How does a workers’ compensation lien affect a personal injury settlement?

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How a Workers’ Compensation Lien Impacts Your North Carolina Personal Injury Settlement

Detailed Answer

If you are hurt on the job because of someone other than your employer (for example, in a car crash caused by a negligent driver while you are making deliveries), you have two potential claims:

The workers’ compensation insurer must pay medical bills and a portion of lost wages promptly. When you later recover money from the at-fault person, North Carolina law gives the workers’ compensation insurer an automatic lien on that third-party recovery. The rules for the lien appear in N.C. Gen. Stat. § 97-10.2.

1. What the Lien Covers

The lien equals every dollar the comp carrier paid (medical benefits, wage replacement, and vocational costs) plus future obligations it is reasonably certain to pay.

2. Statutory Formula for Disbursement

Section 97-10.2(f)(1) sets a mandatory order for distributing the settlement:

  1. Attorney’s fees and costs of the third-party action come off the top.
  2. One-third of the remaining balance goes first to the injured worker, free and clear of any lien.
  3. The comp carrier then receives up to the amount it paid, less its pro-rata share of the attorney’s fees and costs.
  4. Anything left after satisfying the lien belongs to the injured worker.

3. Can the Lien Be Reduced?

Yes. Under § 97-10.2(j) the parties may agree in writing to reduce the lien. If the comp carrier will not cooperate, the injured worker may petition the Superior Court to determine a "just and reasonable" lien amount. Judges commonly lower liens when:

  • The at-fault party has limited insurance.
  • Fault is hard to prove and the settlement reflects a compromise.
  • The worker has permanent injuries requiring future care not covered by workers’ comp.

4. Approval Requirements

The North Carolina Industrial Commission must approve any third-party settlement before funds can be disbursed when an open workers’ compensation claim exists (§ 97-10.2(h)). Failing to obtain approval can jeopardize both your comp benefits and your settlement proceeds.

5. Practical Effect on Your Take-Home Recovery

The lien often absorbs a large portion of the settlement. Negotiating a reduction—or using the court petition procedure—usually increases the net money in your pocket without harming your workers’ compensation benefits.

Helpful Hints

  • Notify the workers’ compensation carrier as soon as you file a third-party claim; surprise is rarely effective leverage.
  • Document all future medical needs so you can argue for a lien reduction based on uncovered losses.
  • Coordinate counsel. One law firm handling both claims can streamline approval and negotiation processes.
  • Request mediation with the comp carrier before filing a lien-reduction petition. Early agreement saves court costs.
  • Watch deadlines. The carrier has statutory subrogation rights; delaying settlement discussions can limit flexibility.

Bottom Line: A workers’ compensation lien does not stop you from pursuing a personal injury settlement, but it will influence how the money is divided. Careful planning and aggressive negotiation can protect your right to full compensation.

Need guidance? Our North Carolina attorneys routinely navigate the workers’ comp lien maze while maximizing third-party recoveries. Call us today at 919-313-2737 to schedule a free consultation and put our experience to work for you.

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