If an employee is injured on the job as a result of the fault of some third person, then that employee may have a basis for a claim (sometimes referred to as a third-party claim) against that other individual or company. For instance, suppose you are working on a construction job and you are employed by the general contractor. If, while performing those duties, an employee of a plumbing sub-contractor drops a pipe that strikes you on the head, you may be entitled to the benefits called for under the act. In addition to being compensated under the workers' compensation act, you may also have a basis for a claim against the plumbing sub-contractor whose employee dropped the pipe on you. In some states, on a construction job such as this, all contractors may be immune from suit by any other employee on that construction job. In other states, the employee may sue any other responsible contractor on the job.
If the injured employee in that circumstance does recover money from the third party who caused the injury, then the employer of that injured worker (or more likely the employer's insurance carrier) is entitled to recover all or part of the monies paid to the worker under the workers' compensation act. This is a principle known as subrogation. Subrogation literally means that one party is subrogated or steps into the shoes of another party and acquires their rights.
Under most workers' compensation acts, once the employee makes a claim for and receives benefits, then to the extent that the employee has any right of recovery against a third party, the employer or its insurance carrier acquires that right of recovery to the extent of wage and income benefits it paid to the employee. The purpose of allowing subrogation in this instance is to hold down the cost of workers' compensation insurance coverage and further to prevent the employee from receiving a double recovery on the wages and medical benefits received.
If the employee receives compensation under the workers' compensation act and is further compensated for the same injuries as a result of the third-party civil claim, that constitutes a double recovery to the employee. After paying back amounts paid to him for wage and medical benefits under the workers' compensation act, the employee is entitled to keep any excess damages awarded by a jury or received in settlement.
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