By Mitchell M. Peskin, Attorney | Updated October 2026
If you were hurt on the job because another driver ran a red light, because a contractor on the site dropped a tool from a scaffold, or because a defective piece of equipment failed, you may have rights that go well beyond your workers’ compensation claim. Illinois law allows an injured worker to pursue both a workers’ compensation case against the employer and a separate civil lawsuit against the person or company whose negligence actually caused the injury. The two cases run on parallel tracks, and understanding how they fit together — including a provision called Section 5(b) — can make a substantial difference in what you recover.
This post explains when a third-party claim exists, how the workers’ compensation lien works, and how the lien can be reduced so that more of the recovery stays with you.
Two Claims, Two Different Recoveries
Workers’ compensation is a no-fault system. You do not need to prove that anyone did anything wrong; you only need to show that you were injured at work and that the injury arose out of and in the course of your employment. In exchange for that streamlined path, the Illinois Workers’ Compensation Act limits what you can collect. You receive medical care, a portion of your lost wages through temporary total disability benefits, and an award for any permanent impairment. You do not, however, receive compensation for pain and suffering or loss of normal life under the Act. The Act does provide a limited benefit under Section 8(c) for serious and permanent disfigurement to specified exposed areas — such as the hand, head, face, neck, chest above the axillary line, arm, or leg below the knee — but that benefit is capped in weeks of compensation and is generally far less than what the same disfigurement could yield in a civil case.
A third-party civil claim is different. When a person or company other than your employer caused your injury, Illinois law allows you to sue that party in circuit court for the full range of damages permitted in a negligence case. That includes pain and suffering, loss of a normal life, the full scope of disfigurement damages, and any economic losses not covered by workers’ compensation. The legal authority for this parallel right of recovery is Section 5(b) of the Illinois Workers’ Compensation Act, codified at 820 ILCS 305/5(b), which expressly preserves the injured employee’s right to bring legal proceedings against “some person other than” the employer.
Common Scenarios Where a Third-Party Claim Exists
The third-party claim is one of the most overlooked sources of recovery in Illinois work injury cases. Many injured workers assume that filing for workers’ compensation is their only option. In reality, a third-party claim may exist any time someone outside the employment relationship contributed to the injury.
A delivery driver or sales representative who is rear-ended while driving for work has a claim against the at-fault driver in addition to a workers’ compensation claim against the employer. A construction worker injured by the negligence of a different subcontractor on a multi-employer job site may have a claim against that subcontractor. A warehouse employee hurt by a forklift that malfunctioned because of a design or manufacturing defect may have a product liability claim against the manufacturer. A nurse, in-home care provider, or service technician who is injured by an unsafe condition at a customer’s premises may have a premises liability claim against the property owner. And in some cases, when negligent medical treatment of a work injury makes the injury worse, the worker may have a medical malpractice claim against the provider — and the value of that claim is still considered a recovery for the work injury under Illinois law.
The point is that the identity of your employer is not the only thing that matters. The question is whether anyone outside your employment relationship contributed to causing the harm.
What Section 5(b) Actually Says
Section 5(b) does two things at once. First, it confirms your right to sue a third party. Second, it gives your employer (and its workers’ compensation insurance carrier) a lien on the proceeds of that third-party case to be reimbursed for the workers’ compensation benefits already paid out to you. In other words, if the employer’s insurance company has paid for your surgery, your physical therapy, and your lost wages, the Act gives that insurance company the right to be paid back out of any recovery you obtain from the third party.
This is not a bug in the system. It exists to prevent what Illinois law treats as a double recovery, and the principle has been recognized by the Illinois Supreme Court for decades. Eastman v. Messner, 188 Ill. 2d 404 (1999), confirms that, in a true third-party recovery, the employee’s reimbursement obligation exists even if the employer has not asserted a lien. Estate of Dierkes, 191 Ill. 2d 326 (2000), confirms that if the workers’ compensation benefits paid exceed the third-party recovery, the employer is entitled to the entire third-party recovery, less the statutory fees and costs.
The 25% Attorney Fee and Pro Rata Costs
There is a critical protection built into the statute that benefits injured workers. When the attorney who handled the third-party action obtains or substantially contributes to a recovery from which the employer is reimbursed, Section 5(b) requires the employer to pay 25% of the gross amount of that reimbursement as an attorney’s fee, plus a pro rata share of the costs and reasonably necessary expenses of the case. The Illinois Supreme Court has held that this 25% fee is calculated on the gross reimbursement and is not reduced by the employer’s contribution liability arising from its own fault. Silva v. Electrical Systems, Inc., 183 Ill. 2d 356 (1998). The obligation also cannot be avoided by selling or assigning the lien. Evans v. Doherty Construction, Inc., 382 Ill. App. 3d 115 (1st Dist. 2008).
