The Colorado Court of Appeals issued its opinion in Hertz Corp. v. Industrial Claim Appeals Office on September 13, 2012.
Workers’ Compensation—Subrogation—Malpractice—Interest—Economic Damages.
In this workers’ compensation proceeding, the Colorado Insurance Guaranty Association (CIGA) appealed from the final order issued by the Industrial Claim Appeals Office (Panel), which disallowed it from taking a credit or offset against interest earned on the multiple third-party recoveries obtained by claimant. The order was affirmed.
Claimant received a workers’ compensation award of ongoing medical benefits and permanent total disability (PTD) benefits. He also received third-party recoveries for malpractice. The interest earned by claimant included both the investment income generated by the several lump-sum malpractice settlements and the interest component embedded in a statutorily required, court-ordered annuity investment. Claimant later moved for an order compelling CIGA to begin payments for PTD and medical benefits on a continuing basis and to pay past-due benefits without offsetting any of the interest earned or any interest contained in the annuitized payments for loss of future earnings and medical costs.
CIGA contended that the Panel erred in interpreting CRS § 8-41-203(1) to preclude a credit or offset against the interest component earned on the judgments against the hospital and physicians who caused claimant’s damages. CRS § 8-41-203(1) provides the workers’ compensation insurance carrier with a subrogation right to the proceeds received by the claimant for economic damages awarded in a third-party lawsuit against the tortfeasor. Here, purchase of the annuities essentially constitutes an investment of claimant’s previous judgment, and the interest earned on the annuity is funded by the original investment, not by the third-party tortfeasor’s liability obligation. Thus, the interest earned on the annuity is not the equivalent of the economic and medical benefits recovered from the tortfeasor or owed by the workers’ compensation provider. Rather, the interest component compensates claimant for the loss of use of funds during the accrual period. Further, CIGA was not entitled to any interest earned on claimant’s lump sum payments from the physicians. If CIGA received a credit or offset for the interest earned on these amounts, it would be permitted to recover a sum in excess of the amount of compensation for which it would be liable, in contravention of the statute. Therefore, the Panel properly determined that CIGA’s subrogation rights did not extend to that part of the periodic payments.
Summary and full case available here.