Dallas Appellate Court Defines "Net Amount Recovered" for Repaying Workers Comp Lien

How should a workers compensation claimant calculate the repayment to a workers comp carrier when there is a third party settlement? This was the issue presented in Hartford Acc. & Indem. Co. v. Janery Francois, No. 05-21-00981-CV, handed down by the 5th District of Texas (Dallas) on May 23, 2023, 2023 Tex. App. LEXIS 3489 . Francois was injured in the course and scope of her employment and received $356,669.73 in workers comp benefits from Hartford. She brought suit against a third party, and Hartford intervened to assert its lien. Francois settled the third party claim for $150,000. Her attorneys asked Hartford to take a 3-way split on the settlement, and Hartford refused, arguing it was entitled to “first money” under Tex. Labor Code 417.003, after reducing for attorney’s fees and its pro rata share of expenses. Francois’ attorneys argued that Hartford’s recovery was based upon the “net amount recovered” under section 417.002(a), which they calculated after taking 40% off the top. They then argued that Hartford must pay an additional 1/3 of the reduced amount for attorney’s fees, plus an additional $10,000 in fees since Hartford “always” agreed to a 3-way split, and their failure to accept it on this case was unreasonable. The final number her attorneys calculated for repayment was $58,088.04 out of the $150,000 settlement. The trial court agreed and entered judgment awarding $58,088.04 to Hartford, and the balance to Francois and her attorneys.

On appeal, Hartford argued that the Texas Labor Code provides that the first money from a third party settlement goes to the comp carrier, less 1/3 fees and pro rata expenses (if it is not actively represented), which amounts to repayment of $95,206.03 out of the $150,000. The appellate court discusses the history of the statute and the purpose of reimbursing the comp carrier before payment is made to a claimant from a third party settlement, stating that sections 417.002 and 417.003 work together in the allocation of third party settlements. The appellate court agreed with Hartford’s argument, reversing the trial court’s decision and rendering judgment for Hartford for $95,206.03. This decision is in harmony with similar decisions issued by the appellate courts in San Antonio and Amarillo. The Texas Supreme Court has not yet ruled upon the definition of “net amount recovered.”