Will I Have to Pay Workers Compensation Back If I Settle a Related Personal Injury Claim?

Will I Have to Pay Workers Compensation Back If I Settle a Related Personal Injury Claim?

Understanding Workers’ Compensation Subrogation When Someone Else Caused Your Job Injury

Suppose you are driving for work when another driver runs a red light and hits you.  Workers’ compensation pays for your medical treatment and provides disability benefits while you are unable to work.

At the same time, you bring a personal injury claim against the driver who caused the accident.

Eventually, the automobile insurance company offers to settle your personal injury claim.  That may sound like the end of the case, but then you hear something you may not have expected: “Workers’ compensation may be entitled to some of that money.”

Can that really happen?

Yes.

Under Alabama law, when workers’ compensation pays benefits for an injury caused by someone other than your employer, and you later recover money from the responsible third party, your employer or its workers’ compensation insurance carrier may have a right to reimbursement or subrogation from your recovery.  But that does not necessarily mean workers’ compensation simply gets back every dollar it paid.

Alabama law contains important rules concerning reimbursement, attorney’s fees and litigation expenses, and future benefits.  Understanding those rules can be extremely important before you settle the personal injury claim.

Recommended Reading: Can I Have Both a Workers’ Compensation Claim and a Personal Injury Claim? An injured Alabama worker does not necessarily have to choose between workers’ compensation and a personal injury claim when someone else caused the job-related injury.

First, Why Can I Have Two Claims?

Workers’ compensation and personal injury law serve different purposes.

Suppose you are making a delivery for your employer when another driver negligently crashes into you.  You may have a workers’ compensation claim because you were injured while performing your job.  You may also have a personal injury claim because another person’s negligence caused the accident.

Alabama law specifically recognizes that one accident can create two (or more) separate claims, and under § 25-5-11(a), Ala. Code 1975, when a job-related injury also creates legal liability on the part of someone other than the employer, an injured employee may pursue workers’ compensation benefits and, at the same time, bring an action against the responsible third party.

A Third-Party Claim Does Not Have to Involve a Car Accident

Automobile accidents are probably the easiest example, but they are not the only one.  A third-party personal injury claim may arise when a worker is injured because of the negligence or wrongful conduct of someone other than the employer.

For example:

• A delivery driver is hit by another motorist.
• A construction worker is injured by the negligence of another contractor.
• An employee is injured by defective machinery or equipment.
• A worker is injured by a dangerous condition on property belonging to someone else.
• A commercial truck causes an accident while an employee is traveling for work.

The particular personal injury claim may involve automobile negligence, premises liability, product liability, or another area of Alabama law.

The common factor is that someone other than the employer may be legally responsible for causing the employee’s job-related injury.

Recommended Reading: What If I was Hit by Another Driver while Working?  Can I have both an Alabama Workers’ Compensation Claim and an Automobile Accident Claim?

Why Does Workers’ Compensation Get Any of My Settlement?

At first, this can seem unfair.  The injured worker may understandably think “I was the person who got hurt. Why should the workers’ compensation insurance company get part of my personal injury settlement?”

The answer involves the concept of subrogation.

Workers’ compensation may have already paid benefits because of an injury actually caused by a third party.  If the injured worker later recovers damages from that third party, Alabama law generally prevents a double recovery of certain losses and gives the employer or workers’ compensation carrier statutory reimbursement rights.

Section 25-5-11(a) provides that amounts recovered from the third party may be credited against the employer’s workers’ compensation liability and addresses reimbursement for compensation previously paid. It also expressly provides subrogation rights concerning medical and vocational benefits expended on the employee’s behalf.

You need to know about the workers’ compensation lien or subrogation interest before deciding what you will actually receive from a personal injury settlement.

The Settlement Amount Is Not Necessarily the Amount You Put in Your Pocket

Suppose another driver’s insurance company offers you $100,000 to settle your personal injury case.  It would be a mistake to simply assume “I’m getting $100,000.”

There may be several amounts that must be considered before determining your net recovery, including:

• Attorney’s fees;
• Litigation expenses;
• Workers’ compensation reimbursement or subrogation rights; and
• Other legally enforceable claims against the recovery.

The workers’ compensation issue can be particularly important when the carrier has paid substantial medical expenses or disability benefits.

That is why the workers’ compensation claim and personal injury claim should not be treated as though they exist in completely separate worlds that work together.

Does Workers’ Compensation Get Back Everything It Paid?

Not necessarily.

This is where the calculation becomes more complicated.  Alabama law addresses both the employer’s right to reimbursement and its obligation to bear an appropriate share of the expense incurred in obtaining the third-party recovery.

Under § 25-5-11(e), Ala. Code 1975, the employer is generally responsible for a proportionate share of the attorney’s fees incurred in obtaining the third-party settlement or judgment.

That makes sense.

If the injured employee and the employee’s attorney do the work—and incur the expense—necessary to recover money from the third party, the workers’ compensation carrier should not necessarily receive the benefit of that recovery without bearing the share of attorney’s fees required by Alabama law.

The actual calculation can become complicated and depends upon the facts of the case.

What Happens to My Future Workers’ Compensation Benefits?

This is another issue injured workers sometimes overlook.  A third-party recovery can affect more than benefits workers’ compensation has already paid.  It may also affect benefits workers’ compensation would otherwise owe in the future.

Section 25-5-11 provides for a credit against the employer’s liability in circumstances involving a third-party recovery.  For that reason, settling the personal injury case may affect the workers’ compensation case even though you have not settled your workers’ compensation claim.

