Eric Henrikson was an 8 year veteran with the Sacramento County, California Sheriff's Department, when he was severely injured in a helicopter crash. The 2005 crash also killed two other deputies. The injuries Henrikson sustained ended his career, and the county paid out almost $2 million in workers' compensation up until last year.

After Henrikson settled a lawsuit with the helicopter manufacturer, earning $26 million, the county stopped his workers' compensation benefits. He sued the county in Federal court, with the contention that the county waived its credit rights “because it paid the benefits for five years before stopping last year”.  

U.S. District Judge Morrison C. England Jr. threw out the lawsuit last week, saying the plaintiff “has identified no basis for this court's jurisdiction over this matter.”  He indicated that the question of credit rights “are issues that must be addressed” by the California Workers' Compensation Appeals Board. He also seems to have dealt a blow to Henrikson's argument that the county waived its credit rights when it agreed to forgo a claim for part of the manufacturers' settlement money. To that point he wrote, “The waiver is utterly silent with regard to any impact on separate workers' compensation proceedings.”

There are two interesting points here to ponder. To begin with, it is not clear to me why this case would have been brought in Federal court. Perhaps some California legal eagle can weigh in and tell us what the strategy might have been there. In the absence of that expertise, it makes sense to me that this remains essentially a state (WCAB) matter.

The other area of interest is of course the assumption that the county has waived a right to recovery. The ability for workers' comp to subrogate claims when there is a third party settlement has long been established. When a third party acknowledges a liability contributing to the injury, the workers' comp system becomes itself a victim of that accident, having incurred expense at the alleged fault of another (For the record, the manufacturer in this case admitted no fault or liability. The settlement was sealed for all parties, and the amount paid Henrikson only became public under court proceedings). I find it interesting that the county did not file a claim against a portion of that settlement.

Instead, it appears to have simply filed a petition and stopped payments. On the surface this might seem a reasonable action. A large settlement being made by a third party would seem to transfer the liability for that claim. In effect, they have assumed the responsibility for lost income and medical treatments for the injured deputy, and the county would no longer be responsible for that.

Am I wrong? Wouldn't be the first time – and it won't be the last. And there is more to this story.

This case will most likely hinge on the wording within any waiver that exists, and it does appear the county has made some decisions that do not support its current actions. One week before Henrikson reached a settlement deal, Sacramento County signed an agreement that it would not pursue a “present or future claim” on the money because it was engaged in its own suit against the helicopter manufacturer. Henriksons lawyer, David Mastagni, who is credited with getting that agreement, says that lifetime disability payments from the county were factored into their negotiations with the manufacturer. Afterwards, the county settled its own suit for $1.5 million, reportedly far less than it had spent on the three deputies involved in the crash.

It is possible that the county, by waiving rights to a portion of the initial settlement, has forfeited its rights to stop workers' compensation payments. It now appears the WCAB will have the chance to sort all this out.

In theory, if a product liability issue is proven in comp and an award or settlement is issued, the system should not have to pay over the long run. However, bad decisions in that process should not be held against the people who did not make them. Mastagni says of the agreement with the county that “A deal is a deal is a deal,” and he might be right in this case. The county had every right to pursue a portion of that settlement, and making Henrikson and his legal team aware of that intent prior to settlement might have made a difference in the agreement they ultimately reached. As I indicated, the details of any waivers will be weighed and decided by the WCAB, but the county may find it cannot have its cake and eat it, too.

To expect otherwise now in this case might just be a flight of fancy.



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