I. CURRENT INTERPRETATIONS OF THE STATUTE AND APPLICATION OF THE SAME.
Pursuant to O.C.G.A. § 34-9-11.1, the Employer and Insurer have a subrogation lien, up to the amount of benefits paid, against any recovery by the injured worker. O.C.G.A. § 34-9-11.1(b). This lien only applies to the payment of disability benefits1, death benefits2, and medical expenses paid under Title 34, Chapter 9.3
Assuming that the purported lien is for benefits under the enumerated Code Sections, the Employer and Insurer bear the burden of proving that the Employee has been fully and completely compensation taking into consideration both his Workers’ Compensation benefits and the amount of recovery in the third-party claim. This calculation encompasses all economic and non-economic losses as a result of the injury.4
The lien is against the recovery only, whether by judgment or settlement. In this respect, it differs from many other forms of subrogation which create true “causes of action” for subrogation. Rowland v. Dept. of Administrative Services, 219 Ga.App. 899, 900-01 (1996).5
O.C.G.A. § 34-9-11.1 became effective July 1, 1992. The first published opinion on this statute involved whether, and to what extent, the statute would be applied retroactively. Maryland Casualty Ins. Co. v. Glomski, 21 Ga.App. 759 (1993). In that case, the work-related accident occurred prior to July 1, 1992. The injured worker drew benefits before that date. Additionally, the tort suit was commenced prior to that date. Id. Without deciding which, if any, of those three events operated as the trigger, the court held subrogation inapplicable because all three occurred prior to the July 1, 1992 effective date. A later case, Dutton v. Georgia Assoc. General Contractors Self-Insurers Trust Fund, 215 Ga.App. 607 (1994) appears to have resolved the issue of which event operates as a trigger. In that case, the Georgia Court of Appeals held that subrogation exists only for injury dates subsequent to July 1, 1992. Id. at 608-09.
As originally drafted in 1992, O.C.G.A. § 34-9-11.1 created an effective one (1) year Statute of Limitations on the Employee’s claim. After the first year following the accident, the cause of action was automatically assigned by operation of law to the Employer and its Insurer. The trial courts routinely granted Summary Judgments to the tortfeasor where the Employee instituted the case during the second year. Under the terms of the statute, as it then existed, only the Employer could file suit the second year, with any excess recovery payable to the injured worker. In Bennett v. Williams Elec. Const, Co., 215 Ga.App. 423 (1994) the injured worker attempted to obtain a re-assignment of the cause of action from the Employer and Insurer. As apparent consideration for the re-assignment, the injured worker waived the “fully and completely compensated” requirement by agreeing that any recovery would be applied to satisfy the Employer/Insurer’s lien first. After reviewing the statute, the Court of Appeals held that this was a violation of the prohibition on the assignment of a cause of action. While it is possible for a statute to assign of cause of action, as occurred in this statute, there was no provision for allowing for the re-assignment back to the Employee. As such, the purported re-assignment failed.
In 1995, the statute was amended to alleviate the one (1) year Statute of Limitations. The revised statute, as it exists now, provides that the first year of the case belongs to the Employee. If suit was not instituted by the Employee within one (1) year, either the Employee or the Employer/Insurer, can institute suit. O.C.G.A. § 34-9-11.1(c). This section further imposes a duty upon the one instituting suit to immediately notify the other party that suit had been initiated. Id. Finally, subsection (e) provided that this change would be applied retroactively.
The retroactive application of this change prompted a series of appellate decisions. These opinions unanimously held that, in cases where Summary Judgment had previously been granted, but which were pending appeal at the time the law was changed, the defense motion would be reversed in favor of the Employee. Moore v. Savannah Cocoa Inc., 217 Ga.App. 869 (1995).6 The rationale for the opinions involved the fact that the statute was expressly retroactive. As you know, retroactive application is not generally favored, and will only be applied where substantive rights are not effective. Id. Because this affected a Statute of Limitations, and further because Statute of Limitations do not create substantive rights, this statute can apply retroactively so long as it is expressly required by the Legislature (which it was in subsection (e)). Id.7
Another issue involving this statute is its constitutionality. Only one constitutional challenge of this statute has appeared in the appellate decisions. That case is Bozeman v. Liberty National Life Ins. Co., 265 Ga. 757 (1995). Unfortunately, the case was remanded in light of the 1995 amendment to the statute, and the constitutional issue was never addressed.
