How A Workers' Compensation Lien in Massachusetts Affects A Third Party Personal Injury Settlement

There are circumstances where an employee in Massachusetts may be injured on the job as a result of the negligence or carelessness of a third party. In this type of situation, the injured employee will have two separate and distinct claims. One would be a claim for workers’ compensation benefits, and the second is a personal injury claim for damages. Remember, an injured employee, generally, cannot sue his or her employer. But, if it is a third party (someone other than the employer) that caused the injury, then the injured employee can pursue a bodily injury claim or lawsuit against the third party.

While the two claims may be separate, they will be somewhat interconnected. What we mean by this is that the accident and injury will be the same for both claims, and the medical treatment and bills will be related.

In order to get a full understanding of how a workers’ compensation lien in Massachusetts affects a third party personal injury case, we must first review the basics of workers compensation and a personal injury claim. Let’s take a closer look at this type of situation.

Workers Compensation: Understanding the Basics

Our laws here in Massachusetts require employers to carry workers compensation insurance coverage for their employees. The reason for this requirement is so workers are covered by insurance if there are hurt on the job. This type of insurance offers certain benefits to injured employees. The two main benefits for employees hurt in a work related accident are: disability benefits and medical benefits.

Disability benefits are available to injured workers, whose injuries render them unable to work. The disability benefits act as sort of a wage replacement since they cannot work. Medical benefits are also available from workers compensation to cover all reasonable and related medical bills and costs for treatment of an employee’s injuries.

Personal Injury Claims: A Brief Overview of the Basics

Anyone in Massachusetts that is injured as a result of the carelessness or negligence of another person may file a claim for personal injuries that seeks financial compensation for the injuries and consequential losses of the injuries. The most common example is a motor vehicle accident.  If someone is rear-ended and injured by another person, who wasn’t paying attention, the injured person can file a bodily injury claim for the injuries they suffered in the accident.

The personal injury claim in Massachusetts will seek compensation for the medical bills incurred for the treatment of the injuries, any lost wages as a result of not being able to work due to the injuries, pain and suffering and any other losses that result from the accident and injury.

Workers Compensation & A Personal Injury Claim From The Same Accident

Sometimes these two legal claims arise from the same accident. This occurs when an employee is on the job and is injured in an accident that was caused by a third party. In these circumstances, the injured employee can seek benefits from workers compensation and also pursue a personal injury claim from the negligent third party. The injured worker or his or her attorney will be dealing with two different insurance companies: The employer’s workers compensation insurance and the third party’s auto insurance company.

In these types of cases, the workers compensation insurance company will pay the medical bills of the injured worker, but will place a lien, which is authorized by law, on the third party personal injury claim. The lien is how the workers compensation insurance company seeks reimbursement from the third party settlement for the workers comp benefits paid to the injured worker for injuries the third party caused.  

If the injured worker or his or her lawyer is able to negotiate and obtain a settlement offer from the third party’s auto insurance company, the lien from the workers compensation insurance company must be addressed prior to settlement. This is where it often gets confusing. It is best to use an example to understand this situation.

Example: Let’s use Edward as the employee. Edward is a delivery driver in Massachusetts, who works for Big Delivery Company (the employer). One day, while on the job making a delivery, Edward is hit head on by another car driven by Tom Party (the third party). Edward sustains a comminuted fracture of his fibula and tibia. He is treated at the scene of the accident and transported by an ambulance to an emergency room. Edward undergoes an open reduction internal fixation surgery and is out of work for months while he recovers from his injuries.

Edward has two separate claims: (1) a workers’ compensation claim; and (2) a third party personal injury claim for the car accident against Tom Party.

In the workers’ compensation claim, Edward is paid disability benefits while he is out of work by his employer’s workers’ compensation insurer, WC Ins Co. The workers’ compensation insurer (WC Ins Co.) also pays all of his medical bills.

In Edward’s third party personal injury claim, he seeks financial compensation for his medical bills and lost wages, in addition to his other damages. Let’s assume that there are no issues of liability and at the end of Edward’s treatment Tom Party’s auto insurance company offers the full policy limits of $250,000 to settle the third party personal injury claim.

Edward is happy with the offer and wants to settle. The workers’ compensation insurer, WC Ins Co, however, has a lien on the third party personal injury claim and seeks reimbursement for the medical bills and disability benefits they paid for Edward. Edward is confused and doesn’t understand why he has to reimburse the workers’ compensation insurer, WC Ins Co.

To Better Understand the Workers Compensation Lien on the Third Party Injury Claim, We Must First Understand Compensatory Damages in Massachusetts

In Massachusetts, like most other jurisdictions, compensatory damages are the monetary amounts an injured person may be awarded as part of a settlement or by a court or jury in a lawsuit. Medical bills and expenses are an element of damages in a personal injury claim or lawsuit. They are considered losses for the injured party and he or she will seek reimbursement of the medical bills in a personal injury claim. The medical bills are, therefore, an element of the compensatory damages.

