Lien and Workers Compensation

A lien is a security interest that is granted by the court against another person's property or award to secure the payment of debt or the satisfaction of a legal obligation. If a lien is placed on someone's property the property cannot be sold until the lien is satisfied, which generally means payment is made to the lien holder.

The most common liens are placed on homes or other property, but liens can also be placed against an award, such as payment won in a personal injury suit. Liens, as they relate to workers' compensation, most often refer to a lien a workers' compensation carrier places against an injured worker's personal injury settlement.

For example, if a worker is injured while performing their normal job responsibilities and they are covered by workers' compensation their employer is responsible for paying for lost wages and medical benefits. Under some conditions, however, injuries could have been the result of another third party's actions or a third party product.

If the worker is able to file a personal injury claim against the responsible party, who is not the employer, the employer may choose to take a lien against the defendant and recoup some of the money they paid to the worker for their medical care and lost wages.
One interesting note, the employer may be able to recoup settlement monies even if they were only paid for pain and suffering, something workers' compensation does not provide.

In fact, under the law, the workers' compensation carrier has a right to reimbursement even if the worker's entire settlement award was allocated for pain and suffering.
In general, however, workers' compensation will only take one-third of what they paid for in expenses. For example, if you were delivering newspapers and you are injured by a reckless driver and your leg is broken workers' compensation insurance from your employer would pay for your lost wages and all of the medical expenses associated with your injury.

Now let's assume the amount paid in your workers' compensation settlement for medical and lost wage benefits was $30,000. If you decide to sue the driver and settle with their insurance company for $300,000, the workers' compensation carrier may decide to recoup their costs by filing a lien against your injury award. In this case the lien would be for $20,000, which is the $30,000 they paid for your workers' compensation benefits less one third or $10,000.