Subrogation Credit After Proposition 51 Is Tough

So you thought taking credit for workers’ compensation payments was easy. Have you been under the mistaken belief that you could take credit for every dollar paid in workers’ compensation benefits? The law actually changed in 1986 with the passage of Proposition 51.

An employee has the right to sue a third party for damages resulting from a work injury. The employer has the right to claim reimbursement in the third party action for workers’ compensation benefits paid to the employee. However, in Witt v.  Jackson, the court stated that a negligent employer was barred from obtaining reimbursement from the third party for benefits paid by the employer to the injured worker. The court in Witt was also concerned with preventing the employee from obtaining a double recovery. This case was decided in 1961.

Proposition 51 was enacted in f986\ Proposition 51 slates “each defendant shall be liable only for the amount of non-economic damages allocated to that defendant in direct proportion to that defendant’s percentage of fault, and a separate judgment shall be rendered against that defendant for that amount.” The Court indicated that “the proper allocation of workers’ compensation credit after Proposition 51 depends upon the characterization of the benefits as economic or non-economic damages.” Workers’ compensation benefits were determined not to be economic damages as defined in Proposition 51.

This Court then analyzed the decision of Espinoza v. Machonca. The Espinoza case dealt with the allocation of pre-verdict settlement proceeds under Proposition 51. In that case the plaintiff settled with one defendant before trial and obtained a jury verdict against the non settling defendants. The question was how to determine liability among the nonsettling defendants… “the court looked into the relationship of the jury’s award of economic damages to the total verdict and determined that the economic portion of the settlement proceeds should bear the same ratio to the total settlement as the jury had determined the economic damages bore to the total judgement.” Do you understand that?  Well, the Court adopted this rule for apportioning the credit in the Scalice case.

In this case, the jury’s verdict was for $677,000, with $274,000 allocated to economic damages and $ 403,000 to noneconomic damages. $162,008.53 was paid to the injured worker in workers’ compensation benefits. The injured worker was found not negligent.  The employer was found 30% negligent.  If you thought that the $162,008.53 was to be deducted from either the total award or the economic damages then you are incorrect. You will have to look at the formula used in the case.

Case: Scalice V. Performance Cleaning Systems

Harvey Brown
3501 Jamboree Rd. Suite 602
Newport Beach, CA 92660

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