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Detailed Answer

Under Virginia law, an employer or its insurer holds a lien for workers’ compensation benefits paid when an injured employee recovers from a third party. You must follow specific steps to verify and satisfy this lien before distributing a personal injury settlement.

1. Identify the Lienholder and Amount Owed

Contact the employer’s insurance carrier to request a written statement of benefits paid, including medical costs, indemnity payments, and accrued interest under Va. Code § 65.2-309. Confirm the carrier’s name, address, and claim number.

2. Send Timely Notice of Settlement

Within 90 days of finalizing the third-party settlement, deliver written notice to the compensation insurer specifying the settlement date, gross recovery amount, and proposed net distribution. Failure to notify timely may jeopardize the lien.

3. Obtain a Lien Verification or Release

Request a fully itemized lien statement. The insurer must verify all paid benefits and calculate accrued interest at the statutory rate. You may negotiate disputed items before finalizing the settlement.

4. File a Petition with the Virginia Workers’ Compensation Commission (Optional)

If the parties disagree on the lien amount or allocation, file a Petition for Review with the Virginia Workers’ Compensation Commission. The Commission can issue an order determining the precise lien amount and directing disbursement. For procedures, see Va. Code § 65.2-712.

5. Incorporate Lien Satisfaction into the Settlement Agreement

Draft the settlement agreement to allocate part of the third-party recovery to pay the verified lien. Typically, funds are held in escrow until the lien is satisfied. Ensure the agreement references the Commission’s order if obtained.

6. Disburse Funds and Obtain Release

Upon final settlement, pay the insurer directly. Secure a written release or satisfaction of lien document. Record this release in your file to confirm you have cleared all workers’ compensation claims.

Helpful Hints

• Track deadlines carefully: missing the 90-day notice window can invalidate the lien.
• Maintain clear communication with the carrier to avoid surprises at settlement.
• Consider mediation if the lien amount is disputed before filing with the Commission.
• Include escrow instructions in the settlement paperwork to protect all parties.
• Obtain the Commission’s approval for high-risk or unusually large settlements.

Disclaimer: This article provides general information under Virginia law and is not legal advice. Always consult a qualified attorney for guidance on your situation.