyer list from 2018 to the present. She has had several settlements featured in The Recorder's annual report of "California's Million-Dollar Settlements." Kimberly has served in various leadership roles within the Consumer Attorneys of California, including as an officer, a board member, Chair of the Diversity, Equity & Inclusion Committee, and Chair of the Women's Caucus.

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Workers’ compensation liens and credit issues

When there is a third-party settlement in addition to wc benefits, the complexity comes in layers.

It’s simple – if your client is on the job as an employee and he or she gets injured, your client is entitled to workers’ compensation benefits. (Lab. Code, § 3600.) In most instances, the law of the land makes workers’ compensation an injured worker’s sole and exclusive remedy . However, if another person or entity caused the worker’s injury, you may have a viable third-party claim. If no one other than the employer is responsible for the injury and an exception to the exclusive remedy rule applies, you may be able to sue the employer in civil court.

Where the employer has no fault in causing the harms and losses suffered by an injured employee, the employer and their workers’ compensation carrier enjoy the right to recoup workers’ compensation benefits paid in the event the injured worker recovers from a third-party defendant. The right to recovery may come in the form of a lien claimant, a plaintiff in intervention, or as a petition for credit before the WCAB for an offset against further benefits. However, where the employer is arguably at fault for some, or a substantial share of fault, they may (in full or in part) lose their right to subrogation.

Third-party claims

Labor Code section 3852 provides: “The claim of an employee, including, but not limited to, any peace officer or firefighter, for compensation does not affect his or her claim or right of action for all damages proximately resulting from the injury or death against any person other than the employer.”

If the employee brings a third-party action, the employee must serve a copy of the complaint on the employer and file proof of service of same. This rule also applies to employers who file a third-party claim. (Lab. Code, § 3853.)

“If either the employee or the employer brings an action against such third person, he shall forthwith give to the other a copy of the complaint by personal service or certified mail . Proof of such service shall be filed in such action. If the action is brought by the employer or employee, the other may, at any time before trial on the facts, join as party plaintiff or shall consolidate his action, if brought independently.” (Lab. Code, § 3853.)

Note : Failure to properly place the employer on notice of your third-party action may later reduce your ability to negotiate the workers’ compensation lien they will eventually assert, as it may prevent an assertion under common fund principles, as later discussed herein.

Tip : When placing the employer/WC carrier on notice of the claim, seek their participation and active involvement by giving them a list of everything you need in writing, such as copies of all medical and billing records, employment file, wage records of the employee, investigation reports concerning the incident, etc. The employer/WC carrier will rarely oblige and this will strengthen your future argument in support of a common fund reduction to their recovery rights.

Labor Code section 3852 provides:

Any employer who pays, or becomes obligated to pay compensation, or who pays, or becomes obligated to pay salary in lieu of compensation, or who pays or becomes obligated to pay an amount to the Department of Industrial Relations pursuant to section 4706.5, may likewise make a claim or bring an action against the third person. In the latter event, the employer may recover in the same suit, in addition to the total amount of compensation, damages for which he or she was liable including all salary, wage, pension, or other emolument paid to the employee or to his or her dependents.

Labor Code section 3850, subdivision (b) provides that the term “employer” includes the actual employer or the employer’s workers’ compensation insurer.

What can their lien include?

The workers’ compensation carrier is entitled to recover in the same third-party lawsuit with the employee, the total amount of its expenditures for “compensation,” and any other special damages under Section 3852. (Lab. Code, § 3856, subd. (c).)

California law then defines “compensation” to mean compensation under this division and includes every benefit or payment conferred by this division upon an injured employee , or in the event of his or her death, upon his or her dependents, without regard to negligence. (Lab. Code, § 3207.)

“Compensation” therefore includes the following:

Medical and hospital expenses including nurse case manager expenses. (Lab. Code, §§ 4600-4608.)

Death benefits and funeral costs. (Lab. Code, §§ 4700-4709.)

Temporary disability (i.e., wage loss/replacement) payments for time lost from work. This is a wage replacement that generally pays up to two-thirds of an injured person’s salary for up to 104 weeks subject to a statutory maximum. Some employers have additional wage-replacement policies and those are included as well. (Lab. Code, §§ 4650-4663.)

Permanent disability payments (i.e., loss of earning capacity) designed to compensate the injured employee for loss of ability to compete in the open labor market. [Where the Workers’ Compensation Appeals Board (WCAB) has made a permanent disability award, but the award has not yet been paid, such as a Stipulation & Award with future payments to be made, then the present value of the future payments may also comprise the lien.] ( Smith v. County of Los Angeles (1969) 276 Cal.App.2d 156, disapproved of on other grounds by Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1.) (Lab. Code, §§ 4650-4663.)

Workers’ compensation also expends cost for rehabilitation benefits, which are recoverable benefits. (Lab. Code, §§ 4635-4647.)

Note : An employer can request increases in the lien after judgment in a civil case, but before judgment is satisfied. (Lab. Code, § 3857.)

Tip : Audit the WC lien! You must request/demand the “Itemized Printout of Benefits” from the Workers’ Compensation carrier and assess every penny they claim to have spent on the claim to reach the alleged “total lien amount.” All workers’ compensation carriers and attorneys are familiar with this since, pursuant to California Code of Regulation, Title 8, section 10607, workers’ comp attorneys demand an itemized printout routinely.

What the WC lien cannot include…arguably

This is a gray area of the law as there is no definitive answer; therefore, a good argument can often carry the day. The argument you need to make is that there is no category of damages on the verdict form to identify business expenses of the employer. As stated by the Supreme Court in Breese v. Price (1981) 29 Cal.3d 923, “[I]t would be anomalous for an employer or insurer to recover damages greater, in nature or amount, than those afforded the injured employee.” Arguably, the following items may not be recoverable by the employer’s lien:

Permanent disability where there has not yet been an award or certainty as to the amount of the future payment. If permanent disability has already been paid, which is often the case in the form of an advance or permanent disability advance (PDA), then permanent disability payments may be part of the lien.

Legal costs, defense attorney fees, other expenses such as copy service and investigation (e.g., sub-rosa).

Case management that is a collaborative process of a medical assessment, bill audit, medical treatment reasonableness determination, utilization review.

Utilization Review (UR) and Independent Medical Review (IMR)

Although this process is now mandated by California law under Labor Code section 4610, you should argue that this process is not a benefit or payment conferred on an injured employee. While California law may support reimbursement of such expenses, in many cases the WC carrier abuses the process to wrongfully deny the employee benefits.

Medical examiners cost: PQME/QME & AME

Remember that these are not treating physicians, they are experts, similar to an IME. Under current WC law these doctors cannot dictate medical treatment. In most situations they are used when the employee or applicant disagree on the PTP’s report and findings. Plaintiffs, in many instances, finds themselves in a worse situation following these exams as their primary physicians are often more liberal to the plaintiffs’ cause. Again, you should argue that this process is not a benefit or payment conferred on an injured employee and it is certainly not medical treatment.

Tip : In a case with a favorable QME/AME, particularly where the WC attorney helped the third-party case with these experts, don’t try to argue against the QME/AME’s costs. In many instances you may even be able to work with the subrogation attorney in getting your client to a favorable QME/AME to help build your third-party claim. We often take QME/AME’s depositions at the WC carrier’s expense. Sometimes, we see extensive AME/QME costs that can really drive up the lien, which pressures the third-party defendant into settlement.

Subrogation argument

While most subrogation attorneys make assertions without any legal support, we do see the occasional good argument. We have seen an argument based on a “cost of mitigation” effort. One Court of Appeal decision does allow plaintiffs to recover the cost of mitigation efforts as a recoverable item of damages. ( Kleinclause v. Marin Realty Co ., (1994) 94 Cal.App.2d 733.)My takeaway is: Argue against this theory in your work comp subrogation negotiations, and argue for it in your third-party negotiations.

Note : When the subrogation attorney for the employer/WC carrier argues to recover costs or expenses beyond the basic indemnity and medical benefit payments, ask them for legal authority in support of their position. Put the burden on them. The odds are they won’t be able to provide you with any authority and you’ll be able to effectively argue down the lien.

Lien versus credit

In basic form, the lien constitutes the reimbursement rights of the employer based on benefits paid to the employee up to the time you satisfy the lien. Credit, on the contrary, represents the employer’s right to halt any further benefits by the employer to the employee until the employee has exhausted his net proceeds of any third-party settlement or award.

Credit is based on Labor Code section 3858, which states: “After payment of litigation expenses and attorneys’ fees fixed by the court pursuant to section 3856 and payment of the employer’s lien, the employer shall be relieved from the obligation to pay further compensation to or on behalf of the employee under this division up to the entire amount of the balance of the judgment . . .”

An employer is entitled to claim a credit against future compensation benefits which may be payable to the employee to the extent of the employee’s net recovery from the third party. (Lab. Code, § 3861.) However, if the employer’s concurrent negligence contributes to the employee’s injury, its credit rights may be reduced or defeated depending on the extent of its negligence. ( Associated Construction and Engineering Company v. WCAB (1979) 22 Cal.3d 829.) Credit applies to any benefit of compensation including indemnity, medical treatment, lien claims, attorney’s fees, voucher, med-legal cost, and even penalties.

Credit only applies where the work comp claim is still ongoing with the right to future benefits. You do not need to consider credit issues where the work comp case is closed via C&R. Work comp claims will arise in one of the following situations:

Open and ongoing

This is likely the case in at least 50 percent of your third-party cases since most WC cases take even longer to resolve than civil cases. Likewise, WC seems to delay settlement when they know a third-party settlement is down the road that will potentially relieve them from further payments.

Stipulation with request for an award (Stip)

This settles all issues and gives lifetime medical benefits. Client may receive indemnity and/or pension payments every other week, possibly for life.

Findings and Award (F&A)

Same concept as a Stipulation but after a finding of fact by the trial court.

Compromise and Release (C&R)

The claim is 100 percent closed and money paid out in lump sum.

You need to know at what stage the WC claim is in and understand its ramifications when you settle the third party. If the WC claim is open and ongoing when you settle the third party, the WC attorney will likely not be paid for any work he has done on the case including litigation cost he has expended.

The employer’s pursuit for subrogation

The employer has three options in pursuing reimbursement for workers’ compensation benefits from a third-party claim:

1) The employer may file suit in his or her own name under Labor Code section 3852. Even if the employer has not paid any benefits, he or she may still file a lawsuit in anticipation of future benefits.

2) The employer may file a Notice of Lien asserting first lien rights on the proceeds of any judgment obtained by an injured employee in the employee’s third-party action. (Lab. Code, § 3856, subd. (b).) [Note: As a lien claimant, the employer is not a party, and has no standing to appeal. ( Bates v. John Deere Company (1983) 148 Cal.App.3d 40).]

