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Settling a Third-Party Claim

| Nov 5, 2018 | Injuries |

It is fairly well known that you have a claim for workers’ compensation benefits if you are injured on the job. The primary benefits in a workers’ compensation case include wage loss, medical benefits, disability benefits, and retraining benefits, if applicable.

Third-Party Claims Generally

It is less known that you may also have a personal injury claim against a third part if that party negligently caused your injury, even though you were at work. This is known as a third-party claim. A third-party claim is pursued in the same way as any other personal injury claim. The only difference is what happens when a settlement or final judgment is reached.

Reimbursing Your Employer

If your employer paid workers’ compensation benefits AND you recover money from a third party related to an injury, your employer may need to be reimbursed for benefits provided. The amount that the employer is reimbursed is determined in one of two ways: the statutory formula or through a Henning hearing.

The Statutory Formula

The default distribution in a third-party settlement or judgment is determined by applying the formula found in Minnesota Statutes Section 176.061, subd. 6. The statute first provides that attorney fees and costs are deducted from the settlement or judgment amount. After fees and costs are deducted from the settlement or judgment amount, the remaining balance is what is distributed between you and your employer. You are guaranteed one-third (1/3) of what remains after fees and costs are deducted.

After your one-third of the remainder is deducted, there is a second formula that is applied to determine what your employer receives. The second formula is designed to ensure that your employer pays its fair share of the cost of collection before it receives any reimbursement. If there is a balance after the second formula is applied, that balance is paid to you, but the employer receives a credit for future benefits.

Henning Allocation

As indicated, the default distribution is to apply the statuory formula. However, you also have the right to pursue a Henning allocation in lieu of applying the statutory formula. A Henning allocation may result in a more favorable distribution to you.

Under Henning, an injured person in a third-party claim may petition the court to ask that the court decide which benefits are compensable under the workers’ compensation statutes and which are not. The court then applies the statutory formula only to those benefits which are compensable under the workers’ compensation statute. The non-compensable benefits are paid to you and do not go through the formula. This type of allocation may be advisable if, for example, pain and suffering damages are disproportionately higher than medical benefits paid.

Contact a Lawyer

Third-party claims are very complex. If you are injured at work and a third party is at fault for the injury, your best bet is to contact a lawyer who regularly handles both workers’ compensation claims as well as personal injury claims. There are many pitfalls for those not experienced in both areas of law. The lawyers at Bird, Stevens & Borgen, P.C. have extensive experience handling workers’ compensation claims, personal injury claims, as well as third-party claims. Please give us a call for a free consultation.