Subrogation

General

According to Minn. Stat. §176.061, Subd. 1 and Subd 4, an injured employee cannot sue the employer for work-related injuries as the workers’ compensation benefits are his or her exclusive remedy. However, the employee and an employer or workers' compensation carrier who pay benefits are entitled to pursue a district court action for damages against a negligent third-party. These situations most commonly occur in construction, motor vehicle, product and premises liability accidents as well as an occasional medical malpractice claim involving an employee injured at work.

Recovery

If a recovery is received from the third-party tortfeasor, the proceeds are generally allocated according to Minn. Stat. §176.061, Subd. 6*:

The proceeds of all actions for damages or of a settlement of an action under this section……shall be divided as follows:

(a) After deducting the reasonable cost of collection, including but not limited to attorneys fees and burial expense in excess of the statutory liability, then

(b) One-third of the remainder shall in any event be paid to the injured employee or the employee’s dependents, without being subject to any right of subrogation.

(c) Out of the balance remaining, the employer or the special compensation fund shall be reimbursed in an amount equal to all benefits paid under this chapter to or on behalf of the employee or the employee’s dependents by the employer, less the product of the costs deducted under clause (a) divided by the total proceeds received by the employee or dependents from the other party multiplied by all benefits paid by the employer or the special compensation fund to the employee or the employee’s dependents.

(d) Any balance remaining shall be paid to the employee or the employee’s dependents, and shall be a credit to the employer or the special compensation fund for any benefits which the employer or the special compensation fund for any benefits which the employer or the special compensation fund is obligated to pay, but ahs not paid, and for any benefits that the employer or the special compensation fund is obligated to make in the future. There shall be no reimbursement or credit to the employer or to the special compensation fund for interest or penalties.

*It should be noted that the employee or the employer can also choose to settle their respective claims separately pursuant to the Naig [Naig v. Bloomington Sanitation, 258 N.W.2d 81 (Minn. 1977)] and Folstad [Folstad v. Eder, 467 N.W.2d 608 (Minn. 1991)] cases. Also, after a verdict or if all the parties consent to the total settlement pursuant to Minn. Stat. 176.061, subd.8a, the employee has the option to request the district court judge to distribute the proceeds in a manner that may deviate from the statutory formula pursuant to Henning [Henning v. Wineman, 306 N.W.2d 550 (Minn.1981)].

Subrogation and WCRA

If a subrogation recovery is received, the net proceeds are first used to reimburse the WCRA for amounts paid or payable. In reported claims, the member needs WCRA approval to waive subrogation. See Member’s Reference Guide/ Claims Reference Guide/ Waivers of Subrogation.