In order to preserve the subrogation lien, it is incumbent upon the Employer or its Insurer to provide notice to the tortfeasor or his carrier. DOAS v. Deal, 220 Ga.App. 846 (1996). Failure to do so defeats the lien. Id. However, it has also been implied that where the tortfeasor settles with full knowledge of the Workers’ Compensation carrier’s payment and right of subrogation, the lien survives. Rowland v. DOAS, 219 Ga.App. 899 (1996). Presumably, the cause of action would be directly against the tortfeasor and the carrier under the dicta of Rowland. However, this has not been expressly decided, and it is arguable that, because the lien attaches to the recovery, the only cause of action would be against the injured Employee who holds the proceeds. An employer or insurer who finds themselves on the wrong end of this requirement as expressed in Rowland should try to argue that the injured worker and the tortfeasor both have constructive knowledge of the lien, and therefore actual knowledge is not required. This argument succeeded, albeit not under workers’ compensation subrogation statute, in Poole Truck Line, Inc. v. State Farm Mut. Auto Ins. Co., 163 Ga.App. 755 (1982). In Poole the court of appeals held that, where the right of subrogation arises by operation of law as opposed to purely contractual subrogation rights, there is constructive knowledge of the subrogation lien. “Appellants, however, can be found to have had constructive knowledge of appellee’s statutory right of subrogation as no-fault coverage is mandatory in Georgia… [They are] presumed to know the law which gives the injured party’s insurance company a statutory right of subrogation.” Id. at 758.
Another issue that has arisen under this statute involves the recovery of death benefits and burial expenses. As originally enacted in 1992, neither death benefits nor burial expenses were covered under the express language of the lien. In Bankhead v. Lucas Aerospace Ltd., 878 F.Supp. 221 (N.D.Ga. 1994) the Northern District of Georgia held that the Legislature’s failure to include those items by name, coupled with the fact that other Workers’ Compensation benefits were specifically enumerated, resulted in their not being subject to recovery. Id. An unpublished opinion, also in Federal Court, resulted in a certified question to the Georgia Supreme Court regarding the 1995 amendment to this statute wherein the General Assembly incorporated death benefits into the statute. O.C.G.A. § 34-9-11.1(b). This amendment, which is incorporated in a different subsection than the 1995 amendment relating to assignment of the cause of action, was not applied retroactively. Wausau v. McLeroy, 266 Ga. 794 (1996). Answering the certified questions, the Supreme Court held that the General Assembly’s express language on the retroactive application of the amendments applied only to subsection (c). There was no mention of applying subsection (b), either retroactively or prospectively, in the legislation. Therefore, the amendment to subsection (b) regarding death benefits would fall under the general rule of purely prospective application.
The final litigated issue on this statute involves intervention. It has been held that an Insurer has an unconditional right to intervene. DOAS v. Brown, 219 Ga.App. 27 (1995). It is error for the trial court to deny the intervenor petition. Id. However, if neither the Employer nor Insurer is listed in the caption of the case, and they fail to intervene, they have no standing in the case, including the lack of the right to appeal. Astin v. Callahan, 222 Ga.App. 226 (1996). In Astin, the complaint was signed by two attorneys. One attorney’s signature reflected that he was counsel for the injured worker/Plaintiff. The other counsel signed as attorney for the Employer. However, when the Employer attempted to appeal the case, the Georgia Court of Appeals held that his signature standing representation of the Employer was not enough to make the Employer or Insurer a party to the case. As such, they lacked any appeal rights.
