Use a Third Party Claim as Leverage to Get Your Workers’ Compensation Claim CLINCHERED


If an employee was injured in the course and scope of employment because of a third party, the employer/carrier has a lien against proceeds the employee receives from the third party. For example, if your employee was driving to the bank to make a deposit for his or her employer, if the employee is hit by a drunk driver, the employer/carrier still has to pay for workers’ compensation benefits (assuming no other defense applies). However, the employer/carrier has a lien against any award or settlement the employee receives from the drunk driver, or can bring a claim against the drunk driver if the employee is not going to do so himself.

If the employee is entitled to lifetime medical treatment for injuries sustained, the employer/carrier is responsible for providing those benefits, even after the employee reaches maximum medical improvement. If the disability portion of the claim is resolved at a hearing or on a Form 16A, the employer/carrier remain responsible for future medical treatment and potential liability for a change of condition for the worse within one year of the original disability payment. When a workers’ compensation claim is resolved this way, the employer/carrier has ongoing liability until the employee dies or suffers some intervening injury that severs the causal connection between the original accident and the current need for treatment.

This creates an issue because the employer/carrier does not know their final workers’ compensation lien amount to assert against the third party claim—the employer/carrier cannot know what medical treatment the employee may need in five years and what that treatment will cost.

When a third party claim is resolved, the Commission has the right to cram down the employer/carrier’s current lien amount. But, when there’s more than $5,000 after Claimant’s attorney’s fees and the employer/carrier’s (probably reduced) lien are paid, the remainder goes to the employer/carrier to use for future benefits such as medical treatment or a change of condition. This is good for the employer/carrier—we receive dollar for dollar reimbursement on future benefits to be paid with no cram down.

This is NOT good for the employee. A $100,000 third party settlement could result in no money going to the employee after the employee’s attorney is paid, our current (crammed down) lien is paid, and future medical treatment expenses are estimated to cost more than the remainder of the settlement. The employee has entitlement to future medical treatment provided by the employer/carrier…but no pay day from his six-figure third party settlement.

So, use this as leverage to resolve the workers’ compensation claim on a full and final clincher agreement!   When the claim is fully and finally resolved by a clincher settlement agreement, the employer/carrier has a final lien amount that will not change. There are no future liabilities the employer/carrier has to pay that would be included in the lien. Thus, the third party claim can be resolved and proceeds divided between the employee and the employer/carrier with no additional issues.

The employer/carrier is in the driver’s seat on these settlements. Since the amount you are paying to fully and finally resolve the claim can be crammed down, you don’t have to agree to anything you don’t like—and can instead hold the third party settlement in a trust for future medical treatment. If the employee wants to see any money from the third party claim, they are going to have to be more reasonable with their workers’ compensation clincher settlement and lien reduction.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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