Insurer says plaintiff's lawsuit settlement should be used to reimburse worker's comp payout

David Yates Mar. 25, 2008, 9:10am

After a TJ Maxx employee received more than $140,000 in worker's compensation for a slip and fall at work, she also won damages in a civil suit against the janitorial service she claimed caused the fall. Now the insurance carrier wants to be reimbursed for the money it paid out to cover the injury.

As soon as American Casualty, the company who paid Pauline Barnett's worker's comp claim, learned of Barnett's settlement, it contacted Barnett's Beaumont attorney Charlton Hornsby and requested to be reimbursed under Texas Labor Code No. 417.002.

To date, American Casualty's requests have gone unanswered, so the insurer took legal action and filed a suit against Hornsby and Barnett on March 24 in Jefferson County District Court.

According to the petition, American Casualty of Reading, Penn., was the worker's compensation carrier for Barnett's employer TJ Maxx.
On April 6, 2003, Barnett was injured when she slipped and fell on a wet floor while in the course and scope of her employment.

As a result, American Casualty Company paid worker's comp benefits to Barnett in an amount totaling $143,430.11, comprised of $123,207 in medical payments and $20,222.34 in indemnity payments.

Represented by Hornsby, Barnett then pursued a third party subrogation claim against Karmay Janitorial, the service that mopped the floor. According to the original complaint, the janitorial service settled the claim directly with Barnett and Hornsby in December 2006 and the case was dismissed and order signed by the court on Jan. 17, 2007.

"In April 2005, more than a year prior to settlement, Plaintiff received a letter of representation and a copy of Barnett's original petition from Hornsby indicating that he represented Pauline Barnett and was aware of the Plaintiff's subrogation lien," the suit said.

A copy of Hornsby's letter is attached to the suit.

American Casualty's representative contacted Karmay Janitorial and its counsel in March 2005.

"Nonetheless, Defendants failed to honor and reimburse Plaintiff first money from the subrogation lien, which arose pursuant to Texas Labor Code 417.001," the complaint states.

"Furthermore, Plaintiffs counsel has sent numerous letters to Hornsby discussing settlement and even reaching a Rule 11 agreement regarding settlement funds and expenses to be paid.

"Plaintiff would show that it has a cause of action against Defendants for reimbursement under (the Texas Labor Code), which provides in part that the amount recovered by a claimant in a third-party action 'shall be used to reimburse the insurance carrier for benefits, including medical benefits that have been paid for the compensable injury.'"

American Casualty claims the Labor Code entitles it to recover actual damages from Hornsby and Barnett, representing the "first money from the third-party recovery in the amount of Plaintiff's subrogation interest, plus prejudgment and post-judgment interest at the applicable statutory rate."

"Defendants, particularly Hornsby, had a fiduciary duty to notify Plaintiff of the receipt of settlement funds to which Plaintiff held an interest and to either promptly tender funds to Plaintiff to satisfy its lien or to hold any disputed portion in escrow, and to promptly notify Plaintiff that the funds were in escrow," the suit said.

"Alternatively, and only in the event that this court does not rule in favor of Plaintiff on the claims above, Plaintiff would show that in October 2006 Defendant Hornsby and Plaintiff entered into an agreement to settle plaintiffs subrogation interests for the amount of $76, 500.00, said amount to be paid from the settlement reached by Barnett and Hornsby in the third party action."

After eight months of writing unanswered letters and leaving phone messages to Hornsby, American Casualty learned on June 27, 2007, that Hornsby had been out of the office due to a serious illness and that the matter would be resolved when he returned to the office in August 2007, the suit said.

Several more months passed and American Casualty discovered Hornsby's health was still an issue and he was now expected to return to work on Oct. 8, 2007. By January 2008, the insurance carrier confirmed that Hornsby had in fact returned to work.

"After several more letters and calls to Hornsby in an attempt to avoid litigation, Plaintiff has still neither received payment of the settlement nor any proof that the settlement had been paid previously," the suit said.

American Casualty is suing for actual damages, attorney's fees, pre-judgment and post-judgment interest and court costs.

The company is represented by the Law Offices of Jeffrey M. Lust.

Judge Donald Floyd, 172nd Judicial District, has been assigned to the case.

Case No. E181-475

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