FECA FECA and Third Party Subrogation. It s really a Statutory RIGHT OF REIMBURSEMENT FECA THIRD PARTY REQUIREMENTS

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1 FECA and Third Party Subrogation It s really a Statutory RIGHT OF REIMBURSEMENT Session 4 Federal Workers Compensation Conference 2012 Cathy Carter and Paul Klingenberg Department of Labor Office of Solicitor, FEEWC Division FECA Subrogation: Third Party Claims 1 FECA THIRD PARTY REQUIREMENTS 1. Under 8131, claimants are required to initiate a suit if the circumstances of their injury or death created a legal liability on a person other than the United States. This requirement in certain limited circumstances can be waived. 2. Under 8132, if there is a recovery, claimants are required to reimburse the United States for the benefits paid. This requirement can never be waived. 2 FECA 8131 To the extent that an injury or death for which compensation is payable under this subchapter is caused under circumstances creating a legal liability on a third party to pay damages, OWCP may require the FECA beneficiary to assign a right of action to enforce that liability to the U.S.or to prosecute an action in their name. 3 1

2 CONTINUED Statutory Right of Reimbursement!!! The refund owed to the U.S. when a claimant achieves a recovery from a third party arises by operation of law under the specific language of 5 U.S.C (Statutory Right of Reimbursement) However, most attorneys representing claimants in third party cases will speak in terms of a lien, because that is the term used in many state workers compensation actions, with which they are more familiar 5 PLANES, TRAINS AND AUTOMOBILES *IDENTIFYING 3RD PARTY CASES Car Accident where a federal employee is injured or killed in POD (performance of duty) A plane crash or train wreck in POD Malfunctioning elevator Falls due to negligent building maintenance Dog bite Product liability (defective chair) Asbestos cases 6 2

3 THIRD PARTY IDENTIFICATION YES Critical for immediate superior (or person at employing agency completing the agency s portion of the initial claim form) to identify possible Third Party case on the initial claim form itself Box 30 of CA-1 Box 33 of CA-2 7 THIRD PARTY IDENTIFICATION YES Asbestos cases ALL asbestos claims should be identified as third party cases. PLANES, TRAINS AND AUTOMOBILES Car Accident where a federal employee is injured or killed in POD - such as being hit from behind or failure to yield the right of way or any other negligent act on the part of the other driver. 8 THIRD PARTY IDENTIFICATION YES A plane crash or train wreck in POD if the pilot or the train operator is negligent or the plane or train malfunctions due to poor service or product liability, there is third party liability Malfunctioning elevator if the elevator has not been properly serviced and maintained and doesn t stop evenly with the floor or suddenly drops several floors causing injury to a federal employee in the POD, the manufacturer and/or the service/maintenance company may be held liable for the employee s injuries. 9 3

4 THIRD PARTY IDENTIFICATION YES Falls due to negligent building maintenance If liquid has been on the floor for a long period of time or if the carpet or tile is not properly installed and a federal employee falls and is injured, there would be third party liability. Product Liability (e.g., defective chair) If a federal employee sits in a chair and the chair breaks and the employee is injured, the chair may have been defective, and if so, there is third party liability. 10 THIRD PARTY IDENTIFICATION YES Medical Malpractice If the FECA beneficiary s injuries are made worse by medical malpractice, there is third party liability. For purposes of computing the long form Statement of Recovery, only the disbursements relating to the malpractice will be utilized. 11 THIRD PARTY IDENTIFICATION NO Census workers injury. Due to privacy considerations and at Census Bureau request, DOL does not require census workers to pursue certain third party claims. (Exception--other federal employees, such as park employees, may be bitten by dogs or other pets and must pursue the third party aspects of the claim.) If the census worker does pursue the third party claim and receives a recovery, the Government has a statutory right of reimbursement. 12 4

5 Does the government get all $? While the government cannot waive or compromise any part of its statutory right of reimbursement, you should be aware, that the formula set forth in 8132 effects a considerable reduction in the amount to be refunded by the FECA beneficiary and/or credited against future FECA benefits. Claimant is entitled to retain a minimum of twenty percent of the tort recovery after expenses of suit and reasonable attorney s fees are deducted. A portion of the recovery may be allocated for loss of consortium for the spouse and children of an injured employee. COP is not included in determining amount of disbursements. 13 Releasing Obligation to Pursue A beneficiary may make a written request to OWCP or SOL pursuant to 20 C.F.R to be released from section 8131 s requirement that the beneficiary prosecute a claim against a third party. The beneficiary should include in the request as much detailed information as possible. 14 DOL Will Decide on Release! Beneficiary will be provided written notice on the request. DOL will emphasize that this discharge extends only to the prosecution requirement of section Why? Should a recovery from a third party be received, the refund requirement imposed by section 8132 is still in effect. 15 5

6 Statute of Limitations The clock is running on third party cases! The employee s right to sue the third party is lost if suit is not timely filed! Timely follow up is key! 16 THIRD PARTY BASICS Statement of Recovery The Statement of Recovery is now an Approved Government Form with an OMB clearance number. Use only the approved form, do not alter or modify an OMB-cleared form. Why? Changing an OMB-cleared form can have Paperwork Reduction Act consequences, and can adversely affect DOL s ability to get other forms cleared through OMB. Short Form SOR (CA-1122) requires the claimant to sign the form, and contains the usual warning on fraud. USPS must use OWCP forms and procedures. 17 Failure to Respond Claimant/Attorney must take action (including filing a lawsuit, if necessary) against a responsible third party to satisfy the requirements of 8131 and 8132 of the FECA. Claimant/Attorney are also required to provide periodic status updates and other relevant information in response to OWCP or SOL requests. See 20 C.F.R Failure to respond to requests to initiate a third party action or for information may result in forfeiture of right to compensation, 20 C.F.R , or the right to compensation may be suspended. 18 6