3) The employer may intervene into an existing action brought by the plaintiff/employee pursuant to Labor Code section 3853, which provides for intervention any time before trial. (See also Mar v. Sakti International Corp . (1992) 9 Cal.App.4th 1780.) If the employer intervenes in the action, it is a party and all of the defenses that the third-party defendant has against the employee/plaintiff are also available against the intervener. ( Hubbard v. Bolt (1983) 140 Cal.App.3d 882).The right to intervene into an existing action is also available to the injured worker.

Tip : If the employer timely files their lawsuit against the third-party defendant and the plaintiff misses the SOL, the plaintiff can still intervene into the employer’s action and will not be barred by an SOL defense.

Resolving the lien with a fault-free employer

There are two scenarios to consider here. The first – where the employer is fault free; the second – where the employer is not. We will first address the former. [Note: It is good practice to inform the employer when you begin settlement discussion with the third party. And, you are required to notify the employer of any settlement pursuant to Labor Code section 3860.Failure to provide the proper notice and, in some instances, obtain employer consent may entitle the employer to their full claim for reimbursement. (See Lab. Code, § 3860, subds. (a) & (b).)]

Settlement effectuated with or without suit under Labor Code 3860

Labor Code section 3860, subdivision (c) –“Where settlement is effected, with or without suit, solely through the efforts of the employee’s attorney, then prior to the reimbursement of the employer , as provided in subdivision (b) hereof, there shall be deducted from the amount of the settlement the reasonable expenses incurred in effecting such settlement, including cost of suit, if any, together with a reasonable attorney’s fee to be paid to the employee’s attorney , for his services in securing and effecting settlement for the benefit of both the employer and the employee.” (Emphasis added.)

Labor Code section 3860, subdivision (e) – “Where both the employer and the employee are represented by the same agreed attorney or by separate attorneys in effecting a settlement, with or without suit, prior to reimbursement of the employer , as provided in subdivision (b) hereof, there shall be deducted from the amount of the settlement the reasonable expenses incurred by both the employer and the employee or on behalf of either, including cost of suit, if any, together with reasonable attorney’s fees to be paid to the respective attorneys for the employer and the employee, based upon the respective services rendered in securing and effecting settlement for the benefit of the party represented.” (Emphasis added.)

Where there is a judgment

Labor Code section 3856, subdivision (b) states: “If the action is prosecuted by the employee alone , the court shall first order paid from any judgment for damages recovered the reasonable litigation expenses incurred in preparation and prosecution of such action, together with a reasonable attorney’s fee which shall be based solely upon the services rendered by the employee’s attorney in effecting recovery both for the benefit of the employee and the employer. After the payment of such expenses and attorney’s fee the court shall, on application of the employer, allow as a first lien against the amount of such judgment for damages, the amount of the employer’s expenditure for compensation with any amounts to which he may be entitled as special damages under section 3852.” (Emphasis added.)

Labor Code section 3856, subdivision (c) states: “If the action is prosecuted both by the employee and the employer , in a single action or in consolidated actions, and they are represented by the same agreed attorney or by separate attorneys, the court shall first order paid from any judgment for damages recovered, the reasonable litigation expenses incurred in preparation and prosecution of such action or actions, together with reasonable attorneys’ fees based solely on the services rendered in each instance by the attorney in effecting recovery for the benefit of the party represented. After the payment of such expenses and attorney’s fees the court shall apply out of the amount of such judgment for damages an amount sufficient to reimburse the employer for the amount of his expenditures for compensation together with any other amounts to which he may be entitled as special damages under section 3852.” (Emphasis added.)

So when the subrogation attorney/ WC carrier argues that “they have the first lien”….yes, they do…after your cost and attorney’s fees have been paid. “Where the settlement is insufficient to satisfy the employer’s claim and compensate counsel, the attorney’s fees and cost take priority.” ( Quinn v. State of California (1975) 15 Cal.3d 162.)

The distribution of funds

Labor Code section 3860 is clear – first the proceeds are to be used to pay the litigation cost and attorney’s fees; second they are to be used to pay the employer’s reimbursable compensation claims; and third the plaintiff will receive any balance remaining. ( Summers v. Newman (1999) 20 Cal.4th 1021.)

In Summers v. Newman , the California Supreme Court held where an “employer and employee are separately represented and the joint efforts of both counsel contribute to a settlement with the third party, the employer’s fair share of attorney’s fees is determined by reference to the benefit conferred on the employer which is the primary criterion used to determine the fee paid to the employer’s attorney. We conclude the amount of this fee, together with the employer’s fair share of other litigation expenses, is to be deducted from the reimbursable compensation cost paid to the employer.” ( Id. at 1035.)

For instance, if the employer lien is $150,000 and the employer intervenes and aggressively fights for reimbursement and is eventually awarded $150,000, any claim for cost and attorney’s fees by the firm representing the employer comes out of that same $150,000 and not from any other source.

Common Fund Doctrine

The issue is based on whether the employer had “active participation” or “passive participation.” If the employer is merely a lien claimant, you can argue they are a passive participant and common fund principles apply. If the employer intervenes and has “actively participated,” then the common fund doctrine or equitable apportionment is not allowed. (See Kavahaugh v. Sunnyvale (1991) 233 Cal.App.3d 903). However, just because the employer intervenes does not automatically make their participation active. The intervener has the burden of proof and, in more instances than not, they are passive beneficiaries. The trier of fact for “active versus passive” participation is the trial court and the courts are in disagreement to some degree as to whether you can apportion the level of active participation in calculation of attorney’s fees under a common fund theory.

Expect the employer to remind you that “you do not represent the employer” and they do not have to reduce their lien. As stated in Quinn v. State of California (1975) 15 Cal.3d 162, 176, “Yet if the employer receives his fair share of the recovery, he must bear his fair share of the cost of the recovery.”

For the employer to avoid paying its share of fees and costs, they have the burden to produce evidence of a “conscientious effort in the circumstances to address the substantive issues encompassed by the lien holder’s case.” ( Gapusan v. Jay (1998) 66 Cal.App.4th 734, 745-746.) Employer has the burden to show their active participation, and merely filing a complaint and showing up to a few depositions will not suffice. “[A] token appearance insufficient.” ( Id. at 745-746.) Another court in Hartwig v. Zacky Farms (1992) 2 Cal.App.4th 1550 stated, “merely retaining separate counsel or filing a complaint in intervention or a lien, with nothing more, does not satisfy the standard of ‘active participation.’”

Settlement proceeds allocated to independent claim

Some claims, such as a wife or husband’s claim for loss of consortium, are not subject to the employer’s claim for credit. ( Gapusan v. Jay (1998) 66 Cal.App.4th 734.) Use with caution, as in every third-party case where you have a spouse, you have the ability to make a loss of consortium claim and specifically assign a portion of the settlement to the spouse. When WC comes asking for the net recovery to the plaintiff/employee, you need only give the net recovery to him/her and not include the amount assigned to the loss of consortium claim for the spouse. Be fair and reasonable. The courts have the power and authority to re-allocate funds if it appears this was done to unfairly circumvent the employer’s right to credit.

UM/UIM recoveries

There is no right to a lien or credit when the policy belongs to the employee. (See Ins. Code, § 11580.2, subd. (c)(4) and Rudd v. California Casualty General Inc. Co. (1990) 219 Cal.App.3d 948, 954.) The UM/UIM carrier may, however, have an offset for benefits paid by workers’ compensation carrier. ( Ibid .)

Malpractice actions, both medical and legal

While not 100 percent impossible, it is extremely difficult and rare for the Employer/WC Carrier to assert a valid right of lien or credit in a medical malpractice action. (See Graham v. Workers’ Comp. Appeals Board (1989) 210 Cal.App.3d 499.)

There is no right to a lien or credit for the employer for monies recovered in a legal malpractice action arising out of the incident giving rise to industrial benefits. (See Soliz v. Spielman (1974) 44 Cal.App.3d 70.)

Example scenarios with no employer negligence

“Passive Participation”

Assume the following: The employer filed a notice of lien in the amount of $150,000, which constitutes all the benefits paid to that point. The employer does not participate in the fight. In the third-party case you recover $450,000 in settlement. Assume litigation costs are $50,000 and fees are $180,000 (40 percent); the remaining balance would be $220,000. ($450k-$50k-$180k=$220k.) In such a scenario, you should argue that the work comp lien is subject to a 40 percent reduction for fees and a pro-rata share in the cost, in this case one-third of $50,000, or $16,666.Hence, their lien would be reduced first by the fees of $60,000, followed by the cost of $16,666, and they would be paid $73,334 on their $150,000 lien. The plaintiff would pocket $146,660 from $450,000, which would be subject to employer credit rights in the event the WC case was still open.

The above illustration is the argument supported by law; however, in practice we see the employer is more likely to agree to a 33.3 percent to 40 percent reduction for fees and no reduction in cost. It is all open to negotiation, so make your case.

“Active Participation”

Assume the same $450,000 settlement, the same $50,000 in cost and same fees at $180,000, but this time the employer has actively participated in the litigation sufficient to meet their burden. They would be entitled to their full lien value of $150,000, which would leave a balance of $70,000 for the plaintiff, which would still be subject to credit. As discussed above, unless the employer has acted as a true party to the litigation, noticed deposition and examined witnesses, served and answered discovery, do not let them extort your client by claiming they are active participants and therefore the common fund does not apply.

Policy limits issues

Assume you had the same $150,000 in employer paid benefits and your third party only had a $100,000 policy limit which was tendered. In this scenario, it really doesn’t make a difference what level of participation the employer had. You would recover your attorneys’ fees and your cost first and the balance would then go to the lien. The plaintiff recovers nothing from the third party. This is almost always the situation in high WC lien cases and low third-party policy limits.

Note : In these situations, work closely with the WC attorney representing your client. In our experience, when the employer is being paid back a substantial sum of money, we are often able to obtain a more favorable WC settlement for the client. Thus, not all is lost.

Employer fault and its impact on the lien and credit

It is contrary to the policy of the law for the employer, or his subrogee, the insurance carrier, to profit by the wrong of the employer . . . the concurrent negligence of the employer [can be invoked] to defeat its right of reimbursement. ( Witt v. Jackson (1961) 57 Cal.2d 57, 72.)

“[W]hen . . . the employer seeks to recover the amount paid . . ., from such third party, his [or her] hands ought not to have the blood of the dead or injured work[er] upon them.” ( Id. 57 Cal.2d at 71.)

Employer fault can be used to decrease or defeat the workers’ compensation lien and credit rights. Timing is everything. During discovery the employer can prove to be a powerful ally and cooperate in providing witnesses, documents and more. Raising issues of employer’s negligence too early can impair this alliance and give the third-party defendant ammunition to push for a lower settlement. A case-by-case analysis must be done.

