Workers’ compensation and general liability often operate in parallel worlds, but when a workplace injury involves a third party, those worlds collide. For claims professionals and risk managers, understanding that intersection is critical to protecting recovery rights, managing exposure, and avoiding costly missteps.
New York Workers’ Compensation Law (WCL) Sections 11 and 29 provide the framework for how and when workers’ compensation benefits can be recovered from responsible third parties. While the concepts may be familiar, the practical application, particularly around liens, credits, and future benefits, can significantly impact claim outcomes.
This article walks through the key considerations every claims professional should keep top of mind.
Exclusive Remedy—and Its Limits (WCL §11)
Workers’ compensation is built on a compromise:
Employees receive no-fault benefits, including wage replacement and medical care.
Employers receive limited liability through the exclusive remedy doctrine.
However, exclusive remedy is not absolute. Exceptions include:
Failure to secure workers’ compensation coverage
Intentional torts
More importantly for recovery efforts, exclusive remedy does not protect third parties whose negligence contributed to the injury.
When Third-Party Liability Enters the Picture (WCL §29)
Section 29 of the WCL governs situations where a third-party bears responsibility for an employee’s injury. Common scenarios include:
Accidents in common areas
Motor vehicle accidents
Labor Law §240/§241 claims
Product liability
When these claims exist, the workers’ compensation carrier may have:
A lien against past benefits paid
A credit (holiday) against future benefits
Potential assignment rights if the claimant does not pursue recovery
The purpose of Section 29 is threefold:
Allow the claimant to recover from responsible third parties
Prevent double recovery by the claimant
Reimburse the carrier for benefits paid due to another’s negligence
Claimant Choices—and Carrier Consequences
A claimant with third-party rights under Section 29 may:
File a lawsuit
Resolve the matter by settlement
Proceed to trial
Do nothing at all
Importantly, doing nothing is not always neutral. If the claimant fails to act within statutory timeframes, the carrier may obtain an assignment of rights, allowing it to pursue the third-party action directly. This gives the carrier control over litigation strategy, recovery, and distribution.
Consent to Settlement: A Critical Protection
When a claimant seeks to voluntarily settle a third-party action, written consent from the workers’ compensation carrier is essential.
Without consent (or court approval), the claimant risks forfeiture of future workers’ compensation benefits.
Carrier consent typically outlines:
The settlement amount
The lien being recovered
Allocation of litigation costs
Treatment of future benefits
Judicial approval may be obtained where a settlement is reasonable, including via nunc pro tunc orders when consent was not obtained in advance.
Understanding the Workers’ Compensation Lien
What’s Included
A workers’ compensation lien consists of past benefits paid, including:
Indemnity benefits
Medical benefits
Amounts paid under Section 32 agreements
What’s Excluded
The lien does not include:
Carrier Legal expenses
Independent medical exams (IMEs)
Administrative costs
The distinction is critical when calculating recoverable amounts following a third-party settlement.
Cost of Litigation: Sharing the Burden
Under New York law, carriers must share in the cost of litigation, including attorneys’ fees and disbursements, proportionally to the benefit they receive from the third-party recovery.
This reduces:
The recoverable lien amount
The value of the credit against future benefits
Pre-settlement loans to claimants are not considered litigation costs and do not factor into lien reductions.
When the Lien Exceeds the Recovery
Not every third-party settlement benefits the claimant—or the carrier.
If:
The third-party settlement is small
Attorneys’ fees significantly reduce the recovery
The lien remains greater than the remaining balance
The claimant may receive no net benefit, even after the lien is reduced for litigation costs. These scenarios require careful evaluation before settlement to manage expectations and avoid disputes.
Assignment and Subrogation Rights
A carrier may pursue an assignment of the claimant’s rights if:
One year has passed since the action accrued, or
Six months have passed since an award of compensation
Assignment is not automatic and requires strict notice requirements pursuant to WCL Section 29(2). If the claimant does not commence action within 30 days of proper notice, assignment may occur by operation of law.
Special Consideration: Motor Vehicle Accidents and Loss Transfer
Motor vehicle accidents remain a frequent source of third-party recovery.
Key points include:
Payments made in lieu of no-fault benefits (generally the first $50,000) are not recoverable under Section 29
However, loss transfer under Insurance Law §5105 may apply
Loss transfer allows recovery where the accident involves at least one vehicle which is:
Over 6,500 pounds; and/or
Principally used for the transportation of persons or property for hire
Claims must be arbitrated and are subject to a statute of limitations tied to each payment made, not the date of the accident.
Final Takeaways for Claims Professionals
When workers’ compensation and general liability intersect:
Analyze how the accident happened
Assess the true value of the third-party claim
Understand how settlement impacts both past and future benefits
Scrutinize the breakdown of litigation costs
Think long-term—not just at the lien number
That final, inevitable question “What’s the lien?” rarely has a simple answer. But with the right analysis, it can become a powerful tool instead of a point of contention.
Every claim is different, and the nuances of liens, credits, and third-party recoveries can make a big difference in how a case ultimately resolves. If you have questions, want a second set of eyes on a particular matter, or just want to talk through how these issues may impact your claims strategy, our team is always happy to connect. We welcome the chance to talk through the details and help you make the most informed decisions possible. Please feel free to contact us.
