Detailed Answer
How Workers’ Compensation Liens Work
Under Va. Code § 65.2-309, if a third party—someone other than your employer—causes your work-related injury, your workers’ compensation insurer may step into your shoes to recover benefits it paid. These benefits include medical expenses and wage-loss benefits. The insurer can claim reimbursement from any settlement or judgment you obtain in your personal injury action.
Calculating the Lien
Virginia law requires insurers to credit reasonable attorney fees and litigation costs. To calculate the net lien:
- Start with total benefits paid by the insurer (medical and indemnity).
- Determine the total attorney fees and costs incurred in the third-party case.
- Allocate a pro rata share of fees and costs against the insurer’s recovery.
Example: You settle a third-party claim for $100,000. The insurer paid $20,000 in workers’ compensation benefits. You incurred $10,000 in attorney fees. Your fees represent 10% of the total recovery, so the insurer’s lien reduces by that percentage. The net lien equals $20,000 minus $2,000 (10% of $20,000), or $18,000.
Impact on Settlement Proceeds
When dividing your settlement, you and the defendant categorize amounts for medical expenses, lost wages, and pain and suffering. While the insurer’s lien technically attaches to the total recovery, you can negotiate to allocate a larger share to non-economic damages—areas typically not subject to subrogation. Proper allocation helps preserve your net recovery.
Steps to Protect Your Rights
- Notify your workers’ compensation insurer before finalizing any settlement.
- Request a detailed lien statement showing the benefits paid and calculation method.
- Work with counsel experienced in both workers’ compensation and personal injury cases.
- Negotiate a pro rata credit for attorney fees and costs under § 65.2-309.
- Include lien-satisfaction language in your settlement agreement.
Helpful Hints
- Document all compensation benefits received.
- Keep records of medical bills and wage-loss payments.
- Obtain written confirmation of the lien amount from the insurer.
- Allocate settlement funds carefully to limit subrogation exposure.
- Review your settlement agreement for compliance with § 65.2-309.
- Consult a Virginia attorney to review your settlement strategy.
Disclaimer
This article provides general information and does not constitute legal advice. Consult a licensed attorney in Virginia to discuss your specific situation.