In the calculation we consider what’s called the “ threshold” number. The threshold number is the amount of money the employer must spend in compensation benefits before it has the right to recover its lien and claim credit. “The Board must…deny the employer credit until the ratio of his contribution to the employee’s damages corresponds to his [or her] proportional share of fault.” ( Associated Const. & Eng. Co. v. WCAB (1978) 22 Cal.3d 829.)

Scenario one – pre-verdict settlement

Assume settlement of $1 million where employer fault was alleged. Assume work comp paid $150,000 in benefits. Assume employer was an estimated 30 percent at fault and third-party defendant at 70 percent. Plaintiff receives $1 million less fees ($400,000) and costs; assume $500,000 in plaintiff’s pocket. Employer fault at 30 percent amounts to a “threshold” number of $300,000.

This means that their lien does not get paid and WC must provide additional benefits up to an additional $150,000 until they get a right to their credit. Once WC has paid $300,000 in benefits, they will have the right to petition the WCAB for a credit based on the $500,000 plaintiff recovered. You will need to work with the WC attorney and respond/object to any petition for credit where employer negligence is alleged.

Scenario two

Same as scenario one, but $1 million by verdict with the same fault allocation. Because there was no settlement, defendants can raise a “ Witt v. Jackson”  post-trial motion to reduce the judgment by the amount the workers’ compensation benefits paid. Hence, no double recovery. Thus, a $1 million recovery will be reduced to $850,000 after deduction of work comp benefits paid. WC will not be paid their lien and will have to pay an additional $150,000 in benefits before they can assert a credit. After deduction of attorney’s fees and costs (same as above), the plaintiff in this case nets $150,000 less in his pocket.

Note : When you have significant employer fault and you compare the same gross outcome before trial and after verdict, your client may be better served with a settlement. The third-party defendant runs the risk they will not be able to shift liability to the employer which should result in a larger pre-trial settlement. Likewise, when you have facts pointing to employer negligence, you carry all the cards in negotiating the WC lien. These cases are prime for mediation.

The third-party defendant may raise employer fault as an affirmative defense in its answer to the complaint. However, the court in C.J.L. Construction, Inc. v. Universal Plumbing (1993) 18 Cal.App.4th 376, held that an employer may not be compelled to participate in litigation based solely on a Witt v. Jackson .

The case of Brandon v. Santa Rita Technology Incorporated (1972) 25 Cal.App.3d 838, establishes that the issue of employer fault must be raised in a pleading filed and served on the employer or lien claimant in a timely manner. The Brandon case has been used successfully by plaintiffs in intervention to obtain motions precluding the introduction of evidence of employer negligence or fault at trial were the allegation has not been timely raised. We too can use this case to our advantage.

Res judicata

In those proceedings where all parties are present, plaintiff, third-party defendants, and the employer or insurance carrier, and the civil court makes a finding concerning the comparative fault of the parties, that finding is binding or res judicata in the event that subsequent proceedings are instituted before the Workers’ Compensation Appeals Board.The related doctrines of collateral estoppel as well as res judicata operate between civil courts and the WCAB. (See Roe v. WCAB (1974) 12 Cal.3d 884. [“both the trial court and WCAB are bound to accept the others prior adjudication of employer negligence but are free to adjudicate the issue if it is yet unsettled”].)

Interestingly, at least one court has found that the doctrine of collateral estoppel may apply in WCAB credit rights proceedings on the issue of employer negligence even though the employer was not a party to the civil action. ( Curtis v. State of California (1982) 128 Cal.App.3d 668.)

Settling around the employer

An employee may settle the action against the third-party defendant exclusive of the workers’ compensation benefits paid (i.e., the “lien”) without the consent of the workers’ compensation carrier. This is often referred to as “settling around” the employer, and is authorized by Labor Code section 3859, subdivision (b), which reads: “Notwithstanding anything to the contrary contained in this chapter, an employee may settle and release any claim he may have against a third party without the consent of the employer . Such settlement or release shall be subject to the employer’s right to proceed to recover compensation he has paid in accordance with Section 3852.” (Lab. Code, § 3859, subd. (b).)

An employee’s attempt to use Labor Code section 3859(b) will fail, and settlement proceeds will be subject to the employer’s lien, if the settlement includes workers’ compensation benefits that have been paid. (See Marruqo v. Hunt (1977) 71 Cal.App.3d 972).

An employee has a statutory duty to notify the employer of any settlement with the third-party defendant. (Lab. Code, § 3860, subd. (a).) In order to avoid an employer’s claim that it did not receive notice, a plaintiff should give written notice with a proof of service in a similar fashion as the notice requirements set forth in Labor Code section 3853.

Trial on the issue of employer negligence

Employer as a lien claimant

The trial court’s ruling or a jury verdict on the issue of employer fault are binding on the employer. However, if employer’s negligence is not resolved in the third-party case, the WCAB acts as an alternative forum for resolution of the employer’s negligence.

Employer as plaintiff in intervention

The trial court’s ruling or a jury verdict on the issue of employer fault are binding on the plaintiff in intervention.

Settlement with third party before trial

You may wish to settle with the third-party defendant and proceed forward in your civil case to trial essentially against the plaintiff in intervention on the sole issue of employer negligence. This is a rare instance where you can answer ready for trial without the defendant and put on your case to establish employer negligence. The trial court may prefer this to be conducted as a bench trial or evidentiary hearing during which the trial court judge will make the necessary ruling.

Subject Matter Index

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California: Board Panel Reverses Rebolledo 1, Clarifies Term “Lien Owner” under Labor Code Section 4903.8

On October 29, 2021, an Appeals Board panel issued a decision in which it held that a medical provider’s billing/collection service could pursue a lien for medical services as a non-attorney representative on the provider’s behalf but could not be the owner of the lien under Labor Code section 4903.8 for purposes of payment because it was not the assignee of the lien, nor did the circumstances permit it to be an assignee. That decision was Rebolledo v. New Cure, Inc., 2021 Cal. Wrk. Comp. P.D. LEXIS 300 ( Rebolledo 1).

In that case, WSPT Network (WSPT), a billing/collection service, filed a timely lien for physical therapy services provided to applicant under Labor Code section 4903 (b) by Lo Acupuncture, Inc. (Lo), through licensed therapist Josephine Chau (Chau). The lien was disputed and a WCJ found that WSPT was not the original provider of the physical therapy services that were the subject of the lien, nor was it an assignee under the provisions of Labor Code section 4903.8. The WCJ ordered that WSPT take nothing on its lien claim.

WSPT sought reconsideration of the WCJ’s decision, arguing that it is the lien owner as defined by Labor Code section 4903.8 (a)(1) based on a contract that authorized it to seek payment on the lien for services provided to applicant by Lo through its licensee Chau. The panel in Rebolledo 1 rejected that claim and relied on Chorn v. Workers’ Comp. Appeals Bd . (2016) 245 Cal. App. 4th 1370 [81 Cal. Comp. Cases 332] ( Chorn ) in which the court concluded that the effect of Labor Code section 4903.8 is to prohibit the Appeals Board from ordering or awarding lien payments to anyone other than the medical provider who provided the services (i.e., the “lien owner”) absent a valid assignment. Although Labor Code section 4903.8(a)(1) permits a medical provider to assign a lien, the panel reasoned that a valid assignment could not be made because Lo/Chau had not ceased doing business. Nonetheless, the panel observed that the Appeals Board’s rules ( Cal. Code Reg., tit. 8, § 10401 (a)) allow a lien claimant to use the services of a non-attorney representative to file and seek payment on a lien. Thus, Lo/Chau could authorize WSPT to file and pursue a lien on their behalf. The panel then rescinded the WCJ’s decision and returned the matter to the trial level to allow WSPT to pursue and adjudicate the lien on Lo/Chau’s behalf.

State Compensation Insurance Fund (SCIF) sought reconsideration of Rebolledo 1 , and reconsideration was granted on January 1, 2022 to further study the factual and legal issues raised. By its Decision after Reconsideration issued on March 25, 2022, the panel rescinded Rebolledo 1 and replaced it with a new decision. Rebolledo v. New Cure, Inc., 2022 Cal. Wrk. Comp. P.D. LEXIS – (Board Panel Decision).

Board Panel’s Analysis

The panel acknowledges that while WSPT timely filed a lien claim for physical therapy treatment provided to the injured worker by Lo’s licensee, Chau, WSPT was not the provider of those services, nor was it an assignee. Rather, WSPT is a medical billing/collection company that contracted with Lo to provide management services in the form of billing and collections. Such arrangements, the panel states, are permitted by Business and Professions Code section 650 (b), which authorizes contracts between medical providers and non-medical providers for management services. The panel then frames the relevant legal issue as whether a medical provider’s billing/collections company can be the owner of a medical treatment lien (Lab. Code § 4903b)) under Labor Code section 4903.8(a)(1) and entitled to payment on such lien.

The panel begins its analysis by scrutinizing the precise language in Labor Code section 4903.8(a). Subdivision (1) of subsection (a) mandates that “any order or award for payment of a lien filed pursuant to subdivision (b) of Section 4903 shall be made for payment only to the person who was entitled to payment for the expenses as provided in subdivision (b) of Section 4903 at the time the expenses were incurred, who is the lien owner ” (emphasis added). Next, subdivision (2) states that “all liens filed pursuant to subdivision (b) of Section 4903 shall be filed in the name of the lien owner only, and no payment shall be made to any lien claimant without evidence that he or she is the owner of that lien ” (emphasis added). Further, subdivision (2) prohibits payment of the lien to an assignee, “unless the person (i.e., lien owner) has ceased doing business in the capacity held at the time the expenses were incurred and has assigned all right, title, and interest in the remaining accounts receivable to the assignee.”

Rebolledo 1 relied on Chorn v. Workers’ Comp. Appeals Bd . ( Chorn ) (2016) 245 Cal. App. 4th 1370 [81 Cal. Comp. Cases 332] in concluding that the Appeals Board is prohibited from ordering or awarding lien payments to anyone other than the medical provider who provided the services covered by the lien. The Chorn court summarily concluded that the lien owner could only be the medical provider who provided the services. Such reliance, the panel now admits, was a mistake. The litigants in Chorn did not put in issue the definition of “lien owner,” as that term is used in Labor Code section 4903.8, nor was such definition relevant or necessary to the constitutional questions raised and decided in Chorn. Instead, the decision in Chorn addressed whether the lien filing fee ( Lab. Code § 4903.05 ) and the anti-assignment provisions of Labor Code section 4903.8 violated various California Constitutional provisions. Chorn simply repeated the statutory language within section 4903.8, without offering any explanation or analysis to support the conclusion it reached that the lien owner could only be the medical provider who incurred the expense. Moreover, the panel observes, the summary conclusion was extraneous to the decision being made in Chorn and, therefore, is merely dictum.

