Disclaimer: This article is for informational purposes only and does not constitute legal advice.

Detailed Answer

What Is a Workers’ Compensation Lien?

Under Connecticut law, when you receive workers’ compensation benefits for a work-related injury and then pursue a personal injury claim against a third party, your employer or its insurer may assert a lien on any recovery you obtain. Conn. Gen. Stat. §31-293 grants the insurer subrogation rights: it steps into your shoes to recoup the benefits it paid. You must reimburse both medical and indemnity payments up to the amount you recover from the third party. Conn. Gen. Stat. §31-293.

How the Lien Reduces Your Settlement

Suppose you settle a third-party claim for $100,000 after a workplace injury. If your insurer paid $20,000 in medical bills and lost-wage benefits, it can demand reimbursement of that $20,000. Your net recovery then drops to $80,000, before attorney fees and costs. The insurer’s lien attaches to the gross settlement before calculating your attorney’s share and litigation expenses.

Allocating Attorney Fees and Costs

Connecticut courts generally require a pro rata allocation of attorney fees and costs between you and the insurer. If your total fees equal 30% of the settlement, you apply that percentage to both the insurer’s lien and your remaining recovery. This approach ensures the insurer shares in attorney expenses and does not receive full reimbursement without contributing to legal fees.

Exceptions and Limitations

The lien covers only damages that mirror the benefits paid. Your insurer cannot claim portions of your settlement designated for pain and suffering or punitive damages, since workers’ compensation does not cover non-economic damages. When you negotiate a settlement, you and the insurer should agree on an allocation between economic and non-economic damages. Courts may review this allocation to ensure fairness.

Practical Steps to Handle a Workers’ Compensation Lien

• Obtain a detailed lien statement from your employer’s insurer, itemizing medical and indemnity benefits paid.
• Negotiate a lump-sum reduction of the lien if the case involves complex or disputed issues.
• Allocate your settlement explicitly between economic and non-economic damages in a written agreement or court filing.
• Work with your attorney to structure the settlement and ensure the insurer’s lien pays out correctly.

Helpful Hints

• Document all workers’ compensation benefits paid and track lien statements.
• Discuss lien negotiations early to avoid surprises at settlement.
• Consider structured settlements to manage lien repayment and tax implications.
• Allocate damages categories clearly in your settlement agreement.
• Consult an attorney experienced in both workers’ compensation and personal injury law.