Can I Settle a Personal Injury Claim Without Telling Workers Compensation?

Can I Settle a Personal Injury Claim Without Telling Workers Compensation?

Why Settling With the Person or Company That Caused Your Job Injury Can Affect Your Alabama Workers’ Compensation Claim

Suppose you are injured while working because of someone else’s negligence.  Workers’ compensation begins paying your medical expenses and disability benefits.  At the same time, you pursue a personal injury claim against the person or company that caused your injury.  Eventually, their insurance company makes a settlement offer.

You may naturally wonder: “This is my personal injury case. Can I just settle it and continue with my workers’ compensation claim?”

That can be a dangerous assumption.

When the same injury gives rise to both an Alabama workers’ compensation claim and a personal injury claim against a third party, the two claims may be legally separate—but they are not financially independent of one another.

Under § 25-5-11, Ala. Code 1975, your employer or its workers’ compensation insurance carrier may have reimbursement, credit, and subrogation rights arising from your recovery against the responsible third party.  As a result, settling the personal injury claim without first considering the workers’ compensation claim can create consequences you did not anticipate.

Recommended Reading: Can I Have Both a Workers’ Compensation Claim and a Personal Injury Claim? When someone other than your employer causes your job injury, you may have both claims arising from the same accident.

This Isn’t Just About Car Accidents

A negligent driver is probably the easiest example.  Suppose you are making a delivery for your employer when another driver runs a red light and hits you.  Because you were performing your job when injured, you may have a workers’ compensation claim.

Because another driver’s negligence caused the collision, you may also have a personal injury claim against that driver.

But the same issue can arise in many other situations.  For example:

• A worker is injured by the negligence of another contractor on a construction project.
• An employee is injured by defective machinery or equipment.
• A delivery employee is injured because of a dangerous condition on someone else’s property.
• A worker is injured by a commercial truck while traveling on company business.
• An employee suffers a job-related injury because of the negligence of another person or business.

In each situation, the employee may potentially have two claims arising from the same injury.

Workers’ compensation provides statutory benefits because the injury is job-related.  The personal injury claim seeks damages from the third party legally responsible for causing the injury.

Why Does Workers’ Compensation Care About My Personal Injury Settlement?

Because workers’ compensation may have already paid benefits for an injury caused by someone else.  Suppose workers’ compensation has paid:

• $75,000 in medical expenses;
• $25,000 in temporary disability benefits; and
• additional benefits associated with your permanent injury.

You then recover money from the person or company that caused your injury.

Alabama law does not necessarily allow you to recover the same elements of loss twice while requiring the workers’ compensation carrier to bear the entire expense.  That is where subrogation and reimbursement become important.

Under § 25-5-11(a), Ala. Code 1975, an employee may pursue workers’ compensation benefits while also proceeding against a legally responsible third party. However, the statute also provides the employer or carrier with certain rights concerning money recovered from that third party.

In plain English: Your personal injury settlement can affect what workers’ compensation has already paid and what workers’ compensation may have to pay in the future.

That is why the personal injury settlement should not be considered in isolation.

Do I Need the Workers’ Compensation Carrier’s Permission to Settle?

This question requires some care.  The important point is not simply whether the workers’ compensation carrier gets to say “yes” or “no” to your personal injury settlement.  The more important issue is that the carrier may have statutory rights that are affected by the settlement.

Those rights do not disappear merely because the employee and the third-party insurance company agree upon a settlement amount.

Before settling, you need to understand:

• How much workers’ compensation has paid;
• What reimbursement or subrogation interest is being asserted;
• What credit may apply against future workers’ compensation benefits;
• How attorney’s fees and litigation expenses affect the calculation;
• Whether future medical treatment may be affected; and
• How the settlement will affect the overall value of both cases.

The question therefore should not simply be “Can I settle without telling them?”  The better question is: “What will this settlement do to my workers’ compensation benefits?”

The Gross Settlement Is Not Necessarily What You Receive

Suppose you receive a $250,000 personal injury settlement offer.  That sounds like a substantial recovery, but before deciding whether the offer is fair, you need to know what happens to that $250,000.

