Disclaimer: This article is for informational purposes only and does not constitute legal advice.
Detailed Answer
1. Understanding Subrogation Rights
Under New Mexico law, when you receive workers’ compensation (WC) benefits for a work-related injury, your employer or its insurer gains a subrogation lien against any third-party recovery. This means they can claim reimbursement from your personal injury settlement for benefits they already paid. See NMSA 1978 § 52-5-1 (Justia).
2. Notifying the Insurer Early
Promptly inform the WC insurer of any potential third-party claim. Provide basic facts—date, nature of injury, identity of the third party—to preserve your rights and avoid disputes over notice.
3. Valuing the Lien and Negotiating
The insurer calculates its lien by totaling WC benefits paid plus interest. Under NMSA 1978 § 52-5-8 (Justia), you can negotiate a reduction for attorney’s fees or litigation costs. A common approach allocates a percentage of the settlement to your WC lien before deducting fees.
4. Structuring the Settlement
Work with your attorney to draft a settlement agreement that clearly allocates settlement proceeds among:
- Past and future medical costs
- Lost wages
- Pain and suffering
- WC lien repayment
Assigning specific amounts to each category helps justify the WC insurer’s share and preserves nontaxable benefits (medical and wage loss portions are generally tax-free).
5. Court or Agency Approval
After you reach a settlement, the WC insurer typically petitions the Workers’ Compensation Administration to approve the offset. The agency reviews the lien amount, attorney’s fees, and fairness of allocation. Once approved, the insurer receives its share directly from escrow.
6. Final Release and Lien Satisfaction
Ensure the settlement agreement and release language specifically reference lien repayment under NMSA 1978 § 52-5-2 (Justia). After disbursement, obtain a written lien satisfaction. This prevents the WC insurer from seeking additional reimbursement.
Helpful Hints
- Start WC lien discussions early to avoid last-minute conflicts.
- Keep detailed records of WC benefits paid and treatment dates.
- Use a clear settlement allocation to separate taxable and nontaxable items.
- Confirm agency approval before finalizing disbursements.
- Obtain a lien waiver or satisfaction letter in writing.