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Workers' Compensation And Third-Party Liability: Legal Considerations For Employers

Like many other states, employers in New York are required to carry Workers’ Compensation insurance for their employees. This is good for both the employer and the employee, but what happens when a third party is responsible for an employee’s injuries? With every Workers’ Compensation claim filed, the employer faces the potential of several thousands of dollars being paid toward medical bills and lost wages. If someone else is responsible for the employee’s injuries, it makes sense that the employer would prefer that party pay the associated expenses. The employee may even prefer it. Understanding the complex interaction between Workers’ Compensation and third-party liability is critical to understanding not only when you may not be financially responsible for your employee’s injuries but also when you can attempt to hold the third party responsible if the employee does not wish to. If you have additional questions regarding Workers’ Compensation or holding third parties responsible for an employee’s work-related injuries, call Schwab & Gasparini in our Syracuse Office at (315)422-1333, or our Albany Office at (518)591-4664, or our Hudson Valley or White Plains Offices at (914)304-4353 for a consultation. One of our experienced New York Workers’ Compensation defense attorneys may be able to review your case and explain your legal options. 

What Is Workers’ Compensation?

Workers’ Compensation is a type of insurance that employers carry to compensate employees when they are injured in the workplace while performing work-related functions. This insurance protects the employer from liability lawsuits from the employee, as the employee is legally barred from suing their employer when they file a Workers’ Compensation claim. Workers’ Compensation is the sole remedy for these injuries. 

The employee does not need to prove the employer was at fault for their injuries, and the employer does not need to admit fault for a Workers’ Compensation claim. Instead, both parties simply need to ensure they comply with the responsibilities set forth for them by the New York State Workers’ Compensation Board. As long as both parties comply with those responsibilities and the injuries qualify for Workers’ Compensation, the employee will be compensated for current and future medical bills, lost wages, and disability benefits when applicable. 

What Is Third-Party Liability?

Third-party liability is when another party besides the employer or a co-worker is responsible for the employee’s injuries. When this happens, the employee can file an action against this third party for negligence or liability, claiming that the third party caused or contributed to their work injuries. To prove their claim, the employee must be able to prove that the third party owed them a duty of care, breached that duty of care by failing to act with reasonable care, and that this breach is the direct and proximate cause of their injuries. They also must prove that the employee sustained damages as a result of the breach and related injuries. 

Workers’ Compensation protects the employer and any co-workers from being sued when an employee is injured at work. However, this protection does not apply to third parties who are responsible for the employee’s injuries. These third parties may include: 

• Another driver who causes a car accident while the employee is driving for work purposes
• Equipment manufacturers or distributors who sold or rented defective or faulty equipment
• Service or maintenance companies who failed to properly maintain equipment
• Architects, designers, or engineers for defective structure designs
• Subcontractors
• Property owners
• Vendors
• Cleaners 

The Differences Between Workers’ Compensation and Third-Party Liability

Workers’ Compensation is usually the remedy available to employees when they are injured in the workplace. Understanding the difference between Workers’ Compensation and third-party liability can be important to ensure that employers are not paying claims that may be someone else’s responsibility. There are two main differences between Workers’ Compensation and a third party’s civil liability: fault and damages. 

Proving Fault 

For a Workers’ Compensation claim, no one must prove or admit fault. If the employee was injured in the workplace (or in a location they were authorized to be as part of their work duties) and performing work-related functions, and they follow the requirements for filing their claim, it does not matter whether the employee or the employer may have contributed to the injuries by their own actions or inactions. 

However, a third-party liability claim does require proof or admission of fault. The third-party must acknowledge that they are responsible for the employee’s injuries or the employee must be able to prove the third party is to blame. Additionally, if the employee is partially responsible for their own injuries, New York CPLR §1411 still allows them to recover damages. New York is a pure comparative fault state, which means that if the injured party is partially to blame for their injuries, their recovery is reduced by the amount of fault they are assigned. 

Recovering Damages 

Workers’ Compensation pays only specific damages to the injured employee. These damages are their current and future medical bills related to the workplace injuries and any wages lost as a result of the injuries. If the employee is disabled as a result of the injuries, Workers’ Compensation will also pay disability benefits. Workers’ Compensation does not provide for pain and suffering or other non-economic losses as a result of the injuries. 

