§ 42-1-560 — Right to compensation not affected by liability of third party; rights and remedies against third party.

(a) The right to compensation and other benefits under this title shall not be affected by the fact that the injury or death is caused under circumstances creating a legal liability in some person, other than the employer or another person exempt from liability under Section 42-1-540 to pay damages therefor, the person so liable being hereinafter referred to as the third party. The respective rights and interests of the injured employee, or, in the case of his death, his dependents and any person entitled to sue therefor, and of the employer or person, association, corporation or carrier liable for the payment of compensation and other benefits under this title, hereinafter called the "carrier," in respect to the cause of action and the damages recovered shall be as provided by this section. (b) The injured employee or, in the event of his death, his dependents, shall be entitled to receive the compensation and other benefits provided by this title and to enforce by appropriate proceedings his or their rights against the third party; provided, that action against the third party must be commenced not later than one year after the carrier accepts liability for the payment of compensation or makes payment pursuant to an award under this title, except as hereinafter provided. In such case the carrier shall have a lien on the proceeds of any recovery from the third party whether by judgment, settlement or otherwise, to the extent of the total amount of compensation, including medical and other expenses, paid, or to be paid by such carrier, less the reasonable and necessary expenses, including attorney fees, incurred in effecting the recovery, and to the extent the recovery shall be deemed to be for the benefit of the carrier. Attorney fees owed and payable by the carrier to the attorneys effecting the recovery shall be set by the commission but shall not exceed one third of the total claim amount paid by the carrier to the injured employee. Such fees shall be paid from the funds recovered by the carrier. Any balance remaining after payment of necessary expenses and satisfaction of the carrier's lien shall be applied as a credit against future compensation benefits for the same injury or death and shall be distributed as provided in subsection (g). Notice of the commencement of the action shall be given within thirty days thereafter to the Workers' Compensation Commission, the employer and carrier upon a form prescribed by the Workers' Compensation Commission. (c) If, prior to the expiration of the one-year period referred to in subsection (b), or within thirty days prior to the expiration of the time in which such action may be brought, the injured employee, or, in event of his death, the person entitled to sue therefor shall not have commenced action against or settled with the third party, the right of action of the injured employee, or, in event of his death, the person entitled to sue therefor shall pass by assignment to the carrier; provided, that the assignment shall not occur less than twenty days after the carrier has notified the injured employee or, in the event of his death, his personal representative or other person entitled to sue therefor in writing, by personal service or by registered or certified mail that failure to commence such action will operate as an assignment of the cause of action to the carrier. Prior to the expiration of ninety days after the assignment, the carrier shall give the Workers' Compensation Commission, the injured employee, or, in event of his death, his dependents and any other person entitled to sue therefor notice, upon a form prescribed by the Workers' Compensation Commission, that action has been or will be commenced against the third party. Failure to give this notice, or to commence the action at least thirty days prior to the expiration of the time within which such action may be brought, shall operate as a reassignment of the right of action to the injured employee, or, in event of his death, his personal representative or other person entitled to sue therefor, and the rights and obligations of the parties shall be as provided by subsection (b) of this section. If the carrier as assignee recovers in an action: (1) for injury, an amount in excess of the sum of the total of benefits paid or provided the injured employee and the reasonable expenses, including attorneys' fees, incurred in making such recovery; or (2) for death, an amount on behalf of the dependents of the employee in excess of the benefits paid the dependents, and the reasonable expenses, including attorneys' fees, incurred in making the recovery, the excess shall be applied as a credit against future compensation and other benefits for the same injury or death and shall be distributed in accordance with subsection (g). (d) If the persons entitled to share in the proceeds of an action brought under subsections (b) or (c) for death of the employee include any person who was not a dependent of the deceased employee, such person's share of any recovery made in the action, less a rateable share of the reasonable expenses incurred in making the recovery, shall be paid to the person or to the personal representative of the deceased. (e) The injured employee, or, in event of his death, his dependents, and the carrier may, by agreement approved by the Workers' Compensation Commission, or in event of a settlement made during actual trial of the action against the third party, approved by the presiding judge at the trial, provide for distribution of the proceeds of any recovery in the action different from that prescribed by subsection (b) or (c). (f) If the third party, with notice or knowledge of the carrier's lien, and the employee, or, in the event of his death his personal representative or person entitled to sue therefor make a compromise settlement without the written consent of the carrier for an amount less than the total of the compensation to which he or they are entitled under this title because of such injury or death, the settlement shall be invalid as against the carrier, which shall be entitled to maintain an action against the third party to recover the amount of compensation for which the carrier is liable under this title, less the amount actually inuring to the benefit of the carrier from the proceeds of the settlement. At the trial the fact of settlement shall be prima facie evidence that the injury was proximately caused by a breach of duty owed to the employee or a warranty given by the third party. The carrier shall not unreasonably refuse to approve a proposed compromise settlement with the third party. The injured employee or his dependents may make written application to the Workers' Compensation Commission for a finding that a proposed compromise settlement with the third party is reasonable and fair to all parties. If the Workers' Compensation Commission, after such inquiry as it deems necessary, and after hearing if demanded by either the carrier, the injured employee or his dependents, finds the proposed settlement reasonable and fair, it shall be deemed to have been approved by the carrier. Notwithstanding other provisions of this item, where an employee or his representative enters into a settlement with or obtains a judgment upon trial from a third party in an amount less than the amount of the employee's estimated total damages, the commission may reduce the amount of the carrier's lien on the proceeds of such settlement in the proportion that such settlement or judgment bears to the commission's evaluation of the employee's total cognizable damages at law. Any such reduction shall be based on a determination by the commission that such reduction would be equitable to all parties concerned and serve the interests of justice. (g) When there remains a balance of five thousand dollars or more of the amount recovered from a third party by the beneficiary or carrier after payment of necessary expenses, and satisfaction of the carrier's lien and payment of the share of any person not a beneficiary under this title, which is applicable as a credit against future compensation benefits for the same injury or death under either subsection (b) or subsection (c), the entire balance shall in the first instance be paid to the carrier by the third party. The present value of all amounts estimated by the Workers' Compensation Commission to be thereafter payable as compensation, with the present value to be computed in accordance with a schedule prepared by the Workers' Compensation Commission, shall be held by the carrier as a fund to pay future compensation as it becomes due, and to pay any sum finally remaining in excess thereof to the beneficiaries. As soon as the Workers' Compensation Commission has fixed the amount to be held by the carrier in this fund, or determined that no future compensation will be due, the excess of the third party recovery over the total amount necessary for payment of necessary expenses, satisfaction of the carrier's lien, and payment of the share of any person not a beneficiary under this title and creation of such fund, if any, shall be paid forthwith to the beneficiary but shall continue to constitute a credit against future compensation benefits for the same injury or death as to any compensation liability that may exist after the fund has been exhausted. (h) If death results from the injury and if the employee leaves no dependents entitled to benefits under this title, the carrier shall have a right of action against the third party for any amounts paid into the second-injury fund established by Section 42-1-380 and for reasonable funeral expenses and medical benefits actually paid by the carrier. The cause of action shall be in addition to any cause of action of the legal representative of the deceased. This right may be enforced in any action of law brought against the third party within two years after the death of the employee.

Legislative History

HISTORY: 1962 Code SECTION 72-126.1; 1969 (56) 622; 1974 (58) 2236; 1978 Act No. 522 SECTION 5.