Short answer. Not entirely. Labor Code Article 174 provides that once the System pays your benefit, it is subrogated to your rights against the third party responsible, in accordance with general law. If the System later recovers more than it paid you, that excess, after costs, is delivered back to you.
What the law says
In case benefit is paid under this Title, the System shall be subrogated to the rights of the disabled employee or the dependents, in case of his death, in accordance with the general law.
Labor Code, Article 174 — Third-Party Liability And Subrogation. Read the full provision →
What triggers this rule
Article 174 applies specifically when the disability or death is caused by circumstances creating a legal liability against a third party, meaning someone other than the employer whose fault or responsibility contributed to the accident. In that situation, the disabled employee or the dependents are still paid under this Title by the System in the ordinary way. The System's payment to you is not conditioned on first recovering from that third party; the benefit is paid first, and the rest of the article is about what happens afterward.
Why subrogation, not an outright loss of rights
Once the System has paid, it steps into your shoes as against the third party through subrogation, in accordance with the general law. Subrogation transfers the right to pursue the third party to the party that already paid, to the extent of what was paid, rather than simply extinguishing the underlying claim against the wrongdoer. So the practical effect is less that your claim disappears and more that the System, having compensated you, becomes the one positioned to recover from the person actually responsible for the accident.
What happens if the System recovers more than it paid
The article does not let the System keep everything it recovers beyond what it paid out. It states that where the System recovers from such third party damages in excess of those paid or allowed under this Title, such excess shall be delivered to the disabled employee or other persons entitled thereto, after deducting the cost of proceedings and expenses of the System. So if the third party's liability turns out to be worth more than your benefit under this Title, that additional value is not lost to you; it comes back to you once the System's own costs of pursuing the claim are deducted.
What this means in practice
The practical upshot is that once the System has paid your work injury claim, it, rather than you personally, is the one positioned to bring a claim against the party who caused the accident, up to the amount it paid. You are not left without any stake in that pursuit, since anything recovered beyond what the System paid, net of its costs, is returned to you. This structure avoids the third party facing two separate claims for the same injury, one from you and one from the System, while still making sure you are not shortchanged if the third party's actual liability turns out to be larger than your benefit.