Subrogation – Fact or Fiction?


O.C.G.A. 34-9-11.1(b) provides that when an employee has a cause of action against a third-party tortfeasor in a work-related accident and the employer has paid workers’ compensation benefits as a result of the accident, the employer/insurer has a subrogation lien against the third-party. The employer may therefore seek to intervene in any action against the tortfeasor to recover an amount up to that which has been paid in workers compensation benefits. The recovery can only occur if the settlement or jury award leaves the employee “fully and completely compensated” for all losses, both economic and noneconomic as a result of the injury.

As simple as the above may sound, it is a nearly impossible burden for the employer to carry. There is great discretion for judges to determine when a claimant has been fully and completely compensated and the usual result is that the employee has not been made whole and so the employer/insurer recover nothing. Further, any decision by a judge with regard to whether the claimant has been fully and completely compensated can only be overturned on appeal if the decision is “clearly erroneous.” See, Georgia Electric Membership Corp. v. Garnto, 266 Ga.App. 452 (2004). A very high standard indeed.

The practical solution for the employer/insurer is often to intervene in the lawsuit, but then quickly come to a settlement agreement with the injured worker on the workers’ compensation claim that provides for the payment of some of the total benefits paid out based upon the amount of the settlement or judgment in the tort claim. As an example, such an agreement may provide for the payment to the employer/insurer of $20,000.00 if the injured employee recovers more than $120,000.00 from the tort claim and $40,000.00 if the recovery is more than $200,000.00. These agreements are often referred to as “ladder agreements.”

In the event that some type of agreement cannot be reached with the injured worker, the employer/insurer can often face expensive, protracted litigation, and, as stated above, slim prospects of recovery.