At some point in every workers’ compensation adjuster’s career, and likely on many occasions, he or she will undoubtedly encounter a request for an advance of compensation by an injured worker whose case they are handling. Injured workers request advances for many reasons, but the case law is now clear that advances should only be granted in cases of financial hardship and in furtherance of a legitimate interest intended by the Workers’ Compensation Act. A “legitimate” interest furthered by an advance is one that has a plausible nexus to the intended statutory purpose of the Florida Workers’ Compensation Act, which is to address the medical and related financial needs arising from workplace injuries.
For many years, it was believed that contesting an advance of $2,000 or less was pointless since neither the legislature nor the First District Court of Appeal had provided guidance as to what a judge of compensation claims could consider when determining whether a requested advance was legitimate, and so judges were awarding advances in any case where he or she thought it was in the best interests of the injured worker. However, if the judge was only required to consider the “interests” of the claimant without any other parameters, wouldn’t almost every monetary advance arguably be in the best interests of an injured worker? In 2012, the First District Court of Appeal finally answered that question in the case of ESIS/ACE American Ins. Co. v. Kuhn, 104 So.3d 1111 (Fla. 1st DCA 2012).
The statute governing advances is §440.20(12)(c), Fla. Stat. (2012), and it sets forth the requirements for advances on indemnity benefits in two different categories, those requests for $2,000 or less, and those above $2,000 but not exceeding $7,500. For advances of $2,000 or less, the statute states that in the event the injured worker has not returned to the same or equivalent employment with no substantial reduction in wages, or has suffered a substantial loss of earning capacity or a physical impairment, an advance may be ordered by the judge of compensation claims after giving the parties an opportunity for a hearing if desired, and after giving due consideration to the interests of the injured worker. With respect to advances of more than $2,000, the judge of compensation claims may approve these requests if he or she finds that such advance payment is for the best interests of the injured worker, will not materially prejudice the rights of the employer/carrier, and is reasonable under the circumstances of the case. However, the statute prohibits advances in excess of $7,500 or 26 weeks of benefits in any 48-month period, whichever is greater, from the date of the last advance payment. Accordingly, the judge of compensation claims can only consider the resulting prejudice to the employer/carrier in cases where the requested advance is more than $2,000, which is why the majority of advance requests from injured workers are for $2,000 or less.
In Kuhn, the First District Court of Appeal was asked to review an award of an advance of $2,000 to a claimant who wanted the money to augment her savings and provide a greater financial “cushion” for unexpected bills. Ms. Kuhn acknowledged that she was current on all her financial obligations and had no imminent need for the money, and admitted that receipt of monies as an advance would always be in her interest, stating that “I don’t think anybody would say no” to getting extra money. ESIS/ACE American Ins. Co. v. Kuhn, 104 So.3d 1111 (Fla. 1st DCA 2012). The court in Kuhn established a two-part test for determining entitlement to advances of $2,000 or less. The judge of compensation claims must determine that the injured worker (a) is a proper claimant, meaning he or she has not returned to the same or equivalent employment with no substantial reduction in wages, or has suffered a substantial loss of earning capacity or a physical impairment, and (b) has provided adequate justification for her request. In explaining what goes into the determination of whether the claimant “has provided adequate justification” for the advance, the Kuhn court stated that the need for the advance must be in furtherance of the purpose of the Workers’ Compensation Act, that is, “to address medical and related financial needs arising from workplace injuries.” Id. at 1114. In reversing the award of the advance, the Kuhn court found that requesting an advance to simply have a financial “cushion” is not adequate justification to support the advance since there is no financial need with a plausible nexus to the industrial accident.
Two years after Kuhn was decided, the First DCA was asked to review another advance case, this time where the judge of compensation claims denied a claimant’s request for an advance of $2,000 for the purpose of paying for a doctor’s deposition to be taken in her underlying workers’ compensation case. In Taylor v. Air Canada, the First DCA held that requesting an advance for the purpose of paying for depositions of witnesses who may advance proof of the compensability of a claim can be considered a need in furtherance of the statutory purpose of the Workers’ Compensation Act. See Taylor v. Air Canada, 136 So.3d 786 (Fla. 1st DCA 2014).
So now that we know what qualifies as a legitimate interest supporting an advance, how do you confirm that the claimant has a true financial need for the requested amount? Although the First District Court of Appeal has not addressed this specific issue, many judges of compensation claims have allowed injured workers to prove their financial need for the requested advance amount with a Financial Affidavit. If you are considering agreeing to an advance, having the injured worker complete a Financial Affidavit is a good way to document their specific financial need for the requested amount.
Recouping the advance
If you’ve decided to provide an advance to a claimant with a specific and statutorily legitimate financial need, you should also try to reach an agreement with the claimant as to how those funds will be paid back. Make sure to always include the caveat that if the case settles in its entirety when there is still an outstanding advance, then any remaining advanced amounts will be recovered in a lump sum from the total settlement amount unless specifically waived in the negotiations.
The statutory provision related to repayment of advances can be found at Florida Statute §440.20(13) and states that if the employer has made advance payments of compensation, she or he shall be entitled to be reimbursed out of any unpaid installment or installments of compensation due. Compare this to the statutory provision related to overpayments, which is found at §440.15(12) and states that if the injured worker has received a sum as an indemnity benefit to which she or he is not entitled, the employee is liable to repay that sum to the employer or the carrier or to have that sum deducted from future benefits, but a partial payment of the total repayment may not exceed 20 percent of the amount of the biweekly indemnity benefit payment amount. So this begs the question, can the employer/carrier seek repayment of an advance by deducting more than 20 percent of the injured worker’s future indemnity checks? While the First DCA has yet to address this issue, the author submits the answer is yes since advances and overpayments are treated separately under the statute, and there is no 20 percent statutory recovery limit placed upon advances. However, irrespective of how you decide to recoup the advance, make sure that you remember to recoup it and that the claimant has a clear understanding of the recoupment schedule.