II. HOW TO DETERMINE WHETHER THE EMPLOYEE HAS BEEN FULLY AND COMPLETELY COMPENSATED.
Pursuant to subsection (b) of O.C.G.A. § 34-9-11.1, the workers’ compensation carrier is entitled to subrogation only if “the injured employee has been fully and completely compensated.” O.C.G.A. § 34-9-11.1. This language does not appear to have incorporated from the subrogation statute of another state. Rather, it is the author’s belief that the Legislature drew this language from the text of the former Georgia Motor Vehicle Accident Reparations Act. The Georgia Motor Vehicle Reparations Act is more commonly known as the No-Fault Act, and was repealed effective October 1, 1991. Terry v. State Farm Mutual Auto Ins. Co., 205 Ga.App. 224 (1992). The No-Fault subrogation statute provide as follows:
[T]he insurer or self-insurer providing benefits shall have a right of action to the extent benefits provided against such tortfeasor only in the event that the person for whom benefits are provided has been completely compensated for all economic and non-economic losses incurred… .
O.C.G.A. § 33-34-3(d)(1) (Repealed).
The similarity between the two statutes is apparent. The language creating the complete compensation of the injured person as a prerequisite to the carrier’s right to subrogation is nearly verbatim. While the workers’ compensation statute contains the additional language requiring that the injured workers be “fully ..compensated,” it is this authors opinion that complete compensation is no additional requirement is created by this language, and the same is mere surplusage. “Completely” compensated and “fully and completely” compensated are no different.
Given the apparent similarities and the distinct possibility that the language was borrowed from the No-Fault statute, cases interpreting the “complete compensation” requirement of No-Fault should be relied upon when the courts are interpreting this requirement under the Georgia Workers’ Compensation Act.8 Assuming that cases interpreting the prerequisite to No-Fault subrogation are relied upon, it would appear that an employee who settles his or her case against the third-party tortfeasor will be estopped to deny that he or she has been fully compensated. This issue was addressed in Hawkins v. Traveler’s Ins. Co., 162 Ga. App. 231 (9182). In Hawkins the injured party settled her case against the tortfeasor. The no-fault carrier then sought to recover payments made by subrogation. The court of appeals noted that “the decisive issue is whether Hawkins received ‘full compensation’ for her injuries.” Id. at 223. The court held that, because the injured party had settled the case, she was fully compensated.
When a release is taken, the consideration paid is presumptively full compensation. Where, without the practice of any fraud upon her, a Plaintiff accepts, in full satisfaction of her claim, a lesser amount than what she claims is due her, there is an accord and satisfaction and she is not entitled to a recovery. Therefore, when Hawkins accepted the payment from Allstate on behalf of the [tortfeasor] and executed a general release in their favor, she was ‘fully compensated’ by them for injuries and the balance of the [tortfeasor’s] assets ‘if any’ was thereby subject to Traveler’s formerly subordinate subrogation rights.
Id. at 234.
Thus Georgia law supports the proposition that one who settles their case may be estopped to deny that there has been full and complete compensation, and the subrogation rights of the carrier mature. The injured workers is therefore cautioned that entering into a settlement may well estop them from asserting that there has been less than full and complete compensation. It should be pointed out that, in Hawkins, the carrier’s right to subrogation matured as against the tortfeasor. However, the workers’ compensation subrogation statute creates a lien against the recovery. Whereas under No-Fault the settlement merely allowed the carrier to proceed against the remaining assets of the tortfeasor, the carrier under workers’ compensation has the lien against the injured workers’ recovery. As such, satisfaction of the lien comes from the proceeds in the hands of the injured worker. Thus, the injured workers” recovery will be reduced by the subrogation lien of the workers’ compensation carrier if there has been full and complete compensation.
III. IS THERE A RIGHT TO SET OFF BY A UM CARRIER AGAINST COVERAGE WHERE THE SAME CARRIER HAS ALSO PAID WORKERS’ COMPENSATION BENEFITS?
Because O.C.G.A. § 34-9-11.1 and the cases interpreting it did not directly address the offset for a Workers’ Compensation lien in a UM case it is necessary to look at O.C.G.A. § 33-7-11 and cases interpreting it for the answer to whether, and to what extent, UM coverage is reduced in proportion to Workers’ Compensation benefits paid. O.C.G.A. § 33-7-11(a)(1) provides as follows:
“No automobile liability policy or motor vehicle liability policy shall be issued or delivered in this state … upon any motor vehicle then principally garaged or principally used in this state unless it contains an endorsement or provisions undertaking to pay the insured all sums which he shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle… .”
