Should Employers Cooperate With Workers’ Compensation Subrogation?

People generally know that they cannot sue their employers when they get hurt at work.  It is the foundation of our system of workers’ compensation in Pennsylvania (and in all other states too) that the tradeoff for receiving workers’ compensation benefits is that employers are shielded from liability even if they are negligent in causing injuries to their employees.  But most people are not as familiar with the concept of workers’ compensation subrogation, which arises when injured workers sue so-called third parties and not their employers.

In short, injured workers are permitted under the PA Workers’ Compensation Act to bring a negligence suit again anyone who is not their employer who causes damages to them.  The injured worker herself is referred to as the "first party," the employer is the "second party," and the other negligent entity is called the "third party."  So, for instance, if an employee drives a work vehicle for a living and is hit by another driver in the course of her employment, she cannot sue her employer, but she can bring a personal injury suit against the third party who hit her.

Consider, then, that since the injured workers was in the course of her employment when she was injured, her employer’s workers’ compensation carrier would have to pay for her wage loss and medical expenses due to the injury.  Then she also brings a personal injury case against the third party, and obtains a recovery either by settlement or verdict.  Does she get to keep all the personal injury proceeds and also have the benefit of workers’ compensation paying for her wage loss and medical expenses?  The short answer is no.  The workers’ comp law provides that the workers’ comp carrier is entitled to repaid, essentially as a beneficiary of the plaintiff’s lawsuit proceeds.

The subrogation interest of the workers’ comp carrier in Pennsylvania is an absolute right under the Workers’ Compensation Act.  The workers’ compensation insurance company is subrogated to the interest of the personal injury plaintiff; that is, the workers’ comp carrier has a statutory lien on the proceeds of the personal injury claim.  Therefore, in most cases, it makes sense that the workers’ compensation carrier will want the plaintiff to do well in the personal injury claim, so that it can recover as much of what it has paid out on behalf of the injured worker as possible.  The exact amount which the workers’ comp carrier is entitled to be paid is a topic for another article, but suffice it to say that once the carrier has contributed its fair share of the costs and expenses of obtaining the personal injury proceeds, it is entitled to be paid back all of the past wage loss and medical benefits which it has already paid, and also all of the wage loss and medical benefits it might have to continue to pay into the future.  The calculations can be complicated and are best left to experts.

But this article is meant to draw attention to an interesting problem.  What happens if the injured worker is injured due to the negligence of one of his employer’s business partners?  For instance, the employer contracts with a snow removal company to clear and salt its parking lot during winter weather.  The snow removal company fails to do its job properly, and due to its negligence, the employee is hurt.  Workers’ comp pays the employee’s wage loss and medical expenses.  The employee then sues the snow removal company.  During the litigation, the employee’s attorney wants to gather evidence from the employer about the contract terms, or perhaps specific communications between the employer and the snow removal company from the date of the injury.  Does the employer cooperate?

The employer’s workers’ compensation carrier would certainly like for the employer to cooperate.  The workers’ comp carrier is trying to get as much money back as possible, so it has an interest in securing as big a settlement as possible for the injured worker.  But the employer might have other ideas, and may want to maintain an ongoing business relationship with the third party.  Perhaps both the employer and the "third party" are two separate companies owned by the same family.  Often employers are leery of getting involved in workers’ comp issues at all, without fully understanding all of the issues in play.  There is no right answer, and each case is fact-specific, but the best advice when dealing with workers’ comp subrogation issues is to talk to an experienced workers’ compensation attorney.  That person can help guide his or her clients, be they injured workers or employers, with tailored advice to help bring the matter to a satisfactory conclusion.