March 2005 - Highlight

Apportionment Strategy Following Arsenault v. Thurston

In Arsenault v Thurston (2004 ME 83, 853 A.2d 217), the Maine Supreme Court, sitting as the Law Court, held that if a petition for apportionment has been filed, and is pending against an employer, that employer may not lump sum settle its case until the petition is decided. In terms of strategy, the Arsenault decision has multiple implications. It will prevent carriers from avoiding their obligation to pay retroactive benefits to another carrier by lump summing their date of injury; it will make it more difficult for employees to pit carriers against one another to drive up the settlement price; and it will motivate carriers to determine, during their initial analysis of a case, whether or not an apportionment possibility exists.

In addition, the opinion has a potentially negative effect on fair play during litigation. That is, it might motivate a carrier, who is litigating its responsibility to its injury, to delay filing a petition for apportionment against another injury while the other carrier was not aware of the potential claim. By doing this, the carrier would generate evidence against a prior carrier, when that carrier does not have legal representation. It might then immediately file a petition for apportionment before the earlier carrier has a chance to lump sum settle its case.

The right to apportion under Maine Workers' Compensation law derives from the right to subrogate pursuant to Title 39-A M.R.S.A. §354. The term "subrogation" means that a carrier, which is paying or has paid benefits to an employee, has the right to stand in the shoes of the employee and assert a claim against another carrier. Once the employee waives any rights he or she may have against the settling carrier, the theory of subrogation would serve to preclude a non-settling carrier from asserting a claim. The reason for this preclusion is that the non-settling carrier would be stepping into the shoes of an employee who has waived all claims against the settling carrier. The reader should note that a carrier which settles its claim does not waive its rights to apportion against a non-settling carrier.

Prior to the Arsenault decision, it was possible- at least in theory - for a carrier served with a petition for apportionment to settle out unilaterally with the employee, thereby extinguishing any potential exposure it had to reimburse the petitioning carrier. For example, assume the petitioning party had already paid out $100,000 in indemnity and medical bills for a back injury. It later discovers that there existed an earlier back injury which might have contributed fifty percent to the employee's ongoing condition. The carrier on the risk for the latter date of injury would likely file a petition for apportionment. It would make sense for the earlier carrier to lump sum its future exposure with the employee. The employee has no vested interest in seeing that the latter carrier is reimbursed. By lump summing its injury, the earlier carrier saves $50,000 in reimbursement to the latter carrier.

Of course, the Law Court has now prohibited that type of maneuvering by not allowing a lump-sum settlement to proceed during the pendency of a petition for apportionment.

Another implication of the Arsenault opinion is that it will make it more difficult for employee's counsel to drive up the cost of settlement by pitting the carriers against one another. The carrier that is the respondent in apportionment litigation may be willing to pay more than its future exposure in order to extinguish its potential obligation to reimburse the petitioning party.

Also, during the pendency of apportionment litigation, neither carrier knows what its contribution will eventually be. The employee could take advantage of this uncertainty by exacting a "premium" from each carrier in order to terminate the risk each faces in apportionment litigation. The Arsenault decision makes this less likely because only the initiation of apportionment litigation will deprive the employee of the ability to settle with one carrier before the apportionment is established. Once the apportionment litigation concludes, each carrier will know with less speculation what its exposure is.

Indirectly, the Law Court's opinion in Arsenault also fosters more efficient litigation. It encourages carriers litigating a recent injury to investigate the possibility of earlier contributing injuries immediately. From a litigation efficiency standpoint, this is preferable to a carrier litigating exposure on a recent injury, and then initiating a totally separate round of litigation to recoup reimbursement from an earlier injury.

The Arsenault opinion unfortunately might allow for some dubious litigation maneuvering by attorneys. It is not unheard of for attorneys litigating exposure on a recent injury, with knowledge of a prior injury, to generate evidence against the prior injury without making the carrier on the risk for the prior injury a party to the proceedings. Hence, the attorney can pose questions to an expert regarding the prior injury, without the "inconvenience" of the earlier carrier having legal representation.

Normally, what happens in this instance is that when the more recent carrier does initiate apportionment litigation, the Hearing Officer admits into evidence prior expert testimony, as long as the attorney representing the respondent has the opportunity to cross examine the experts who have previously rendered opinions. Although in theory one might surmise that this procedure would create an "even playing field," the reality is quite different. It is much more difficult for the respondent attorney to change an expert's opinion, once he has gone on record, than it is to affect the expert opinion beforehand, even when that expert is presented with new facts.

Conclusion

The most significant lesson which workers' compensation adjusters and attorneys should draw from Arsenault is that it is now more important then ever that apportionment possibilities be culled out during the initial investigation of a claim. The Law Court makes it quite clear that the Arsenault opinion only prevents a lump-sum settlement during the pendency of a petition for apportionment. If a non-paying carrier with potential exposure learns that the employee has been reinjured, there is nothing that prevents that carrier from settling its case unilaterally, prior to a petition for apportionment being filed.

- Lawrence B. Goodglass