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Third party lien calculations differ in paying Federal vs State Workers’ Compensation Liens

The calculations for payment of the the workers compensation lien significantly differ if it is a State WC lien under FSA 440.39(3)(a) or under the Federal Employees’ Compensation Act (FECA).  But what about when calculating Defense Base Act (DBA) liens – which is merely an extension of the Federal Worker’s Compensation program?  Below is a precursory analysis of how liens are calculated and based on same, it’s clear Florida and DBA lien calculations are not nearly as complex as FECA calculations.

Florida Worker’s Compensation Lien Calculation:

Under Florida’s 3rd party lien law, Worker’s Compensation (WC) carriers are entitled to recover 100% of past and future payments, but…. the same law reduces this recovery by the carrier’s proportionate share of the injured worker’s attorney fees/costs and any reductions considering the injured workers own negligence in the settlement. It is very important the injured person’s attorney argue the injured worker did not get the full value of the case because he was partly at fault.

When a WC carrier has provided benefits to the injured worker, the Carrier has a lien up to the full amount it has paid.  The lien may be waived if the injured person gives up his right to future benefits.  When it is not waived, the amount the injured worker must pay back is determined by the Manfredo Formula.  See Manfredo v. Employer’s Casualty Insurance Company, 560 So.2d 1162 (Fla 1990). The formula, as set forth in the statute, can be difficult to understand.  The formula has not changed since I posted on this in 2013. However, the easiest way to understand the “Manfredo Formula” is by example:accounting-calculator-1-1241522-300x225

The case of Manfredo v. Employer’s Casualty Ins. Co., 560 So.2d 1162 (Fla. 1990) provides for the formula to use for the Florida state wc lien repayment.  Assume the third party settlement of $275,000.00 is divided by our client’s net tort recovery, which is $127,124.80. This amount is arrived at by deducting our one-third for attorney’s fees and costs along with the outstanding medical bills as our client had surgeries outside of workers’ compensation. Divide $127,124.80. that he will receive over the full value of the case, $275,000.00, equals a 46% payback.  That 46% payback times the wc lien of $20,359.38 calls for us to pay the lien holder $9,441.57.

Now is this formula used when calculating FECA liens or DBA liens?  The short answer is NO

Federal Employees’ Compensation Act:

The Federal Act states that claimants must, for any injury caused by a person other than the United States (US), make a claim against that 3rd party.  Any recovery must be reported to determine if a portion is required to be paid to the US as reimbursement for benefits that have been paid. See

The statute allows a FECA beneficiary to retain, as a minimum, 1/5 of the net remaining after attorney’s fees/costs have been deducted from the 3rd party recovery. The US shares in the attorney fees by allowing the beneficiary to retain, at the time of distribution, an amount equivalent to a reasonable attorney’s fee proportionate to the refund due the US.  After the refund, the FECA beneficiary retains any surplus remaining, which is credited, dollar for dollar, against future compensation including wage-loss compensation, schedule award benefits and medical benefits.  Thereafter payment of compensation will resume only after the FECA beneficiary has been awarded compensation which exceeds the amount of the surplus.  The calculation is complex but can be calculated as follows:

(1) Determine the amount of the recovery of the FECA beneficiary as set forth in §10.711 as follows:

(i) Set out the gross recovery which is the entire amount of the award;

(ii) Subtract the amount of award representing damage to real/personal property approved by OWCP or SOL (Subtotal A);

(iii) Multiply Subtotal A by the appropriate percentage in §10.711(c), or if it is a contested verdict by the percentage allocated by the judge/jury, and subtract this amount from Subtotal A (Subtotal B);

(iv) If both a wrongful death action and survival action have been asserted, multiply Subtotal B by 65% to determine the amount allocated to the wrongful death case and multiply Subtotal B by 35% to determine the amount allocated to the survival action, or if it is a contested verdict, by the percentage allocated by the judge/jury.

