What is a “third party” in California workers’ compensation?

A normal workers’ compensation case consists of two parties – the injured worker and the employer. Workers’ Compensation is a “no fault” system which means that it does not matter how you got hurt at work so long as you were hurt at work. However, if you are injured through the negligence of a “third party” (someone other than your employer or yourself), then you may still have a claim against that third party based on that party’s fault. If the other party has caused you injury and caused your employer to have to pay for your medical care or pay you benefits, then the employer has also been damaged by the third party and also has a claim against that other person or entity.

An easy example is that you are driving as part of your work and you have an accident with another vehicle through the negligence of the driver of that other vehicle. Since you were injured at work, you are entitled to all of the benefits of a workers’ compensation case. However, since you are also injured through the negligence of another driver who is not employed by your employer, (a “third party”), you and your employer may make a claim against that other driver. If that other driver is also driving in the course of her employment and she is working for a company, then you and your employer also have a claim against the company which employs the other driver.

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Is the “Third Party” Part of My Workers’ Compensation Case?”

The short answer is no. The workers’ compensation case and the “third party” case are separate. Your workers’ compensation case, like all workers’ compensation cases, is heard before the workers’ compensation court called the Workers’ Compensation Appeals Board. The “third party” case is handled in civil court just like every other car accident case. Sometimes you will have two different attorneys and sometimes one attorney will handle both cases. If you have two attorneys, you should make sure that they are communicating and cooperating with each other.

Can’t I Just Drop the Workers’ Compensation Case and Go After the Other Driver?

Yes, you can waive your rights under workers’ compensation and pursue the claim strictly as a negligence case. But that means that you will not be accepting any of the benefits which you could have through the workers’ compensation claim such as temporary disability, medical benefits, and vocational rehabilitation. Some attorneys who handle civil cases and are not familiar with workers’ compensation might recommend that you do this. However, most attorneys who are familiar with the benefits available under workers’ compensation would not suggest that you give them up.

Another thing to consider is that the attorneys fees in a civil case are usually anywhere from thirty-three and one-third percent to forty percent or more. The attorney fees in a workers’ compensation case are usually not more than fifteen percent.

What Happens if I Pursue Both Claims?

If you pursue both the workers’ compensation case and the civil case, your employer will have a right to claim a lien on the recovery from the “third party.” Here’s a simple example. You have an automobile accident with a party who has $15,000.00 insurance. Your workers’ compensation carrier pays doctor bills, mileage, and other benefits totaling $5,000.00. You settle your automobile accident case for $15,000.00. Your attorney takes one-third or $5,000.00. For this example, we will assume there are no costs. However, usually your attorney will be entitled to reimbursement of costs of litigation. The workers’ compensation insurer has a lien on your case which means it is entitled to be reimbursed for the $5,000.00 which they have already expended. That leaves $5,000.00 for you.

That sounds good so far. However, what if you still need medical attention or are entitled to some permanent disability benefits which the workers’ compensation carrier would be paying in the future. The workers’ compensation insurance has a right to claim credit for the money which you have obtained ($5,000.00). Even though the workers’ compensation might be ordered to pay future medical bills, they will not have to pay until you spend the entire $5,000.00 on doctors. If you were entitled to $2,000.00 for permanent disability which has not been paid and to your future medical care, then you would only have to pay the first $3,000.00 for medical care before the insurance company had to start paying for your doctor bills again.

Some personal injury attorneys who are not familiar with workers’ compensation might tell you that you should go ahead and settle your case and not to worry because the workers’ compensation will cover your future medical bills. If this happens, make sure that your third party attorney understands “credit rights” as well as “lien rights” of the workers’ compensation insurance company.

Another problem with settling your personal injury case too early is that there is no money left for the workers’ compensation carrier to pay and therefore, nothing from which to deduct a fee for your workers’ compensation attorney. This is another reason for the attorneys to cooperate.

Can I Work Out a Deal with the Carrier?

Sometimes, the workers’ compensation insurance carrier is willing to give up some of the credit rights and/or lien rights in order to resolve the “third party” case and get some of their money back. Using the same example as before, except now assuming that the workers’ compensation had paid $10,000.00 rather than $5,000.00, you can see that if the workers’ compensation carrier took everything to which they were entitled ($10,000.00) and your attorney took one-third ($5,000.00), there would be nothing left for you. Why would you want to settle your “third party” case just so that your attorney and the workers’ compensation carrier could get paid and not you? That’s what your third party attorney should tell the workers’ compensation insurance carrier and sometimes they will see the value of reducing their lien in order for you to obtain a recovery too. In that example, the workers’ compensation insurance might reduce their lien to $5,000.00 even though they are entitled to $10,000.00 just so that the settlement will be worth it to you. Otherwise, if you refuse to enter into a settlement and walk away from the “third party” case, the workers’ compensation insurance company would have to sue the other driver and subpoena you as a witness. However, remember, that even though the workers’ compensation insurance company reduced their lien from $10,000.00 to $5,000.00 to settle the case, unless they specifically state that they are also waiving their right to credit, you still would have to spend the first $5,000.00 before you could get any more money from workers’ compensation.

Is There Any Way to Get Out of Reimbursing the Employer?

If the employer is also negligent then you may not have to reimburse your employer from your “third party” claim. So, using the same example, if the party who hit you is negligent but part of your damages came from the fact that your employer negligently maintained the seat belt or air bags in the car you were driving, then you may not have to reimburse the employer, at least to the extent of the employer’s negligence.

It can get very complicated if there is a workers’ compensation lien and employer negligence. It is difficult calculating the amount which you will recover. It is important that you have a “third party” attorney who understands the intricate relationship between workers’ compensation and a personal injury case. You will have to work closely with both attorneys. You should definitely keep each attorney informed if the other case is nearing settlement.

As usual, you should contact your attorney for any questions you have about your case.

This article is for general information, and not meant as specific legal advice. You should always see an attorney for specific legal questions.