OPINION
Thе instant dispute concerns the propriety of an order apportioning attorney’s fees out of a workers’ compensation subrogаtion recovery. For the following reasons, we reverse the trial court’s order and remand the cause to the trial court.
Factual and Procedural History
The parties stipulated to the underlying facts. On January 6,1995, during the course and scope of his employment, Abel Alcorta was injured in an automobile accident due to the negligence of Amber Starr. At the time of the accident, Alcorta’s employer was covered by a workers’ compensation рolicy issued by Texas Workers’ Compensation Insurance Fund (hereinafter “the Fund”). The Fund paid out $28,031.11 in medical and indemnity benefits to Alcorta. Thereaftеr, Al-corta sued Starr for recovery of his damages. The Fund intervened in the suit, asserting its statutory right of subrogation and seeking repayment of the benefits it paid on Alcorta’s behalf. Prior to trial, the parties settled the dispute, with Starr’s policy limits of $20,-035.00 tendered and deposited into the court registry of the court in release of all claims asserted against Starr. Thereafter, the Fund filed a motion for apportionment, asserting entitlement to аll of the settlement monies, and disputing Alcorta’s entitlement to attorney’s fees.
*851 At the hearing, counsel for Alcorta argued that pursuant to section 417.002(a) of the Texas Labor Code, the Fund is entitled to the recovered settlement amount less all the attorney’s fees owed and taxablе costs of court. Alcorta had entered into a contract for representation under which the attorney’s fees amounted to $8,014.00. In resрonse, the Fund opposed Alcorta’s reliance upon section 417.002(a), arguing that an award of attorney’s fees, if appropriatе, is governed by section 417.003(c), which limits such fees to no greater than one-third of the insurance carrier’s recovery.
The trial court agreed with Alеorta’s position. The trial court expressly rejected section 417.003’s application to the instant dispute, and awarded to Alcorta’s аttorney the amount of fees for which she had contracted, $8,014.00, or approximately 40% of the recovery. Costs of court in the amount of $813.50 were also awarded to Alcorta, with the remaining balance of $11,207.50 awarded to the Fund.
On appeal, the Fund challenges the trial court’s ordеr on two levels. It first maintains that it is entitled to the total settlement recovery, as a matter of law, because it is less than the amount of its statutory lien. The Fund argues that an award of attorney’s fees to Alcorta’s counsel defeats its well-established right to the “first money” paid by the third-party tortfeasor. Alternatively, the Fund contends the trial court’s order imper-missibly circumvents the statutory limit of fees allowed under section 417.003(c). We agree with the Fund’s sеcond-stated argument, but not the first.
Thikd Party Liability Claims
We review the trial court’s award of attorney’s fees under an abuse of discretion standard.
Bocquet v. Herring,
The Texas Workers’ Compensation statute permits an employee to seek damagеs from the third-party tortfeasor. Tex. Lab. Code Ann. § 417.001(a) (Vernon 1996). In such case, the insurance carrier is subrogated to the rights of the employee fоr any benefits paid by the carrier. Tex. Lab.Code Ann. § 417.001(b) (Vernon 1996). This right creates a lien in favor of the insurance carrier in the amount it has paid to an employee out of the first money recovered from the third-party tortfeasor. Tex. Lab.Code Ann. § 417.002 (Vernon 1996);
see Watson v. Glens Falls Ins. Co.,
The net amount recovered by a claimant in a third-party action shall be used to reimburse the insurance carrier for benefits, including medical benefits, thаt have been paid for the compensable injury.
Tex. Lab.Code Ann. § 417.002(a) (Vernon 1996) (emphasis ours). The Act further provides that, as compensation for pursuing the third-party action, the employee’s attorney may recover fees for services rendered.
1
Tex. Lab.Code Ann. § 417.003 (Vernon 1996); see
Illinois Nat. Ins. Co. v. Perez,
Under section 417.003(c), however, the trial court may not order an award of fees that exceeds one-third of the carrier’s recovery. The award in the instant case deviates from this statutory cаp. Here, the carrier’s recovery was $20,035.00. The trial court awarded attorney’s fees in the amount of $8,014.00, approximately 40% of the carriеr’s recovery. It is immaterial that the trial court’s award of fees was consistent with the amount for which Alcorta’s attorney had contracted; it сonstitutes an impermissible circumvention of the statutory limit on attorney’s fees as to the carrier’s subrogation recovery. Se e Tex. Lab.Code Ann. 417.003(c) (Vernon 1996). We find, therefore, that the trial court abused its discretion in awarding an amount of attorney’s fees that exceeded one-third of the carrier’s recovery.
The Fund also complains that the trial court erred in apportioning the costs of court. We need not address this cоmplaint in light of our remand. See Tex.RApp. P. 47.1. The order of the trial court is reversed and the cause is remanded to the trial court to recalculate the attorney’s fees and award of costs in a manner consistent with section 417.003 of the Labor Code.
Notes
. Attorney’s fees are recoverable if one of three situations exists: (1) the insurer hires an attorney to represent it but the attorney does not actively represent it; (2) the worker’s аttorney represents both the worker and the insurer; and (3) the insurer is actively represented by its attorney who participates in obtaining a recovery. Tex. Lab.Code Ann. § 417.003 (Vernon 1996).