Detailed Answer
When you recover money in a personal injury claim after receiving workers’ compensation benefits, the employer’s workers’ compensation carrier typically has a lien on your recovery. Under New Jersey law, N.J. Stat. Ann. § 34:15-40 allows an employer or insurer to seek reimbursement of benefits it paid once you obtain a third-party settlement or judgment.
Here’s how the lien usually affects your net recovery:
- Gross Recovery: The total amount you obtain from a settlement or jury award.
- Attorney’s Fees and Costs: In New Jersey, contingent fee agreements typically range from 33% to 40% of the gross recovery, plus litigation expenses (filing, expert witness fees, etc.). Courts have held that the workers’ compensation lien must share in these fees and costs. See Magee v. Raritan Bay Medical Ctr., 174 N.J. 51 (2002).
- Prorated Reduction of Lien: Under Magee, the employer’s lien is reduced proportionally by the percentage of legal fees and costs you pay. For example, if you pay 35% in attorney’s fees and 5% in costs (total 40%), the lien is reduced by 40%. A $50,000 lien becomes $30,000.
- Remaining Lien Payment: You or your attorney then pays the reduced lien amount ($30,000 in our example) out of the settlement fund.
- Net Recovery: After subtracting attorney’s fees, costs, and the reduced lien, you receive the balance in your pocket.
Example: If you settle for $200,000 and agree to a 33% attorney fee ($66,000) plus $4,000 in costs (total 35% or $70,000), your net pot before lien repayment is $130,000. A $50,000 lien gets reduced by 35% to $32,500. After paying the lien, you keep $97,500.
Key Statute: N.J. Stat. Ann. § 34:15-40 governs subrogation and lien enforcement by workers’ compensation insurers.
Disclaimer: This information is for educational purposes only and does not constitute legal advice. You should consult a qualified attorney to address your specific situation.
Helpful Hints
- Obtain from your employer or insurer a written statement of the exact lien amount before you settle.
- Review your contingent fee agreement to confirm how costs and fees allocate against the lien.
- Negotiate lien reduction when possible, especially if litigation costs are high.
- Keep detailed records of all legal expenses—these support proportional lien reduction under Magee.
- Work with an attorney experienced in both personal injury and workers’ compensation subrogation.