Disclaimer: This article is for educational purposes only and does not constitute legal advice. Always consult a qualified attorney regarding your specific situation.
Detailed Answer
When an injured worker in New Mexico recovers from a third-party personal injury action, the employer or its workers’ compensation insurer may assert a lien for benefits paid. Under New Mexico law, the employer is subrogated to the employee’s right of recovery to the extent of compensation paid and is entitled to reimbursement from any third-party settlement or judgment (NMSA 1978, §52-1-9).
Step 1: Identify and Notify Interested Parties
As soon as you consider settling your personal injury case, inform both the employer and the workers’ compensation carrier. Deliver written notice of your intent to settle. This preserves their right to assert a lien and triggers any statutory deadlines for lien assertion or contest.
Step 2: Request a Formal Lien Statement
Ask the workers’ compensation insurer for an itemized lien statement. It should list all benefits paid (medical, indemnity), applicable interest, and any statutory penalties or fees. Ensure the statement references the correct claim number and includes contact information for the lien administrator.
Step 3: Allocate the Settlement Among Damage Categories
New Mexico law permits lien recovery only against portions of the settlement that compensate for medical expenses and lost wages. Work with your attorney to allocate your gross settlement among:
- Pain and suffering
- Medical expenses
- Lost wages
- Other economic losses
Clearly document this allocation in your settlement agreement to avoid disputes.
Step 4: Calculate reduction for Attorney’s Fees and Costs
Under New Mexico’s apportionment rule, the workers’ compensation lien is reduced by the proportion of attorney’s fees and litigation costs attributable to the recoverable portion of the settlement (NMSA 1978, §52-1-11). Compute as follows:
- Determine your total attorney’s fees and costs.
- Divide the portion of the settlement subject to lien by the total settlement amount.
- Multiply your total fees and costs by that fraction.
- Subtract the result from the employer’s lien amount.
Step 5: Negotiate or Litigate the Lien Amount
If the lien statement appears inflated or does not account for apportionment, negotiate with the insurer. If negotiations fail, you may petition the Workers’ Compensation Administration to enforce or contest the lien amount.
Step 6: Prepare Settlement Documents to Address the Lien
Include a clause in your release stating that the workers’ compensation lien will be satisfied out of the settlement proceeds. Attach the lien statement and any agreed reduction calculation. Confirm the employer or carrier signs off on the satisfaction of lien.
Step 7: Disburse Funds and File Satisfaction
At closing, allocate and disburse funds:
- Pay the reduced workers’ compensation lien amount directly to the insurer.
- Pay attorney’s fees and costs as agreed.
- Distribute the remaining net proceeds to the injured worker.
Finally, file a satisfaction of lien with the Workers’ Compensation Administration or submit proof of payment to the carrier. Retain copies for your records.
Helpful Hints
- Start lien verification early to avoid settlement delays.
- Keep detailed records of all communications with the workers’ compensation carrier.
- Clearly label settlement allocations to minimize disputes.
- Review your attorney’s fee agreement to confirm how costs are shared.
- Consider mediation if lien negotiations stall.