3rd party and subrogation - dcpas - home page · 2018. 5. 8. · achieving excellence through...

Andre StephensICUC New York District Management Advisor

3rd Party and Subrogation

Achieving Excellence Through Knowledge

Objectives

• Understand 3rd party and subrogation

• Identify indicators used to recognize potential 3rd party cases

• Become familiar with your responsibility regarding 3rd party cases

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What is subrogation?

Subrogation is a legal doctrine whereby one person is entitled to enforce the rights of another for one’s own benefit.

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What is Federal Employees’ Compensation Act (FECA) Subrogation?

• In any case where a Federal employee is injured by a third party (i.e., a person other than the United States), they can bring a claim against that third party for damages (e.g., medical bills, lost wages, property damages, pain and suffering, etc.) and recover damages.

• Under FECA, the United States takes over some of the rights to damages and, as a result, gets some of the money from the settlement in order to “offset” the cost of care under FECA.

• The government’s right of subrogation comes from 8131 and 8132 of FECA which the United States acquires a right to be reimbursed from the recovery.

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What is Federal Employees’ Compensation Act (FECA) Subrogation (cont’d)?

• Under Section 8131 of the Act, a claimant may be required to pursue a recovery for damages against a third party. The same is also true of a beneficiary in a death case. In most cases this is done by filing a lawsuit or contacting an insurer. In certain limited circumstances, the claimant may be released from this requirement to pursue a recovery (DOL/SOL makes this determination).

• OWCP may require the FECA beneficiary to assign a right of action to enforce that liability to the United States, or to prosecute an action in their name.

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• Under Section 8132 of the Act, there is a “statutory right of reimbursement” which mandates that the beneficiaries who obtain a recovery from a third party action, such as an insurance recovery or a lawsuit, are required to reimburse monies to the United States for benefits paid. This section establishes the reimbursement formula, which is the basis for the Statement of Recovery (SOR).

• The entire recovery in the third party action is included in the formula calculating the refund due, regardless of the elements of damages. This requirement can never be waived.

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• Note: Many attorneys representing claimants in third party cases use the common law term “lien” rather than “reimbursement”. However, both terms essentially refer to the same responsibilities under Section 8132 requirements.

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Who Handles FECA Subrogation?

• As of August 5, 2013, the Office of the Solicitor (SOL) handles all FECA subrogation matters. The SOL is the legal office of the U.S. Department of Labor.

• SOL will communicate with attorneys to make sure that the U.S. government receives what is due.

• All cases considered 3rd party cases over $1500 paid our to claimant for medical expenses should be referred to SOL by DOL Claims Examiners.

• All asbestos claims are handled by SOL in Washington, D.C..

• Any case where attorney or claimant has questions about subrogation should be referred to SOL.

• OWCP retains control regarding all other aspects of the FECA claim.

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Third Party Terminology

• Subrogation: The process of transferring the right to receive payment of a debt owed (i.e., damages for the accident) from one party (i.e., the claimant) to another (i.e., the United States).

• Reimbursement: The total amount owed to the government including both the refund and surplus.

• Refund: Amounts owed to the government for benefits paid as calculated on Statement of Recovery (SOR) this normally includes all medical and compensation cost paid as of date of settlement.

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Third Party Terminology (cont’d)

• Consortium: The legal right of husband and wife to companionship. Loss of consortium sometimes can be claimed by a family member. SOL will work this out in accordance with state law(s).

• Surplus: Credit against future compensation and medical benefits that must be absorbed before FECA benefits may resume. This typically occurs when the recovery is significantly greater than the amount of disbursements. Note: DOL tracks absorption of this surplus until it is exhausted and compensation and medical payments can resume.

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Third Party Terminology (cont’d)

• Disbursement: The total funds paid out by OWCP which consist of medical and compensation payments to the claimant.

• Tort: A civil wrong or wrongful act, whether intentional or accidental, from which injury occurs to another (e.g., a motor vehicle accident).

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Common Third Party Situations

• Car accident where a federal employee is injured or killed

• Fall due to negligent building or property maintenance

• Dog bite (most common with Postal Service workers)

• A plane or train accident

• Malfunctioning elevator

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Common Third Party Situations (cont’d)

• Product liability (e.g., a defective chair)

• Asbestos exposure

• Medical malpractice

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Situations Not Considered Third Party

• Injury caused by other Federal employees

• Injury due to the employee’s own negligence

• If the recovery is from the employee’s own insurance company

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What can agencies do to help?

• Make sure claimants understand this obligation.

• Cooperate with OWCP and SOL, when accidents or investigation reports are requested.

• Cooperate with claimant’s attorney for third party case.

• Remember money refunded to OWCP due to a third party settlement is credited to an employing agency’s chargeback, which reduces costs.

• If the settlement is significantly larger than the disbursements paid in the case, then the future benefits are paid from the surplus, not by OWCP, which saves money.

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Importance of 3rd Party to OWCP

• The claimant is required to pursue damages.

• Injured workers are required to report any settlements obtained from the third party.

• Benefits can be suspended if the claimant does not pursue damages or fails to report them.

• A portion of any settlement obtained must be refunded to OWCP.

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Settlements

• The U.S. government cannot waive or compromise any part of its statutory right of reimbursement.

• However, one should be aware that the formula set forth in 5 U.S.C. 8132 creates a considerable reduction in the amount to be refunded by the FECA beneficiary and/or credited against future FECA benefits.

