Subrogation Lien Rights: Pay Close Attention to the Distribution of the Money!

During the course of many in-person seminars and internet webinars, we have always advised our clients to be very careful when it comes time to receive their portion of a third-party settlement as reimbursement of their Section 40 lien rights. A recent decision by the Superior Court only serves to further emphasize this point.

The petitioner was employed as a manager. On December 23, 2017, he was struck by a car that backed up into his torso causing significant injuries. His workers’ compensation claim was accepted as compensable and he received medical treatment, wage loss benefits for the time out of work, and eventually and award of permanent partial disability.

The petitioner/plaintiff also pursued a third-party claim and obtained an $85,000 settlement initially (UIM) and then another $15,000 settlement for additional insurance that was located for a total of $100,000.

The workers’ compensation lien was far greater than the third-party settlement. The lien totaled $177,084. The workers’ compensation carrier and employer agreed to accept one-third of the $100,000 recovered $33,333. However, when the plaintiff’s attorney forwarded the check, it was accompanied by a letter that stated, “The check represents full and final payment of any outstanding workers’ compensation lien in connection with the above referenced matter.” The check was accepted and cashed. There was no challenge to the statement in the letter.

The issue before the Workers’ Compensation Court and the Superior Court was whether there were further lien offsets available to the employer/carrier due to petitioner’s recovery of his share of the third-party settlement of $33,333. The offsets could reduce the workers’ compensation carrier’s exposure for indemnity (wage loss), medical payments, or additional permanency. Both the Workers’ Compensation Judge and the Superior Court concluded that there was no future lien or offsets available to the employer and carrier. Those offsets were waived when they accepted the check, deposited the check, and did not contest the letter from counsel stating this was a full and final reimbursement of the lien.

COMMENT: This case supports our longstanding advice to never allow the final letter in a subrogation matter to be drafted by plaintiff’s counsel that is inaccurate. You must challenge the letter with the language noted above and respond by stating that future lien rights and offsets remain available to the employer and carrier in the event they face future workers’ compensation benefits for this claim.