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Subrogation and Workers Compensation Liens on Third Party Settlements

Workers’ compensation lawyers may face extraordinarily complicated issues when dealing with third party settlements. Staying on top of current statutes and case law is crucial. In this episode of Workers’ Comp Matters, host Alan Pierce welcomes Cathy Surbeck to discuss subrogation and liens on third party settlements. Subrogation refers to instances where an insurance company steps into the injured worker’s shoes to sue a third party. They explain the variables involved in these matters and give specific examples of how processes differ in various states.

Are Workers’ Compensation Settlements Taxable?

If you’re injured on the job, workers’ comp benefits everyone. You get compensation for workplace injuries or illness without having to sue. Your employer and coworkers don’t have to worry about liability for the accident. And your benefits help make up for the income you lose while you’re out injured, but they’re not taxed as income.

Injury and Illness
The tax laws for workers’ comp also apply to other benefits, such as black-lung compensation for miners or Jones Act job-injury pay for the Merchant Marine. Generally, if you get money because you became sick or injured due to your job — regardless of which law covers you — the money doesn’t count as taxable income. You don’t even have to include it on your 1040. If you die and the act gives your family survivor benefits, those aren’t taxable either.

Exceptions
If your occupational injury or workplace-caused illness is bad enough that you decide to retire, that doesn’t make your retirement pay into a type of workers’ comp. If your retirement benefits are based on age, prior contributions to the plan or your years with the company — as opposed to your injuries — they’re often taxable. If you receive workers’ comp benefits and Social Security benefits at the same time, the government may reduce your Social Security and tax part of your workers’ comp payment.

Lawyer Claims Highest Known Workers’ Comp Settlement in California History

Attorney Christopher Asvar believes he has secured the highest known workers’ compensation insurance settlement in California history, totaling $8.9 million on behalf of a Antonio Enriquez, who suffered a traumatic brain injury in 2004 at the age of 18 after falling from a scaffold.

Asvar said he’s talked to “structured settlement folks up and down the state,” and with those negotiating the settlement on behalf of California’s State Fund, and everyone he’s spoken with agrees this is the highest known workers’ comp settlement in California.

Workers’ comp settlements in California are not tracked by size, and what those involved with the case wouldn’t know about would be confidential settlements, or cases were the “usual players” were not involved, Asvar said.

According to State Fund, this may very well be one of the largest settlements that California’s biggest provider of workers’ comp insurance has been involved with.

“It’s pretty darned large,” said State Fund spokeswoman Emily Gorin. “I think it would be safe to say that this is among our biggest cases.”

Gorin, who said research is being conducted to see if this is State Fund’s largest settlement, noted that State Fund has a lot of high risk businesses, and insures a large number of big employers.

Gorin said the settlement was so large due to the nature of Enriquez’ injuries, because he’s so young and that intense care is likely to be required for the rest of this life.