What Is Workers’ Compensation Subrogation and How Does It Work?
The vast majority of workers in Pennsylvania do not use the workers’ compensation system, so they do not understand or know about some of the common terms regarding work comp.
The term “workers’ compensation subrogation,” is one of the more technical parts of workers’ comp process, and it can be very confusing.
A subrogation claim in workers’ comp can end up costing you money. That means that if have a workers’ comp claim, it is a good idea to at least understand the basics of the concept, so you know the right questions to ask your attorney. This basic-level knowledge will often also help you get the most out of your settlement as well.
What Is a Subrogation Claim?
The term “subrogation” is not exclusive to workers’ compensation, but it comes up pretty frequently in these cases. Generally, the term means that someone else (your employer or their insurance company) may be able to receive some of the benefits that you get from your workers’ compensation case.
However, no one can start your workers’ compensation case but you. Instead, subrogation claims focus on third-party liability. There are situations where you may be able to get workers’ compensation and sue a third-party for the damages that they cause—and that is where workers’ comp subrogation comes into play
Consider an Example
Imagine that you work in a warehouse. Your job is to load product onto a truck using a forklift. Third-party truck drivers, employed by other company, back their vehicles up into the loading bay, and you load them once they are in place. Unfortunately, the driver moves the truck just as you are about to enter it; the forklift falls with you in it, and you are seriously injured.
In this example, you have at least two claims. You have one for workers’ compensation because you were engaged in your work duties at the time of the accident.
You also have another complaint about your personal injuries against the truck driver because he moved his truck when he was not supposed to do so. The claim against the truck driver is referred to as a “third-party” claim.
Understanding Workers’ Compensation Subrogation
When you receive workers’ compensation benefits, you will often receive money for wage replacement and medical benefits. However, if someone else was at fault for your work injury (the truck driver in the example above), then that person should be responsible for paying you for the losses you experienced—instead of the insurance company that provides workers’ compensation benefits.
Subrogation claims allow an employer or its insurance company to get some or all of the funds that they paid to you back from your third-party claim. That means that if you collect anything in your third-party lawsuit, some of that money may go back to your employer or its insurance company to pay for the benefits that they have already provided to you. It is important to take that into account as you work through your third-party lawsuit.
How Do Subrogation Claims Work in Workers’ Compensation?
There are generally two ways that an insurance company will start a subrogation claim for workers’ compensation in Pennsylvania.
The insurer will file a workers’ compensation lien in the third-party case.
Once you get started in your lawsuit against the third party, the insurer will generally file a notice of lien. That notice will set out how much the insurance company has paid in workers’ compensation benefits as of the date of the lien. It also puts everyone on notice that the insurance company should be paid if you recover any funds from the third-party suit.
The insurance company will ask you to assign your rights or voluntarily participate in a third-party lawsuit.
In some situations, the insurance company will recognize that there is a third-party claim available. If you do not see it or do not want to pursue it for any reason, the insurance company may ask you to either participate in the lawsuit voluntarily or assign your claim to them.
In Pennsylvania, however, an insurance company cannot start a third-party lawsuit without your permission.
If the insurance company obtains money over and above the amount owed to them for your workers’ compensation benefits, you should get at least a portion of those funds. However, that type of factual pattern is rare.
What is a Waiver of Subrogation for Workers’ Compensation?
Waivers of subrogation claims can be very confusing, and, frankly, they do not always work. However, the term “waiver of subrogation” in a workers’ compensation case can have a couple of different meanings.
Waiving Subrogation from the Insurer (Lien Reduction)
Subrogation claims can be costly, and they can significantly eat into your funds obtained from a third-party case. Because of that issue, employees and their attorneys will sometimes request a waiver of subrogation for a workers’ compensation claim.
In that context, the insurance company will sometimes agree to waive all of part of their subrogation lien. In many circumstances, however, the insurance company will not waive their subrogation claim unless they get something in return. That “something” could be to “close out” the workers’ compensation claims so that you cannot get any additional payments for medical care, for example.
Waiver of Subrogation Involving Third Parties
Waiver of a workers’ compensation claim also has another possible meaning as well. In some situations, employers will ask that third parties waive any rights to subrogation when they do work at their facilities.
For example, a general contractor at a construction site may ask that their subcontractors waive subrogation as a term of the work contract. That means that if the subcontractor’s employee is hurt, that subcontractor’s insurance company cannot recoup any money from the general contractor for a workers’ compensation claim.
It does not mean that the injured worker cannot sue—but the subcontractor’s insurance company cannot get that money if the employee’s lawsuit is successful. In reality, a workers’ comp waiver of subrogation when used in this way can benefit the injured worker in some circumstances.
Call a Pennsylvania Workers’ Compensation Lawyer
Workers’ compensation cases are confusing, and when you add in the extra layer of a potential third-party claim and subrogation, it can get much more complicated. Thankfully, you do not have to face these issues alone.
Krasno Krasno & Onwudingo is here for you—and we can work with all of the parties to increase the likelihood that you get enough funds to help you address your work injury adequately.
Call (866) 948-9088 to schedule an appointment with a member of our team.