FAQ: How do workers’ compensation liens affect the final amount received in a personal injury recovery?
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Always consult a qualified attorney for guidance on your specific situation.
Detailed Answer
When an employee suffers a workplace injury, the employer’s workers’ compensation insurer pays benefits for medical treatment and lost wages. Under Virginia law, the insurer has a subrogation right—often called a lien—against any personal injury recovery that compensates for the same injury. This right appears in Virginia Code § 65.2-309 (link).
The lien works as follows:
- Gross Recovery Allocation: When you settle or win a verdict, you typically allocate the total recovery among medical expenses, lost wages, and pain & suffering.
- Attorney’s Fees and Costs: Virginia law requires the insurer’s reimbursement to be reduced by its pro rata share of attorney’s fees and litigation costs. For example, if 50% of your recovery covers medical bills and your attorney’s fee is 30%, the insurer’s share of fees equals 50% of that 30%.
- Net Lien Amount: The insurer’s lien equals the total benefits paid for medical treatment and lost wages, minus its share of fees and costs. You keep the remainder.
Example (hypothetical): You recover $100,000, allocated as $20,000 for medical bills, $30,000 for lost wages, and $50,000 for pain & suffering. Your attorney’s fee is 33.3% ($33,300); court costs total $2,000. The insurer’s benefits paid total $50,000. Its share of fees equals 50% × $33,300 = $16,650. Its share of costs equals 50% × $2,000 = $1,000. The net lien is $50,000 – $16,650 – $1,000 = $32,350. Your final recovery: $100,000 – $33,300 – $2,000 – $32,350 = $32,350.
Helpful Hints
- Notify the workers’ compensation insurer promptly about any third-party claim.
- Allocate your settlement clearly among medical bills, lost wages, and non-economic damages.
- Request a written, itemized lien statement from the insurer early in the process.
- Review Virginia Code § 65.2-309 to understand subrogation rights and fee reductions.
- Work with an attorney experienced in both workers’ comp and personal injury to maximize your net recovery.
- Negotiate lien amounts when appropriate to ensure fair reduction for fees and costs.