Escrow account doesn't save worker's settlement from reduction

In Indiana, an injured worker who settles with a third party for substantially less than the damages value of his claim without the consent of his employer or the workers' compensation carrier can reduce his lien by attorney's fees and costs.

Case name: Kornelik v. Mittal Steel USA, Inc., No. 45A03-1011-CT-583 (Ind. Ct. App. 08/10/11).

Ruling: The Indiana Court of Appeals held that a worker could reduce his lien by attorney's fees and costs, but not in the same proportion that his full recovery was reduced.

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What it means: In Indiana, an injured worker who settles with a third party for substantially less than the damages value of his claim without the consent of his employer or the workers' compensation carrier can reduce his lien by attorney's fees and costs.

Summary: A worker for a business suffered third degree burns to his hands and face while performing maintenance on a slag processing system at a steel company. The business's workers' compensation carrier paid him temporary total disability benefits and medical expenses. He sued the steel company and one of its supervisors. The parties reached a settlement agreement for substantially less than the damages value of his claim. The agreement provided that that the worker was responsible for paying all liens, including the workers' compensation lien for the benefits received from the business. The agreement was reached without the consent of the business or its carrier. The worker sought to reduce his workers' compensation subrogation lien. The Indiana Court of Appeals held that the worker could reduce the lien by attorney's fees and costs.

The court explained that if an injured worker settles with a third party for an amount more than his workers' compensation benefits, he must reimburse the workers' compensation payor and keep the remainder of the settlement, relinquishing his right to the compensation benefits.

The court said that the worker was barred from seeking a lien reduction because he settled the case without the business's consent. The worker argued that he set aside the lien amount in an escrow account. However, the court said this did not protect the business by court order, as required by state law. Therefore, the lien could not be reduced in the same proportion that the worker's full recovery was reduced.

Read more at the WorkersComp Forum homepage.

October 3, 2011

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