Opinion ID: 1280838
Heading Depth: 2
Heading Rank: 1

Heading: The Workers' Compensation System

Text: The Workmen's Compensation Act of Colorado, §§ 8-40-101 to 8-54-127, 3B C.R.S. (1986) (Workers' Compensation Act), [1] established an administrative system for compensating workers for employment-related injuries and occupational diseases. See Popovich v. Irlando, 811 P.2d 379, 381 (Colo.1991). The benefits provided under the workers' compensation system include medical expenses, § 8-49-101 (current version at § 8-42-101), vocational rehabilitation, § 8-49-101, [2] and disability benefits that compensate for lost wages, §§ 8-51-102, -103 (current versions at §§ 8-42-105, -106). These benefits constitute the injured employee's exclusive remedy against the employer for employment-related injuries. [3] § 8-42-102 (current version at § 8-41-102); Triad Painting Co. v. Blair, 812 P.2d 638, 641 (Colo.1991); Popovich, 811 P.2d at 381. When the employment-related injury is caused by a third party tortfeasor, the injured employee has several alternatives. See § 8-52-108(1) (current version at § 8-41-203(1)). First, the employee may elect to receive workers' compensation benefits. The workers' compensation insurer then is subrogated to the employee's rights against the tortfeasor for the amount of the compensation for which the insurer is liable. Second, the employee may elect to receive workers' compensation benefits and also sue the tortfeasor for damages in excess of the amount of compensation benefits for which the insurer is liable. Again, the insurer is subrogated to the employee's rights against the tortfeasor for the amount of the insurer's workers' compensation liability, so both the employee and the insurer have claims against the tortfeasor. Third, the employee may elect to pursue an action against the tortfeasor. In that event, the insurer is liable for only any deficiency between the recovery from the tortfeasor and the worker's compensation benefits to which the employee is entitled. In general practice these remedies have been combined by allowing the injured employee to file for workers' compensation benefits and sue the tortfeasor for the full amount of damages allowable in tort. See, e.g., Peterkin v. Curtis, Inc., 729 P.2d 977 (Colo.1986); Kennedy v. Industrial Comm'n, 735 P.2d 891 (Colo.App. 1986). If the employee recovers from the tortfeasor, the employee must reimburse the insurer for any benefits paid. Continental Cas. Co. v. Gate City Steel, 650 P.2d 1336, 1338 (Colo.App.1982). The insurer may also offset any portion of the recovery not used to reimburse the insurer for past benefit payments against any future benefits the insurer may have to pay. See Peterkin, 729 P.2d at 980. Under this approach the employee receives interim workers' compensation benefits, recovers from the tortfeasor, reimburses the insurer for the interim benefits, credits the insurer for potential future benefits, and keeps the remainder as excess damages. The employee has an incentive to recover the entire damages from the tortfeasor because the employee does not recover for the excess damages until the workers' compensation benefits have been recovered. Moreover, the insurer's subrogation right allows it to recover its workers' compensation payments from the tortfeasor if the employee does not pursue a tort action or limits the claim to an amount in excess of workers' compensation benefits. This system shifts ultimate liability to the tortfeasor, the party responsible for the employee's injuries. The workers' compensation insurer's subrogation interest is defined by section 8-52-108(1) (current version at § 8-41-203(1)), which provides: If such injured employee or, in case of death, his dependents elect to take compensation under [the Workers' Compensation Act], the payment of compensation shall operate as and be an assignment of the cause of action against such other person to the ... insurance carrier liable for the payment of such compensation. Said insurance carrier shall not be entitled to recover any sum in excess of the amount of compensation for which said carrier is liable under said articles to the injured employee, but to that extent said carrier shall be subrogated to the rights of the injured employee against said third party causing the injury. (Emphasis added.) This section does not create a new cause of action or grant the insurer an independent claim against the third party tortfeasor; the insurer merely takes over the employee's claim against the tortfeasor. Jackson v. Bates, 133 Colo. 248, 256, 293 P.2d 962, 966 (1956). The insurer's rights against the tortfeasor derive from the rights of the employee, so limitations and restrictions on the employee's rights necessarily apply to the insurer's derivative subrogation rights. Id. (State Compensation Fund's subrogation claim subject to same statute of limitations as injured employee); cf. Marquez v. Prudential Property & Cas. Ins. Co., 620 P.2d 29, 33 (Colo.1980) (determining scope of an insurer's subrogation right under no-fault act).