There may be:

• Attorney’s fees;
• Litigation expenses;
• Workers’ compensation reimbursement or subrogation;
• A credit affecting future workers’ compensation benefits; and
• Other legally enforceable claims against the recovery.

The amount of the settlement check therefore tells you only part of the story.  What matters is what you actually receive and what rights or benefits may be affected afterward.

Recommended Reading: Will I Have to Pay Workers’ Compensation Back If I Settle a Personal Injury Claim? Alabama law provides important rules concerning reimbursement, subrogation, attorney’s fees, expenses, and future workers’ compensation benefits following a third-party recovery.

A Personal Injury Settlement Can Affect Future Workers’ Compensation Benefits

This is something many injured workers do not realize.  The issue isn’t limited to money workers’ compensation has already paid.  A third-party recovery may also affect future workers’ compensation obligations.

Under § 25-5-11, the employer may receive a credit against certain future workers’ compensation liability based upon the employee’s third-party recovery.

That means an employee can settle a personal injury case and later discover that the settlement changed what workers’ compensation is required to pay.  This can be particularly important when the employee has suffered a serious permanent injury.

Be Especially Careful About Future Medical Benefits

Future medical treatment can be one of the most valuable parts of an Alabama workers’ compensation claim.  Suppose your injury requires:

• Pain-management treatment;
• Prescription medications;
• Periodic injections;
• Follow-up diagnostic testing; or
• A possible future surgery.

Workers’ compensation has been paying those expenses, then you then settle your personal injury case.  It would be a mistake to automatically assume:

“Workers’ compensation will just keep paying my medical bills exactly like before.”

Alabama law recognizes subrogation rights involving medical benefits, including issues concerning the portion of a third-party recovery attributable to future medical expenses.  The Alabama Supreme Court addressed this issue in Ex parte Miller & Miller Construction Co., 736 So. 2d 1104 (Ala. 1999). The Court recognized the employer’s subrogation interest in that portion of a third-party recovery properly attributable to future medical expenses the employer would otherwise be required to pay.

In practical terms, a third-party settlement may result in an injured worker having to exhaust an applicable future-medical credit before workers’ compensation resumes responsibility for otherwise compensable medical treatment.

Recommended Reading: Are Alabama Workers’ Compensation Medical Benefits Really for Life? An injured worker considering a third-party settlement should understand how that recovery may affect future workers’ compensation medical treatment.

Be Careful With the Personal Injury Release

There is another reason the two cases need to be coordinated.  A personal injury settlement normally requires signing a release.

Never assume that every release does exactly the same thing.  The language should be reviewed carefully to determine:

Who is being released?

What claims are being released?

What injuries are included?

Are only the third-party defendants being released?

Does the agreement contain broad language that could create unintended issues elsewhere?

A settlement document should accomplish what the parties intend to settle—and no more.  This becomes especially important when an employee has both an active workers’ compensation claim and a third-party personal injury claim arising from the same injury.

What If the Personal Injury Lawyer Isn’t Handling My Workers’ Compensation Case?

This happens frequently.  One attorney may be handling the automobile accident or other personal injury claim while another attorney handles the workers’ compensation case.

There is nothing inherently wrong with that arrangement, but the two cases need to be coordinated.

The personal injury lawyer needs to know about the workers’ compensation claim.  The workers’ compensation lawyer needs to know about the personal injury case.

Why?

Because decisions made in one case can affect the other.  For example: A personal injury settlement may affect workers’ compensation reimbursement and future benefits.

Medical testimony taken in one case may affect the other.

Statements made in depositions may be relevant to both.

Settlement language in one case may create issues in the other.

The two attorneys should not be operating as though the other claim does not exist.

Don’t Wait Until the Settlement Check Arrives

This is probably the most important practical advice in this article.  Do not wait until after the personal injury case has settled to begin asking: “How much does workers’ compensation want?” or: “Will workers’ compensation still pay for my surgery?” or: “Does workers’ compensation get some of this settlement?”

Those questions should be addressed before the personal injury settlement is finalized.

The workers’ compensation carrier’s payment history and claimed subrogation interest can affect the true value of a settlement offer, and you need to understand the entire picture before deciding whether the settlement makes sense.

