Employee’s Decision To Forego Certain Damages Against Third-Party Does Not Diminish Employer’s Recovery Rights

In Duncan v. Wal-Mart Stores, Inc. (Cert. for Pub. on 12/13/17, No. G054220), the California Court of Appeal held that a plaintiff-employee is not entitled to reduce her employer’s lien to recover paid temporary disability, though the judgment awarded to plaintiff did not include lost wages.

Plaintiff was injured at Wal-Mart while in the course and scope of her employment with Acosta. While she received workers’ compensation benefits through Acosta’s workers’ compensation carrier, she sued Wal-Mart as the third party tortfeasor, seeking recovery for her medical expenses, lost wages and earning capacity, and pain and suffering. The court awarded plaintiff $355,000, which consisted of $178,000 in past medical expenses, $102,000 in future medical expenses, and $75,000 for past and future pain and suffering. Although plaintiff’s Complaint sought lost wages and earning capacity, the court did not award her damages for these claims because she did not ask for them at trial.

The workers’ compensation carrier filed a lien in the civil litigation in an amount in excess of $152,000, consisting of approximately $115,000 in medical expenses and $37,000 in temporary disability indemnity. In California workers’ compensation, an employee receives temporary disability benefits in place of lost wages during periods the injured employee is unable to work. This benefit is in addition to permanent disability indemnity and medical treatment. As plaintiff did not request lost wages at the end of the trial, the trial court denied the carrier’s claim for $37,000 in disability indemnity payments. The carrier appealed.

The Court of Appeal modified the trial court’s order by granting the carrier’s lien for the entire amount the carrier paid in workers’ compensation benefits, including the $37,000 paid as temporary disability indemnity. In coming to this decision, the Court of Appeal explained that the workers’ compensation statutory scheme (Labor Code sections 3852, 3856) grants the carrier a first lien on the entire judgment regardless that the judgment awarded to plaintiff did not include her lost wages. The only offset or deduction that plaintiff was entitled to was for the attorneys’ fees and costs she incurred in filing an action against Wal-Mart, since the workers’ compensation carrier did not intervene in the action or initiate its own proceeding against Wal-Mart. (Lab. Code § 3856(b).)

The Court of Appeal also addressed, and rejected, other arguments presented by the plaintiff, including plaintiff’s claim that the carrier’s lien and reimbursement rights were “subject to the principles of equitable subrogation” and a policy of preventing double recovery. The Court held that nothing in the statute required the carrier to show that the employee recovered the exact type of damages that the carrier paid to the employee. On the contrary, the statute provides that the employee is entitled to “nothing other than attorney fees and costs until the employer is fully reimbursed.”

Duncan supports the statutory scheme and existing case law establishing the recovery rights of employers and carriers in subrogation when a third party’s negligence causes an injury to an employee. In summary the employer’s right of recovery attaches to the entire judgment obtained, including any award for pain and suffering or other damages that the employee cannot recover through the workers’ compensation system, unless the employer’s own contributory negligence would reduce the recovery. The opinion also reflects the court’s disparagement of efforts to diminish employer recovery rights through creative lawyering.

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January 4, 2018