If a worker is injured in an automobile accident while working and has collected workers’ compensation benefits, then the law grants a right of subrogation to the employer against any third party tortfeasor who is responsible for injuring their employee. Under § 287.150 RSMo., said employer is granted such legal right.
The same right of subrogation is held by the employer if the employee dies and his dependents make a workers’ compensation claim. Any amounts that the dependent receives from a third person is subject to “a subrogation lien on any recovery” and the employer shall receive a credit for sums paid under the workers’ compensation law for any dependents of the deceased employee to the extent of the settlement or recovery by the dependents for the wrongful death of the employee. § 287.150.2 RSMo.
The employer must pay from his share of a third party settlement a proportionate amount of attorneys’ fees and expenses incurred in order to recover from the third party. § 287.150.3 RSMo. After deducting the fees and expenses, the balance of the recovery is apportioned between the employer and the employee/dependents “in the same ratio that the amount due the employer bears to the total amount recovered if there is no finding of comparative fault on the part of the employee, or the total damages determined by the trier of fact if there is a finding of comparative fault on the part of the employee.”
§ 287.150.3 RSMo.
The apportionment of the balance of recovery after the attorney’s fees and expenses are deducted is determined by what is commonly known as “The Ruediger Formula,” as set forth in the case of Ruediger v. Kallmeyer Brothers Service, 501 SW2d. 56 (Mo. 1973). The formula set forth in Ruediger is as follows:
(1) The expenses of the third party litigation should be deducted from the third party recovery;
(2) The balance should be apportioned in the same ratio that the amount paid by the employer at the time of the third party recovery bears to the total amount recovered from the third party;
(3) The amounts due each should be paid forthwith;
(4) The amount paid the employee should be treated as an advance payment on account of any future installments of compensation; and
(5) In a case such as presented here, the employee should be entitled to future compensation benefits in the event the amount paid him as an advance is exhausted under the provisions under the statute.
Ruediger v. Kallmeyer Brothers Service, 501 SW2d. at 59.
If a jury assesses comparative fault on the part of the plaintiff, that comparative fault is taken into consideration in the formula. See Kerperien v. Lumberman’s Mut. Cas. Co., 100 SW3d. 778 (Mo. 2003).
People often struggle with the language of Ruediger, especially when comparative fault is involved, so the best way to explain it is by giving an example. Assume that a workers’ compensation carrier has paid total benefits in the amount of $95,000.00, and the workers’ compensation case is settled. Next, assume that a jury awards the plaintiff/employee in the third party action $180,000.00. Next, assume the attorney’s fee is $60,000.00 with expenses totaling $10,000.00, for a total of $70,000.00 in fees and expenses. The calculation would be as follows:
$95,000.00 (amount paid by employer in workers’ compensation claim) = 0.5277777
$180,000.00 (the total amount of the third party recovery)
This is the manner in which the balance of settlement should be apportioned, with the employer receiving 0.5277777 of the balance of the settlement after attorney’s fees and expenses are deducted. This is easily calculated as follows: $180,000.00 (total third party settlement) - $70,000.00 (attorney’s fees and expenses) = $110,000.00 (balance of settlement) x 0.5277777 = $58,055.47. This is the amount the employer would receive out of the third party settlement in this case.
If the matter had gone to trial and the plaintiff would have been assessed a percentage of fault, the calculation would be modified according to cases similar to Kerperien v. Lumberman’s Mutual, above. Basically, the employer still gets the same ratio of the amount due to the employee after attorney’s fees and expenses are deducted. If 50% fault was assessed in the above example and the employee was receiving $90,000.00 rather than $180,000.00, the settlement would be apportioned as follows:
(1) The attorney’s fees would then be $30,000.00 + $10,000.00 in expenses or $40,000.00;
(2) The balance of the settlement after the attorney’s fees and expenses were deducted under this scenario would be $90,000.00 - $40,000.00 = $50,000.00;
(3) The employer would receive 0.5277777 of $50,000.00 or $26,388.88 of the balance.
It makes little difference if the employee receives nothing after the Ruediger Formula, as the employee actually becomes the trustee of an express trust for the benefit of the employer for the part of the third-party recovery that is subject to subrogation. Missouri Highway and Transportation Commission v. Merritt, 204 SW3d. 278 (Mo. App. E.D. 2006). However, the statute specifically states that “the balance of the recovery may be divided between the employer and the employee or his dependents as they may otherwise agree.” § 287.150.3 RSMo. In other words, the law does not prevent the parties from reaching a settlement agreement. Because the results of the Ruediger Formula can be harsh to either party, it makes a lot of sense to get an agreement with the workers’ compensation carrier on a subrogation amount prior to resolving a third-party case.
Make sure to talk to a St. Louis MO Workers' Compensation attorney before you settle your third-party case if you have received workers' compensation benefits for your injuries.