That is an important reason to evaluate the two claims together.

What About My Future Medical Treatment?

This deserves special attention.

Suppose workers’ compensation has been paying for treatment of a serious back injury.  You may need additional treatment in the future.  Perhaps your doctor believes you will eventually require another surgery.

Then you settle a personal injury claim against the person who caused your accident.

Does workers’ compensation simply continue paying every future medical bill exactly as it did before?  Not necessarily.

Alabama appellate courts have addressed the employer’s subrogation rights concerning future medical expenses following a third-party recovery.  In Ex parte Miller & Miller Construction Co., 736 So. 2d 1104 (Ala. 1999), the Alabama Supreme Court held that the employer was entitled to subrogation as to the portion of a third-party recovery attributable to future medical expenses the employer would otherwise be legally required to pay. Once the applicable portion of the third-party recovery is exhausted, the employer may again become responsible for covered medical expenses.

The subsequent Madewell litigation demonstrates just how complicated determining that future-medical credit can become.  This is why an injured worker should be very careful about settling a third-party personal injury claim without considering future workers’ compensation medical benefits.

Recommended Reading: Are Alabama Workers’ Compensation Medical Benefits Really for Life? Future medical benefits can be among the most valuable benefits available under Alabama workers’ compensation law, and a third-party recovery can affect how those benefits are paid.

What If My Personal Injury Settlement Isn’t Enough to Fully Compensate Me?

This is another reason these cases can become complicated.

Workers’ compensation generally does not compensate an injured worker for everything that can potentially be recovered in a personal injury case.  For example, workers’ compensation generally does not award traditional damages for pain and suffering.  A personal injury claim may involve those damages along with other losses.

Meanwhile, workers’ compensation may have paid substantial medical expenses and disability benefits.

Determining the effect of the third-party recovery on workers’ compensation therefore involves applying § 25-5-11 and the Alabama cases interpreting it—not simply looking at the gross settlement amount and subtracting whatever the workers’ compensation carrier says it paid.

Can the Workers’ Compensation Lien Be Negotiated?

Sometimes reimbursement and subrogation issues can be addressed as part of resolving the overall case.  Whether a particular lien or claimed reimbursement amount can be reduced depends upon the facts, the applicable law, the amounts paid, the nature of the third-party recovery, attorney’s fees and expenses, and the positions of the parties.

The important point for the injured worker is this: Find out what workers’ compensation claims it is owed before—not after—you settle the personal injury case.

A settlement can look very different once all reimbursement obligations and credits are properly considered.

Don’t Treat the Two Cases as Completely Separate

This may be the most important practical lesson.

Suppose one attorney handles the workers’ compensation case while another attorney handles the personal injury case.  If the two cases are treated independently, problems can develop.

A settlement of the personal injury case may affect:

• Workers’ compensation reimbursement;
• Future disability benefits;
• Future medical treatment;
• Settlement strategy in the workers’ compensation case; and
• The injured worker’s actual net recovery.

Likewise, decisions made in the workers’ compensation case may affect the value or handling of the personal injury claim.

The two claims may be legally separate, but financially and strategically they can be closely connected.

Recommended Reading: Can I Settle With the Other Driver—or Another Responsible Party—Without Telling Workers’ Compensation? Before settling a third-party personal injury claim, an injured worker should understand how that settlement may affect workers’ compensation benefits and the carrier’s statutory rights.

Don’t Forget That the Claims Provide Different Benefits

It is also important not to look at subrogation and conclude “If workers’ compensation gets some of the money back, why should I bother bringing the personal injury claim?”

Because the personal injury claim may provide compensation that workers’ compensation does not.  Depending upon the circumstances, a personal injury recovery may include damages for:

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

Workers’ compensation provides a much more limited set of statutory benefits.  That is why identifying a potential third-party claim after a serious job injury can be extremely important.

The Law

• 25-5-11, Ala. Code 1975, governs many of the issues arising when a compensable job injury is also caused by a legally responsible third party.

The statute permits an injured employee, in appropriate circumstances, to pursue workers’ compensation benefits while also bringing an action against the third party. It also establishes rights involving reimbursement, credits, subrogation for medical and vocational benefits, and the employer’s proportionate responsibility for attorney’s fees incurred in obtaining the third-party recovery.

Alabama Supreme Court decisions, including Ex parte Miller & Miller Construction Co., further address the effect of third-party recoveries upon future medical benefits.

Because these calculations can become complicated, the amount of a third-party settlement should not be considered in isolation from the workers’ compensation claim.

The Bottom Line

If workers’ compensation has paid benefits for an injury caused by someone else, yes, the employer or workers’ compensation carrier may have a right to recover or receive credit for some of those benefits when you recover money from the responsible third party.

But that does not necessarily mean workers’ compensation simply takes back everything it has paid.  Alabama law contains important rules governing reimbursement, subrogation, attorney’s fees and expenses, credits, and future medical benefits.

The most important practical lesson is simple:

Before settling a personal injury claim arising from a job-related injury, determine how that settlement will affect your workers’ compensation claim—and how your workers’ compensation claim will affect what you actually receive from the settlement.

One accident may create two claims, and they should be evaluated together.

Experience Handling Both Workers’ Compensation and 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 injury creates both claims, decisions involving settlement, medical treatment, workers’ compensation subrogation, and future benefits can affect the overall recovery. 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.