Litigating 102.29 Interests

WDC Journal Edition: Winter 2004
By: James Ratzel

While many parties are aware that worker’s compensation benefits that have been paid may be recovered from a tortfeasor, unfortunately, many litigants and courts misunderstand 102.29 and the rights and powers of parties within 102.29. This area of the law has not been heavily litigated. The seminal case is Threshermens Mut. Ins. Co. v. Page, which defined the scope of the claims the insurer could make when bringing its own suit against a tortfeasor. This article reviews the law concerning this type of litigation so that its parameters may be better understood.

I. Understanding the statute

102.29 was created as a part of the entire worker’s compensation scheme. It represents an avenue by which a worker’s compensation carrier may recover benefits from an appropriate tortfeasor. The most significant feature of the statute is the recognition that the rights of the worker’s compensation carrier are identical to the rights of the injured worker. The rights are neither greater nor less, but equivalent. Similarly, the injured worker has the exact same rights as the carrier. Arising out of this recognition is one of the most important premises of the statute, that being that there is but one cause of action. For that reason, whenever a suit is filed, the statute requires notice to be given to the other party. Simply stated, if the carrier proceeds as the named plaintiff, the injured worker must be notified as to the existence of the lawsuit. Similarly, if the worker starts the action, the worker’s compensation carrier should be identified and made a party to the lawsuit.

II. When does the claim arise

The ability to proceed with a claim under 102.29 arises the moment that there is exposure for payment of worker’s compensation benefits. Even if at the time of the filing of the suit, there have not been any benefits paid or only some benefits have been paid, the carrier still has the ability to proceed to recover the exact same claims of the injured worker. Wisconsin courts have likewise determined that if the claim is denied by the worker’s compensation carrier, that carrier is still not precluded from recovery in a 102.29 action. Thus, as will be discussed later, whenever a liability carrier is confronted with a claim by an individual it is imperative that a determination be made as to whether or not that injured person was in any fashion in the course of his or her employment, thereby triggering a potential 102.29 exposure.

III. When must claim be filed

Since the claim of the 102.29 carrier is identical to that of the injured worker, the same statute of limitation applies. The worker has three years from the date of the injury to bring a claim against the tortfeasor. Similarly, the worker’s compensation carrier has three years from the date of the injury to bring a claim against the tortfeasor. From a practice standpoint, it is therefore important for worker’s compensation carriers to note the three year statute of limitations. While a worker’s compensation claim and payment of benefits may extend well beyond the three year period, the suit under 102.29 must be filed in order to protect and preserve recovery against the tortfeasor within the statute of limitations.

IV. Third-party litigation during a pending worker’s compensation claim.

In cases of serious injury, many times the worker’s compensation carrier finds itself in the position of defending the worker’s compensation claim while at the same time seeking recovery against the tortfeasor. There are practical considerations that must be taken into account. First, it is advisable that a rapport be established between the compensation carrier and the injured worker and/or the injured worker’s counsel so that steps and defenses are not taken in the worker’s compensation arena that defeat or lessen recovery in the liability arena. For that reason, many times the parties agree that the worker’s compensation action essentially be stayed informally while the third-party liability case is being litigated, or even resolved prior to commencement of the third-party action in order to forestall any issues which may arise later.

As an example, if there is a serious injury, and a strong possibility of recovery in a third-party liability case, it makes no sense for the worker’s compensation carrier to proceed with an IME. That IME may provide a defense to future worker’s compensation payments temporarily, but that IME may also be utilized by the third-party tortfeasor in defense of the third-party claim. The same holds true for other types of action such as witness statements and perhaps even surveillance. One practical way to proceed is simply having the worker’s compensation carrier and injured worker agree to suspend further action in the worker’s compensation arena and concentrate on the liability claim. This essentially allows the compensation carrier the freedom to not spend time and money defending a claim which is going to in-turn hurt the recovery in the liability case. While in the worker’s compensation arena, medical proof is required in order to deny benefits/stop benefits, it is believed that the parties can informally agree that the compensation carrier need not defend the claim in an effort to allow for greater success in the liability case. The reality is that any additional benefits paid by the worker’s compensation carrier in a case where there is going to be recovery against the tortfeasor is simply an exercise in having payments made and later recovered. It does not help either party to have increasing worker’s compensation payments made to only have to turn around and pay those back once there is recovery from the third-party tortfeasor.

