Disclaimer: This article is for informational purposes only and does not constitute legal advice.
Detailed Answer
In Michigan, an employer or its workers’ compensation insurer can assert a lien on any personal injury recovery when a third party’s negligence causes your work injury. This right stems from Michigan Compiled Laws Section MCL 418.827. Under this statute, the employer may recover benefits it paid (medical, wage loss, vocational rehabilitation) from the proceeds you obtain by settlement or judgment against the third party.
How the Lien Is Calculated
First, your workers’ compensation carrier files a lien statement in the Workers’ Disability Compensation Court. The lien amount typically equals the total benefits paid, plus a statutory processing fee under MCL 418.845. Michigan courts allow a proportional reduction of attorney fees and case expenses under the equitable principles set forth in Horsfield v. Decatur Foundry Co., 461 Mich 638 (2000).
Effect on Your Net Recovery
- Total Settlement or Judgment: The full amount you negotiate or win against the negligent third party.
- Attorney Fees and Costs: Your lawyer’s fees and litigation expenses are deducted first.
- Workers’ Compensation Lien: The carrier claims repayment of benefits paid, reduced by its share of fees and costs as required by Horsfield.
- Net Amount to You: The balance after subtracting fees, costs and lien repayment.
For example, if you recover $100,000 and owe $30,000 in legal fees and $10,000 in costs, you have $60,000 left. If your carrier paid $40,000 in benefits and is entitled to a 20% share of fees ($6,000) plus a $500 processing fee, your lien claim would be $34,500. You would then receive $25,500.
Negotiating and Managing the Lien
You can often negotiate a reduction of the lien if repayment would leave you under-compensated. Ask your attorney to review the carrier’s lien paperwork for accuracy and file any objections on time. In some cases, you may set aside a portion of the settlement in escrow until the carrier confirms its final lien amount.
Helpful Hints
- Keep detailed records of all workers’ compensation benefits, including medical bills and lost wages.
- Ask your personal injury attorney to analyze potential lien exposure early in your case.
- Verify that the carrier filed the lien statement within the statutory deadline under MCL 418.827.
- Consider mediation or negotiation to reduce the lien if it impairs your ability to cover non-work-related losses.
- Review key authorities: MCL 418.827 and the Horsfield decision, Horsfield v. Decatur Foundry Co., 461 Mich 638 (2000).