/>iNevada’s Supreme Court has overruled 38 years of precedent concerning how workers’ compensation liens are resolved in personal injury claims. In 1986, the Supreme Court created a formula allowing the parties and carriers to calculate with reasonable certainty how much of a workers’ compensation lien would be paid after a personal injury recovery. It was known as the Breen formula. It is no longer valid.
In AmTrust North America, Inc. v. Vasquez , a worker was injured on the job and received workers’ compensation benefits totaling $177,335.59. The worker then sued third parties he alleged negligently caused his injuries. AmTrust intervened as a subrogee to protect its lien. The worker eventually settled for $400,000. The district court then applied the formula and determined that AmTrust’s lien was reduced to zero.
The Supreme Court first concluded that the formula it created in 1986 directly conflicted with NRS 616C.215, the statute that granted AmTrust a lien against the third-party recovery. The court wrote that the formula simply no longer worked. “Here, the Breen formula failed to provide a net positive recovery for AmTrust, demonstrating that it is mathematically flawed and unworkable.” When applied in this case, it produced a “net negative recovery for AmTrust” while producing “a double recovery” for the worker. The court found similar flaws in a related case, Poremba v. Southern Nevada Paving, that had limited which settlement proceeds were subject to the lien.
The Supreme Court next concluded that NRS 616C.215(5) controls workers’ compensation liens against personal injury claims. That statute states that the workers’ compensation carrier “has a lien upon the total proceeds of any recovery from some person other than the employer, whether the proceeds of such recovery are by way of judgment, settlement or otherwise.” It also specifies that injured employees “are not entitled to double recovery for the same injury.”
For practical purposes, this change has created a great deal of short-term uncertainty in personal injury litigation. NRS 616C.215(5) fails to create a formula determining the amount of the lien that must be reimbursed. Nor does it indicate that the insurer must bear any costs the worker might have incurred in pursuing the third-party recovery. Also, it does not require the carrier to reduce its lien. This, in turn, has made negotiating settlements involving a workers’ compensation lien more difficult. Previously, the parties could reasonably calculate what would be reimbursed and adjust their settlement targets accordingly. However, that is no longer possible. While the compensation carrier may now recover more of its lien, the casualty carrier could pay more to settle a claim involving a compensation lien.
Given the amount of discussion generated by this ruling, the court’s decision and NRS 616C.215(5) may be topics of conversation for Nevada’s legislature when it convenes in February 2025.
