If I am paid in the personal injury case, what happens to my Workers’ Compensation benefits?
You may have to pay back to the Workers’ Compensation [“WC”] insurance carrier a portion of the lost income and medical benefits that it paid to you IF you recover enough money in your personal injury case. This is commonly known as the WC lien.
Moreover, the WC insurance carrier may not have to pay lost income and medical benefits to you for some future period. This is commonly known as the WC holiday.
WC benefits are paid to an injured worker no matter who is responsible for the accident. Thus, you can collect WC benefits even if you are 100% responsible for your accident.
If you recover money from a negligent third party in a personal injury case, and keep all the WC lost income benefits you received, you could collect more by NOT working than if you had worked. For that reason, the law allows the WC insurance carrier to recover a portion of what it paid to you in lost income and medical benefits.
As a general rule, you have to pay back to the WC insurance carrier two-thirds of the total sum of lost income and medical benefits that it paid to you or on your behalf.
For example, if the WC insurance carrier paid you $20,000 in lost income benefits, and paid $10,000 for your medical treatment, the total WC payout is $30,000. You would have to pay the WC insurance carrier $20,000 (Two-thirds [or 66-2/3%] of $30,000 equals $20,000) from the proceeds of the settlement or verdict in the personal injury case.
We hope that, at the end of your personal injury case, you will put a substantial amount of money in your pocket. The GROSS amount of your settlement or judgment is first reduced by the costs, disbursements and out-of-pocket expenses that we incurred on your behalf.
Before we can determine what you will put in your pocket, we must first deduct the attorney fee and the amount of the WC lien, if any.
Here is an example of a case we resolved previously. Mr. X accepted a $360,000 settlement. He was responsible for $1,957.16 in costs, disbursements and out-of-pocket expenses. The NET settlement was $358,042.84 ($360,000 minus $1,957.16). The attorney fee was $119,347.61 (one-third of the NET settlement). The WC lien payback was $25,000.00. Thus, the net to our client was $213,695.23.
By law, the WC carrier has a “holiday” for $213,695.23 that it otherwise would have been required to pay to Mr. X for lost income and medical benefits. The WC carrier, however, is responsible for paying some part of your lost income and medical benefits in the future.
In the above example, the “cost of litigation” (attorneys fees PLUS expenses DIVIDED BY total settlement) was thirty-four percent (34%). Thus, the WC carrier was responsible for paying 34% of lost income and medical benefits after the settlement. Once Mr. X has not received the $213,695.23 that the WC carrier otherwise would have had to pay him, he may be able to receive full WC benefits again.