Detailed Answer
In Vermont, when an employee receives workers’ compensation benefits for a work-related injury and later recovers damages from a third party (for example, a negligent driver or property owner), the employer’s workers’ compensation insurer has a right of subrogation. Under 21 V.S.A. § 643, the insurer may seek reimbursement (often called a lien) for the benefits it paid, including medical expenses and wage replacement.
Statutory Basis for Subrogation
Vermont’s subrogation statute establishes that when you recover from a third party, the insurer “is entitled to recover from the amount of the recovery the amount of compensation paid” but only to the extent it corresponds to your recovery. The statute also requires the court to deduct a proportional share of legal fees and costs incurred by the employee in obtaining the settlement.
Reimbursement Process and Deadlines
To protect its lien, the insurer must file a formal notice of lien in the superior court where the personal injury suit is pending, typically within 90 days after receiving notice of the third-party action. If the insurer fails to file timely, it may waive its right to reimbursement. Once the lien is filed, any settlement or judgment funds must be held in escrow until the court approves the distribution.
Calculation of the Lien Amount
The lien amount is limited to the proportion of your recovery that represents workers’ comp benefits. For example, if you settle for $100,000 total and your comp insurer paid $20,000 in medical expenses and $30,000 in wage benefits, the insurer’s maximum lien is $50,000. From that lien, the court will subtract your share of attorney fees and litigation costs in proportion to the recovery.
Hypothetical Example
Jane slips and falls at work, injuring her back. She collects $15,000 in medical benefits and $10,000 in wage replacement from her employer’s insurer. Later, she settles with a negligent property owner for $80,000. Her employer’s insurer files a $25,000 lien. Assuming Jane’s attorney fees and costs total 25% of her recovery ($20,000), the court allocates 25% of the lien ($6,250) to those fees, reducing the lien to $18,750. Jane nets $80,000 – $18,750 = $61,250.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney to discuss your specific situation.
Helpful Hints
- Notify your workers’ compensation insurer immediately when you file a third-party claim.
- Check statutory deadlines: late lien filings can waive subrogation rights.
- Allocate your settlement among damages (medical, lost wages, pain and suffering) to minimize lien exposure.
- Review your attorney fee agreement to understand how costs will affect the lien calculation.
- Discuss negotiation strategies: sometimes insurers will accept a reduced reimbursement to avoid litigation.
- Keep detailed records of all compensation benefits paid and the related medical bills.