Upon reaching the conclusion that Chorn is not controlling on the relevant legal issue before it, the panel allows for the possibility that WSPT may contractually be entitled to payment for the physical therapy services provided to applicant by Chau. While it is conceivable that WSPT may have become the lien owner through a contract and/or joint venture with Lo, the panel finds the record lacking substantial evidence to enable it to determine the nature and terms of any such contract and/or joint venture. Since those issues were not adjudicated at trial by the WCJ, the principles of due process and the right to a fair hearing require the case to be returned to the trial level for development of the record and consideration in the first instance of whether WSPT is the lien owner under Labor Code section 4903.8.

SCIF’s Contentions

Interestingly, the panel does not end its opinion here. Instead, the final four pages of the opinion specifically address each of SCIF’s contentions. The panel disagrees with SCIF’s assertion that the lien is subject to the assignment provisions within Labor Code section 4903.8, stating, “[i]t is undisputed that there is no assignment of Chau’s receivables to WSPT Network.” (Opinion, Part II, p. 7.) Next, it discusses widespread lien abuses that Senate Bill 863 was intended to prevent and SCIF’s implication that WSPT’s lien was frivolous. The opinion observes a complete lack of evidence in the record that WSPT’s lien in this case is a problem lien targeted by the Legislature. It then notes that the lien does not involve an assignment and was filed by WSPT in its own name because WSPT believed that it was the lien owner by virtue of its contract and/or joint venture with Lo/Chau. Next, the panel cautions that SCIF is asking the Appeals Board to interpret Labor Code section 4903.8 narrowly, so as to limit the filing of medical treatment liens to only those liens filed by the provider (or representative), or, if the provider has ceased doing business, by its assignee. The panel notes a lack of clear statutory basis for such a limited interpretation and concludes by expressing its uncertainty, “that the Appeals Board has the authority to interfere in the right of providers and general corporations to enter into lawful contracts.” (Opinion, Part II, p. 8.)

Notice of Joinder Necessary

Finally, the opinion offers the panels’ reasoning for directing the WCJ in Rebolledo 1 to issue a notice of joinder of Lo and Chau. An order of joinder may be necessary to ensure that any order of lien payment be made in favor of the proper party. While an order of joinder is clearly within the authority of the Appeals Board, the panel notes that SCIF’s argument is premature since a notice of joinder has not yet issued.

The newly issued Rebolledo opinion may not be the final word on the meaning of “lien owner” as that term is used in Labor Code section 4903.8. Nonetheless, the opinion’s significance should not be underestimated, either. The panel candidly admits that it made a mistake by accepting Chorn’s conclusory dicta in Rebolledo 1 without fully considering the relevant question: whether someone other than the provider of the medical treatment services might be the “lien owner.” The thoughtful, scholarly opinion is compelling and persuasive.

Reminder: Board panel decisions are not binding precedent.

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Engle v. Endlich (1992)

MARY L. ENGLE, Plaintiff and Appellant, v. HAROLD ENDLICH, Defendant and Respondent.

(Superior Court of Los Angeles County, No. NWC19496, James Greely Kolts, Judge. fn. * )

(Opinion by Croskey, Acting P. J., with Hinz, J., and Danielson, J., fn. † concurring.)

Oring, Margolese & Schulte and Vana Parker Margolese for Plaintiff and Appellant.

Daniels, Baratta & Fine and Mark R. Israel for Defendant and Respondent.

CROSKEY, Acting P. J.

Mary L. Engle (plaintiff) appeals from that portion of the judgment entered on August 7, 1990, reducing the amount of the jury award in her favor by the amount of workers' compensation benefits paid on her behalf. fn. 1

As we conclude that a plaintiff's personal injury award is properly reduced by (1) the amount of any sums received from a settling defendant and, (2) under Witt v. Jackson (1961) 57 Cal. 2d 57 [17 Cal. Rptr. 369, 366 P.2d 641] and its progeny, the amount of any workers' compensation benefits received from a concurrently negligent employer (up to the amount of the employer's proportionate share of liability), we affirm the judgment. This result is unaffected by the fact that the injured plaintiff may have acquired, by assignment, a lien for the compensation benefits on which the Witt v. Jackson offset defense is based.

Procedural and Factual Statement

On June 26, 1986, plaintiff filed a complaint against defendants Coast Elevator Company (Coast) and Dr. Harold Endlich (Endlich) for recovery of damages for personal injuries allegedly sustained on July 1, 1985. The first cause of action for negligence was directed against Endlich. It alleged that he was aware the elevator machinery in the closet where he parked his bicycle leaked oil; when he took the bicycle out of the closet, the bicycle tracked oil in the hallway that was the main entrance and exit to the Radiology Department at Granada Hills Community Hospital (Hospital); fn. 2 and plaintiff slipped and fell on the oil. The second cause of action for negligence was against Coast for improper maintenance, operation, repair, design, manufacture and installation of the elevator equipment. [9 Cal. App. 4th 1157]

In his answer filed November 19, 1987, Endlich denied the material allegations of the complaint and asserted various affirmative defenses, including one based on the contention the actions of plaintiff's employer, Hospital, were the sole proximate cause of plaintiff's injuries, and thus, any recovery against Endlich was barred under the doctrine of Witt v. Jackson, supra, 57 Cal. 2d 57 .

On May 6, 1987, Insurance Company of North America (INA), Hospital's workers' compensation carrier, filed a complaint in intervention with regard to the compensation benefits it had paid on behalf of plaintiff. On November 19, 1987, Endlich filed a cross-complaint against Hospital for express contractual indemnity and against Coast for indemnity, comparative liability and premises liability.

On September 2, 1988, the court held a hearing on a proposed good faith settlement. Plaintiff agreed to enter into a settlement with Coast for the total sum of $400,000. The terms of the settlement provided, "[T]hat $400,000 [to be paid in settlement] is inclusive of the lien [originally held by INA] which has been purchased by the plaintiff [for the sum of $95,000]." INA, plaintiff, and Coast stipulated that there was a waiver of all lien claims for reimbursement of medical benefits paid on behalf of plaintiff, inter alia. Upon payment of the $95,000, INA would dismiss its intervention complaint. Endlich stipulated that plaintiff's settlement with Coast was in good faith and waived the right to a hearing under section 877.6 of the Code of Civil Procedure. Thereafter, INA filed a dismissal with prejudice of its complaint in intervention. The case went to trial against Endlich alone.

On June 13, 1990, the jury returned special verdicts in favor of plaintiff. Among the matters the jury had been asked to consider was the percentage of responsibility of each of the original defendants, as well as Hospital, the plaintiff's employer. It found that the settling defendant, Coast, was free of negligence but that Endlich and Hospital were each 50 percent negligent. The jury also found that such negligence was the proximate cause of plaintiff's injuries. The total amount of damages suffered by plaintiff was found to be in the sum of $802,851.

On June 21, 1990, following a hearing, the court granted the motion of Endlich for reduction of the judgment in the amount of the workers' compensation lien. The court ruled the judgment in the total sum of $802,851 was to be reduced by $400,000, the amount of the Coast settlement, and by $370,000 for the workers' compensation lien, which left a net judgment of $32,851. On the same date, the court ruled on Endlich's cross-complaint [9 Cal. App. 4th 1158] against Hospital and found that, pursuant to a written agreement of indemnification between them, they were required to share the burden of the judgment equally. fn. 3

On July 3, 1990, plaintiff filed a motion for reconsideration of the court's order that Endlich was entitled to an offset of $370,000 against the jury award. She argued the credit was invalid under the law since she had paid valuable consideration (i.e., $95,000) for the workers' compensation lien, and thus the amount thereof did not constitute an impermissible "double recovery" on her part. She also claimed the $370,000 credit was already part of the $400,000 credit allowed against her judgment by reason of Coast's good faith settlement. Alternatively, plaintiff argued the amount of the credit was erroneous. She urged the correct amount should be $326,835.65, which included $168,707.28 for medical expenses and $158,128.37 for disability benefits, minus the $95,000 plaintiff paid INA for the lien. These motions were denied on July 12, 1990, except that the court did recalculate the amount of the compensation benefits and found them to be in the sum of $326,835.65. fn. 4

As a result of the trial court's rulings, it was determined that the judgment against Endlich was to be reduced by not only the $400,000 paid by Coast, pursuant to the good faith settlement, but also by the amount of the compensation benefits (i.e., $326,835.65) pursuant to the offset allowed under Witt v. Jackson. These sums were deducted from the $802,851 jury award to determine the net amount due on the judgment from Endlich. The total amount of the judgment to be paid, and which was to be shared equally by Hospital and Endlich, was thus in the sum of $76,015.35.

This timely appeal followed.

Issues Presented

The arguments asserted by the parties present four issues for resolution.

1. Was the assignment of the workers' compensation lien to plaintiff permissible?

2. If so, did that assignment preclude an offset of workers' compensation benefits against plaintiff's damage award? [9 Cal. App. 4th 1159]

3. Is Endlich estopped from asserting such offset?

4. Did the court correctly compute the offset of workers' compensation benefits?

1. Witt v. Jackson Offset

As demonstrated, post, the right of a defendant to interpose an offset under Witt v. Jackson is independent of the right, if any, of a workers' compensation lienholder to reimbursement of such benefits under the Labor Code. fn. 5 Plaintiff's attack on the judgment is based primarily on a misunderstanding of this distinction.

For that reason, and before addressing the specific issues raised by the parties, we initially review the parameters of an employee's right to recover for injuries, the remedies available to the employer for reimbursement of benefits paid on behalf of the employee and the nature of the benefit offset.

a. Right of Employee to Recover for Injuries Against Employer and Third Party Tortfeasors

"Workers' compensation benefits are the product of a statutory system of employer liability not dependent upon proof of fault. ( Cal. Const., art. XIV, § 4.) With certain exceptions not here relevant, an injured employee's only remedy against his employer is a claim for workers' compensation; thus, the employer is generally immune from tort liability. ( Lab. Code, § 3601, subd. (a) [now § 3602, subd. (a)].)" (Arbaugh v. Procter & Gamble Mfg. Co. (1978) 80 Cal. App. 3d 500 , 506 [ 145 Cal. Rptr. 608 ].) On the other hand, a claim for such benefits does not "affect his or her claim or right of action for all damages proximately resulting from the injury or death against" third party tortfeasors. (§ 3852.)

