Workers’ Compensation Carrier Third-Party Recovery Only Entitled to Recover Future Credit on Indemnity Benefits.

Workers’ Compensation Carrier Third-Party Recovery Only Entitled to Recover Future Credit on Indemnity Benefits.

When an employee is injured at work, their employer becomes liable under the Pennsylvania Workers’ Compensation Act to pay disability or indemnity benefits (77 P.S. § 431) and medical expenses.  (77 P.S. § 531).  When that work injury is caused by the negligence of some third-party, for example the manufacturer of a defective product used in the workplace or the at fault driver in a motor vehicle crash, the employer’s insurance company has a right of subrogation if the employee pursues a claim against the negligent third-party.  The term “subrogation” simply means that the employer has a right to get paid back a portion of the disability and medical payments they paid to the injured employee from any recovery the employee makes against that third party.  (77 P.S. § 671).

At the time of any third-party recovery, the injured employee must reimburse the employer’s Workers’ Compensation insurance carrier a portion of any disability benefits and medical expenses the carrier has previously been paid up to the date of the third-party recovery.  Previously, Workers’ Compensation carriers would also assert a right to offset the amount they paid out in future Workers’ Compensation benefits for both disability benefits and medical expenses until such time as their subrogation right as to the total third-party settlement had been exhausted.  Typically, this meant that the Workers’ Compensation carrier only paid 1/3 of the amount of benefits due going forward, leaving the remaining 2/3 to be paid by the employee.

In a recent case, the injured worker challenged the right of the Workers’ Compensation carrier to take a credit for future medical benefits incurred after a third-party recovery and the carrier’s accrued subrogation claim had been paid.  In Whitmoyer v. Workers’ Compensation Appeal Board (Mountain Country Meats), 186 A.3d 947 (Pa. 2018), the Pennsylvania Supreme Court ruled that the applicable statute did not provide for Workers’ Compensation carriers to take a credit against the payment of future medical benefits.  Accordingly, going forward, Workers’ Compensation carriers can only assert subrogation of future disability or indemnity benefits.  This ruling is great news for Pennsylvania’s injured workers in that it leaves them with a larger portion of their third-party settlements from which to pay their bills, feed their families and to survive on, which still suffering from any work related injury.