V. Can the worker’s compensation file be discovered in the third-party liability case?

It should not be. Often the attorney for the tortfeasor will send a general request for production of documents which includes the worker’s compensation file. The proper avenue for response is to simply object to disclosure of those documents and material that have not already been disclosed to third-parties. As it is an active legal claim, the third-party tortfeasor has no right to inspect or obtain documents from the worker’s compensation file. Obviously those reports and forms which have been filed with the state can be disclosed. If there are medical records, the carrier should insist on proper authorizations for the release of those medical records. Remember, the individual worker cannot sign a release which binds the carrier to disclose all of the carrier records. Those records are not the possession of the injured worker. Thus, it makes no difference if the injured worker has authorized the carrier to disclose its compensation file. It is not his to disclose. There is nothing secret about payments that have been made and thus any documents or itemization identifying payments can readily be disclosed. Similarly, as a practical matter, if there are photographs or other similar evidence, that likewise can be disclosed. However, it is completely appropriate to object to disclosure of any notes from any rehabilitation nurses or other internal communication and correspondence.

VI. Practice and procedure

A. Liability carrier.

Unfortunately, at a time that a claim is being adjusted, there often is not a wide range of information concerning the injured claimant. However, certain red flags must catch the attention of the individual adjusting the claim. Steps must be taken to determine whether there is a potential worker’s compensation claim that may not have yet been filed, but nevertheless could be. This statute completely nullifies any settlement if the proceeds have not gone through the formula of 102.29 and as such, carriers must be aware of the circumstances of the accident prior to making any settlement in order to avoid having that settlement voided.

If the claimant is in any fashion operating a company/employer vehicle, inquiry must be made as to whether or not that individual was in the course of employment. If the accident occurs during what is routinely seen as normal work hours, questions must be asked in the statement as to where the person was going or where the person was coming from. If there are other individuals in the vehicle who appear to be co-workers, further inquiry is necessary in order to determine whether this trip had some employment purpose. These and other areas of inquiry are necessary in order to avoid a situation in which a settlement is made only to be disregarded two or three years later.

Cautionary note: In the event a settlement is made with a tortfeasor and if the worker’s compensation carrier did not receive notice and did not participate in the settlement, the compensation carrier may and will file suit against that same carrier for the tortfeasor and can recover the identical amounts that presumably were paid to the injured worker. Essentially the tortfeasor is going to be making double payments.

VI. Pre-suit settlement.

As with other litigation, claims involving 102.29 interests may be settled prior to suit. However, the law requires the settlement to be approved by either the worker’s compensation department or circuit court. This requirement is absolute. If a settlement is not approved by the department or court, the settlement is void and has no binding affect.

VII. Lawsuits involving 102.29 interests.

While an interest under 102.29 is routinely called a subrogated interest, it is not. The 102.29 interest is an interest that is more significant than a routine subrogated interest. The distinction between the 102.29 lien and the more routine subrogated lien is a difference between night and day. Under 102.29, the parties must be notified of the pendancy of the action. However, while there are notice provisions to either the injured worker or the worker’s compensation carrier, there is no requirement that the “silent” party participate. The significance of the 102.29 interest is also identified in the fact that a worker’s compensation carrier cannot be defaulted when joined in third-party litigation. There is no requirement that the compensation carrier file an answer. There is no requirement that the compensation carrier participate in motions or scheduling orders. There is an absolute interest that cannot be altered by any type of civil procedure.

