The Lien: Where the Worker’s Compensation Case and Third Party Liability Suit Come Together in Illinois

There are two separate systems for compensating injured workers for on the job injuries in Illinois.  These are:

• Worker’s compensation cases:  they are brought against your employer in a no-fault case at the Worker’s Compensation Commission, and provides the limited benefits provided for injured workers by the Illinois Worker’s Compensation Act; and

• Third party liability lawsuits: these are brought against anyone except your employer or a co-worker in the court system.  You must show that the other party is at fault, and when you do, you can recover the full range of compensatory damages, including some that are very similar to the worker’s compensation benefits you are entitled to.

We should emphasize that worker’s compensation is a no-fault system: your employer is required to pay benefits no matter who is to blame, whether it is you, your employer, or some other third person (which is where the term “third party liability lawsuit” comes from).  Your employer also must pay those benefits as they come due.  While you are off work, your employer must pay the disability benefits on a weekly or bi-weekly basis, and when you are getting medical care, they must pay your bills in a timely fashion.  On the other hand, the defendant in a third party liability lawsuit does not have to pay anything until either a settlement is reached or there is a jury verdict.  This can take months (and more frequently, years) to occur.

If you think about an accident that results in a third party liability lawsuit from the perspective of your employer, it is not their fault that you were hurt, either, but they are still liable for paying worker’s compensation benefits to you.  For example, let’s assume you were working as a delivery man for a plumbing supply company and were out making a delivery and were rear-ended at a stop light and suffered a herniated disc on your lower back.  Your employer clearly has no fault in causing your accident, but still has to pay your worker’s compensation benefits.

The state legislature recognized how unfair it would be to require employers to pay worker’s compensation benefits in situations where there is a third-party liability lawsuit and not be able to recover any of the benefits that they paid out.  Therefore, the Worker’s Compensation Act provides that employer will have a lien against any funds that are recovered from a third-party liability lawsuit.  A lien is a legal right to recover funds, and it attaches to any judgment or settlement from a third-party liability lawsuit.  This means that your employer gets paid back the benefits it paid to you out of the settlement or judgment.  The amount of the lien equals the total amount of worker’s compensation benefits that was paid to you.

Going back to our plumbing supply driver example, assume that as part of the worker’s compensation case, the injured driver received a total of $10,000 in TTD payments while he was off work, that the employer paid $15,000 in medical expenses, and the lump sum settlement for permanency was $18,000.  This is a total of $43,000.  That figure represents the worker’s compensation lien which must be paid back to the employer.  Let’s assume further that the case went to trial and assessed damages  in the amount of $100,000 including $15,000 for lost wages (remember that TTD benefits are only two-thirds of your average weekly wage), $15,000 for medical expenses, and $70,000 for pain and suffering.  From the verdict, $43,000 would have to be repaid to the injured worker’s employer, and he would be receive a net verdict of $57,000.

When the defense is successful in claiming that the injured worker was contributorily negligent, one strange twist in the law is that the worker’s compensation lien does not get reduced correspondingly.  It would make sense that if the injured worker is found 20% contributorily negligence, then the worker’s compensation lien would be reduced 20% also, but that is not how it works.  The worker’s compensation lien is not affected by a finding of contributory negligence against the injured worker.  However, when the injured worker is found more than 50% contributorily negligent, then the worker’s compensation lien is wiped out by the verdict in favor of the defense.  The possibility of losing its lien altogether can be used as a powerful lever against the worker’s compensation carrier in settlement negotiations to get them to accept a reduced amount which will still leave the injured worker with an acceptable settlement from his or her third party liability suit.

It goes without saying that the interplay between the third party liability suit and the worker’s compensation lien can be very complex.  Moreover, you will sometimes find that the worker’s compensation carrier will try to claim items as part of the lien which they are not entitled to claim as part of the lien.  This is a good reason why you should hire an experienced Chicago personal injury lawyer to assist you with your third party liability suit.