Why Not Just Wait and Let Workers’ Compensation Find Out Later?

Trying to keep the third-party settlement separate from the workers’ compensation case does not eliminate the carrier’s statutory rights.  It can instead make the situation unnecessarily complicated.

Workers’ compensation carriers maintain payment records.  They know what medical and disability benefits they have paid, and they have a legal right to assert reimbursement, subrogation, and credit rights under Alabama law.

A better approach is to identify those issues and properly account for them when evaluating and resolving the third-party claim.

What If the Personal Injury Claim Is Worth More Than the Workers’ Compensation Claim?

That is entirely possible because the two systems compensate different losses.  Workers’ compensation generally provides benefits such as:

• Authorized medical treatment;
• Temporary disability benefits;
• Permanent disability benefits; and
• Other benefits provided by Alabama’s Workers’ Compensation Act.

A personal injury claim may permit recovery for damages that workers’ compensation generally does not provide, including:

• Pain and suffering;
• Mental anguish;
• Loss of enjoyment of life;
• Lost earnings or earning capacity;
• Future medical expenses; and
• Other compensable damages under Alabama law.

The existence of workers’ compensation subrogation rights therefore does not mean pursuing the personal injury claim is pointless.  Quite the opposite: A valid third-party claim may provide important compensation that simply is not available through workers’ compensation.

What If the Third Party Doesn’t Have Enough Insurance?

This can make the analysis even more important.

Suppose you suffer catastrophic injuries, but the responsible driver has only limited liability insurance.  Or a negligent business has limited available coverage.  The personal injury recovery may represent only a fraction of your actual damages; meanwhile, workers’ compensation may have paid substantial medical and disability benefits.

Questions concerning available insurance, reimbursement, subrogation, attorney’s fees, future benefits, and potentially other sources of recovery should therefore be evaluated before the third-party settlement is finalized.

In an automobile accident, this may also require investigating whether uninsured or underinsured motorist coverage is potentially available.

The Law

• 25-5-11, Ala. Code 1975, governs many of the issues arising when someone other than the employer is legally responsible for causing an employee’s compensable job injury.

The statute permits an employee, in appropriate circumstances, to receive workers’ compensation benefits and pursue a third-party action arising from the same injury.

It also provides the employer with statutory rights involving reimbursement, credits, and subrogation and addresses the employer’s proportionate responsibility for attorney’s fees associated with the third-party recovery.

Alabama appellate decisions, including Ex parte Miller & Miller Construction Co., 736 So. 2d 1104 (Ala. 1999), address how those principles may apply to future medical expenses.

The important point is that settling the third-party personal injury case does not occur in a legal vacuum.

The settlement can have significant consequences for the workers’ compensation claim.

The Bottom Line

If you have an Alabama workers’ compensation claim and a personal injury claim against someone else arising from the same injury, do not treat the cases as completely separate.

Before settling the personal injury claim, you should know:

• What workers’ compensation has paid;
• What reimbursement or subrogation rights are being asserted;
• How attorney’s fees and expenses affect those rights;
• Whether the recovery will create a credit against future benefits;
• How future medical treatment may be affected; and
• What you will actually receive after all of those issues are considered.

One job injury can create two separate claims.  Resolving one without considering the other can be an expensive mistake.

Experience Handling Workers’ Compensation and Third-Party Personal Injury Claims

At Powell & Denny, P.C., we have extensive experience representing injured workers in Alabama workers’ compensation claims and related third-party personal injury claims. When the same accident creates both claims, it is important to understand how they work together. Medical evidence, settlement decisions, workers’ compensation subrogation rights, and other issues in one claim can directly affect the other. Our experience handling both workers’ compensation and personal injury cases allows us to evaluate the entire case—not just one part of it—and work to protect all of the benefits and compensation available to our clients.

If you believe you have a workers compensation and also a personal injury claim against another party-don’t hesitate to contact and speak with one of the experienced  attorneys at Powell and Denny today for a free consultation. Appointments are available in person, or virtually via Zoom if more convenient.  Powell and Denny would appreciate the opportunity to help.  And remember, there is no fee unless you win.