Outside Counsel

One of the ways that personal injury law has become vastly more complex over the years that I have been tilling in this field is in the area of third party reimbursement. I came into things just about the time that the law was settled with respect to Worker's Compensation lien recovery: basically the rule boiled down to the idea that the Comp carrier was entitled to recover the amounts it had expended, less 1/3, which was the "equitable" amount for the plaintiff's work in obtaining the recovery, plus an allowance, called a holiday, to account for future payments that would not have to be made. I'm simplifying here, because oh my stars and garters it was much more complicated than that, but I want to move on. A further complication subsequently arose with liens being asserted by private health insurance providers, and over the last ten or 15 years the question has been what to do about Medicare payments. The rule is that these are reimbursable, and that future payments must be accounted for as well. Part of the award that catastrophically injured plaintiffs receive is  based on future losses, including future medical expenses, and the Social Security Administration doesn't want to pay benefits if the expenses are already covered. This becomes a complicated mess because it means that some portion of an award or settlement must be set aside to account for the money that Medicare might otherwise be obliged to spend-- and the Social Security Administration has to approve it. It is a horrible nightmare to dope this stuff out, and the law is far from settled.

Comes now the Second Circuit to help, in Iron Workers v. Dinnigan, (S.D.N.Y. Nov. 21, 2012), 2012 WL 5877426:

ERISA plan paid medical bills of $1,692,371.76 for the employee’s 7 year old minor daughter Amanda. Amanda was “horribly and permanently injured... [rendering her] quadriplegic and completely insensate below the her jaw, requiring a ventilator to breathe and a shunt to control hydrocephalus… [requiring] round-the-clock nursing care.” Products liability claims netted a total recovery of $14.6 million, before attorney’s fees and required the expenditure of over $975,000 in court-approved expenses. This decision recognizes that “the total recovery of $14.1 million amounts to only a small fraction of the ‘full value’ of Amanda’s claim,” but nonetheless permits reimbursement to the ERISA plan in the amount of $1,292, 278 which is 75% of its claim. The court applies the “common fund” approach, stating,
But for Defendants' efforts and legal fees and expenses incurred on behalf of the injured girl, [the ERISA Plan] would have no funds from which to seek reimbursement. In equity and conscience, Plaintiff should bear its fair share of the fees and expenses incurred in creating the funds from which Plaintiff seeks reimbursement.
The Clerk of the Court is directed to enter judgment for Plaintiff in the amount of $1,292,278. This is 75% of the medical expenses of $1,692,371 paid out by Plaintiff. The amount of $423,092.75 reflects Plaintiff's fair share of the attorneys' fees and expenses incurred in creating the total settlement Fund.
 

(Thanks to Brett Newman and the Lien Resolution Group for the tip.)