Recovery from Negligent Third Parties – Section 151Z
If a worker’s injury is caused, wholly or in part, by the negligence of a person other than the employer, the insurer may recover compensation payments from that other person.
Section 151Z of the 1987 Act provides the mechanism for recovery.
The insurer may commence action for recovery against the other person, and usually does so in the name of the employer (pursuant to the right of subrogation under the workers compensation policy). It is not necessary for the worker to sue the other person—it is sufficient for the worker to have an entitlement to sue.
Section 151Z can benefit employers by reducing the claims experience component of their premium calculation. Identifying claims in which there is a potential for recovery is important because a discount can be applied to the premium calculation immediately, without needing to wait for recovery action to be commenced or compensation to be recovered.
If the worker sues the other person and recovers damages, the worker is obliged to reimburse the insurer for all compensation paid. A successful recovery of damages by the worker also extinguishes any right to further payments of compensation.
If the worker sues, or is entitled to sue, the employer as well as the other person, then the amount of compensation that may be recovered by the insurer depends upon the culpability of the employer. This is governed by section 151Z(2).
The insurer, if ordered to pay damages to the worker, receives a credit for compensation paid. If the proportion of damages to be paid by the employer is less than the amount of compensation paid, the insurer has an entitlement to be reimbursed by the worker for any excess payment.
The most common situation in which section 151Z applies, is when the worker’s injury occurs as a result of a motor vehicle accident. The CTP insurer may accept the claim and reimburse compensation payments, in whole or in part, depending upon the CTP insurer’s assessment of what the worker would have recovered for damages under the Motor Accidents Compensation Act 1999 (MACA).
The assessment of damages under MACA is determined differently to the manner in which work injury damages are calculated. Whereas work injury damages are only payable if the worker can establish at least 15% WPI (or the worker has died) and those damages are limited to economic loss, a claimant for damages under MACA is entitled to:
- non-economic loss damages subject to meeting a threshold of more than 10% WPI
- past and future economic loss, treatment expenses, domestic assistance, etc., whether or not the 10% WPI threshold is met.
If liability is not disputed and the notional damages exceed the amount of compensation for which reimbursement is sought, the CTP insurer will usually reimburse payments to the workers compensation insurer.
If the notional damages are less than the compensation payments, the CTP insurer may decide to make a payment equal to the amount of the notional damages but deny liability for further payments. It would then be up to the workers
compensation insurer to decide whether or not to pursue an action for recovery of the balance of compensation payments.
The CTP insurer may deny liability outright, but the workers compensation insurer may still take recovery action if there is a reasonable prospect of establishing liability. Such action can be pursued whether or not the injured worker is also pursuing his or her own claim against the CTP insurer.
You also need to consider the extent of liability of the other person and any contributory negligence on the part of the worker regarding the accident, given the potential for these issues to reduce the payback or the amount of the notional damages out of which compensation is recoverable.
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