Workers’ compensation is the exclusive remedy for any worker injured on the job.  While the worker cannot sue the employer in civil court for general damages such as pain and suffering – the worker can sue a third party who may have caused his/her injury.

For example, if I send my paralegal to the bank, any accident that happens while you are on your way to the bank would be covered under workers’ compensation; yet, if the accident is caused by a negligent third party – then – the worker has the right to sue that person in civil court.

If the accident was pretty bad and my paralegal settles his/her third party lawsuit for $300,000.00, my workers’ compensation insurance can assert a third party credit against the amount my employee got from the third party civil suit.  If the third party attorney takes a fee of 33 1/3%, my employee would get the remaining $200,000.00 from the third party lawsuit.  My workers’ compensation insurance could then petition the W.C.A.B. for a credit – meaning that they would not have to pay any further benefits until my employee shows that he spent the full $200,000.00 he got from the civil case.  The third party credit is normally allowed so the employee does not get paid twice for his loss.

This situation changes if the employer [in this case me] was negligent as well in causing the accident.  If I sent out my paralegal in a car with bad brakes and the bad brakes were 50% of the cause of the accident, the third party credit is reduced by 50% – so – instead of needing to spend $200,000.00 before getting any more workers’ compensation benefits, my employee would only have to spend $100,000.00 of his third party money prior to getting back on workers’ comp.

If there is no agreement, the W.C.AB. will determine (1) The full value of the damages suffered; (2) the percentage of fault of the employer; and (3) the amount of the credit remaining against the pending work comp. benefits.

There are two scenarios here: (1) a jury in the civil case determines the damages and percentages of fault – making the job of the W.C.A.B. a lot easier and (2) there is a settlement prior to the civil trial.  It may be that the employee settled his third party claim at less than full value.  If that is the case, the employee will have to show the W.C.A.B. what the full value of the claim really is prior to determining employer fault and eventual credit.

Let’s say that in our example the employee settles for the $300,000.00 but can show at the W.C.A.B. that the actual damages suffered were $600,000.00.  If the employer is still 50% at fault, then the employer could not get a credit until he can show that he paid the $330,000.00 in damages his negligent caused.  The policy against the employee getting paid twice is defeated by a stronger policy of not allowing the employer to profit from his wrong.

If you have any questions about Third Party Credits please feel free to call me at 619.338.9012 or e-mail me at JACK@SDWORKCOMPATTORNEY.COM.

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