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What is the Difference Between Workers’ Compensation and a Third-Party Personal Injury Claim?

What is the Difference Between Workers’ Compensation and a Third-Party Personal Injury Claim?

Not all personal injury lawyers handle workers’ compensation cases, but most will represent victims of workplace accidents in personal injury claims against third parties.

Personal injury civil lawsuits differ considerably from claims filed through an employer’s workers’ compensation insurance. The most significant differences have to do with fault:

  • Workers’ compensation is a no-fault insurance system that provides automatic benefits to workers who sustain injuries in the course of their employment. Injured workers do not need to prove negligence and are legally entitled to benefits irrespective of whether anyone was at fault for the injury. If an injury occurred during a job-related activity, the injured employee is entitled to benefits, but the trade-off is that the injured worker is barred from suing his employer or co-workers for civil damages. In other words, workers’ compensation is the employee's only avenue of collecting compensation from the employer; the exclusive remedy rule.
  • Personal injury claims, on the other hand, require plaintiffs to prove fault in order to receive compensation for damages. In other words, in order to be entitled to compensation, the plaintiff must prove liability; e,g, that his / her injuries were caused by the defendant’s negligence or other wrongful conduct. Proving liability necessitates the need for investigations, evidence, and sound arguments that prove the essential elements of a claim.

While workers’ compensation is an important safety net, it does have its limitations. In matters of serious injury, lasting disability, or wrongful death, workers’ compensation benefits are inadequate to fully compensate for the harms and losses the injured worker has suffered or will suffer in the future.

Where there is a third party (someone other than the worker's employer or co-workers) whose conduct caused the incident in which the worker was injured, it is in the injured worker's best interests to pursue a civil claim in addition to the workers’ compensation claim.

Although third-party liability may not exist in every workplace accident, it can be a substantial source of additional compensation when the facts indicate a third party is liable.

An injured employee can successfully pursue a third-party personal injury case only in limited circumstances:

  • When a third party's (or multiple third parties') negligence caused the accident in which the worker was injured.
  • When a third party engaged in other wrongful / illegal conduct that caused the accident.
  • in rare circumstances, where the injured worker is entitled to sue his employer; such as where the injured employee was injured while working with a metal forming device that the employer either removed a guard from or failed to guard. (Cal. Labor C. §4558.)

Why Pursue a Personal Injury Claim?

There are many benefits available to the injured worker when third-party liability exists and a civil suit is filed, as compared to what is available only through worker's compensation:

  • Choice of doctor: Under workers’ compensation procedures, injured workers are generally required to obtain treatment from doctors and providers approved by their employers, and may not be able to seek covered care from medical professionals of their choosing – with the exception of emergency treatment.
  • Limited wage replacement: Workers’ compensation provides temporary disability benefits at only a percentage of the worker’s wages, and only for a maximum of 2 years. Once the injured employee is declared to have achieved maximum medical improvement, then the worker is entitled to permanent disability benefits based on a formula which provides compensation that is far less than the employee's actual lost wages or earnings capacity.
  • No compensation for pain and suffering: Workers’ comp does not award compensation for pain and suffering and other intangible losses, which can be very significant in cases of serious injury or death.
  • No punitive damages: Workers’ comp claimants are not entitled to punitive damages, a form of exemplary damages designed to punish wrongdoers in civil actions for gross negligence or reprehensible conduct. While punitive damages are rarely awarded in civil claims, they are never available in the workers’ compensation jurisdiction.

When an injured worker is able to prove a third party’s fault, the worker may recover damages not provided for or compensated through workers’ compensation. This can include compensation for:

  • Hospital and medical bills for treatment by specialists not covered by WC
  • Future medical expenses
  • Full past and future lost wages or earnings capacity
  • Loss of household services
  • General damages (a/k/a human damages) for pain and suffering
  • General damages for loss of quality and enjoyment of life
  • Compensation for the worker's spouse's loss of consortium

Can I File Both a Workers’ Comp Claim and Personal Injury Claim?

Given the limitations of workers’ compensation benefits, pursuing civil claims for personal injury can greatly broaden the compensation and resources available to victims.

