Detailed Answer
Under Tennessee law, an injured worker may receive workers’ compensation benefits while pursuing a personal injury claim against a negligent third party. The workers’ compensation insurer has a statutory right of subrogation under Tennessee Code Annotated § 50-6-114 to recover benefits it paid from any third-party recovery.
1. Subrogation and Reimbursement Rights
Tennessee Code Annotated § 50-6-114(a) gives the insurer a lien on any third-party settlement or judgment to the extent of compensation paid. The insurer stands in the employer’s shoes and may assert subrogation to recoup medical expenses, lost wages, and other benefits it has covered.
2. Notice and Approval Requirements
To preserve subrogation rights, the injured worker must notify the insurer in writing before finalizing the third-party settlement. The insurer may intervene in the civil action or petition the Workers’ Compensation Appeals Board to approve the settlement and confirm its lien. Failure to provide timely notice can result in waiver of subrogation rights.
3. Allocation of Attorney’s Fees and Costs
Under subsection (d) of § 50-6-114, the insurer’s reimbursement is reduced by its proportional share of attorney’s fees and litigation expenses. For example, if counsel’s contingency fee is 33% and costs total 2% of the recovery, the insurer’s lien is reduced by 35% of its lien amount.
4. Example Scenario
Suppose an employee collects $20,000 in workers’ compensation benefits and later settles a third-party claim for $100,000. If attorney’s fees are 33% ($33,000) and costs are 2% ($2,000), the net recovery is $65,000. The insurer’s $20,000 lien is reduced by 35% (the share of fees and costs), leaving $13,000 for reimbursement. The worker receives $52,000 net.
Statute References
Helpful Hints
- Provide timely written notice to your workers’ compensation insurer before settling any third-party claim.
- Work with counsel experienced in both workers’ compensation and personal injury to navigate subrogation rules.
- Track all medical bills, wage records, attorney fees, and litigation costs carefully.
- File a petition with the Workers’ Compensation Appeals Board if the insurer disputes the lien or settlement allocation.
- Review your settlement agreement to ensure it addresses subrogation and lien reductions.
Disclaimer: This article is for informational purposes and does not constitute legal advice. For advice specific to your situation, consult a qualified attorney.