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Texas Department of Insurance
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ADVISORY 2004-02

SUBJECT: Third Party Litigation (Subrogation) Claim Processing

The Texas Workers' Compensation Act permits injured employees or their legal beneficiaries to seek damages from a third party who is or becomes liable to pay damages for a compensable injury or death. [Tex. Labor Code Chapter 417] The insurance carrier is subrogated to the rights of the injured employee and may enforce the liability of the third party in the name of the injured employee or the legal beneficiary. Chapter 417 of the Labor Code was amended by the 78th Legislature to provide that the insurance carrier's subrogation interest is limited to the amount of the total benefits paid or assumed by the carrier to the employee or the legal beneficiary, less the amount by which the court reduces the judgment based on the percentage of responsibility determined by the trier of fact under Section 33.003, Civil Practice and Remedies Code, attributable to the employer. The amount recovered by the injured employee in the third-party action shall be used to reimburse the workers' compensation insurance carrier for benefits, including medical benefits that have been paid for the compensable injury, up to the amount of the insurance carrier's subrogation interest. In addition, if the amount recovered exceeds the amount of the insurance carrier's subrogation interest, then the injured employee is responsible for paying the remaining amounts for future benefits, including medical benefits that the injured employee is entitled to receive. The workers' compensation carrier shall resume benefit payments when the amount of the insurance carrier's subrogation interest has been paid by the injured employee according to these requirements.

During the period when the injured employee is paying medical benefits under these requirements, health care providers must continue to submit requests for preauthorization and to submit their medical bills to the workers' compensation insurance carrier as required by Commission rules. The workers' compensation carrier is responsible for responding to those requests for preauthorization and for adjusting the medical bills received as required by Commission rules. However, once the medical bills are adjusted, the insurance carrier should submit the medical bills and the required explanation of benefits to the injured employee for prompt payment of the adjusted amount by that employee to the health care provider. The insurance carrier should subtract the adjusted bill amounts and the amounts of any other benefits due from the remaining subrogation interest to determine when the insurance carrier is required to resume payment of benefits. Medical necessity and medical fee disputes shall be handled according to the Commission rules.

The Commission will consider any necessary enforcement actions should system participants fail to comply with these requirements of the Texas Workers' Compensation Act and Commission rules.

Signed on this 29th day of March, 2004

Richard F. Reynolds, Executive Director


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