Detailed Answer
Under Texas law, an employer or workers’ compensation insurer that pays benefits can assert a lien on any third-party personal injury recovery to secure reimbursement of benefits paid plus interest. See Texas Labor Code §408.025 and §408.027.
The lien covers medical benefits and income (wage) benefits paid under the Texas Workers’ Compensation Act. To enforce the lien, the carrier must perfect it by filing a notice with the Texas Department of Insurance, Division of Workers’ Compensation (TDI-DWC) and serving that notice on you. If the carrier misses the statute’s deadlines for filing and service, the lien may become unenforceable.
The maximum lien amount cannot exceed the total benefits paid, plus statutory interest. Section 408.027 caps the carrier’s reimbursement at 100% of benefits paid, plus interest at the rate specified by statute. In practice, carriers sometimes negotiate or compromise the lien to resolve claims more quickly.
On settlement, the workers’ compensation lien reduces the net amount you receive. Consider this hypothetical: you settle a third-party claim for $200,000. Your attorney fee is 33% ($66,000), leaving a net recovery of $134,000. If your carrier paid $30,000 in benefits, it has a $30,000 lien. Subtracting the lien yields a final amount to you of $104,000.
Note: Your fee agreement may calculate attorney fees on the gross or net recovery. Clarify this point with your attorney before settling. Some fee agreements allocate a portion of fees to the lien portion of the recovery.
Helpful Hints
- Review your contingency fee agreement to see how fees apply to lien reimbursement.
- Check TDI-DWC records to confirm whether the carrier properly perfected its lien.
- Negotiate a lien reduction; carriers sometimes accept less to avoid litigation over the lien amount.
- Factor in potential future medical care when determining settlement values.
- Keep detailed records of all benefits paid and communications with the carrier.
Disclaimer: This article is for educational purposes only and does not constitute legal advice.