Third Party Actions – Good Cases For Lawsuit Funding?

When a worker is injured on the job, he is entitled to workers’ compensation benefits. The injured employee is entitled to these “benefits” regardless of fault. In other words, even if the worker was not paying attention or otherwise did not take the appropriate steps to safeguard himself from injury, workers’ compensation benefits are still paid. Likewise, if an employer negligently contributes to the employee’s injury on the job, the worker’s remedy is limited to the workers’ compensation system.

When an entity OTHER THAN the worker or the employer is at fault, workers may have a “third party” case available to them. By way of example, if a machinist is injured at the job, and the equipment was not properly maintained by a maintenance company (third party), the worker can pursue a claim of negligence against the maintenance company in civil court. Another frequent example is when a worker is injured on the job while driving a vehicle and the accident is caused by the negligence of the other driver. In that case, the injured worker can sue the other driver as a third party.

This is significant because the victim can now be compensated in full for his/her injuries instead of being limited by statutory provisions under the state compensation laws.

This is also good for the employer (insurance carrier) because any “benefits” given to the worker must be paid back if a monetary award is recovered against the third party. This is known as a Workers’ Comp Lien.

For the victim’s attorney, the situation is ideal as it pertains to fees. The attorney can collect a fee for handling the workers’ compensation case AND collect a contingent fee of up to 40% on the third party civil action.

Are Third Party Cases Good for Lawsuit Loans or Cash Advances Prior to Settlement?

The answer to the above question (and to most questions of this nature) is that it depends on a variety of factors.

In certain jurisdictions, lawsuit loan companies will not advance funds on workers’ compensation claims. The presence of a third party case makes the case available for cash advance funding in those jurisdictions where lawsuit funding companies might not otherwise fund a workers’ compensation claim. Third party cases avail themselves to case loans in New Jersey, New York, Ohio, Pennsylvania, Texas, California Arizona, Maryland, Massachusetts, Michigan and a variety of other states. So that is good news.

The bad news is the presence of the workers’ comp lien. That amount must be paid back from any recovery against a third party. Liens are a major consideration for lawsuit funding underwriters since they must assess the risks associated with advancing money before the case is resolved (pre-settlement). So while there may be more money available for the plaintiff and his/her attorney, the amount available for repayment of the advance after settlement must be weighed in order to properly manage the funder’s risk.

Of course the same is true for all liens, not just workers’ compensation liens.

Thank you for your interest in the lawsuit cash advance business.

WebEditor