Two‑Thirds Workers' Compensation Lien in a Third‑Party Suit: How It Works

What Is a Two‑Thirds Workers' Compensation Lien?

A workers' compensation lien allows a claimant to secure a claim against a third‑party defendant's assets or settlement proceeds. In many states, the lien amount is limited to two‑thirds (≈66.7%) of the claimant's recoverable benefits, ensuring that the claimant receives priority over other creditors while protecting the defendant's broader estate.

When Does the Lien Apply?

The lien applies when the injured employee's compensation is sought from a third party—typically a vehicle owner, contractor, or property owner—whose liability contributed to the injury. The claimant must first obtain a workers' compensation award from the state board before the lien can be filed against the third party.

Filing Requirements and Procedure

1. Notice of Lien: The claimant files a formal notice with the state workers' compensation board, specifying the third party and the amount based on the two‑thirds rule.

2. Proof of Award: A certified copy of the award or settlement statement is attached to substantiate the lien.

3. Service to Defendant: The lien notice is served on the third‑party defendant, giving them a chance to contest or negotiate.

4. Court Filing: If the third party disputes the lien, the claimant files a claim in the civil court handling the third‑party suit, attaching the lien notice.

Impact on Settlement and Recovery

Once the lien is upheld, the claimant's two‑thirds share is paid directly from the defendant's settlement proceeds before the defendant receives any net payment. The remaining one‑third is typically returned to the claimant's workers' compensation insurer.

Limitations and Exceptions

• The lien cannot exceed the total amount of the workers' compensation award.

• Some states exclude certain third‑party defendants, such as insurance carriers or government entities, from lien applicability.

• The claimant must act promptly; a delayed lien may be deemed invalid.

Key Takeaway

A two‑thirds workers' compensation lien is a powerful tool that secures a claimant's priority interest in third‑party settlements, but it requires precise filing, timing, and compliance with state statutes.