This language is important because, although the case cited below did allow the offset, a subsequent case calls that into question for failure to address this code section.
An offset against UM coverage to the extent of Workers’ Compensation benefits paid by the UM carrier is currently permissible. Northbrook Property & Casualty Ins. Co. v. Merchant, 215 Ga.App. 273 (1994). In Northbrook,Northbrook Property & Casualty provided both automobile liability and Workers’ Compensation coverage to Claxton Poultry. The case was on interlocutory appeal filed by the carrier regarding the extent of coverage. After resolving a dispute as to whether the Employee’s were “insureds” under the policy, the Court of Appeals addressed the permissibility of an offset of UM coverage by Workers’ Compensation benefits paid. The Court of Appeals allowed the offset based on policy language that stated:
“Any amount paid under this insurance for medical expenses, work loss, or ‘survivor loss’ will be reduced by the amount of benefits an ‘insured’ is entitled to receive for the same elements of loss under any Workers’ Compensation law.” Id. at 275.
After reviewing the quoted language, the Court of Appeals held that the unambiguous policy terms provided for the offset of UM benefits based upon Workers’ Compensation benefits to which the insureds were entitled.9 Id. at 276. The court held that this liability limitation is neither precluded by statute nor is it contrary to public policy. As such, it was enforceable. Id.
This holding has, however, been called into question by a case decided only two weeks subsequent to the opinion. Specifically, in Johnson v. State Farm Mutual Automobile Ins. Co., 216 Ga.App. 541, State Farm attempted to use a non-duplication of benefits clause to reduce UM benefits by the amount of no-fault payments made for medical treatment. Id. at 541. The court ultimately held that the non-duplication clause was enforceable because such did not reduce the limits of liability on the coverage. Rather, it merely prevented a double recovery where the insured had already received medical payments. If the coverage was not reduced by the amount of benefits paid under the no-fault coverage, the Plaintiff would receive more than his actual damages. As such, the court enforced the non-duplication clause.
However, in doing so, the court made a direct reference to Northbrook. Specifically, it stated that that case never addressed whether the clause was contrary to the requirements of O.C.G.A. § 33-7-11(a)(1). Presumably, such language would leave open the argument that, at least where a double recovery would not occur, the offset is contrary to the above quoted language of O.C.G.A. § 33-7-11. The medical bills paid in Johnson were clearly duplicate. However, an attorney with a strong working knowledge of Workers’ Compensation would likely argue that many elements of Workers’ Compensation indemnity benefits are different forms of damages than those addressed by a liability suit for general and special damages.
A different result may occur where the coverage is insufficient to afford a double recovery. In Johnson, the coverage was sufficient even with the offset, and the court simply prevented a double recovery of medical bills that had already been paid. In Northbrook, the case was on interlocutory appeal and therefore no judgment for damages had been entered.
While Johnson appears to raise an issue that had not been addressed in Northbrook, it still appears that the offset would be permitted as addressed in Northbrook for cases not subject to the recently enacted O.C.G.A. § 33-24-56.1. Because of the court’s implied review of all of the law. The appeal stated in Northbrook that “the offset of uninsured motorist’ benefits based upon the Workers’ Compensation benefits to which the insureds are entitled, and this limitation in liability is not precluded by statute or contrary to the public policy of this state.” Id. at 276. Presumably, they reviewed all of the law of Georgia including O.C.G.A. § 33-7-11.
The recently enacted O.C.G.A.§ 33-24-56.1 arguably eliminates the offset previously addressed in Northbrook and Johnson. The text of the statute does not make any reference to retroactive application, and therefore the authority cited in § I, supra, including Moore v. Savannah Cocoa, 217 Ga.App. 869 (1995) would suggest that this statute apply prospectively only. There is certainly an argument that because these clauses are contained in contracts, application other than prospectively would operate to impair contracts in violation of the Constitutional prohibition against the same. It is possible that the trigger date would be the injury date in light of the holding and rationale of Dutton, supra. Thus far, there have been no reported cases addressing this issue with respect to O.C.G.A. § 33-24-56.1.