(v) Subtotal C is the amount of recovery of the FECA beneficiary;

(2) Subtract the amount of attorney’s fees actually paid, but not more than the maximum amount of attorney’s fees, from Subtotal C. This is calculated by determining the attorney fee percentage which is determined by dividing the gross recovery into the amount of attorney’s fees actually paid, but the attorney’s fee amount must not be more than the maximum amount of attorney’s fees considered to be reasonable by OWCP or SOL and must be approved by OWCP or SOL. Subtotal C is multiplied by the fee percentage and this amount is subtracted from Subtotal C (Subtotal D);

(3) Subtract the costs of litigation from Subtotal D (Subtotal E). If loss of consortium and/or wrongful death and survival actions are claimed, the costs of litigation are reduced first by the percentage used for loss of consortium and then by the percentage used for wrongful death or survival action as set forth in §10.711;

(4) Multiply Subtotal E by 20% and subtract from Subtotal E (Subtotal F);

(5) Compare Subtotal F and the refundable disbursements as defined in §10.714. Subtotal G is the lower of the two amounts;

(6) Multiply Subtotal G by the percentage used for attorney’s fees in paragraph (a)(2), to determine the Government’s allowance for attorney’s fees, and subtract this amount from Subtotal G. This is the amount of the refund.

(7) The credit against future benefits (also referred to as the surplus) is calculated as follows:

(i) If Subtotal F, as calculated according to paragraph (a)(4) of this section, is less than the refundable disbursements, as defined in §10.714, there is no credit to be applied against future benefits (but the remainder of the unused disbursements must be applied to any future recovery for the same injury);

(ii) If Subtotal F is greater than the refundable disbursements, the credit against future benefits (or surplus) amount is determined by subtracting the refundable disbursements from Subtotal F.

For example, a Federal employee sues another party for causing injuries for which the employee has received $22,000 in benefits under the FECA, subject to refund. The suit is settled, and the injured employee receives $100,000, for his injury. The injured worker paid attorney’s fees of $25,000 and costs for the litigation of $3,000.  Using these facts, how much is the refund?

(i) Gross Recovery $100,000.00
(ii) Amount of Property Damage $0.00
(iii) Subtotal A (Line a minus Line b) $100,000.00
(iv) Amount Allocated for Loss of Consortium 0% of Line c $0.00
(v) Subtotal B (Line c minus Line d) $100,000.00
(vi) Amount Allocated for Wrongful Death 0% of Line e $0.00
(vii) Amount Allocated for Survival Action 0% of Line e $0.00
(viii) Subtotal C—If Wrongful Death use Line f, if survival action use Line g, otherwise use Subtotal B $100,000.00
(ix) Attorney’s Fees 25% (Line h × .25) $25,000.00
(x) Subtotal D (Line h minus Line i) $75,000.00
(xi) Court costs $3,000.00
(xii) Subtotal E (Line j minus Line k) $72,000.00
(xiii) One-fifth of Subtotal E (Line l × .20) $14,400.00
(xiv) Subtotal F (Line l minus Line m) $57,600.00
(xv) Refundable Disbursements $22,000.00
(xvi) Subtotal G (lower of Subtotal F or refundable disbursements) $22,000.00
(xvii) Government’s allowance for attorney’s fees (attorney’s fees percentage used to determine Subtotal D multiplied by Subtotal G) $5,500.00
(xviii) Refund to the United States (Line p minus Line q) $16,500.00
(xix) Credit against future benefits (If Subtotal F greater than refundable disbursements, Line n minus Line o) $35,600.00

Based on the above, the refund to the US is $16,500.00 and the way to do so is by utilizing the Statement of Recovery form.  Without this form, it is virtually impossible to determine the proper refund.

Defense Base Act:

The Defense Base Act, an extension of the Federal Worker’s Compensation program, applies to Federal Contractors working outside of the Unites States.  Under the Act, Employer/Carrier’s get 100% of the net tort recovery for any classification of damages up to the full lien amount.  Unlike Florida WC lien laws, there is no reduction whatsoever.

As with Florida and FECA laws, a DBA recovery does not preclude a lawsuit against a negligent 3rd party.  However, you must get the employer’s/insurance Carrier’s consent prior to settling the case.  Failure to do so, will cause the injured worker to lose all rights to future compensation and medical treatment.   See, 33 USC 933 et seq.

In resolving liens in a 3rd party lawsuit, know the lien calculations differ.  Regardless of whether you are dealing with Federal or State laws, the United States and the Insurance Carriers are entitled to receive recovery based on the applicable law.

Our law firm is always prepared to advise you on these issues and our initial consultation is always free. If this is a concern, do not hesitate to contact our office.












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