Syracuse New York Personal Injury Lawyer Discusses How to Deal with New York Workers’ Compensation Liens

Most folks know that when you are hurt on the job you can’t sue your employer.  Instead, you get worker’s compensation, which means the employer’s worker’s compensation insurance (“comp”) pays your medical bills and some of your lost income (the most they pay is about 2/3 of your lost income, but that’s only if you are 100% disabled).

You can’t sue your employer, or your co-workers employed by the same employer, but you can sue others who negligently caused, even partially, your on-the-job injuries. When you sue these non-employer others, that lawsuit is called a “third-party action”.

For example, say you are working on a Syracuse construction site for a plumbing subcontractor.  One of the employees of an electrical subcontractor is working from a ladder and drops a power tool on your head.  Your employer’s insurer pays your worker’s compensation benefits, but you can also sue the electrical subcontractor in a “third-party action”.

But what will your personal injury lawyer sue them for in that third-party action?  Clearly for pain and suffering compensation because you don’t get that from comp. And clearly also for the 1/3 of your wages comp did not pay, right?  But do you also sue them for the other 2/3 of your wages that comp paid you, and for the cost of your medical treatment that comp paid?  The answer your New York injury attorney gives you may surprise you: Yes!  You sue for all that.

But why?  Are you allowed to double dip?  Can you collect your wage losses twice and collect medical expenses you did not have to pay?

No.  The reason you need to sue for those items is because “comp” has a lien on your “third-party action”. This means that the worker’s compensation carrier gets to recover, out of your third-party settlement, all the lost wages they paid you and all the medical expenses they paid to your doctors.

What if you don’t sue the negligent party for those items in your third-party action?  What if you sue only for pain and suffering and the 1/3 of your wages you are out of pocket?

Well, you made a mistake by not suing for those items because you still have to pay comp back out of your settlement or verdict.  That’s precisely why you have to sue the third-party for EVERYTHING.  Because if not, you get left holding the bag for all those wages and medical bills that comp initially paid for.

In a sense when you bring a third-party action your personal injury lawyer is working for you and for comp.  Your lawyer sues the third-party not just for your pain and suffering and the wages you are out of pocket, but for all the medical expenses comp paid, and all the lost wages comp paid so you can pay comp back for those without dipping into your own portion of the settlement or verdict you get from the negligent party.

One problem that arises is when your third-party action has “liability problems”.  That means there is a high chance that a jury will throw your case out, finding that the third-party was not responsible for your injury.  Using the electrical worker example, let’s say you were warned not to go near that ladder, but you did so anyway.  A jury could find that you were 100% responsible for your own injury and that the electrical subcontractor did nothing wrong. (Actually, this is extremely unlikely because of New York’s Labor Law, but I won’t go into that now).  If your lawyer is smart, he’s going to advise you to settle that case so you don’t have to assume the high risk losing at trial.  But the lawyer for the third-party is no idiot; that lawyer, like yours, knows your case is weak, so he will likely recommend to his client that they agree to pay only a small fraction of the full value of the case. Maybe 1/3?

Let’s assume the full value (what a jury would give you if they found the defendant 100% responsible for your injuries) of your case (pain and suffering, lost income, and medical expenses) is $300,000.  Let’s assume further that your comp lien (what comp has paid in wage replacement and medical expenses) is $100,000.  Let’s assume the third-party will offer only $100,000 in settlement, which is one-third the full value of the case.

If you take that $100,000 settlement, it all goes to pay off the comp lien and you end up with nothing, right?

No.  Not if your lawyer knows what he is doing.

First, you are entitled to reduce the worker’s comp lien to account for the “cost of recovery”, which means the comp lien is automatically reduced by at least 1/3, and usually a bit more to account for expenses the attorney incurred.  That will bring the lien down to roughly $65,000 (depending on the expenses your attorney has paid for prosecuting the case).

But even then you will end up with nothing because the attorney’s fees (approximately 1/3 of the $100,000 settlement) will eat up the rest of your recovery, right?.  After all, if the lien is $65,000 and the settlement is for $100,000, that leaves only $35,000.  Your lawyer’s 1/3 of the $100,000 is $35,000.  So zero for you, right?

Wrong, at least if your attorney knows what he is doing.  This is where your New York personal injury lawyer needs to negotiate with the comp carrier to further reduce the lien.  And he or she has a big bargaining chip which might seem counterintuitive:  “My client’s case sucks”.  This is the opposite argument your attorney is making to the third-party you sued.  There, he wants to convince the other side that the case is great so they will offer a lot of money in settlement.  But now he wants to convince the comp carrier that your case is terrible. Why?  Because the comp carrier wants to get paid on its lien and it knows that if you lose at trial and get zero in recovery there will be nothing to pay the lien back with.

Here’s your lawyer’s sales pitch to the comp adjuster: “My client is no idiot.  He is not going to settle the case so that you get all the money and he gets nothing. If you don’t reduce your lien so that my client ends up with something decent, my client will not agree to settle, and we will instead take our chances at trial where we will likely lose because the liability case is weak, and then you will recover nothing.”  The comp adjuster, if he or she is smart, will agree to reduce the lien.  Otherwise, why would you settle?

In the example we have been using, typically the comp carrier will agree to what we call a “1/3, 1/3, 1/3 split”.  That means that the net settlement figure (which is the gross settlement minus expenses) is split evenly three ways, between the comp carrier, your lawyer and you.  So if the gross settlement is $100,000, and your attorney spent $1,000 on prosecuting the case, then the “net” settlement is $99,000.  The comp carrier takes $33,000, and so do you, and so does your lawyer.

$33,000 might not sound like a lot to you given all your pain and suffering, but if the liability case is weak against the third-party, it still might be the smartest way for you to resolve your case.  It won’t be much fun spending a week in trial only to have a jury hand you a goose egg.  To add insult to injury, you will likely end up owing your lawyer for the expenses of prosecuting the case, too, since there will be no incoming money to pay those expenses.

Comp liens are a problem.  But they are not an insurmountable problem if you have a good personal injury lawyer in your corner.

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