Settling Your Workers’ Compensation by a Compromise & Release Agreement Will Not Extinguish Employer’s Right to Reimbursement in Third Party Case

The Pennsylvania Commonwealth Court in a July 2008 decision clarified that when a worker settles his or her workers’ compensation case by a Compromise & Release Agreement, and later pursues a third party case against another defendant, the employer is still entitled to get money back that was paid in workers’ compensation against any other recovery, even if it was not recognized in the Compromise & Release Agreement.

In Gorman v. Kirkwood Construction Company, Mr. Gorman suffered a work related injury when a nail ejected by a nail gun hit him in the eye. He settled his workers’ compensation claim for $100,000. When completing the Agreement, the question regarding a lien or potential lien for any recovery from another party was check “no” because no such claim was contemplated at the time. However, Mr. Gorman later brought an action against another defendant. The employer then sought to recover the money it had paid in worker’s compensation benefits. Mr. Gorman said “too late” you waived your rights when you checked “no” in the Compromise & Release Agreement.

The Commonwealth Court, which handles most workers’ compensation appeals, said no to Mr. Gorman. The Court found that the evidence in the record failed to establish that the Employer released or waived its subrogation rights, and found that the right to subrogation (or paying back the money paid by workers’ compensation) is “both automatic and absolute.”