"Under the rule of American Motorcycle [(1978) 20 Cal. 3d 578 ], the joint and several liability of joint tortfeasors is retained. (20 Cal.3d at pp. 586-591.) [1] Thus, except for his Witt- type deduction, the third party remain[ed] liable for all of employee's damages, including the portion which represents the extent to which [ Labor Code] section 3864 insulates the negligent employer from the comparative responsibility he would otherwise [9 Cal. App. 4th 1160] incur." fn. 6 (Associated Construction & Engineering Co. v. Workers' Comp. Appeals Bd. (1978) 22 Cal. 3d 829 , 842-843, at fn. 9. [150 Cal. Rptr. 888, 587 P.2d 684])

However, with the enactment of Proposition 51 ( Civ. Code, §§ 1431.1-1431.5), the third party may no longer be held jointly liable for all of the employee's damages. The third party remains jointly liable for all economic damages, but with regard to noneconomic damages the third party's liability is several only and is limited to his or her own comparative fault. (DaFonte v. Up-Right, Inc. (1992) 2 Cal. 4th 593 , 604 [ 7 Cal. Rptr. 2d 238 , 828 P.2d 140 ]; Civ. Code, § 1431.2.)

b. Employer's Right to Reimbursement of Workers' Compensation Benefits Prior to Witt v. Jackson

An employer or its compensation insurance carrier is entitled to recover the benefits paid or owed on behalf of the injured employee. (§§ 3852, 3853, and 3856.) "In the event a third party is liable in whole or in part for the employee's injuries, the Labor Code provides the employer with three basic techniques for obtaining reimbursement from the third party for workers' compensation benefits the employer has paid or become obligated to pay: the employer 'may bring an action directly against the third party (§ 3852), join as a party plaintiff or intervene in an action brought by the employee (§ 3853), or allow the employee to prosecute the action himself and subsequently apply for a first lien against the amount of the employee's judgment, less an allowance for litigation expenses and attorney's fee (§ 3856, subd. (b)).' [Citation.]" (Associated Construction & Engineering Co. v. Workers' Comp. Appeals Bd. (1978) 22 Cal. 3d 829 , 833 [150 Cal. Rptr. 888, 587 P.2d 684].) fn. 7

c. Witt v. Jackson: Offset to Preclude Employee's Double Recovery and Bar of Employer's Concurrent Negligence

[2] In Witt v. Jackson, supra, 57 Cal. 2d 57 , our Supreme Court held a concurrently negligent employer was barred from reimbursement for any compensation benefits previously paid to the injured employee. The rationale behind this rule was to prevent the employer from taking advantage of its own wrongful conduct. (Id. at pp. 72, 73.) [9 Cal. App. 4th 1161]

The Witt court then held "[s]ince, however, the injured employee may not be allowed double recovery, his damages must be reduced by the amount of workmen's compensation he received." (57 Cal.2d at p. 73.) This bar against double recovery is the essence of the benefit offset which may be asserted by a defendant in an action by the employee against such defendant.

Our Supreme Court explained: "The central animus of our decision in Witt was to obtain an equitable distribution of liability between the negligent employer and the third party tortfeasor. [Citations.] Under the rule of Witt, the negligent employer pays workers' compensation benefits to the employee and is denied reimbursement; the third party [defendant] obtains a reduction in his tort liability which corresponds to those benefits; and the employee's net recovery remains unchanged. The effect of Witt is thus to allow the third party defendant to 'shift part of the responsibility for the judgment rendered against it to the employer's carrier.' [Citation.]" (Associated Construction & Engineering Co. v. Workers' Comp. Appeals Bd., supra, 22 Cal. 3d 829 , 841.)

d. Impact of Comparative Negligence Principles on Witt v. Jackson

The Witt v. Jackson rules were modified with the advent of the principles of comparative negligence and indemnity announced in Li v. Yellow Cab. Co. (1975) 13 Cal. 3d 804 [119 Cal. Rptr. 858, 532 P.2d 1226, 78 A.L.R.3d 393] and American Motorcycle Assn. v. Superior Court (1978) 20 Cal. 3d 578 [146 Cal. Rptr. 182, 578 P.2d 899].

"Applying the principle that the employer and third party should, to the extent consistent with the employer's statutory immunity from tort liability, share the burden of the employee's recovery as joint tortfeasors, [our Supreme Court] conclude[d] that the concurrently negligent employer should receive either credit or reimbursement for the amount by which his compensation liability exceeds his proportional share of the injured employee's recovery. [Citation.]" (Associated Construction & Engineering Co. v. Workers' Comp. Appeals Bd., supra, 22 Cal.3d at p. 842.)

e. Calculation of Benefit Offset and Amount of Reimbursement Post Witt v. Jackson

(1) Right of Defendant to Benefit Offset Independent of Employer's Right to Reimbursement

[3] Even if the employer has not joined as a plaintiff in the employee's action, filed a complaint in intervention or sought to interpose a lien, the defendant is nonetheless entitled to seek an offset based on the amount of the [9 Cal. App. 4th 1162] workers' compensation benefits paid or owed on behalf of the employee in order to carry out the double recovery bar of Witt v. Jackson.

"The third party tortfeasor should be allowed to plead the employer's negligence as a partial defense, in the manner of Witt. Once this issue is injected into the trial, the trier of fact should determine the employer's degree of fault according to the principles of American Motorcycle. The court should then deduct the employer's percentage share of the employee's total recovery from the third party's liability-up to the amount of the workers' compensation benefits assessed against the employer. Correspondingly, the employer should be denied any claim of reimbursement-or any lien under section 3856, subdivision (b)-to the extent that his contribution would then fall short of his percentage share of responsibility for the employee's total recovery." (Associated Construction & Engineering Co. v. Workers' Comp. Appeals Bd., supra, 22 Cal.3d at p. 842, fn. omitted.)

In other words, "an employee's damage judgment against third parties must be reduced by an amount attributable to the employer's proportionate share of fault, up to the amount of workers' compensation benefits paid. If the employer's share of fault exceeded the benefits paid or owed, its claim for reimbursement, lien, or credit should be denied. If the benefits paid or owed exceeded the employer's share of fault, the employer should recoup the excess only. [Citations.] Under this formula, third party defendants remained jointly and severally liable to the injured employee for all damages attributable to the employer's fault which were not covered by workers' compensation benefits. [Citations.]" (DaFonte v. Up-Right, Inc., supra, 2 Cal.4th at p. 599.)

In DaFonte, the court held the above rule of joint and several liability was modified with the enactment of Proposition 51: Although a defendant remains jointly and severally liable to the injured employee for all economic damages, the defendant's liability for noneconomic damages is several and limited to defendant's own proportionate share of comparative fault. (DaFonte v. Up-Right, supra, 2 Cal.4th at p. 604; fn. 8 Civ. Code, § 1431.2.)

[4] "[T]he proper method of computing plaintiff's recovery is to first subtract from the total award the proportionate amount attributable to plaintiff's negligence[, if any,] and then to subtract the proportionate amount attributable to the employer's negligence up to the amount of the workers' [9 Cal. App. 4th 1163] compensation benefits paid .... [If the employer's] percentage share of responsibility for plaintiff's recovery is greater than the compensation benefits it paid, its ... claim for reimbursement should be denied." (Aceves v. Regal Pale Brewing Co. (1979) 24 Cal. 3d 502 , 512 [156 Cal. Rptr. 41, 595 P.2d 619].)

(2) Good Faith Settlement Is Not a Factor

A good faith settlement by one defendant "shall not discharge any other such party from liability unless its terms so provide, but it shall reduce the claims against the others in the amount stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for it whichever is the greater." ( Code Civ. Proc., § 877, subd. (a).)

[5] From the above, it is clear the nonsettling defendant's potential liability is unaffected by the discharge of the settling defendant, unless the settlement provides otherwise. Moreover, the effect of a good faith settlement is to provide an offset against a plaintiff's award in the amount specified or in the amount of the consideration, whichever is more. Thus, the good faith settlement of one defendant does not alter the right of a remaining defendant to assert the benefit offset since the liability of the nonsettling defendant is unaffected thereby; nor does a good faith settlement in any way affect the formula for calculating the amount of such offset.

The amount representing the good faith settlement is deducted from the plaintiff's total award and operates to lessen plaintiff's net recovery against the nonsettling defendants in that amount. However, the good faith settlement does not alter the benefit offset formula, because in calculating the offset, the court measures the employer's degree of fault against plaintiff's total award, not the net recovery, to arrive at the employer's percentage share of the employee's recovery. (See, e.g., Johnson v. Cayman Development Co. (1980) 108 Cal. App. 3d 977 , 980, 982 [ 167 Cal. Rptr. 29 ]; see also, Associated Construction & Engineering Co. v. Workers' Comp. Appeals Bd., supra, 22 Cal.3d at p. 842; Aceves v. Regal Pale Brewing Co., supra, 24 Cal.3d at p. 512.)

2. Assignment of Workers' Compensation Lien to Plaintiff Is Permissible

a. Rationale Behind Assignment of a Workers' Compensation Lien

A workers' compensation insurer may be willing to assign its lien for benefits paid on behalf of an employee/plaintiff for a sum less than face value on the theory a bird in hand is worth two in the bush. This is [9 Cal. App. 4th 1164] particularly true where the insurer may have some concern about the extent of the employer's concurrent negligence in causing the employee's injury. A party who purchases a workers' compensation lien, prior to a judgment against which the lien could be imposed, is speculating that there will be a judgment to which the lien can attach, and that the amount of the lien will exceed the employer's proportionate share of any concurrent negligence. Accordingly, both gamble and can benefit from the assignment of the lien at a discount. b. Assignment of Workers' Compensation Lien to a Plaintiff Is Not Prohibited by the Double Recovery Bar of Witt v. Jackson

As Endlich concedes, a workers' compensation lien is assignable. (Hone v. Climatrol Industries, Inc. (1976) 59 Cal. App. 3d 513 , 523 [130 Cal. Rptr. 770]; Quinn v. Warnes (1983) 144 Cal. App. 3d 309 , 314-315 [ 192 Cal. Rptr. 660 ]; see also, 2 Witkin, Summary of Cal. Law (9th ed. 1987) Workers' Compensation, § 68, p. 629.) Endlich urges, however, "purchase of the workers' compensation lien by a plaintiff violates the double recovery prohibition of Witt [v. Jackson, supra, 57 Cal. 2d 57 ]." Although acknowledging no California case has directly decided the validity of the purchase of such a lien by a plaintiff, fn. 9 as Endlich asserts, the court in Quinn did address the issue. "[Plaintiff's] point is that had he, himself, purchased the lien at a discount, he would be getting a 'double recovery,' at least to the extent the consideration given for the lien was less than its face amount. Such a 'double recovery' to the employee would presumably violate the rule in Witt." (144 Cal.App.3d at p. 318.)