• The claimant is entitled to retain a minimum of twenty percent of the tort recovery after expenses of suit are deducted.

• A portion of the recovery may be allocated for loss of consortium for the spouse of an injured employee (with supporting documentation).

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Special Case: Census

• Census enumerators may not reveal the name or address of anyone from whom they collect information to any other agency.

• It has been determined that OWCP claims staff should not pursue the third party aspect of a claim for injury or death filed by an enumerator or field representative of the Bureau of Census IF the circumstances would reveal the name or address of the party from whom they collect information.• Example: Slip and fall on homeowner’s property; bit by homeowner’s

dog.

• Confidentiality guaranteed by law (FECA PM 2-1100.7.a.3; FECA Bulletin 99-30).

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Special Case: Census (cont’d)

• In these situations, Bureau of Census cannot provide DOL with the name of the third party.

• This is void if the resident deliberately harmed the enumerator.

• Also may pursue third party cases where the accident happened off specific premises (Example: car accident going from one home to another).

• If the employee does pursue the third party claim and recovery, the government has a statutory right of reimbursement.

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Case Studies

• Case Study #1: If the claimant receives monies from his or her own insurance company, does OWCP have a third party interest?

• Case Study #2: A DoD employee is taking a taxi from his hotel to the airport to return home from training. On the way, the taxi driver rear ends a car at a stop light injuring the DoD employee’s back. Is this a reportable third party case?

• Case Study #3: A census employee is returning to the office after conducting a personal interview with a homeowner. She is rear ended by a car driven by her supervisor, another census employee. Is this a reportable third party case?

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Case Study Answers

• Case Study #1: No. The claimant is sometimes called the first party and OWCP has no right to these funds. This happens often in uninsured/underinsured motorist claims. Nothing is recovered from the third party, but the claimant recovers something from his/her own insurance company.

• Case Study #2: Yes. Claimant is still in TDY status:• Covered on travel for activities reasonably incidental to the travel

• Covered while eating, sleeping, brushing teeth, etc.

• Not covered during a substantial deviation for personal activities such as sightseeing or skydiving

• IMPORTANT: It is an overstatement to say there is 24/7 blanket FECA coverage for all activities during travel

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Case Study Answers (cont’d)

• Case Study #3: Yes. When two or more U.S. government employees are involved in an accident involving a third party, the cases must be referred to SOL (required by FECA Procedure Manual). Note: Special case rule for census does not apply to this case as it was a MVA off the specific premises and it will not reveal the addresses of the parties from which they collected information.

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Review

Which cases below are NOT likely to have “third party” potential?

a. The claimant is hit by a car on a military base on his/her day off.

b. The claimant sues a surgeon for malpractice and wins a settlement (OWCP paid for surgery).

c. The claimant is assaulted by an unknown assailant while at work.

d. The claimant runs their government vehicle into a telephone pole while intoxicated and no other cars are involved.

e. The claimant’s injury is caused from repetitive motion while operating a piece of machinery.

**In an instance, once a claimant sues a third party, the matter must be referred to SOL.

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Answer

The cases below are NOT likely to have “third party” potential:

a. The claimant is hit by a car on a military base on his/her day off.

c. The claimant is assaulted by an unknown assailant while at work.

d. The claimant runs their government vehicle into a telephone pole while intoxicated and no other cars are involved.

e. The claimant’s injury is caused from repetitive motion while operating a piece of machinery.

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Review

The following are all examples of types of third party cases except:

a. A malfunctioning elevator.

b. An automobile accident when another government vehicle is at fault.

c. A train wreck or plane crash while traveling in the performance of duty.

d. Asbestos cases

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Answer

The following is NOT an example of a third party case:

c. A train wreck or plane crash while traveling in the performance of duty.

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Takeaway Tips

• When a federal employee is injured in the performance of duty and that injury places legal liability on a person or organization other than the federal government, this person or organization is referred to as a “third party” or “responsible third party.”

• A claimant may be required to pursue a recovery for damages against a third party. The same is also true of a beneficiary in a death case.

• Money refunded to the Office of Workers’ Compensation Programs (OWCP) is credited to an employing agency’s (EA) chargeback, which reduces the EA’s costs.

• The claimant is entitled to retain a minimum of twenty percent of the tort recovery after expenses of suit are deducted.

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Third Party Recovery

• The FECA specifies how the third party recovery shall be distributed.

• First, the costs of the person obtaining the recovery, including a reasonable attorney’s fee if a fee was paid, and any court costs, are deducted from the total sum recovered as damages. The employee retains one-fifth of the net amount (minimum of 20%).

• Then, from the remaining four-fifths, a refund must be made to OWCP for the cost of all compensation benefits paid on account of the injury, less an amount equivalent to a reasonable attorney’s fee proportionate to the refund made to the United States.

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Third Party Recovery (cont’d)

• Finally, any surplus remaining is retained by the injured employee and credited against future compensation benefits. OWCP will resume payment of compensation benefits and medical bills only after the employee has submitted claims which equal the amount of the retained surplus.

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References

• 5 U.S.C. 8131

• 5 U.S.C. 8132

• Title 20, Code of Federal Regulations, Employees’ Benefits

• 20 CFR 10.705-10.719

• FECA Procedure Manual

• 2-1100 FECA Third Party Subrogation guidelines

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3rd party and subrogation - dcpas - home page · 2018. 5. 8. · achieving excellence through...

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