Disclaimer: This article is for informational purposes only and does not constitute legal advice.
Detailed Answer
1. Identify the Workers’ Compensation Lien
Under New Jersey law, an employer’s or insurer’s lien on a third-party personal injury recovery arises by statute. Once you notify the carrier of your third-party claim, the workers’ compensation carrier must file its lien within 90 days. To verify the lien:
- Obtain the carrier’s lien notice and copy of any Division of Workers’ Compensation claim file.
- Request payment records and medical expense reports from the carrier.
- Confirm the carrier timely asserted its subrogation interest under N.J.S.A. 34:15-56.27.
2. Provide Written Notice of Settlement
Send the carrier a formal written notice of your intent to settle the third-party case. Include:
- Case name, number and parties.
- Projected gross settlement amount.
- Breakdown of damages categories (general, medical, lost wages).
This notice activates the carrier’s right to verify and perfect its lien.
3. Calculate the Lien Amount
Under N.J.S.A. 34:15-56.27, the carrier’s lien equals the ratio of total workers’ compensation benefits paid to your total injuries, applied to your gross recovery, less a pro rata share of attorneys’ fees and costs. To compute:
- Total comp benefits paid ÷ total damages (as claimed) = lien ratio.
- Ratio × gross settlement = preliminary lien amount.
- Subtract your percentage of attorneys’ fees and litigation costs.
4. Negotiate Disputed Amounts
If you dispute any element of the lien, negotiate directly with the carrier. You may request:
- Detailed medical and indemnity breakdowns.
- Adjustments for overlapping or unrelated bills.
- A reduction for future care estimated outside the settlement.
5. Secure and Document the Lien Release
Once you and the carrier agree on the final lien amount, obtain a written “Satisfaction of Lien” or “Release of Subrogation Interest.” Confirm it includes:
- Exact dollar amount paid.
- Reference to the third-party claim.
- Statement that the carrier waives any further claim against the recovery.
6. Distribute Settlement Funds and File Proof
At closing, pay the lien directly to the workers’ compensation carrier. Preserve:
- Proof of payment (cancelled checks, wire confirmations).
- The carrier’s receipt of funds.
- Copies of the release or satisfaction document.
7. File Final Paperwork
After the settlement, deliver copies of the lien satisfaction and release to:
- The New Jersey Division of Workers’ Compensation.
- Opposing counsel and court clerk (if the settlement was filed with the court).
- Your client, for their records.
Helpful Hints
- Start lien verification early—remember the 90-day filing deadline.
- Keep organized records of all correspondence and notices.
- Use a detailed spreadsheet to calculate lien ratios accurately.
- Attempt informal negotiations before filing any objections.
- Obtain a clear, written satisfaction to prevent future claims.
- Share the final release and payment proof with all parties immediately.