However, we find his reliance on Quinn to be misplaced. When viewed in context, it is clear the Quinn court was not reaching that issue. Instead, the court was merely attempting to understand the nature of the plaintiff's challenge of the assignment of a lien to a third party who had bought it at a discount. fn. 10

[6] As we have already noted, the rule against double recovery provides, "Since ... the injured employee may not be allowed double recovery, his [9 Cal. App. 4th 1165] damages must be reduced by the amount of workmen's compensation he received." (Witt v. Jackson, supra, 57 Cal.2d at p. 73; cf. De Cruz v. Reid (1968) 69 Cal. 2d 217 , 226-227 [70 Cal. Rptr. 550, 444 P.2d 342].) We see no reason to conclude that this rule bars the assignment of a workers' compensation lien to a plaintiff. When a plaintiff purchases the lien, he or she pays valuable consideration therefor and steps into the shoes of the employer; that is, plaintiff is subject to the same defenses which the defendant has against the employer. Thus, in asserting the lien, the plaintiff does so in her capacity as the assignee of the employer or its carrier, not as a "plaintiff."

As a lienholder, plaintiff's right to recoup workers' compensation benefits depends on the employer's degree of concurrent negligence. For example, as we discuss below, if the proportion of the damages owed to plaintiff by the employer due to the latter's percentage of negligence is equal to or greater than the benefits, then the plaintiff, as lienholder, will receive nothing under the lien.

However, the identity of the lienholder, whether employer, insurer, defendant or plaintiff, is irrelevant to the separate issue of whether a deduction of workers' compensation benefits from the plaintiff's award is proper to preclude a double recovery. A plaintiff's award must be reduced where the defendant establishes a benefit offset defense pursuant to Witt v. Jackson. This is true whether or not a lien has been asserted or claimed and irrespective of who owns the lien.

3. Assignment of Workers' Compensation Lien to Plaintiff Does Not Preclude Offset of Benefits Against Damages.

[7] Plaintiff asserts Endlich is precluded from seeking an offset of the workers' compensation benefits by his stipulation to the good faith settlement of Coast for $400,000. She argues any credit for workers' compensation benefits paid to plaintiff were included in the $400,000 settlement offset. We find no merit in this contention.

The fact plaintiff utilized $95,000 of the $400,000 from the Coast settlement to purchase the subject lien is of no legal significance. Nothing in the record reflects this sum has anything to do with the benefits paid or owed on behalf of plaintiff. Such sum, instead, merely represents the consideration given by plaintiff for the lien. Moreover, the stipulation by Coast, waiving its right to assert any benefit offset, was in no way binding on Endlich; nor did [9 Cal. App. 4th 1166] Endlich, by agreeing that Coast's settlement was in good faith, lose his right to raise a benefit offset defense under Witt v. Jackson.

Here, Endlich had the right to and did assert that affirmative defense, that is, he was entitled to an offset in "the proportionate amount attributable to the employer's negligence up to the amount of the ... benefits paid." fn. 11 (Aceves v. Regal Pale Brewing Co., supra, 24 Cal.3d at p. 512.)

4. No Estoppel to Assert Benefit Offset

a. Proper Procedure to Determine Offset Was Followed

[8] Plaintiff complains there was no special verdict on the issue of workers' compensation benefits and the respective rights of the employer and employee were never before the jury. She urges Endlich is thus estopped from asserting the benefit offset because no evidence of any "payments" was before the jury or the court prior to entry of judgment. (Love v. Wolf (1967) 249 Cal. App. 2d 822 , 843 [58 Cal. Rptr. 42]; Knox v. County of Los Angeles (1980) 109 Cal. App. 3d 825 , 834 [ 167 Cal. Rptr. 463 ].)

We find no estoppel. Where, as here, the action was prosecuted by the employee alone, fn. 12 "it is clear that the jury is not concerned, in arriving at its verdict, with the rights of the employer and that the verdict and judgment may properly refer only to the plaintiff and to the third party tortfeasor. It is for the court, after judgment has been entered (or concurrently therewith), to make the orders provided for by subdivision (b) of section 3856 [regarding any lien on the judgment for benefits paid or owed]." (Kuhlmann v. Pascal & Ludwig (1970) 5 Cal. App. 3d 144 , 150 [ 85 Cal. Rptr. 199 ].)

The appropriate procedure for applying a benefit offset under Witt v. Jackson and its progeny is for the trier of fact, here the jury, initially to determine the employer's degree of fault (Associated Construction & Engineering Co., supra, 22 Cal.3d at p. 842) and then for the court, upon motion, [9 Cal. App. 4th 1167] to determine the amount of the offset (Quinn v. Warnes, supra, 144 Cal.App.3d at p. 312.)

In the present case that procedure was carried out. The jury determined the employer was 50 percent at fault, and the court then determined the appropriate amount of the offset. In fact, in making its determination the court relied on the information supplied by the plaintiff herself regarding the amount of benefits which she received.

b. Waiver of Right to Lien by Employer Does Not Bar Right of Defendant to Benefit Offset

[9] Plaintiff further argues "if the employer is negligent and chooses to settle with its employee, and the employee pays consideration for the waiver of any further lien, the employee [should] get[] the benefit of their bargain ...."

Plaintiff's argument is without merit. She misapprehends the nature of her purchase. By paying the employer's insurer $95,000, plaintiff purchased the right, if any, of the employer to reimbursement of benefits paid or owed. She thus acquired, by such assignment, the right to a lien against the judgment for recoupment of such benefits to the extent those benefits exceeded the employer's percentage share of her recovery. If the benefits were equal or less than that percentage, plaintiff would receive nothing, which is the case here.

Although she may have paid that sum as "consideration for the waiver of any further lien," the waiver of the lien by the employer or its assignee, here plaintiff, does not preclude the right of a third party tortfeasor, such as Endlich, from asserting a benefit offset under Witt v. Jackson. Indeed, even the total failure of an employer to seek reimbursement for benefits does not preclude a third party defendant from asserting the bar of double recovery under Witt v. Jackson and obtaining an offset against the judgment. (See, e.g., Associated Construction & Engineering Co. v. Workers' Comp. Appeals Bd., supra, 22 Cal.3d at p. 842 [as a partial defense]; see also, Del Monte Corp. v. Superior Court (1982) 127 Cal. App. 3d 1049 , 1053-1055 [ 179 Cal. Rptr. 855 ] [cross-complaint against the employer permitted "in order to facilitate the third party defendant's proof of the employer's negligence where a finding of such negligence would lead to a reduction in plaintiff's award by the amount of compensation benefits paid"].) fn. 13 [9 Cal. App. 4th 1168]

5. The Benefit Offset Was Correctly Computed

a. Since Employer's Percentage Share of Plaintiff's Recovery Exceeded Benefits, the Benefit Offset Equals the Benefit Amount

Pursuant to the benefit offset defense the court was required to subtract the proportionate amount attributable to the employer's negligence up to the amount of the benefits from plaintiff's total award. As a lienholder, however, plaintiff was entitled to recoup the amount, if any, of the benefits in excess of the employer's percentage share of the plaintiff's award. (Aceves v. Regal Pale Brewing Co., supra, 24 Cal.3d at p. 512.)

The total award here was $802,851. The employer's percentage of fault was 50 percent. The employer's proportionate amount of the award based on such fault therefore was $401,425.50 (50 percent of $802,851). The amount of the benefits paid or owed was $326,835.65. Thus, the benefit offset exceeded the amount of the benefits, i.e., $326,835.65, and the lienholder, plaintiff, was entitled to zero on the lien.

b. Challenge to Calculation of Workers' Compensation Offset Meritless

[10] Plaintiff claims the formula for calculating the offset and the amount of damages recoverable by her was based on the erroneous assumption that both consisted entirely of economic damages. She asserts an employer is not entitled to recover noneconomic damages. She also claims the right to attorney fees for services rendered with regard to the lien. As authority, she relies on DaFonte v. Up-Right, Inc., supra, 2 Cal. 4th 593 , Demkowski v. Lee (1991) 233 Cal. App. 3d 1251 [284 Cal. Rptr. 919]; and Raisola v. Flower Street Ltd. (1988) 205 Cal. App. 3d 1004 [ 252 Cal. Rptr. 726 ].

We agree that an employer is not entitled to recover noneconomic damages since he or she is only entitled to recovery for the benefits paid or owed. (See §§ 3852, 3853, and 3856.) We also acknowledge that an employee's attorney may be entitled to attorney fees based upon the amount of the lien. (Raisola v. Flower Street Ltd., supra, at p. 1009; § 3856, subd. (b).)

These principles, however, are of no import in this case. First, the record does not demonstrate that the offset consisted of any particular amount of noneconomic damages. While it may be reasonable to assume that some portion of the award represented such damages, we are left to speculate as to the amount. Second, as the lien amount was zero there was nothing upon [9 Cal. App. 4th 1169] which to base a claim of attorney fees, assuming plaintiff otherwise qualified therefor.

If what plaintiff is seeking to do here is to assert an argument based on Proposition 51 ( Civ. Code, §§ 1431.1-1431.5), then we reject it out of hand. Proposition 51, which mandates apportionment of noneconomic damages based on each tortfeasor's own percentage of fault, is simply inapplicable to this case. This action accrued on July 1, 1985. Proposition 51, which was effective June 4, 1986, is not retroactive. (Evangelatos v. Superior Court (1988) 44 Cal. 3d 1188 , 1192, 1193, fn. 2 [ 246 Cal. Rptr. 629 , 753 P.2d 585 ].)

Nor can plaintiff assert any credible argument that the $95,000, which she paid for the lien, should be credited against the benefits paid on her behalf. We agree that she had the right to purchase an assignment of the lien. But that did not alter her rights as a plaintiff. She simply stands in the shoes of the lienholder. In this case, in light of the application of Witt v. Jackson and its progeny, there is no value to the lien which she purchased and she has lost the gamble represented by her $95,000 investment.

Disposition

The judgment is affirmed. Endlich shall recover his cost on appeal.

Hinz, J. and Danielson, J., fn. * concurred.

FN *. Retired Judge of the Los Angeles Superior Court sitting under assignment by the Chairperson of the Judicial Council.

FN †. Retired Associate Justice of the Court of Appeal, Second District, sitting under assignment by the Chairperson of the Judicial Council.

FN 1. The judgment was signed on August 3 but not entered until August 7, 1990. We deem the appeal to have been taken from the judgment entered on August 7, 1990, albeit the notice of appeal refers to the judgment "entered" August 3, 1990. We dismiss as nonappealable plaintiff's purported appeal from the prejudgment orders dated June 21, 1990 and July 12, 1990.

FN 2. Hospital was not named as a defendant or, apparently, sued as a Doe. However, it was made a party to the case in a subsequent cross-complaint filed by Endlich.

