The Ruediger Formula calculates the presumptive amount an employer’s workers compensation carrier must be repaid if a third party later pays out a settlement for the same injury. This is most seen when someone has both a car accident and workers compensation claim. This usually happens when someone is in an accident while they are driving or riding in a work vehicle. The individual then can bring an injury claim through workers compensation and pursue a personal injury claim against the at fault party.
In Missouri, the employer must pay for all medical expenses if someone is injured while on the job. To prevent employees from obtaining two benefits (i.e. free medical treatment from workers compensation and a settlement from personal injury claim), Missouri law grants the employer a right of recovery against the at fault party for all amounts that it pays for the employee’s medical treatment.
The amount of reimbursement is calculated using the “Ruediger Formula.” This takes the:
Amount of Medical Bills Paid by Worker’s Compensation
Divided By Gross Third Party Recovery
Times the Net Third Party Recovery
Let’s say hypothetically worker’s compensation pays $10,000 of your medical bills. You resolve your worker’s compensation case for $20,000 and receive a net settlement of $15,000 (after attorney’s fees, which are 25% in worker’s compensation cases). Next, you resolve the claim against the at fault driver that hit you for a gross total of $25,000. After attorney’s fees of $8,000, let’s say you also owe $2,000 for medical expenses that were not covered by your employer. Your Net Third Party Recovery is therefore $15,000.
Under this scenario, you would calculate the amount to be paid back to worker’s compensation by taking the $10,000 paid by workers comp and dividing it by $25,000 of the Gross Third-Party Recovery. You then take that figure and multiply it by the $15,000 Third Party Net Recovery to arrive at $6,000. Under this scenario, you would owe $6,000 to your worker’s compensation provider.
The final total of both settlements would then be:
Worker’s Compensation Case:
$20,000 Gross Recovery
$ 5,000 Attorney’s Fees
$ 15,000 Net to Client
Personal Injury Case:
$25,000 Gross Recovery
$ 8,000 Attorney’s Fees
$ 2,000 Non-Employer Covered Medical Expenses
$ 6,000 Worker’s Compensation Lien
$ 8,000 Net To Client
The employer’s right of recovery is known as a lien. While the Ruediger formula provides the presumptive lien amount, the employer will sometimes negotiate a reduction of the lien. While it is possible to get the lien down 10-25%, I personally would not expect to negotiate it much lower than that absent extreme circumstances. The employer typically hires a separate lawyer to handle the worker’s compensation lien than the one who handled the actual worker’s compensation injury claim. This is practical as it makes it more difficult for a plaintiff's lawyer to ask for a reduction of the lien during negotiations of the PPD award.
If your attorney settled your third-party case prior to settling worker’s compensation claim, you may be liable for paying the worker’s compensation lien out of your third-party settlement. Worker’s compensation may have an action against you directly. If your lawyer settles the injury claim first, it is important that either the full amount of the workers compensation lien is known or that all funds are held in trust until the worker’s compensation claim is settled.