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Typically, if an employee is injured on the job they can file two types of actions. First, and the most traditional, is filing suit against their employer for workers’ compensation benefits. Second, if the injured employee sustained the injury as a result of a defective product or in a car accident involving an individual who is not a co-employee, they have the right to file a separate suit against that entity or individual. In the latter cases, an employer or its workers’ compensation insurance provider has the right to assert its subrogation interest in an attempt to recoup a portion of the benefits it paid out to the injured employee. This occurs after the injured employee files suit against the third-party.
While the above represents the typical scenarios most companies and insurance carriers find themselves in, a little-known provision of Alabama’s Workers’ Compensation Act could help employers and its insurance carriers recoup benefits paid to an injured employee that may otherwise be overlooked. Alabama Code, § 25-5-11(d) provides that “[i]n the event the injured employee . . . do[es] not file a civil action against the [independent third party] to recover damages within the time allowed by law, the employer or the insurance carrier for the employer shall be allowed an additional period of six months within which to bring a civil action against the other party for damages on account of the injury or death.”
Not only is this a possible means of recouping benefits paid to the injured employee, but § 25-5-11(d) also provides that “[i]n the event the damages recovered in the civil action are in excess of the compensation payable by the employer” the employer or carrier is also able to recoup any “costs, attorney's fees, and reasonable expenses incurred by the employer in making the collection” prior to turning over any excess amount to the employee or their dependents. As such, the employer or its carrier does not have to carry the costs of litigation to bring third party suit and can recover amounts traditionally not recoverable in a subrogation action.
What this means is that an employer and its
insurance carrier could have a second bite at recouping costs in certain cases.
As such, when an employer or its carrier is notified of a workplace injury, it
is important for it to conduct its own internal investigation and identify
possible third-party claims the employee may have the right to bring against an
independent third-party. If you identify a possible third-party claim, it is
important to monitor court filings and be ready to file suit at the appropriate
time. This is due to the fact that the window to bring suit is limited. An
employer or carrier only has six months following the running of the
traditional statute of limitations for an action to file suit. While an
employee with a valid third-party claim is likely to bring suit on his own
behalf, there are instances where he may elect not to pursue the claim and an
employer or its carrier should be prepared to capitalize on their behalf.