FN 3. Ultimately, this meant that Hospital and Endlich were required to share equally the final amount payable to plaintiff. No issue is raised here as to this part of the trial court's ruling.

FN 4. Apparently, no issue is raised herein that this is not a correct calculation of the amount of such benefits.

FN 5. All statutory references are to the Labor Code unless otherwise indicated.

FN 6. "[U]nless there is a written agreement to the contrary, an employer is not obligated to indemnify a third party who has been found liable to an employee who was injured as the result of the joint negligence of the employer and the third party. ( Lab. Code, § 3864.)" (Arbaugh v. Procter & Gamble Mfg. Co., supra, 80 Cal.App.3d at p. 506.)

FN 7. With regard to the employer's remedies against a third party tortfeasor as encompassed in sections 3850-3864, the reference to "employer" includes the employer's workers' compensation insurance carrier. (§ 3850, subd. (b).)

FN 8. The DaFonte court, however, did not reach the issue of what would be the proper allocation of the benefit offset in a Proposition 51 case. (Ibid.) As we explain, post, this case does not fall within Proposition 51, and thus, we do not concern ourselves with the resolution of that issue.

FN 9. We note, however, in Morris v. Standard Oil Co. (1926) 200 Cal. 210 [252 P. 605], our Supreme Court upheld the assignment of a workers' compensation lien to an employee who brought a separate action to enforce the lien in his capacity as assignee of the lien.

FN 10. The Quinn court pondered: "Appellant [plaintiff] argues that in the instant case the third party (respondent) is getting a 'double recovery' by virtue of the lien assignment .... [¶] It is unclear how whatever respondent's insurer (U.S.A.A.) got can be characterized as a 'double recovery.' Possibly, appellant is suggesting that just as Witt prevents the employee from getting more than that to which he is entitled, so too should Witt prevent a third-party tortfeasor from paying less than that to which he is obligated. [¶] More likely, appellant's point is that had he, himself, purchased the lien at a discount, he would be getting a 'double recovery,' at least to the extent the consideration given for the lien was less than its face amount. Such a 'double recovery' to the employee would presumably violate the rule in Witt. Therefore, if the purchase by an employee of a lien, at a discount, is a violation of Witt, so too should purchase of a lien by the third-party be considered a violation of Witt. [¶] In any event, the point is not well taken." (Quinn v. Warnes, supra, 144 Cal.App.3d at pp. 317- 318.)

FN 11. Under the former Witt rule the benefit offset was in the amount of the benefits provided, and thus, no double recovery was possible. (Witt v. Jackson, supra, 57 Cal.2d at p. 73; see also Del Monte Corp. v. Superior Court, supra, 127 Cal.App.3d at p. 1053 [Witt "defense that [defendant] is responsible only for the excess above compensation benefits paid by an allegedly negligent employer"]). However, post-Witt, where the employer does not seek recoupment, plaintiff will be entitled to a double recovery to the extent the proportionate amount attributable to the employer's negligence is less than the amount of benefits paid. However, this result is simply a function of the employer's failure to assert its clear recoupment right against the third party defendant and does not really constitute a denigration of the policy proscribing a double recovery.

FN 12. The employer's insurer's complaint in intervention for reimbursement of compensation payments paid to the employee was dismissed before trial.

FN 13. Thus, no legal significance attaches to the fact the complaint in intervention was dismissed.

FN *. Retired Associate Justice of the Court of Appeal, Second District, sitting under assignment by the Chairperson of the Judicial Council.

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Lien on Me? Understanding the Workers’ Compensation Lien in Job Injury Cases

If you bring a lawsuit after being injured at work, you might be surprised to learn that part of your settlement will be given to your employer’s workers’ compensation company. This is because of the workers’ compensation lien. Why does this happen?

First, you need to know that it is possible to be injured while working and have not one, but two separate cases.

Few people realize this.

I will give you an example.

Let’s say you are a pharmaceutical sales rep who drives to multiple appointments daily. While coming from one appointment with a doctor and going to another with a hospital, you are sitting at a red light and you get rear ended. The person behind you wasn’t paying attention. You feel pain in your neck, back, and shoulder, and a headache is coming on quickly. More frightening, you immediately notice you can’t put any weight on your right leg. Your foot is twisted funny. You are pretty sure you have a broken ankle. The ambulance is there. So are the police.

Do you know what to do? Initially, of course, accept medical treatment and take these important steps for after any car crash . And be aware of the dangers of giving statements to the auto insurance company! Then, you need to go about getting compensated for your medical treatment and missed work, so you can continue supporting yourself and your family.

The Workers’ Compensation Case

First of all, you have a workers’ compensation case (it’s not a lawsuit) against your employer. Anyone who is injured “arising out of” and “in the course of” their employment has a workers’ compensation case. Illinois workers’ compensation pays for three things:

• Medical benefits. Generally, you are entitled to go to any two (2) medical facilities of your choice, plus referrals from those. Your employer may also have you examined within certain guidelines. You do NOT have to go to the “company doctor.”
• TTD, or Temporary Total Disability. This is what many people refer to as “being on workers’ comp.” This is what you are paid when you are taken off work by a doctor. It is paid at a rate of 2/3 of your average weekly wage (AWW), or the average rate of gross pay over the past 52 weeks prior to the incident.
• PPD, or Permanent Partial Disability (and in limited cases PTD, Permanent Total Disability). This is what you are paid at the end of the case based upon the severity of the injury, any restrictions, the body part injured, your age, job description, wage rate, and several other factors. This is the only part the attorney takes a 20% fee from.

The “Third Party” Negligence Case

You also have a case against the driver who hit you, or more accurately, against their insurance company (Illinois does not have direct actions against insurance carriers for injury, but the insurer stands in for its insured and pays damages up to the policy limits).

Unlike workers’ compensation cases, this type of case DOES allow for recovery for “pain and suffering,” “loss of a normal life,” and “lost wages.” Generally, this case will be a larger recovery, since workers’ comp is almost a strict liability model where damages are limited.

The Workers’ Compensation Lien

Let us go on the assumption that your ankle injury was the most severe of the bunch (your neck and back got better quickly and the headache wasn’t serious). It required surgery and you were off work for 2 months. During this time, you accumulated medical bills which your employer’s workers’ compensation insurance carrier paid. You also could not work but were paid TTD (which is income tax-free, making it at least theoretically close to what you earned before you were hurt).

Say you retained a lawyer for this. Her job would be to evaluate the cases and determine the best way to proceed. It can be confusing, but there are at least two options:

• Settle the workers’ comp case, then settle the injury case
• Ignore the workers’ comp case and settle the injury case

If you settle the workers’ compensation case for $50,000 — and then also receive compensation in the injury case — you will have to pay back most of that plus whatever TTD and medical payments were made at approximately 75% of the total.

So, say your lawyer does a great job and you have a $50,000 workers’ comp settlement. Plus, TTD totaled $10,000 and medical $30,000. Thus, is the total paid out by workers’ comp is $90,000. This is the amount of workers’ compensation lien; put otherwise, the amount the workers’ comp insurer can try to get back from your injury suit settlement. In practice, you would have to pay back 75% of that (less pro rata costs and expenses), about $67,500, to the workers’ compensation insurer.

Say your injury lawyer got you a nice $180,000 settlement on the injury case with the driver. You would deduct the 1/3 fee for your lawyer ($60,000), her expenses (for medical records, depositions, filing a case) of $2,000, leaving you with $118,000. From that, you would deduct the $67,500 for the compensation lien, leaving you with a net tax-free settlement of $50,500. This would be on top of the workers’ compensation settlement, where you probably received a net of about $40,000 ($50,000 less a 20% fee).

Confused Yet?

It is tough stuff. Yet another reason you should always have a lawyer.

Contact a Personal Injury Lawyer

If you have the misfortune of becoming injured in a car crash or work incident you should contact a personal injury lawyer. If your injury was from a car crash while on the job, like in the example above, you should contact an attorney who is familiar with both Illinois workers’ compensation law and Illinois motor vehicle accident law .

• If injured in a car accident, take a police report and get medical treatment.
• If injured at work, make a workers’ compensation claim.
• In either case, talk to a personal injury lawyer to make sure you are receiving all the compensation you have a right to.

Contact Chicago Personal Injury Lawyer Stephen Hoffman

As in all cases involving injury and potential liability, immediately get medical treatment, report the crash to police and your own insurance company, and contact a personal injury lawyer.

If you've been in an accident and have questions, contact Chicago personal injury attorney Stephen L. Hoffman for a free consultation at (773) 944-9737. Stephen has nearly 30 years of legal experience and has collected millions of dollars for his clients. He has been named a SuperLawyer , has a 10.0 rating on Avvo, and is BBB A+ accredited. He is also an Executive Level Member of the Lincoln Square Ravenswood Chamber of Commerce.

Stephen handles personal injury and workers' compensation claims on a contingency fee basis, which means you don’t pay anything up front and he only gets paid if you do. Don’t wait another day, contact Stephen now .

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Workers’ Compensation Liens: The Early Bird Gets the Worm

January 26, 2021 by Hien Nguyen

By Jack Bollier, Esq. Rains Lucia Stern St. Phalle & Silver, PC

Click here for printer-friendly PDF

Introduction

California Workers’ Compensation liens: less punitive than a Medicare lien, and less complicated than an ERISA lien, but no less significant in its potential impact on the economic feasibility of your case. It is important to know the applicable law to protect your client’s rights. Comp liens often threaten a greater share of a civil settlement because they include not only medical payments, but also include wage loss and disability, which is like a form of general damages. Ideally, the third-party case of a worker injured on the job will have ample evidence of employer fault to defeat the employer’s lien and credit rights. This article aims to offer practical advice in the absence of employer fault.

If you have a third-party case where comp benefits have been provided, you must start your negotiations as soon as possible and before the comp lienholder asserts itself. If you move quickly, you can create a settlement fund that protects your lien and maximizes the recovery to your client by requiring the lienholder to equitably reduce its claim.

Informed Client

If a case lacks evidence of employer fault, it is critical to educate the client on the likelihood of recovering additional money, beyond their comp recovery, through a civil settlement. After all, in the event of a settlement, the comp lien must be dealt with and any new money paid to the client might only serve as a credit against the employer’s obligation to fund future medical care. As such, the client may see the civil settlement as little more than a cash advance which must be set-aside for future treatment. This may serve as little incentive to pursue a third-party claim and give even greater pause when weighed against the obligations accompanying litigation and its depositions, discovery, and medical examinations. Therefore, resolving the matter pre-litigation is preferred.

