How do workers’ compensation liens affect the final amount received in a personal injury recovery?

Woman looking tired next to bills

Detailed Answer

When you are hurt on the job in North Carolina and a third party (someone other than your employer or a co-worker) caused the accident, you may have two concurrent claims:

  • a workers’ compensation claim that pays medical bills and wage loss through your employer’s insurance, and
  • a personal-injury claim against the negligent third party for the rest of your losses (pain and suffering, full lost wages, scarring, etc.).

The workers’ compensation insurer is entitled to be reimbursed from the personal-injury recovery. This reimbursement right is called a statutory lien and it is governed by N.C. Gen. Stat. § 97-10.2.

How the Lien Is Calculated

The comp carrier’s lien equals every dollar it has paid (medical expenses, wage-replacement payments, and death benefits) plus any future payments it is obligated to pay. However, the lien is reduced before money is actually paid back to the carrier:

  1. First, statutory costs of the lawsuit—filing fees, expert costs, deposition expenses—are taken out.
  2. Second, attorney’s fees—typically one-third—are deducted.
  3. Third, the remaining balance is applied to the workers’ compensation lien. If the balance is large enough, the lien is paid in full. If not, the lien is satisfied pro rata and the carrier bears its share of the attorney’s fee.

Whatever is left after paying the adjusted lien goes to the injured worker.

Judicial Power to Reduce or Eliminate the Lien

Even after the above formula, Superior Court judges have discretion under § 97-10.2(j) to further reduce—or in rare cases, eliminate—the lien if “required to provide substantial justice.” The court weighs factors such as:

  • the strength of the third-party case (liability questions),
  • the amount of insurance available,
  • the severity of the worker’s ongoing needs, and
  • whether the carrier acted unreasonably in the comp claim.

Your attorney must file a motion and present evidence to secure this discretionary reduction.

Hypothetical Example

Assume you recover $300,000 from a negligent driver. Litigation costs were $10,000, and your fee agreement is one-third.

StepAmountRunning Balance
Total settlement$300,000$300,000
Less costs-$10,000$290,000
Less attorney’s fee (1/3)-$96,667$193,333
Workers’ comp lien paid to date$125,000

The balance ($193,333) can fully repay the $125,000 lien, leaving you with $68,333. If the recovery had been smaller—say $150,000—the lien would have been repaid only in part, and the remainder would have been waived automatically by statute or by court order.

Future Benefits Stop After Lien Repayment

Once the comp carrier is reimbursed in full, it no longer has to pay future medical bills for the same injury. Plan ahead so you are not left without medical coverage.

Helpful Hints

  • Notify the workers’ comp insurer of the third-party case early; failing to do so can jeopardize benefits.
  • Coordinate settlements: settle workers’ comp after you know the third-party recovery to maximize negotiation leverage on the lien.
  • Document all litigation costs; every dollar spent on costs reduces the lien dollar-for-dollar.
  • File a § 97-10.2(j) motion quickly if the lien threatens to consume most of the settlement.
  • Plan for medical care once the lien is repaid because comp benefits may end.

Bottom line: A workers’ compensation lien does not automatically take your entire personal-injury settlement, but it can drastically change your net recovery. Strategic lien negotiation—and, when necessary, a court petition—can put far more money in your pocket.

Need help protecting your recovery? Our attorneys have years of experience navigating the tricky overlap between workers’ compensation and personal-injury law. Call 919-313-2737 today for a free consultation.

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