Whether to File a Lien or Intervene: Practical Considerations to Maximize Subrogation Recovery

Consider this scenario: You have a strong case for subrogation arising from an employment-related accident. The injured employee’s attorney files suit, but refuses to move the case forward. Out of necessity you intervene and successfully negotiate the recovery of $35,000 of your $50,000 lien. Unfortunately, you spent $45,000 to recover $35,000.

Do not let this happen to you!

Even the best subrogation cases can hurt the bottom line. The purpose of subrogation is to maximize your recovery through pre-litigation negotiations or a lawsuit. Failure to closely monitor the prosecutorial strategy may result in a net loss; the amount of expended fees and costs will be weighed against the amount recovered.

This article provides an overview of recovery practices to maximize the net recovery.

There are three ways the insurance company can pursue the responsible third party: 1) file a complaint against the third party; 2) join as a party plaintiff or intervene in an action brought by the employee against the third party; or 3) allow the employee to prosecute such action and apply for a lien upon the net amount of the employee’s judgment. (Gilford v. State Compensation Ins. Fund (1974) 41 Cal.App.3d 828, 831 [116 Cal.Rptr. 615]).

The employer’s rights in respect to settlement of the employee’s claims against the third party are set forth in Labor Code §§ 3859 and 3860. (Marrujo v. Hunt (1977) 71 Cal.App.3d 972, 976.)

To determine the best, most practical avenue to maximize recovery the considerations are manifold. Experienced counsel take a holistic look at the entire picture and know how to weigh mutually competing factors against each other.

Four key tips to help you maximize subrogation recovery are as follows: