Workers’ Compensation Carriers May Recover Nearly All Benefits Paid From Third-party Settlements

An Arizona Supreme Court decision may ease the burden of negligence on workers’ compensation carriers when third parties are involved – and possibly make settlements more difficult.

In Twin City Fire Insurance Co. v Leija, the court limited the reach of its 1995 decision that allowed such carriers to assert a lien on third-party awards only to the extent that the compensation benefits paid exceeded the judge or jury’s determination of the employer’s share of the total damages.

For example, if a jury determined that an injured worker suffered $100,000 in damages and the employer was 40% at fault for the injuries and an equipment manufacturer was 60% at fault, and the worker’s compensation benefits from the employer’s carrier were worth $50,000, then the carrier could assert a lien of $10,000 against the $60,000 that the equipment manufacturer was paying.  The injured employee would still receive $100,000 in compensation.

In the Twin City case, however, the case never went to trial.  The insurance carrier, Twin City, agreed to pay the deceased worker’s family benefits worth $575,000, and the family later settled with a scaffolding firm, the city of Glendale and others for $1.6 million.  The Arizona Supreme Court allowed Twin City to assert a lien against the $1.6 million for all of the $575,000 that it would pay. While the record showed there was evidence of negligence by the injured worker’s employer, in addition to the third parties, the state Supreme Court declined to order the trial court to determine the employer’s share of fault and reduce the carrier’s lien accordingly, as the Court of Appeals would have required.

By William Horne

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Posted in: Business Law

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