In practical terms, this means the workers’ compensation insurance carrier does not simply get a dollar-for-dollar refund from your settlement. The lien is reduced by 25% for attorney’s fees and by a share of the case expenses, which leaves more money in your pocket at the end of the case. Skilled handling of the lien calculation can significantly increase the injured worker’s net recovery — particularly in catastrophic cases where future benefits are also at issue.
Coordinating the Two Cases Is the Key
Because workers’ compensation and the third-party action affect each other, they should be coordinated by attorneys who understand both areas of law. There are several reasons this matters. Settling the third-party case without protecting the workers’ compensation lien can lead to the settlement being invalidated or to a fight over the lien afterward. Settling the workers’ compensation case without addressing the third-party recovery can leave the employer’s credit against future payments unresolved and open to dispute later. And, in cases involving future medical care, the way the third-party recovery is structured can affect when the workers’ compensation carrier pays for that care.
Equally important, the third-party claim has its own statute of limitations and its own procedural rules — often shorter and more demanding than those that govern the workers’ compensation case. Missing a filing deadline on the third-party side can permanently eliminate that portion of the recovery, even if the workers’ compensation case is going well.
Common Questions About Third-Party Claims and Workers’ Comp Liens
Can I file a third-party claim while I am receiving workers’ compensation benefits?
Yes. Filing a third-party lawsuit does not stop your workers’ compensation benefits. The two cases proceed at the same time, and you continue to receive medical care and temporary total disability benefits while the third-party case is pending.
Does the workers’ comp lien apply to my pain and suffering damages?
Generally, yes. In Illinois, the employer’s Section 5(b) lien attaches to your third-party recovery as a whole, not only to the portion that represents medical bills and lost wages. That is why the 25% attorney’s fee and the share of costs that the statute takes off the lien matter so much to your net recovery.
Can a workers’ comp lien be waived or reduced?
The insurance company can agree to waive or compromise its lien, and lien reductions are often negotiated, particularly when the third-party recovery is limited by the at-fault party’s insurance coverage or by disputed liability. Even without a negotiated reduction, the statute reduces what the insurance company actually receives by the 25% attorney’s fee and its share of the case costs.
Can a third-party settlement affect future workers’ compensation payments?
Yes. Under Illinois law, the employer may claim a credit against future workers’ compensation payments, including payments for medical care, based on your third-party recovery. That credit does not itself eliminate the employer’s underlying liability for your work injury, but it can affect when payments are made. Any applicable credit, fee and cost obligations, and negotiated waiver should be addressed when resolving the two claims.
How long do I have to file a third-party claim?
Most Illinois personal injury claims must be filed within two years of the injury under 735 ILCS 5/13-202. Claims against a local government, such as a city, county, or school district, generally must be filed within one year under 745 ILCS 10/8-101. Other types of claims can have different deadlines. These limits are shorter than the deadline for filing a workers’ compensation claim, so the third-party side of the case should be evaluated early.
What This Means for You
If you were hurt at work in a situation that may have involved someone other than your employer — a traffic crash, a construction site accident, a defective machine, an unsafe customer property — you should not assume that workers’ compensation is your only option. You may be entitled to additional damages that workers’ compensation simply does not pay. At the same time, you should not pursue a third-party case without considering how it will interact with your workers’ compensation benefits, because the two are linked by Section 5(b) and by case law that has been refined for over half a century.
The right strategy depends on the facts. Sometimes the third-party case dwarfs the workers’ compensation case. Sometimes the workers’ compensation case is more valuable because of ongoing medical needs. Often, the best outcome requires careful coordination of both.
Quick answers: Can I sue my employer for a work injury in Illinois? and I was in a car accident while working. Do I have a workers’ comp claim or a personal injury claim? See these and other common Illinois workers’ compensation questions answered in one place.
If you have been injured at work and believe someone other than your employer may have contributed to your injury, the attorneys at The Law Offices of Millon & Peskin, Ltd. are here to help. We handle both workers’ compensation claims and personal injury cases, which allows us to evaluate the full picture from the start and pursue every avenue of recovery on your behalf. We represent injured workers throughout the Chicagoland area, including DuPage, Cook, Will, Kane, and Lake counties. Contact our Wheaton workers’ compensation office today at 630-260-1130 for a free consultation to discuss your case.