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Recouping workers' comp claims.

While every state requires its employers to provide workers' compensation benefits to workers injured on the job, those same employers have the right to recover a substantial portion of benefits (e.g., medical bills, wages) paid to responsible third parties. Most firms, however, are not even aware that they can recover workers' compensation claims payments, much less have an effective means in place to do so. By following a series of simple steps, risk managers can reduce workers' compensation costs and help contribute directly to their organization's bottom line.

Evaluate individual state subrogation laws. These laws vary state to state. Pennsylvania, for example, is a "first-dollar state," meaning the subrogating employer recovers its lien first and has priority over any awards obtained by way of verdict and/or settlement. Other states, such as Georgia, are "made-whole states," which require the injured worker to be fully rehabilitated before the employer receives any reimbursement. It is therefore extremely important for the employer to know the relevant state laws that apply. Many of these laws also entitle employers to credits against future workers' compensation payments, enabling employers to legally suspend payment of benefits.

Retain counsel. In many instances, injured workers retain counsel to pursue third party lawsuits. Under these circumstances, it is absolutely necessary for the employer to place the injured worker and his or her counsel on notice of its lien and demand that the lien be protected and honored at the resolution of the case. In other instances, however, the injured worker does not seek representation but instead relies upon the receipt of workers' compensation benefits in the form of medical payments and wage-loss indemnity. Here, if no counsel has been engaged, it is especially critical for the company to retain outside recovery counsel to pursue the opportunity. What on its face may appear not to have subrogation potential may prove to be a good recovery opportunity. Such cases typically include accidents occurring off-premises.

Investigate. Once an employer has committed to pursuing workers' compensation recoveries, it must put an appropriate investigative process in place to secure evidence, witness statements, necessary documentation and photographic evidence. Once this appropriate evidence has been safeguarded and documented, an analysis to determine subrogation potential may commence. If the employer cannot perform the investigation, competent counsel may then do so.

Look at theories of recovery. To maximize recovery, corporations may take advantage of different legal theories, involving product liability, negligence and breach of warranty.

First, most states impose liability on a third party for manufacturing, selling or distributing a defectively designed or manufactured product regardless of whether due care was used in the manufacturing or design process. Typically, an expert is engaged early on to examine the product at issue to determine whether a valid claim can be pursued. This legal theory is often referred to as "strict liability."

Second, every state embraces negligence as a theory of recovery against liable third parties. If after the investigative process has taken place the facts demonstrate that a third party is responsible for the injuries and damages sustained by the employee because a third party failed to act with due care, then a viable subrogation scenario may exist. Contributory or comparative negligence of the employee is usually used to offset any recovery.

Third, companies usually rely on a breach of warranty theory in conjunction with a negligence and/or strict liability theory. Typically, this does not involve an express warranty but, rather, a potential breach of implied warranty of merchantability or fitness for a particular purpose.

Recognize limitations. Typically, statutes of limitations for negligent actions run from one to four years. Strict liability claims and breach of warranty claims have similar time periods. It is important, therefore, that the employer familiarize himself with the applicable deadlines involved. In many instances, especially those involving governmental entities, there are also additional, more stringent notice requirements.

James D. Golkow is co-chair of the workers' compensation and recovery practice group at Cozen O'Connor.
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Title Annotation:Rules & Regulations
Author:Golkow, James D.
Publication:Risk Management
Geographic Code:1USA
Date:Nov 1, 2004
Previous Article:Managing risk in the public sector.
Next Article:Datebook.

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