Under workers' compensation, employer entitled to funds paid to employee by third parties.

In January 2002, the employee was injured in an automobile accident while working for a lumber company. The employee sued the lumber company (his employer) for workers’ compensation benefits, and the company paid everything due the employee under the Alabama Workers’ Compensation Act.

The employee also sued third parties, asserting that the third parties were responsible for the accident. In October 2005, the third parties and employee agreed to a settlement of the employee’s claims. Part of the funds were put into a trust and part into an annuity.

As provided by Alabama Code § 25-5-11(a), the lumber company sued the employee for reimbursement from the third-party settlement funds. The Wilcox County Circuit Court found that the lumber company was entitled to reimbursement of $1,380,634.50 from the third-party settlement funds. After this decision, the only dispute that remained between the parties was how the funds would be taken from the trust and the annuity.

At the time of its judgment, the circuit court found the trust contained $478,183.50, the annuity contained $357,903.96 in accrued annuity payments, and the annuity would pay $29,825.33 for the next 69 months. Therefore, when the judgment was entered, $836,087.46 was available to pay the lumber company. Over the next 69 months, $2,057,947.70 remained to be paid from the annuity. The circuit court ordered that the lumber company be immediately given the $478,183.50 from the trust and that it be paid the remainder of what it was owed on a monthly basis from the annuity. The lumber company was to receive $14,912.67 for the next 69 months and the employee was to receive $6,160 a month for the next 69 months. The judgment also set aside $114,247.09 for a Medicare lien and awarded attorney fees of $4,275.

The lumber company appealed this decision, maintaining that the annuity should be liquidated so that it could be paid immediately. The Alabama Court of Civil Appeals reversed the circuit court’s decision, finding that the lumber company had to be paid from the annuity first (no splitting of funds being allowed as the circuit court had provided), but that the annuity did not have to be liquidated. See Nuss Lumber Company, Inc. v. Estate of Andy Monghan, decided on March 9, 2012.