A third-party liability claim is a personal injury claim. In New York, personal injury claims can recover economic, non-economic, and punitive damages. Economic damages can include medical expenses, lost income, and diminished earning capacity. Non-economic damages can include pain and suffering, and other less-tangible damages such as being unable to drive, not being able to participate in hobbies or activities the employee enjoyed prior to the injury until they recover, and other similar damages. Punitive damages are awarded by the court as a punishment to the liable party for willful or wanton negligence or significant moral turpitude. While not every claim will be eligible for all of these damages, the potential exists for the employee to be awarded a much larger judgment or settlement in this claim than they would in a Workers’ Compensation claim. 

Does the Employee Have to Choose Which Claim to File? 

In New York, employees who are injured at work can file both a Workers’ Compensation claim and a third-party liability claim, if both apply. For example, if the employee falls off a ladder and breaks a leg, and has evidence that the ladder was defective, they can file a Workers’ Compensation claim and still file a personal injury claim against the ladder’s manufacturer. 

Additionally, the employee has 30 days to report an injury to their employer and then has two years to file an official Workers’ Compensation claim. When filing a third-party liability or personal injury claim, the statute of limitations in New York CPLR §214 allows injured parties up to three years to file their claim. This means that the employee file a Workers’ Compensation claim and opt at a later date to file the personal injury claim. The employee can also choose not to file a personal injury claim at all. If you believe the employee may have a valid claim that they are choosing not to file, an experienced attorney with Schwab & Gasparini may be able to assist you in exploring your legal options. 

How Does Third-Party Liability Affect a Workers’ Compensation Claim? 

When there is third-party liability, the employee can collect Workers’ Compensation benefits and also receive a settlement from the third party that is responsible for their injuries. If they do, the Workers’ Compensation insurance carrier has the right to recover the compensation benefits paid to the employee from the third-party. There are two ways this can happen: the employee can file or the carrier or employer can file. 

Employee Files Suit

If the employee opts to file the lawsuit and wins, the Workers’ Compensation carrier can place a lien on the proceeds of that settlement. However, they can only place the lien on the settlement after reasonable and necessary expenditures for filing the lawsuit have been deducted, including attorney’s fees. This means that of the settlement money left after paying those expenditures, the employee must reimburse the Workers’ Compensation carrier for the benefits that have been paid. This may not be the full amount of the benefits paid. In some cases, the carrier will only receive a percentage of the benefits paid. 

Carrier or Employer Files Suit

If the employee does not choose to file a lawsuit against the third party, the employer or carrier has the right to file instead. This is called subrogation. However, in this instance, the employer or carrier cannot simply file the lawsuit. Instead, they must first wait until either six months from the compensation award or one year from the accident date, whichever comes first. Then, the carrier or employer must notify the employee of their intention to file the lawsuit. This notification must be done in writing by personal service or certified mail. The employer or carrier must then wait 30 days from the date of that notification before they can file the lawsuit. 

Limitations on Employer or Workers’ Compensation Carrier Reimbursement

While the carrier is entitled to be reimbursed if there is a successful third-party liability claim, there are two main limitations on that reimbursement if the claim is the result of a motor vehicle accident. First, if the employee recovers damages under New York ISC §5104(a), the carrier cannot be reimbursed at all. Second, if the employee recovers damages under New York ISC §5102, they cannot be reimbursed from the first $50,000 of the recovery. 

The reason behind both of these statues is basic economic loss. Essentially, because the employee was involved in a car accident, the employee would have been required to receive benefits from their own insurer (in this instance, Workers’ Compensation because they were working). Allowing the carrier to recover that first $50,000 would be equivalent to making the injured employee pay for their own injuries. 

How Can an Attorney Assist You?

As an employer, you have a responsibility to provide a safe work environment for your employees. Sometimes, this is compromised due to a third party’s actions. When this happens, you may have an injured employee who files a Workers’ Compensation claim. However, if a third party is responsible for the employee’s injuries, you may be able to recover some of the compensation paid through a third-party liability suit. An experienced Workers’ Compensation attorney with Schwab & Gasparini may be able to review your case, explain your rights and responsibilities, and explore your legal options. If you have questions about placing a lien against an employee’s settlement or if the employee does not want to file against the third-party, call our Syracuse Office at (315)422-1333, our Albany Office at (518)591-4664, or our Hudson Valley or White Plains Offices at (914)304-4353 to schedule a consultation and discuss your legal concerns. 

 

Wed Aug 7 2024, 6:06am