Detailed Answer
When an injured worker pursues a personal injury claim against a third party, the workers’ compensation insurer may assert a lien to recover benefits it has paid. Under New Mexico law, this right arises through subrogation. The insurer steps into the injured worker’s shoes and seeks reimbursement from any third-party settlement or judgment.
1. Subrogation and Lien Rights
New Mexico’s Workers’ Compensation Act grants the insurer subrogation rights under NMSA 1978, §52-5-1. When an insurer pays medical benefits, wage replacement or permanent disability benefits, it may file a lien against any recovery from a third party. For the full statute, see §52-5-1 on Justia: https://law.justia.com/codes/new-mexico/1978/chapter-52/article-5/section-52-5-1/.
2. Filing and Enforcement
The insurer must file its lien with the Workers’ Compensation Administration (WCA) to preserve its right. Although New Mexico law does not set a strict deadline in the statute, best practice is to file promptly after learning of the third-party claim. Keep proof of filing to avoid waiver.
3. Impact on Settlement Funds
When the case settles, the insurer’s lien attaches to the entire recovery unless the parties agree to allocate funds. Typically, the settlement is divided into two portions:
- Liability/Damages Portion: Covers pain and suffering, emotional distress, and punitive damages. This portion is subject to the insurer’s lien.
- Wage/Medical Portion: Specifically allocated to lost wages or medical expenses. The insurer often claims reimbursement only from this portion.
If the settlement does not specify an allocation, the insurer can assert its full lien against the entire recovery. Under NMSA 1978, §52-5-14, the injured worker must repay the insurer for benefits paid from any third-party recovery: https://law.justia.com/codes/new-mexico/1978/chapter-52/article-5/section-52-5-14/.
4. Attorney Fees and Net Recovery
New Mexico courts require a proportional allocation of attorney fees when a workers’ compensation lien is involved. If your personal injury attorney spends 30% of their time on subrogation issues, only 30% of the fee applies to the lien portion. This ensures you do not pay attorney fees twice on the same recovery.
5. Negotiating Around the Lien
To maximize your net recovery:
- Negotiate a clear allocation between personal injury and wage/medical damages.
- Confirm the insurer’s lien amount before finalizing settlement.
- Consider setting aside disputed lien funds in escrow pending resolution.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for guidance on your specific situation.
Helpful Hints
- Document all benefits paid by the workers’ compensation insurer.
- Request a lien letter detailing the exact amount owed before settlement.
- Work with your attorney to allocate settlement proceeds strategically.
- Verify lien filings with the WCA to prevent insurer waiver.
- Discuss fee allocation to avoid duplicate attorney fees on the same recovery.