An ER and EE file 3rd party actions and obtain a recovery. Who has first right of recovery?

An ER and EE file 3rd party actions and obtain a recovery. Who has first right of recovery?

• A. The EE.
• B. The ER.
• C. The ER, if the lien does not exceed the amount of the recovery.
• D. 1/3 to the EE, 1/3 to ER, 1/3 to ER attorney.

Answer: (C)

The main idea is subrogation in a workers’ compensation context. When both the employee and the employer pursue a third-party claim and there is a recovery, the employer has a first right to be reimbursed for workers’ compensation benefits paid. That right is a lien on the third-party recovery. The key point: the employer’s lien is satisfied first, up to the amount of that lien. If the third-party recovery is large enough to cover the lien, the employer gets the lien amount first; any remaining funds go to the employee (subject to any attorney fees). If the third-party recovery is smaller than the lien, the employer takes the entire recovery and the lien isn’t fully satisfied. That’s why the correct understanding is that the employer has first right of recovery, but only up to the lien amount. The other options don’t fit because the employee does not have the first right, and the stated 1/3–1/3–1/3 split isn’t the standard arrangement for subrogation recoveries.

The main idea is subrogation in a workers’ compensation context. When both the employee and the employer pursue a third-party claim and there is a recovery, the employer has a first right to be reimbursed for workers’ compensation benefits paid. That right is a lien on the third-party recovery.

The key point: the employer’s lien is satisfied first, up to the amount of that lien. If the third-party recovery is large enough to cover the lien, the employer gets the lien amount first; any remaining funds go to the employee (subject to any attorney fees). If the third-party recovery is smaller than the lien, the employer takes the entire recovery and the lien isn’t fully satisfied.

That’s why the correct understanding is that the employer has first right of recovery, but only up to the lien amount. The other options don’t fit because the employee does not have the first right, and the stated 1/3–1/3–1/3 split isn’t the standard arrangement for subrogation recoveries.