Pennsylvania Workers’ Compensation Subrogation Tips

by Michael J. McCadden, Esquire

Every employer in Pennsylvania should arguably find subrogation to be the most satisfying area of workers’ compensation law. Subrogation is the one area of workers’ compensation which allows an employer to sit in the driver’s seat and fully control whether or not the lien will be compromised, and if so, under what circumstances. In general, there is no reason for a self-insured employer to waive any part of the lien without receiving something in exchange (i.e. a compromise and release of future medical or indemnity benefits). An employer’s right to subrogation is absolute under §319 of the Act. While third party plaintiff attorneys have been known to use various scare tactics to have liens fully or partially waived, the following tips allow the Employer to remain in control.

• Investigate all claims for subrogation potential. If ANY potential exists, send notice of lien to claimant, plaintiff’s counsel and any insurance companies, if known.

• Review old cases for subrogation potential. There is no statute of limitations which would bar an Employer’s right to subrogate once it is determined that a third party recovery has occurred.

• An Employer cannot accidentally waive its right to subrogation, even if the Employer “fails to cooperate” with the third party case.

• Do not agree to pay plaintiff’s attorney anything more than the statutory pro-rata share of attorneys’ fees and costs.

• An Employer is entitled to recover for pain and suffering damages, but not for awards for loss of consortium.

• In cases in which the loss of consortium damages appears to be unreasonable, intervene to maximize the recovery.

• Where the third party recovery is more than the lien, an Employer is entitled to a future credit on medical, as well as indemnity benefits.

• A workers’ compensation judge can order a reimbursement by a claimant. An Employer’s remedy is not limited to a credit on future benefits.

• There is a right of subrogation when claimant pursues a medical malpractice case, but the recovery is limited to damages resulting from the malpractice.

• An Employer may subrogate against recoveries made from motor vehicle accidents which occurred subsequent to 8/23/93, including recoveries made under UM and UIM policies.

• An oral agreement to settle issues involving subrogation is not binding or enforceable.

• Where claimant’s counsel is receiving a fee, the fee is factored into the future credit so that the attorney still gets 20% of the gross.

• Obtain copies of releases, fee agreements and bills of costs from the third party suit to verify representations of the plaintiff attorney.

• Whenever negotiating, make all offers to compromise contingent upon a specific offer in third party case. Advise plaintiff’s attorney that if the offer changes, so does the offer to compromise.

• In the event that Employer’s file is subpoenaed, remove any reserve information and legal correspondence.

• When negotiating the lien, advise plaintiff’s counsel that whatever recovery the Employer agrees to receive is free and clear of any obligation to reimburse costs and attorney fees.

Back to Articles