If someone other than your employer or a co-worker caused your injuries, you may, in addition to having a valid workers’ compensation claim, have a basis for filing a civil lawsuit against the party who caused your injuries. If you prevail against this third party, however, your employer and its workers’ compensation insurance company may be entitled to recover some or all of your damages or settlement proceeds as a means of recouping some of all of the workers’ compensation benefits they already paid. This concept is known as subrogation.
Employers are not entitled to subrogation simply because you obtain damages or settlement proceeds from a third party. Indeed, an employer can recover on a subrogation lien only if they can prove that you have been “fully and completely compensated” for both your economic and non-economic damages. The law does not prescribe a specific method for proving this, however, and it is difficult, if not impossible, to quantify non-economic damages such as “pain and suffering.” As a result, employers often are not able to recoup all of their losses through subrogation.