Sometimes a work-related injury will support both a workers' compensation claim and a personal injury action. Within the context of workers' compensation, when it is said that a workers compensation insurer has placed a "lien" on a file, it means that they have registered a claim to be reimbursed out of the proceeds of the personal injury litigation for certain expenditures they made on behalf of the injured worker. This process, whereby an insurer claims a right to reimbursement from a third party who is also responsible for the loss, is known as "subrogation".
Workers' compensation laws vary significantly between states, so it is important to check a particular state's laws in attempting to determine if a workers' compensation carrier will be able to assert a lien on a personal injury case arising from the same injury. Where liens are allowed, they typically permit the workers' compensation insurer to recover certain expenditures made toward the injured worker's medical care, rehabilitation, and lost wages.
Workers' compensation carriers are aware that at times a lien will be so large that it creates a disincentive to litigate. That is to say, if the lien will approach or exceed the total amount a plaintiff is likely to receive as the result of a lawsuit, the plaintiff may simply choose not to litigate. Also, the workers' compensation carrier is generally expected to pay for its share of the litigation in return for receiving a share of the recovery. As a result, the carrier will often negotiate with the plaintiff's attorney about the amount of the lien, and will often agree to resolve the lien for an amount substantially less than the face value of their claim. Whenever a workers' compensation insurer attempts to impose a lien on a personal injury file, the plaintiff's counsel should attempt to negotiate a lower figure - even if the insurer refuses to negotiate, nothing is lost through the effort, and most of the time negotiations will result in a reduction in the amount demanded by the insurer.