In the arena of workers' compensation and subrogation, the employee may be significantly impacted by the workers' compensation carrier's conflict of interest. The most negative impact would be found in those states denying the injured employee the right to maintain an action against the third party who actually caused his injury. Essentially, the carrier's principle conflict would arise when it is not only the employer's workers' compensation carrier but also the liability carrier for the third party. When this happens, the carrier's interest in paying as little as possible for the claim may be in competition with the employee's right to receive the best recovery possible.
A carrier's conflict in being both the workers' compensation insurer and the third party's liability insurer extends to the area of settlements. A carrier may see it in its best interest to settle the employee's claim, as the liability carrier, for an amount less than any judgment amount and then, as the workers' compensation carrier, waive reimbursement rights for any workers' compensation payments up to the time of the settlement.
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