Still, obtaining workers’ compensation benefits can prove helpful in providing workers and families with immediate benefits, as civil claims can take time to resolve. This is why it is generally beneficial for an injured worker to pursue both workers’ compensation and, where the facts support it, third party liability.

In California, workers injured on the job have the right to collect workers’ compensation benefits and bring civil claims seeking full compensation for their injuries caused by a third party who engaged in negligent conduct or other wrongful conduct that caused the worker's injuries.

While California Labor Code § 3520 and case law are both clear in allowing injured workers to receive workers’ compensation benefits and monetary damages awarded in a civil claim, state law is as equally clear on preventing any double recovery.

In order to prevent a double recovery, California law allows the employer to seek a recovery of all benefits paid to the injured worker from the third party defendant(s). The employer can seek in this recovery, or reimbursement, in three different ways:

  1. File a separate lawsuit against the third party defendant(s).
  2. Intervene it the employee's civil suit against the third party defendant(s).
  3. File a lien against the employee's recovery in the third party case.

Here is a simplified example of how this can work:

A workers’ compensation carrier pays benefits to or on behalf of (e.g., medical bills) an injured construction worker who was injured on the job totaling $150,000. The worker also files a civil claim against the sub-contractors whose negligence caused the accident in which the worker was injured. A jury awards the worker $750,000 in damages. The worker's compensation insurer will be reimbursed its $150,000 off the top and the injured worker will receive a net recovery of $600,000 from the defendant sub-contractor or its insurer.

The employer's right to recover benefits that it paid to the injured worker can, however, be eliminated or reduced if the employer also engaged in negligent conduct that was a cause of the accident. If the employer's negligence was a cause of the accident / worker's injuries, then its recovery is reduced by the percentage of fault attributed to the employer. When this happens, the negligent defendant gets a windfall recovery of the amount not paid to the employer or its insurer.

Here is an over simplified example of how this rule works:

Using the example above of the injured construction worker, let's assume that the jury found the worker's employer also was negligent and its negligence was a 50% cause of the accident; the negligence of the sub-contractor being the other 50% cause. Because the employer was 50% negligent, its $150,000 recovery is reduced by 50% and the employer or its insurer only recovers $75,000 back even though they paid the worker $150,000 benefits. But, because of the rule barring the worker from receiving $150,000, the worker cannot receive that $75,000 not paid back to the employer. Instead, the negligent defendant gets to deduct that amount from the damages it was liable for. In this case, the $75,000 is reduced from the $600,000 it was found liable for – a windfall for the negligent defendant -- and it only has to pay the worker $525,000. The worker still receives $600,000.

In reality, the calculation is much more complex as it treats the economic component (money) of the workers’ compensation and jury awards different than the economic component (general damages or pain and suffering). It also factors in negligence attributed to the employer and / or the injured worker and attorney’s fees.

The important thing to realize is that the employer is going to get money back and the amount paid by the defendant will be less than the amount of the award and that these factors have to be considered in every stage of handling of the case.

Workers’ compensation liens, credits, and offsets are complex issues. Only attorneys who have experience handling complicated third-party cases are likely to understand the ins and outs of these complexities and be able to strategize the case to achieve a maximum recovery for the injured worker.

What’s Right for You?

Working with an attorney who has an understanding of workers’ compensation liens, credits, and offsets is not only necessary for challenging an employer’s right to reimbursement, but also for determining what is in the best interests of the injured worker.

While third-party claims can unquestionably provide financial benefit to injured workers in many cases, there are some situations – and perhaps more than most would think – where it may not be advantageous to prosecute a separate civil claim. This can include claims that would result a very small net recovery after satisfying liens, insufficient available insurance coverage, and difficulties in proving employer fault during reimbursement hearings.

At Biren Law Group, our Father-Son legal team has extensive experience litigating third-party cases and workers’ compensation liens and credits. Our award-winning attorneys are available to speak with injured victims, families, and counsel about workplace accidents and the potential for third-party civil claims. Call or contact us online to request a free case review.

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