7 Failure to Respond Beneficiary/counsel is responsible for providing periodic status reports and other information when requested to do so by OWCP or SOL. 19 How can employers/agencies assist on Third Party cases? Important to set out the factual basis of the claim ASAP (employee and agency) Promptly respond to OWCP inquiries Provide complete information on ALL aspects of the claim INCLUDING Information on Third Party Emphasize to employees that medical bills must be submitted to OWCP for processing this insures disbursements are correctly reflected and calculated 20 We Need Your Assistance! It is vitally important that agencies and agency injury compensation specialists educate the supervisors to identify situations where a third party may be liable Absent truly exceptional circumstances, a coworker is not considered a third party 21 7

8 THIRD PARTY BASICS SETTLING FOR LESS Unless permission in writing is given by OWCP or SOL, the beneficiary may not settle or dismiss a case for any amount less than the refundable disbursements as defined in 20 C.F.R See 20 CFR Can t Say It Enough It s Not That We Won t Waive Reimbursement WE CAN T!!!!!!!!!!!!! Willie E. Cantrell, 13 ECAB 490,492 (1962), "terms of the [FECA] are specific as to what shall be charged against the proceeds of a third-party recovery and neither the Bureau (OWCP s predecessor agency) nor the Board has the authority to waive or compromise the requirements of the Act." See also Charles Howell, 38 ECAB 421 (1987). 23 The Supremes Weigh In 24 8

9 U.S. v. Lorenzetti * The statutory right of reimbursement under 5 U.S.C attaches to the entire recovery, regardless of the elements of damages for which recovery is had. Citation: 467 U.S. 167 (1984). (If an attorney argues that DOL shouldn t share because the recovery was for pain and suffering, this is the response.) 25 DOL Steps Up 3 rd Party Efforts OWCP and SOL are making a coordinated effort to be proactive in identifying and following up on third party cases. We have also stepped up collection efforts. In FY 11 alone, SOL received over 8 million dollars in refunds on third party cases and credited over 22 million dollars against future benefits. Monies received in Third Party cases are credited against agency chargeback bills. 26 The Attorney who disagreed with the Supremes Jerrilyn Hedrington v. Golden Touch Transportation. Hedrington, a FECA beneficiary, filed in state court seeking an order to the DOL to show cause why she should not receive the entire proceeds from her third party recovery based on New York state law. The United States removed the action to the Federal District Court in response to the show cause order, asserting that in accordance with the Supreme Court's decision in United States v. Lorenzetti, 467 U.S. 167 (1984), any money received as a result of a third party action, regardless of whether the damages are the type covered by the FECA (wage loss) or not covered by the FECA (non-economic losses such as pain and suffering), is subject to the reimbursement provisions of Claimant agreed to pay the refund and DOL received a check for the full refund. 27 9

10 Attorney who paid himself first U.S. v. Richard Epstein. DOL sued the attorney representing a FECA beneficiary in a third party action, asserting that the attorney was jointly and severally liable because he failed to first satisfy the United States' right of reimbursement under 8132 before distributing the proceeds of a settlement. After successfully obtaining a structured settlement on behalf of the FECA beneficiary, Epstein paid himself $210,000 first along with the court costs from the $230,000 in up front cash from the structured settlement and sent DOL $7,000 for the United States' right of reimbursement. The U.S. District Court entered judgment in the amount of $114,000 against Epstein. As a result, Epstein paid DOL $114, The Attorney Who Claims Settlement is all for spousal consortium ECAB found that that the settlement reached as a result of the third party action by husband and wife was a joint settlement, rejecting assertion that the settlement was only for the husband's loss of consortium claim which would not be subject to 8132 reimbursement provision. U.S. District Court for the District of Columbia agreed, and ordered wife to refund $152,000 to DOL. Gonzalez v. Department of Labor. D.C. Circuit Court of Appeals affirmed the decision. 29 The attorney who wanted to deduct costs and expenses twice In Durand v. USDOL, the Court of Appeals for the Ninth Circuit affirmed DOL s calculation of the refund due to the United States under the statutory formula set forth in The attorney argued that the costs of suit should be deducted from the refund due to the United States; the Ninth Circuit agreed with DOL that there was no ambiguity in the language of 8132, and that the costs and expenses of suit were to be deducted from the gross recovery (as clearly set forth in line 10 of the long form statement of recovery, CA-1108), not from the refund amount

11 References FECA, 5 U.S.C et seq. 20 CFR Part 10 FECA Regulations Part 2, (FECA) Procedure Manual DOL Website has links for fillable Statements of Recovery: Short form CA ca-1122.pdf Long form CA ca-1108.pdf 31 CONTACT INFO ALEXANDRA A. TSIROS, COUNSEL FOR SUBROGATION PAUL KLINGENBERG SENIOR ATTORNEY

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