Detailed Answer
When you recover damages from a third-party personal injury claim in Pennsylvania, your employer’s workers’ compensation insurer holds a lien on any compensation it has paid. You must resolve this lien before distributing settlement proceeds. Below is a step-by-step guide under Pennsylvania law.
1. Identify and Quantify the Lien
Under 77 P.S. § 671, the insurer may claim the full amount of benefits paid, minus reasonable costs and attorney fees. Review your workers’ compensation records to calculate:
- Total benefits paid by the insurer.
- Allowed litigation costs and attorney’s fees (usually prorated from the recovery).
Statute reference: 77 P.S. § 671.
2. Provide Formal Notice
Pennsylvania rules require you to notify the workers’ compensation insurer and your employer in writing. Include:
- A copy of the proposed settlement or complaint against the third party.
- Details of claimed damages.
- Your calculation of the insurer’s lien.
3. Calculate the Net Recovery
Deduct litigation costs and your attorney’s fees from the third-party recovery. The insurer’s lien applies to the net amount. Courts often approve proportional deductions. Keep detailed billing records.
4. Attempt Informal Negotiation
Contact the insurer to propose a compromise. Explain why you believe a reduced lien is fair—factors include:
- Strength of your liability case.
- Extent of your injuries and future medical needs.
- Potential defenses from the third party or insurer.
5. File a Compromise Settlement Petition
If informal talks stall, file a petition under the Workers’ Compensation Act to approve a compromise of lien rights and future benefits. Section 440 allows settlement of future compensation rights:
- Submit Petition for Compromise Settlement to the Bureau of Workers’ Compensation.
- Serve all parties, including your attorney and the insurer.
- Attend a hearing before a Workers’ Compensation Judge.
Statute reference: 77 P.S. § 440.
6. Obtain an Order Approving the Settlement
At the hearing, the judge reviews whether the proposed split is fair and reasonable. If approved, the order binds all parties and extinguishes the lien as agreed.
7. Disburse Settlement Proceeds
Once you have the judge’s order, pay the insurer the agreed amount. Then distribute remaining funds to cover your medical bills, attorney’s fees, and your net recovery.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney about your specific situation.
Helpful Hints
- Maintain clear records of all communications with the insurer.
- Document all medical expenses and future treatment estimates.
- Work with an attorney experienced in both personal injury and workers’ compensation.
- File petitions early to avoid delays in settlement distribution.
- Consider an escrow agreement to protect funds until court approval.