As their name suggests, compensatory damages are intended to compensate the plaintiff for his or her losses. Compensatory damages are designed to make the accident victim whole, not to reward the injured person. The purpose of the law in awarding damages is to compensate an injured person for the losses incurred because of another person’s negligent conduct. The object is to try and restore the person to the position he or she would have been in had the negligent act not occurred.

So, what if workers compensation paid the medical bills and not the injured employee, like in the example above? Can he or she still receive compensation from the negligent third party? The short answer is: Yes.

How Does A Workers’ Compensation Case Affect The Third Party Personal Injury Settlement?

As mentioned above, if the employee was on the job at the time of the accident and the accident was caused by a third party, the workers’ compensation insurer will have a lien on any settlement or recovery from the negligent third party.

Like most states, in Massachusetts a workers’ compensation insurer has the right to be reimbursed for all benefits paid to the injured employee under M.G.L. c. 152 § 15 if there is a third party personal injury claim involving the same work related accident. This statute provides that any recovery in the third party personal injury claim is for the benefit of the insurer. The statute (Section 15) actually uses those terms “The sum recovered shall be for the benefit of the insurer…”

For Example: Using Edward from the example above, the workers compensation insurance company, WC Ins Co, paid the medical bills, including the ambulance bill, emergency room and surgery bills as well as physical therapy. WC Ins Co will place a lien on the third party personal injury recovery or settlement from Tom Party’s auto insurance company.

Remember, Tom Party’s auto insurance company offered a settlement of $250,000 to settle the third party personal injury claim. Part of the settlement offer was to compensate Edward for his medical bills. But, Edward didn’t pay the medical bills, the workers compensation insurer did. So, they have a lien on the third party action and want to be reimbursed for the medical bills they paid.

Does this mean that the injured employee will not receive any compensation? No. The injured party will still receive money from the settlement, provided there are no other issues in the case. He or she will not receive the total amount of the medical bills.

Many think it is unfair to be required to reimburse the workers’ compensation insurer from a third party settlement. This is usually everyone’s initial reaction, but you must keep things in context. As discussed above, the compensatory damages in the third party injury claim are intended to make the injured party whole. But, he or she didn’t pay the medical bills, workers compensation did. The workers’ compensation insurer, however, will only be reimbursed for what they actually paid. The injured employee can retain any excess money from the third party recovery or settlement. The Massachusetts statute, M.G.L. c. 152, Section 15, goes on to state “…unless such sum [recovered] is greater than that paid by [the insurer] to the employee, in which event the excess shall be retained by or paid to the employee.”

Workers compensation insurers pay pre-contracted board rates for medical bills, which are adjusted from their original amount. In the personal injury case, the total original medical bills will be sought. Therefore, if the third party personal injury claim works out, the accident victim will still receive a fair settlement.

For Example: We will focus on one medical bill for demonstrative purposes. In the case above, Edward took an ambulance from the scene of the crash. Let’s assume the ambulance transport cost $1,500. Workers compensation would have paid the ambulance bill from the medical benefits of workers compensation. The workers comp insurer, WC Ins Co, will not pay the total bill, but only a portion.

Assume, for instance, the worker compensation insurer paid only $900 for the ambulance bill. Edward will claim the total $1,500 from Tom Party, the negligent third party, and if Edward is successful in his third party personal injury claim, the total $1,500 ambulance bill will be included in the compensatory damages portion of the settlement offer.

Since the workers compensation insurer, WC Ins Co, paid $900 of the $1,500, their workers compensation lien will seek reimbursement of only the $900 they paid for the ambulance bill. Edward will be entitled to keep the difference of $600 ($1,500 - $900).

Is There Anything That Can Be Done About The Workers Compensation Lien?

In some cases, the injured employee or his or her lawyer can attempt to negotiate a reduction of the workers compensation lien. This typically occurs when insurance policy limits or a weak liability case against the negligent third party render any offered third party settlement insufficient to resolve the workers compensation lien and compensate the injured person. In these circumstances, reduction of the lien is usually in everyone’s best interests. Otherwise, the injured employee, if he or she will net zero from the third party settlement, will most likely choose to reject the settlement offer and go to trial. If he or she loses at trial then no one will receive any money.

Now, this is just an overview of how a workers compensation lien will affect a third party personal injury settlement. There are many other aspects to these types of cases, which are beyond the scope of this article. It is always best for someone injured on the job by a negligent third party to seek legal advice and guidance from a qualified, experienced personal injury attorney.

Get Legal Help

If you have been hurt in an accident on the job and the accident was caused by a third party, you may have more than just a workers compensation claim in Massachusetts. You may have a third party personal injury claim against the person, who caused the accident. A very important decision you can make right away is to seek advice from an experienced injury attorney.

Mahaney & Pappas, LLP has represented numerous employees hurt on the job get the compensation they deserve from both workers compensation and from the negligent third party, who is legally responsible for causing the employee’s injuries. We offer free, no-obligation initial meetings and case evaluations. All you have to do is call (508) 879-3500 or contact us online today. Call today to see how we can help you.