PERSONAL INJURY AND WORKERS' COMPENSATION
It is important to explain the differences between Workers' Compensation and Personal Injury.
Workers' Compensation claims arise when an injury occurs in the course and scope of your employment. In other words, an injury takes place on the job.
A long time ago in Pennsylvania when the Pennsylvania Workers' Compensation Act was being debated, legislators struck a compromise. They wanted to make sure that wages and medical bills were paid without debating who was at fault. In exchange other rights had to be forfeited.
Under the Workers' Compensation Act, a worker who is hurt on the job and unable to return to his former job is paid 2/3 of his wages. This income is not taxed so it increases the take-home amount to the injured worker. For most workers, living off of 2/3rd' s of your income does not allow you to pay all of your bills. Nevertheless, it was part of the Grand Compromise.
The Workers' Compensation Act also provides that workers be paid their medical expenses as a result of the injury. Again, the Legislature in Pennsylvania did not want employers and workers arguing on who was at fault leaving medical bills unpaid and medical treatment denied because nobody was paying the bills. Thus, an employer is responsible for all medical bills from the work related injury.
In return, employers were granted the protection of not having employees sue them for Non- Economic Damages such as Pain and Suffering, Embarrassment and Humiliation, and Loss of Life's Pleasures. Also, employers only need to pay 2/3 of wages for workers whose injuries stopped them from returning their job.
Workers' Compensation became the exclusive means for a worker to recover money from his employer for a work related injury. Fault (Liability) does need to be proved. In fact, an employee could negligently slice himself with a saw and even still be entitled to Workers' Compensation benefits.
So what happens when a salesman is driving down the highway to go to a sales appointment and is hit by another driver and severely injured and out of work with lots of medical bills to pay and months of lost income. Workers' Compensation is the primary source of recovery. The injured salesman again can get 2/3 of his wages paid so long as he is disabled from work and medical bills paid that are related to his accident injuries.
Does that mean that the salesperson cannot sue the other driver? No. The salesperson can sue the other driver because the other driver was not a co-employee or related to his work, but somebody outside of his work that was negligent and caused him injury.
The bigger question is what can the salesman recover from the other driver? Pennsylvania Law makes sure that you don't get a double recovery for the same injury. So, if Workers' Compensation pays out $50,000 in wages and $50,000 in medical bills to the injured salesman, the salesman cannot recover the same money from the injured driver and keep both. That would be a double recovery from two sources for the same expenses. Pennsylvania Law generally prevents this "double-dipping."
Instead, under Pennsylvania Law, the injured salesman can sue the other driver and recover $50,000 in Wage Loss and $50,000 in Medical Bills already paid to Workers' Compensation, but he must give back to Workers' Compensation all the money he has received from the responsible driver. The right to be re-paid all money it spent as the result of someone's fault outside the workplace is called the Workers' Compensation Lien. The process of being re-paid is called Workers' Compensation Subrogation.
On the other hand, the salesperson can recover money that has not been paid out by Workers' Compensation. For example, Workers' Compensation only pays 2/3 of the wage loss. In theory, the 1/3 of wage loss recovered from the party at-fault can be kept by the salesperson and not paid back to Workers' Compensation. That part is not a double recovery.
Here is a quirk in Pennsylvania Law. Say that the salesperson has been paid $50,000 in wage loss and $50,000 in medical bills by Workers' Compensation. The salesperson makes a claim against the at-fault driver and gets $100,000. The $100,000 recovery against the at-fault driver most likely includes $50,000 for Non-Economic Damages such as Pain & Suffering and Loss of Life's Pleasures because the salesman can no longer walk far without excruciating pain running down his legs and cannot hike, ski, and play ball with his young children. In fact, the salesperson can't do anything he used to do and enjoy.
Pennsylvania Law provides that Workers' Compensation has an automatic and absolute lien against that $100,000 recovery from the at-fault driver. That means that Workers' Compensation has the right to reimbursement from the salesperson's full $100,000 recovery against the other driver for all money paid by Workers' Compensation, being $100,000. In this case, the salesperson gets nothing extra from the at-fault driver.
It seems unfair that if $50,000 of the money from the at-fault driver was intended to compensate the salesman for his pain and things he can no longer do, that the salesperson still must pay back to Workers' Compensation that $50,000 when Workers' Compensation by law cannot compensate the salesman for Pain & Suffering and Loss of Life's Pleasures (Non Economic Damages).
Even though this does not seem fair, it is the Law of Pennsylvania . . . for now.
Paying back Lien amounts due to Workers' Compensation from a recovery against the responsible driver is of critical importance. If that money is not paid back from the recovery against the responsible driver, Workers' Compensation will come after the salesperson personally for repayment. Thus, before settling or after receiving money from the responsible driver in a third party liability claim, it is critical to negotiate or pay back to Workers' Compensation its payments.
So what is the incentive for the injured salesperson to even go after the other driver and possibly have to go through a jury trial? Isn't it just a big waste of time because the injured salesperson will have to pay everything back to Workers' Compensation? The answer is "Yes," that could be true.
Only when the amount of money recovered in the case against the at-fault driver is more than the amount of money Workers' Compensation has paid out, does it make sense to pursue the other driver in the eyes of the salesperson. Otherwise, the salesperson is simply doing Workers' Compensation a favor by pursuing the claim against the other driver just to pay back Workers' Compensation.
The lesson here is that the claim against the other driver should anticipate more money than what has been paid out by Workers' Compensation for it to make it worthwhile to pursue the other driver.
The other solution is to negotiate with Workers' Compensation before settling the third party claim against the liable driver so that there is some money left over to pay to the injured party out the third party liability settlement money.