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Detailed Answer

Under Pennsylvania’s Workers’ Compensation Act, an employer or insurer that pays benefits to an injured worker gains a statutory lien (subrogation right) against any third-party recovery. (See 77 P.S. §671.) The lien covers all sums paid or payable, including medical and wage-loss benefits, interest, and statutory penalties.

1. Verify the Lien Claimant and Amount
   • Request a written statement from the workers’ compensation insurer or employer showing the total lien amount. This statement should itemize benefits paid, medical expenses, penalties, and interest.
   • Confirm the claim number and period of benefits to ensure accuracy.
2. Obtain Formal Lien Notice
   • Under 77 P.S. §671, the insurer must timely assert its lien. Request a Notice of Intention to Claim Lien to confirm filing.
   • Keep copies for the settlement file.
3. Calculate Net Settlement Proceeds
   • Subtract projected attorney fees and litigation costs. Pennsylvania courts often apply the “common fund” doctrine to allocate fees proportionally.
   • Determine the portion of the recovery subject to lien reimbursement.
4. Negotiate Lien Reduction (if possible)
   • Engage the insurer in negotiation to reduce its claim. Highlight litigation risks, potential appeal, and administrative costs.
   • Document all settlement offers and counteroffers in writing.
5. Secure Court or Bureau Approval
   • While not always mandatory, obtaining approval from the Workers’ Compensation Judge or Bureau can prevent later disputes.
   • File a petition for approval of settlement under WC Form LIBC-843 (if required). See the Bureau of Workers’ Compensation forms page for details.
6. Distribute Settlement Funds and Satisfy the Lien
   • Allocate the agreed lien amount from the settlement proceeds.
   • Issue payment to the workers’ compensation insurer or employer.
   • Prepare and file a Satisfaction of Lien (WC Form LIBC-769) with the Bureau of Workers’ Compensation to formally close the claim. See the forms page.
7. Obtain Lien Release and Close File
   • Request a formal release or letter confirming full satisfaction of the lien.
   • Retain all documentation in your client file for future reference.

Helpful Hints

• Start lien verification early to avoid settlement delays.
• Keep thorough records of all communications and payments.
• Consult the Bureau of Workers’ Compensation website for current forms.
• Consider pro-rata fee allocations when multiple liens or claims exist.
• Watch deadlines under the Pennsylvania Rules of Civil Procedure for lien notices.

Disclaimer: This article is for educational purposes only and does not constitute legal advice. Consult an attorney licensed in Pennsylvania to address your specific situation.