Workers’ Compensation Liens

What is a lien?

A lien is a legally binding right to reimbursement.  In workers’ compensation, the insurer for the employer will have a right to reimbursement (or lien) against any recovery made in a corresponding third party claim.  A third party claim is a separate lawsuit against a party other than the employer whose negligence caused an on the job injury.  A third party claim can be made in addition to a workers’ compensation claim.

How does a Worker’s Compensation Lien work?

If you file a third party claim, the workers’ compensation insurance company will have a right to reimbursement for all monies paid.  This includes disability benefits and medical expenses.  For that reason, it is ideal to finish your comp case prior to your third party claim, so that you can account for the entire workers’ compensation lien.

If you settle a third party case prior to resolution of the comp claim, you may fail to sufficiently account for future comp benefits that would increase the comp lien.  This could result in the insurer having a credit against future benefits.  In other words, money that should go to you, won’t.

If a settlement is not reached in a third party claim, and instead the case proceeds to trial, the value of the case is left up to the Judge or Jury.  When a civil judgment is less than the comp lien, the comp insurer is only reimbursed for the amount of the judgment.  If a civil judgment is in excess of a comp award, the comp insurer is only reimbursed for the amount that they actually paid, with all leftover money to the injured worker.

Is it even worth it to file a Third Party Claim if there is a Comp Lien?

It depends.  Sometimes, a third party claim will be worth significantly more than the comp lien, and the additional litigation will be well worth it.  Other times, the numbers may not make as much sense.

Each case is different, and should be assessed by considering the amount of the comp lien and the anticipated recovery from third party litigation.  One thing to keep in mind are attorney fees.  In third party claims, attoneys fees are typically 33%-40%. This is significantly more than workers’ compensation cases where fees are set by statute at 20% or less.

Before filing a third party claim,it is worth considering whether there will be any money left over for the injured worker after the lawyers and comp insurer are paid.  I encourage anyone whose on the job injury was caused by a third party to discuss their case with me on an individual and personalized basis.  All consultations are always free of charge!