Ordinarily, workers’ compensation in Pennsylvania is an “exclusive remedy.” That means, the typical injured worker in PA cannot sue anyone for his or her injuries, and only has benefits under the Pennsylvania Workers’ Compensation Act (Act) available. There are exceptions when the injury was caused by the negligence of a third party (a party other than the employer).
However, as we have noted in the past, the Act is designed so that the injured worker receives none of the benefits of the damages recovered in the personal injury (“third party” case). This concept is called “subrogation.” We recently observed this happening to one of our clients.
One of our clients suffered significant injuries, which were caused by a third party. A civil suit was filed (in addition to the workers’ compensation action). This civil suit was handled by a law firm other than us (our firm limits its practice to PA workers’ compensation cases, though we can certainly refer clients to excellent attorneys for any aspect of the law).
A settlement was reached in the civil suit while our client continued to receive workers’ comp benefits. This was a sizable settlement, far more than the PA workers’ compensation insurance carrier had paid out so far in benefits (known as the “lien”). Once the lien was paid back to the insurance company, and deductions were made for the attorney’s fee and the costs of litigation by the attorney, an offset was calculated by a formula on a Third Party Settlement Agreement (TPSA).
The offset will result in our client receiving around 35 percent of his ongoing workers’ compensation benefits, including his medical bills (meaning that our client will now have to pay the majority of his medical bill from his own pocket). By the design of the Act, this offset will continue until every last dollar of his third party recovery is “paid back” to the workers’ comp insurance carrier. This, despite the fact that civil cases (unlike workers’ compensation cases) allow for the recovery of pain and suffering. One could ask how such a result is fair. We could not provide an answer.