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EXAMPLE OF THIRD PARTY CASE & WORKER’S COMPENSATION CASE IMPACT ON OTHER CASE

In my prior blog, I promised an example of the interplay between a Workers’ Compensation case and a related “third party” case.  As you may recall, a “third party” case typically refers to a civil case against another liable party (person or company) arising out of an on-the-job injury.

For this example, assume Mr. Joe Trucker is driving a truck in the course and scope of his employment when his vehicle is hit by another truck driven by Mr. Oblivious Trucker after he runs a red light.  Joe would have at least two possible cases from this incident:  1) a Workers’ Compensation (WC) claim because he was injured while doing his job, which requires no proof of fault or wrong-doing; and 2) a “third party” case against Oblivious Trucker because he was at fault for the crash by failing to stop at the red light.  Joe could have additional “third party” claims against anyone else who was a factor in causing or contributing to the incident, such as Oblivious Trucker’s employer.  Further assume that Joe Trucker’s Workers’ Compensation case is accepted, and the insurance carrier begins providing benefits – both monetary benefits in the form of bi-weekly checks, and medical benefits in the form of providing and paying for related treatment.  Lastly, assume Joe retained the same attorneys for both his WC claim and his “third party” claim.

Under the example above, the Workers’ Compensation insurance carrier can seek reimbursement for some or all of the money it spends on Joe Trucker’s WC matter from any responsible “third parties”, such as Oblivious Trucker, in the “third party” case.  This right to reimbursement is sometimes called a “lien”.  The Workers’ Compensation insurance carrier’s “lien”, which is often tens of thousands of dollars, can impact how much Joe gets from his “third party” case.  The bigger the “lien”, the bigger the impact on Joe’s “third party” case.  If Joe’s WC matter settles before the “third party” case is done, any additional money paid to him by the WC insurance carrier gets added to the “lien”.

If Joe’s “third party” case settle first and he receives or “nets” any reasonable money from that settlement, the full amount of that “net” usually becomes a “credit” in favor of the insurance carrier against any future WC benefits.

So, if Joe settled his “third party” case and received $200,000.00 “net” monies in pocket, the Workers’ Compensation carrier can assert that “credit” immediately and refuse to provide any more monetary or medical benefits until Joe satisfies that “credit”.  Joe satisfies the “credit” by using the money he got from the “third party” case to cover the monetary or medical benefits the WC insurance carrier would normally have owed him.

If Joe were entitled to another $75,000 in permanent disability, the “credit” can wipe that out, leaving $125,000 in credit to be asserted against future medical care, such that Joe will have to provide for payment of $125,000 worth of medical related care from his own resources (e.g. cash or other insurance benefit), before the Workers’ Compensation carrier is liable to pay any other monies on Joe’s behalf.

This is a very simplistic example.  Many cases are much more complex with issues that can impact the WC insurance carrier’s recovery in the “third party” civil action or even affect the claim of “credit”.  Additionally, it is up to your attorney to try to negotiate or obtain the most favorable result by contemplating the interplay between these two distinct types of actions.  There is even an option which would involve settling both the Workers’ Compensation claim and the third party claim at the same time, with the same settlement document.

For all of the above reasons, if you have a case with both WC and “third party” components, you will be better served by consulting with a law firm that handles both types of actions.

Richard Irwin

Mr. Irwin is a recognized specialist in Workers’ Compensation law. He has been certified as a specialist by the State Bar of California since 1995. He limits his practice to handling only workers’ compensation cases. View Attorney Richard Irwin's Attorney Bio Here.

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