O.C.G.A. § 33-24-56.1 provides as follows:
(f) No benefit provider shall be entitled to reduce the amount for which it is liable under an insured party’s coverage for liability, uninsured motorist, disability, medical payments, or other benefits as a setoff against any claim for reimbursement under subsection (b) of this Code section, nor shall any benefit provider be entitled to withhold or set off insurance benefits as a means of enforcing a claim for reimbursement. Nothing in this subsection shall be deemed to prohibit the coordination of benefits between or among benefit providers.
One argument to preserve the set off is that the statute itself is either inapplicable to workers’ compensation subrogation, or else the same is internally inconsistent. Specifically, it states that:
(l) This Code Section shall not apply to the rights of the department of Medical Assistance nor shall it affect the subrogation rights and obligations provided in Code Section 34-9-11.1.
That Code Section is the Workers’ Compensation subrogation statute. If the offset is purely a contractual right (under either an “offset” clause or a “non-duplication of benefits clauses) then offset would clearly be impermissible. Arguably, however, the offset is simply a means of enforcing Workers’ Compensation subrogation rights under O.C.G.A. § 34-9-11.1. If so, then O.C.G.A. § 33-24-56.1 is internally inconsistent to the extent it purportedly eliminates the offset while simultaneously pronouncing it has no affect on O.C.G.A. § 34-9-11.1. To hold that this code section eliminates the workers’ compensation subrogation lien, the courts would be required to interpret around the language of subsection (l). Thus, the holding of Northbrook appears to be preserved.
- O.C.G.A. § § 34-9-261, 262, 263, and 264. Back
- O.C.G.A. § 34-9-265.Back
- O.C.G.A. § § 200 and 200.1.Back
- Technically, the burden of proof on this issue has never been the subject of an appellate case. It is arguable that the burden of proving the absence of full and complete compensation falls upon the injured worker. However, it is my opinion that this burden falls on the Employer and Insurer.Back
- For example, under the former No-Fault Statute, the UM carrier was subrogated to the rights of the recipient and had “a right of action” to the extent of benefits paid against such tortfeasor. Id.Back
- See also, Draughn v. Delta Airlines, 218 Ga.App. 540 (1995); Vaughn v. Vulcan Materials Co., 266, Ga. 163 (1996); Conner v. Greene, 219 Ga.App. 860 (1996); Wilson v. Christian, 220 Ga.App. 221 (1996); Cleveland v. Snowdrop Properties, N.D., 221 Ga.App. 448 (1996); and Dowdy v. Earthwise Restaurant Management, Inc., 221 Ga.App. 220 (1996).Back
- It should also be pointed out that contractual assignments can create substantive rights. As such, to the extent it would impair contracts, this would likely be constitutionally impermissible.Back
- Other similarities between the two statutes, aside from the similar language, include that both statutory schemes involve payment of benefits regardless of fault and the preservation of the cause of action against the tortfeasor.Back
- Interestingly enough it uses the word “entitled” rather than “paid.” It is arguable that failure to yet pay a claim may not preclude the offset for benefits actually due. This may come up if a Workers’ Compensation case is in dispute or on appeal.Back
Bernard F. Kistler, Jr. received his B.B.A. in 1988 from the University of Georgia. He graduated from Mercer University School of Law cum laude receiving his Juris Doctor in 1993. He was admitted to the Georgia Bar in 1993 and the U.S. District Court, Southern District of Georgia in 1994. He was admitted to the South Carolina Bar in 1996. While at Mercer, he was a member of Phi Kappa Phi and the Mercer Law Review. His is a member of the Savannah Bar Association, the State Bar of Georgia, and the South Carolina Bar. Mr. Kistler is an associate with the law firm of Hamilton, Westby, Antonowich & Anderson, where his practice is concentrated in insurance and workers’ compensation defense, tax litigation and construction litigation. He may be reached at firstname.lastname@example.org or (404)-872-3500.