Most workplace injuries involve only the employee and the employer. But sometimes a third party is responsible: a driver who rear-ends a delivery van, a manufacturer of a defective machine, or a contractor whose negligence leaves a hazard on a job site. In those cases, workers’ compensation may pay benefits first, while another party may ultimately be responsible for the cost. That process is called subrogation.
What Subrogation Means
Subrogation is the right of an insurance company to recover money it has paid from another party who was legally responsible for the loss. In workers’ compensation, it generally allows the insurer that paid medical bills and wage-replacement benefits to seek reimbursement from a negligent third party, subject to state law.
The injured employee usually still receives workers’ comp benefits regardless of who was at fault. Subrogation happens in the background and usually does not delay those benefits.
Common Third-Party Situations
Examples vary by industry. A delivery driver injured in a crash caused by another motorist may have a claim against that motorist. A worker hurt by faulty equipment may have a claim against the manufacturer or the company that maintained it. An employee injured at a customer’s premises, or by a contractor on a shared job site, may have a claim against that property owner or contractor. Rideshare, trucking, construction, and field-service work often involve third parties for this reason.
The Employee’s Separate Claim
In many states, an injured worker can pursue a personal injury claim against the responsible third party in addition to receiving workers’ comp benefits. That claim may allow recovery for losses that workers’ comp does not typically pay, such as pain and suffering. The employer generally cannot be sued in this way because of the exclusive remedy rule, but the third party can be.
When both the employee and the insurer have claims, state law often determines how any recovery is divided and how the insurer’s reimbursement, sometimes called a lien, is handled. The rules differ from state to state, and an attorney can explain how they work where you operate.
Why This Matters to Employers
Recoveries from third parties can sometimes reduce the overall cost of a claim. Since claim costs may affect your experience modification rate in many states, a recovery that offsets payments can potentially be beneficial. Employers who are alert to third-party involvement may help the insurer preserve evidence and pursue reimbursement.
Practical Steps After an Injury
When an injury might involve someone outside your company, a few practices can help. Report the injury to your insurer promptly, and mention any other party who may have contributed. Preserve evidence such as photographs, equipment, incident reports, and witness names. Keep any damaged equipment rather than discarding it. Avoid making statements about fault that are not based on facts. Cooperate with your insurer’s requests for information, since the insurer often investigates third-party responsibility.
Contracts Can Change the Picture
Business contracts sometimes address who bears responsibility for injuries on a job site. Indemnity clauses, waivers of subrogation, and additional insured requirements can affect whether recovery against a third party is possible. A waiver of subrogation, for instance, may prevent your insurer from pursuing a certain party, and carriers may charge for adding one. Have your agent and an attorney review such terms before you sign, especially when working with general contractors, landlords, or customers.
Talk With an Independent Agent
You do not have to master the legal details to handle injuries well. An independent agent can explain how your policy treats third-party recoveries, what your contracts may mean for coverage, and how to report claims so that your insurer can protect your interests. If you have contracts that include waiver-of-subrogation language, or your employees regularly work around other businesses, consider reaching out to an independent agent for a review.