An employer and employee file third party actions and obtain a recovery. Who has first right of recovery—the Employee? or the Employer?

• A. The employee
• B. The employer, if the lien does not exceed the amount of the recovery
• C. Shared equally by both parties
• D. The insurer

Answer: (B)

When a worker who is receiving workers’ compensation benefits later obtains a recovery from a third party, the employer (or its insurer) has a subrogation lien on that recovery. This means the funds from the third-party settlement or verdict are used first to reimburse the employer for benefits already paid (and related costs). The employee gets whatever is left after the employer’s lien is satisfied. If the third-party recovery is larger than the lien, the excess goes to the employee; if the recovery is smaller than the lien, the lien can only be satisfied to the extent of the recovery. That’s why the first-right recovery goes to the employer, limited to the amount recovered.