Disclaimer: This article provides general information about Vermont law and is not legal advice. Consult an attorney to address your specific situation.
Detailed Answer
When an injured worker in Vermont collects workers’ compensation benefits and later pursues a personal injury claim against a third party, the workers’ compensation insurer holds a statutory lien (subrogation right) to recover benefits paid. Under 21 V.S.A. § 687, the insurer may seek reimbursement from any third‐party recovery. Here are the key steps to resolve this lien:
1. Identify and Quantify the Lien
- Request a written statement from the workers’ compensation insurer detailing all benefits paid, including medical and indemnity payments.
Link: 21 V.S.A. § 687 - Confirm any accrued interest or adjustment for future medical benefits under the policy terms.
2. Notify the Insurer of the Third‐Party Claim
- Provide immediate written notice of the personal injury suit to the workers’ compensation insurer, including case number, parties, alleged injuries, and demand amount.
- Deliver copies of complaint, discovery responses, and settlement negotiations as they develop.
3. Negotiate Lien Settlement
- Discuss with the insurer a fair allocation of your gross recovery to cover the lien. Common methods include pro rata allocation of settlement proceeds or a fixed percentage of net recovery.
- Consider pooling medical expenses versus indemnity benefits to reach an equitable compromise.
4. Draft Settlement Agreement
- Include specific language allocating funds to the workers’ compensation lien and directing the insurer’s portion to be paid from escrow.
- Ensure the agreement releases the insurer’s subrogation rights upon payment of the agreed amount.
5. Obtain Department of Labor Approval
- Under 21 V.S.A. § 690, approval by the Department of Labor (DOL) is required for any settlement affecting a workers’ compensation lien.
Link: 21 V.S.A. § 690 - Submit the executed agreement and a petition for approval to the DOL. The commissioner reviews lien resolution and ensures compliance with statutory requirements.
6. Complete Payment and Release
- Once the DOL approves, distribute funds: first to cover the insurer’s agreed lien portion, then to plaintiff and defense for costs and attorney fees.
- Obtain a formal release from the workers’ compensation insurer confirming the lien is fully satisfied.
Helpful Hints
- Keep all communications in writing to create a clear record of negotiations and payments.
- Retain copies of benefit statements from the insurer detailing medical and indemnity payments.
- Work with both your personal injury attorney and the workers’ compensation adjuster to align on settlement timing.
- Factor in attorney fees and case expenses when negotiating the lien to avoid unexpected out‐of‐pocket costs.
- File the final, approved agreement promptly with the department to prevent delays in distribution.