VIII. Nature and extent of claims

As identified, the worker’s compensation carrier stands in the identical shoes of the injured worker. The compensation carrier can make a claim for pain and suffering, punitive damages, lost wages, medical expenses, and lost earning capacity. The only significant area of damages that cannot be recovered are those for loss of society and companionship, which are routinely recovered by a spouse or loved one rather than the injured worker. Additionally, the scope of the claim for recovery is limited to tort damages. There cannot be any recovery by the compensation carrier for traditional contract claims, such as uninsured motorist or underinsured motorist claims.

IX. A settlement under 102.29.

Once a case has been settled, it must proceed through the statutory formula in 102.29. Under that formula, unless there is a deviation that is approved by all parties and the court, the formula will be and must be followed to the letter. In the formula, the first recovery is to the attorneys as cost of collection. Interestingly, in recent years, the Courts in Wisconsin have expanded recovery of attorneys fees not only to the attorney representing the injured worker, but also to the attorney representing the compensation carrier. That initial recovery includes both reasonable attorneys fees and cost of collection. After that amount is deducted from the total settlement pool, the next one-third goes to the injured worker. With the remaining balance, the worker’s compensation carrier gets paid its full amount to the extent that there are remaining proceeds. If there are insufficient proceeds, the worker’s compensation carrier simply recovers the remaining balance. If, however, the compensation carrier is paid in full and there are additional funds, those funds are identified as a type of “cushion” which will act as an offset against future worker’s compensation benefits. This money is often returned to the injured worker. However, a reading of the statute finds that this money could arguably be held in trust by the carrier, not in possession of the injured worker.

X. Practice pointers.

The field of 102.29 litigation is evolving. There is limited case law in the area and yet literally hundreds of thousands of dollars are exchanged in the process. Often times, there is a significant amount of negotiation present between the injured worker and the compensation carrier when settlement offers are made. Many times it is in the interest of the worker’s compensation carrier to either forego recovery under the statute or reduce its recovery in exchange for closure of the entire pending worker’s compensation claim. It is extremely important to remember, however, that while a court can approve the settlement distribution under 102.29, any attempt to enter into a limited compromise or full and final compromise of a compensation claim must be approved by the State of Wisconsin Worker’s Compensation Division. Often times an injured worker feels slighted when the numbers are put together in a particular worker’s compensation settlement under 102.29. The worker many times is receiving the least amount of money compared to his lawyer and the worker’s compensation carrier. Therefore, in many instances the worker will not want to settle the case. The incentive that the compensation carrier has to forego its interest and pay more money to the injured worker is that it can close out the entire worker’s compensation claim.

While each case varies and is considered by the State on an individual basis, many times the department will consider the additional sums available to the injured worker as proper consideration for closure of the entire worker’s compensation claim.

XI. Future concerns.

One area of the law that perhaps needs clarification is the actual trial under 102.29. In theory the worker’s compensation carrier stands in the shoes of the injured worker. That being the case, the trial by a worker’s compensation carrier as a plaintiff is a unique event. While the carrier may be the identified plaintiff, the actual scope of the trial focuses on the injured worker. Thus, trial courts must take unusual efforts to ensure that a jury is not influenced or prejudiced by the involvement of the worker’s compensation carrier when it is deliberating the actual liability and damages of the injured worker.

Recovery under 102.29 remains an effective way to reimburse worker’s compensation carriers for what at times are clearly significant payouts of benefits to injured workers.

James Ratzel of Ratzel & Associates concentrates his practice in insurance defense litigation and 102.29 claims. He is a former Assistant U.S. Attorney and workers compensation judge.

217 Wis. 2d 451, 577 N.W.2d 335 (1998).

See Nelson v. Rothering, 174 Wis. 2d 296 496 N.W.2d 87 (1993).

See Judith A. Langer, Recent Case Law Developments Concerning the HIPPA Privacy Rules, Wisconsin Civil Trial Counsel Journal, Vol. 2, Issue at 7.

See Campion v. Montgomery Elevator Co., 172 Wis. 2d 405, 493 N.W.2d 244 (Ct. App. 1992).

See Berna-Mork v. Jones, 178 Wis. 2d 645, 498 N.W.2d 221 (1993).