When an injured worker in PA settles a personal injury case against a third party (typically from a work-related car accident, a products liability case or similar), the workers’ compensation insurance carrier has its hand out to get repaid for the wage loss and medical benefits provided to the injured worker. For past wage loss and medical benefits, that remains the law. For future medical benefits, however, things have changed dramatically.
Recently, the Supreme Court of Pennsylvania issued a decision in Whitmoyer v. Workers Compensation Appeal Board (Mountain Country Meats). The Court found that while a workers’ compensation insurance carrier is entitled to a credit against future workers’ compensation wage loss benefits (when a third party settlement is more than the insurance carrier has already paid), the insurance company is NOT entitled to a credit against future medical benefits. This represents a large change in practice.
When a third party case is settled in the presence of a workers’ comp case in PA, there is a specific form one uses to calculate both the lien (how much the workers’ compensation insurance carrier is getting back for money they have already paid) and the “balance of recovery” (dealing with how the money above the lien amount is treated for future payments). The balance of recovery is used to calculate the “reimbursement rate” for future payments. Instead of having to pay the entire amount due for future obligations, the workers’ comp insurer would only have to pay that amount times the reimbursement rate, typically less than half. This form is called a “Third Party Settlement Agreement” (TPSA).