Pre-Litigation Recovery

The goal must be to resolve the case with a demand letter and without filing suit. This establishes that you as the plaintiff’s attorney are solely responsible for procuring the funds and thus protects your first lien and control over a significant portion of the recovery. (Lab. Code, §§ 3856, subd. (b), 3860, subd. (c).) Apprehensive liability carriers know that finalizing any settlement requires the consent of both the employee and employer. (Lab. Code, § 3859 . ) Request that the policy or settlement demand simply be “tendered.” This will establish the date and amount which the liability carrier is willing to settle the case for even if formal settlement and payment does not occur until some point in the future.

The plaintiff’s exclusive creation of the settlement funds obligates the comp lienholder to reduce its claim under the Common Fund Doctrine to account for its fair share of attorneys’ fees and costs. ( Quinn v. State of California  (1975) 15 Cal.3d 162, 175–176.) However, the comp carrier can defeat application of the Common Fund Doctrine if it can show that it retained an attorney that “actively participated” in the creation of the settlement funds. ( Walsh v. Woods (1986) 187 Cal.App.3d 1273, 1278.) It is unlikely that the comp carrier has even retained counsel to recover its lien pre-suit, which thus precludes a finding of its active participation at this early stage of the case.

It is most likely that the comp carrier has, without the assistance of an attorney, asserted its lien pre-suit by simply providing written notice to the liability insurance carrier and including an itemized accounting of its payments. This is insufficient to establish active participation, which requires a “conscientious effort . . . to address the substantive issues . . . .” ( Hartwig v. Zacky Farms (1992) 2 Cal.App.4th 1550, 1557.) If the liability carrier has made its settlement offer in response to a thoughtful demand letter with a substantive analysis of the facts in law, there will be a clear record that plaintiff’s counsel, and not the comp carrier, was the active participant in procuring the settlement.

If you serve the demand after filing suit you will also be required to put the employer on formal notice of the litigation. (Lab. Code, § 3853.) This will result in an appearance by an attorney on behalf of the employer. You can still resolve the case through your “sole” efforts, but now there will be a dispute about who procured the settlement funds. Consequently, the priority of your lien and applicability of the Common Fund Doctrine will be in doubt; two items which were needed to provide leverage over the comp lien holder.

Appeal to the Liability Carrier

If you find yourself dealing with a stubborn liability carrier or defense counsel, educate them as to how a global settlement becomes more difficult if there is any delay in tendering a reasonable offer of settlement. Show how the plaintiff will be put in a much more difficult position if legitimate offers are not made until after suit is filed and the employer appears. In this scenario the plaintiff’s negotiating position is weakened with its attorney’s lien and right to Common Fund reductions in dispute. The plaintiff nets less and is less likely to enter a global settlement. This will lead to drawn out litigation and increase costs for everyone involved, including the liability carrier. However, if offers are made early-on, then plaintiff’s leverage over the comp carrier is strengthened and the plaintiff is likely to net more money and, therefore, more likely to settle globally, reducing costs for everyone.

Leverage Plaintiff’s Need for Future Care

Depending on how the underlying workers’ compensation case is settled, the applicant (plaintiff) can receive coverage for future care; these settlements are made by “stipulation and order.” For some applicants, coverage for this care is important and should not be bargained away. However, with the cooperation and advice of the applicant’s workers’ compensation attorney, settlement of the comp case can be made on terms relieving the employer of liability for future care; these settlements can be made by “compromise and release.” This route clearly requires the client’s informed consent and may not be suitable for catastrophic injury cases. But, if appropriate, settlement by compromise and release with a waiver of future medical care might appeal to the comp carrier as part of a global settlement of the comp case and comp lien. The comp carrier avoids liability for future care and, in exchange, the plaintiff receives a reduction or waiver of the comp lien. There are obvious risks with this strategy, but there are also rewards if you cooperate and coordinate with your client’s comp attorney.

Workers’ compensation liens present unique impediments to the viability of a personal injury case that might not otherwise be worth the time and effort of both the attorney and the client. With the client’s informed consent, these cases can be profitable if resolved with a demand letter before the workers’ compensation insurance carrier has the opportunity to retain counsel. Approaching a case with this strategy can be in the best interest of both the plaintiff and the defendant insurance carrier.

Jack Bollier is a member of the Rains Lucia Stern St. Phalle & Silver, PC Personal Injury Group.  Jack has handled a variety of cases to successful resolution including auto, pedestrian, bicycle, motorcycle, and bus claims; various industrial and construction site accident claims; premises liability and worksite safety claims; and products liability actions.

Disclaimer: Case law and analysis can change over time. The information in this article is accurate as of the date the article was written and should not constitute legal advice. Always consult with an attorney.

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Home » Blog » How do Workers’ Compensation Liens Work?

How do Workers’ Compensation Liens Work?

If you are injured on the job in California, you are likely entitled to workers’ compensation.   Your employer’s workers’ compensation insurance should cover your injury-related expenses, including ambulance rides, ER expenses, long-term medical bills and wages lost as a result of your injury.   Typically, because you are covered by your employer’s insurance, you are barred from suing your employer based on the accident that led to your injury.   However, if another person was responsible for your workplace injury (for example, if you were hit by a negligent driver while driving the company car for a work task), you may be able to sue that third party directly.   You may be able to recover for damages that your policy will not cover, such as pain and suffering.   The insurer may, in turn, seek to recover its costs by asserting a lien against the personal injury matter.   Learn more about workers’ compensation liens below, and reach out to a seasoned Southern California workers’ compensation lawyer if you need help with a workers’ compensation claim .

What is a Workers’ Compensation Lien?

Workers’ compensation laws are meant to compensate an injured worker for their injuries, not give the employee a windfall.   You cannot collect under the workers’ comp policy and also receive the same damages against a third party that injured you.   Instead, if you have both a workers’ comp claim and a viable personal injury claim for the same incident, the law allows the insurer to register a claim to be reimbursed out of the proceeds of your personal injury action.   Your insurer will thus take some of your personal injury lawsuit winnings.   This is known as placing a lien on your personal injury case.

Negotiating the Lien Amount

The workers’ comp insurer can collect certain expenditures made towards the worker’s medical care, rehabilitation, and lost wages.   Insurers are happy to have the injured worker bring a third-party lawsuit because it means they will be repaid for the claim coverage.   Insurers also understand that if they seek too large a lien, for example if the lien amount meets or exceeds the face value of the personal injury claim, the lien can completely defeat the worker’s incentive to file the third-party lawsuit.   After all, the worker will be reimbursed either way.   In the interest of incentivizing the worker to bring the third-party suit, the workers’ compensation insurer may be willing to negotiate the amount of their lien.

Your worker’s compensation attorney should try to negotiate with the insurer to settle on a lien that compensates the insurer while still allowing the worker to recover a substantial sum from the personal injury matter.   Depending on the nature of the injury, the worker may be able to recover for things like pain and suffering or even punitive damages, which can involve much more substantial amounts than the insurance policy will cover.   Having a savvy plaintiffs’ attorney in your corner negotiating the amount of the insurer’s lien means you may get to keep a greater share of your personal injury lawsuit damages while still benefitting from your workers’ compensation coverage.

CALL THE WORKERS’ COMPENSATION ATTORNEYS AT INVICTUS LAW IF YOU ARE INJURED IN THE WORKPLACE

If you have a claim for workers’ compensation and want to make sure you get the maximum available coverage, call Invictus Law today at 949-287-5711 , and speak with an experienced California workers’ compensation attorney to evaluate your claims.

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Reduce Workers Compensation Costs By 20-50%

A User Guide to Resolving Liens in Work Comp Cases

April 27, 2022 By //  by  Michael B. Stack

What is a Lien?

According to Black’s Law Dictionary, a lien is “the principle under which an insurer that has paid the loss under an indemnity policy is entitled to take on all the rights and remedies belonging to the insured against a third party concerning any injuries or breaches covered by the policy.”

In layman’s terms, a lien is when a third party is interested in the underlying workers ‘compensation claim by providing services or paying for services connected with a claim. Liens can arise in several instances but often include:

• A health care provider providing medical services but not being paid by the workers’ compensation insurance carrier due to a billing error, denial of primary liability, or denial based on arguments of reasonableness and necessity of care;
• An insurance company (often a health insurance plan) paying outstanding medical bills that were incorrectly billed or denied for some reason by the workers’ compensation insurance carrier; and
• A government entity (Medicare, Medicaid, etc.) or Health & Welfare Fund (ERISA) paying for medical care related to a claim for any reason.

The bottom line is interested stakeholders seeking to resolve a workers’ compensation claim need to investigate these claims, ensure they are put on notice, and resolve the claims. Failure to do so can result in delay or a settlement being vacated at some point in the future.

Tips for Negotiating and Reducing Common Liens

Several common themes for resolving liens held by private entities such as a doctor’s office, hospital, or other health insurance carrier. It is essential to treat all parties with respect and dignity because people like to do business with people they like.

• Understanding their recovery rights may be defined by the contract, statute, or local custom. Examples include state laws that grant hospitals certain legal protections when providing medical care to injured parties. It is also essential to be aware of state-specific workers’ compensation fee schedules related to parties’ rights.
• Provide timely notice and recognize the rights of the interested party. Some states require a party holding an interest in a claim to be given formal legal notice under a statute or administrative rule. Failure to follow these specific procedures may hinder the ability to finalize a settlement. In the same regard, these same procedures may also allow parties to extinguish the intervention rights of parties who fail to promptly file the necessary paperwork with the court or industrial commission.
• Communicate and cooperate with all parties on time and be honest and ethical. Concepts of full disclosure and good faith negotiations are a must. Ensure you can back up all claims made about the strengths of your defenses when negotiating.

Never forget – Do not be a jerk! You can be a zealous advocate while still respecting the other party.

Dealing with Government Programs and ERISA

Beware when dealing with government programs such as Medicare and Medicaid, and never forget the rights of an ERISA plan are defined by federal law. These agencies and Plans have many tools to obtain recovery with the ultimate goal of protecting the American taxpayer.

• Timely recognition and notice to a federal government program in workers’ compensation actions. This may include the inclusion of a Medicare Set-aside in the settlement.
• Federalism 101: State law limitations may be trumped by federal law in terms of priority and recovery. It is essential to understand that Medicare often does not reduce its conditional payment amounts based on case law holding these are not “liens” in the true sense of the word. Although Medicaid programs are administered at the state level, they are still subject to federal mandates and constraints.
• Communication and cooperation – even if they do not provide a timely response.

Conclusions

More often than not, any workers’ compensation settlement will include identifying and resolving a lien. It is important to review claims early and often as things can change. When working with a lienholder or government entity, it is important to understand the controlling law or contract and treat them with respect and dignity. Most of all, be professional and do not be a jerk.

Contact: [email protected] .

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

©2022 Amaxx LLC. All rights reserved under International Copyright Law.

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

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