Bill Thayer wrote in 2018 a fairly comprehensive summary of the law in Washington/Oregon regarding when and how much a personal injury claimant would owe out of their settlement or verdict to the worker's compensation carrier that has paid their time-loss and medical expenses.

I follow on that post briefly now to emphasize one important point: when resolving a personal injury claim by settlement against a third party, in the situation where Washington worker's compensation (Dept. of Labor and Industries/”LNI” or a self-insured employer/”SIE”) has paid the bills, under the Tobin case you must allocate the settlement between economic damages (medical bills, wage loss) and general damages (“pain and suffering”).

Must Allocate the Settlement Or Severe Consequences

The consequences for not doing so can be significant.  When worker's comp has paid the bills, the shares in a settlement going to the worker, the attorney, and LNI/SIE are determined by a statutory formula that begins with the gross recovery on the case.  The Tobin case says that LNI/SIE can only enter a number into the gross recovery box in the worksheet that represents damages LNI/SIE actually paid for which are the economic damages.

Doing this usually ends up favoring the worker/injured person, because it usually results in the “offset” (the amount of money the injured worker needs to spend of their own from the settlement on medical care/wages before their worker's comp benefits kick back in) being smaller or eliminated altogether, and the overall reimbursement to LNI/SIE out of the overall settlement being lower.

The Amount Allocated to Economic Damages

The amount allocated to economic damages- the number going into the gross recovery box- needs to be spelled out in the settlement agreement between the injured worker and the at-fault party/insurer, and even then LNI/SIE can challenge that allocation if it isn't done fairly. Thus, the practice I use is this: before settling the third party claim always come to an agreement with LNI/SIE on the allocation before the settlement is finalized, to maximize the result for my client and avoid any uncertainties/negative consequences that can arise (like less money in my client's pocket) when there is a failure to allocate.  

These issues are complex and I would not recommend a non-lawyer tackling them on their own. Feel free to contact our firm for advice, guidance, and/or representation if this situation is looming in your case.