Why Your Workers' Comp Case And Your Lawsuit Have To Talk To Each Other

A construction worker is hurt on a New Haven job site because of a subcontractor's mistake. Workers' compensation pays his medical bills and weekly benefits. His attorney also brings a lawsuit against the subcontractor. Two years later, that case settles.

Before anyone can divide the settlement, the workers' compensation carrier asserts a lien for the benefits it paid.

Connecticut law gives the carrier that right when the statutory requirements are met. If you have both a comp claim and a lawsuit, how the two cases are coordinated can substantially change what you keep and what remains covered later.

The Carrier May Have Repayment Rights

Connecticut law allows an injured employee to receive workers' compensation benefits and also pursue a third-party lawsuit against someone other than the employer who caused the injury. A recovery in the lawsuit, however, can trigger repayment rights in the comp case.

An employer, its workers' compensation carrier, or the Second Injury Fund may have a lien on a third-party judgment or settlement after giving the written notice required by the statute. When the employer and employee are both parties to the lawsuit, the law generally gives the employer's claim priority after reasonable and necessary costs of obtaining the recovery, including attorney's fees, are deducted.

The carrier may be entitled to recover some of the benefits it already paid from the money obtained from the responsible third party. Most injured workers first hear about that lien when settlement numbers are being discussed.

That is too late to start planning.

Connecticut's One-Third Reduction

Under Connecticut General Statutes § 31-293(a), when the employee brings the third-party action, the employer's reimbursement claim is generally reduced by one-third, unless the parties agree otherwise. That one-third reduction belongs solely to the employee.

The employee and the employee's attorney took on the work and risk of pursuing the responsible party, while the carrier benefits when that case succeeds. The one-third reduction accounts for that effort.

Consider a simplified example. Suppose a private workers' compensation carrier paid $100,000 in benefits, and the third-party lawsuit settles for $300,000:

• The carrier's reimbursement claim begins with the benefits it paid.
• The statutory one-third reduction would reduce a $100,000 claim to approximately $66,667.
• The approximately $33,333 reduction belongs to the employee.

That example is deliberately simplified. A real distribution must also account for attorney's fees, litigation expenses, the parties to the action, notice, and the specific benefits paid. The one-third rule also does not apply when reimbursement is owed to the State of Connecticut, a political subdivision, a local public agency as employer, or the Second Injury Fund. Do not assume the carrier's opening lien figure is the final amount.

A Settlement Can Affect Future Benefits

The lien addresses benefits the carrier has already paid. A separate rule can affect benefits that may become due later.

Connecticut courts recognize a credit against certain later workers' compensation benefits when an employee receives net proceeds from a third-party recovery. Lawyers often call this credit a moratorium. The workers' compensation claim remains open, but the carrier may not have to resume paying covered benefits until the applicable credit is exhausted.

In Callaghan v. Car Parts International, LLC, 329 Conn. 564 (2018), the Connecticut Supreme Court held that the employee's statutory one-third reduction is not part of that future-benefit credit. That share remains solely for the employee's benefit.

Future treatment makes the calculation especially important. A back injury may require another surgery years after the lawsuit settles. Before accepting a third-party settlement, the employee needs to understand the amount of any credit, which later benefits it may affect, and how future medical costs will be handled.

The Lien May Be Negotiated

The statute provides the starting rules, but the parties may still negotiate. A carrier may agree to compromise its lien based on disputed fault, limited insurance coverage, litigation risk, future exposure, or the terms needed to complete the settlement.

No further reduction is automatic. A strong third-party case may give the carrier less reason to compromise, while a difficult case may create a different conversation. The result depends on the claim, the available money, and the agreement the parties can reach, and that discussion should happen before the third-party settlement is signed.

One Injury Needs One Coordinated Strategy

Because the lien and the future-benefit credit both depend on the same recovery, the timing and structure of each settlement can change the final result.

When different offices handle the two matters, coordination should be direct and early. Each office should know the benefits paid, the claimed lien, the future medical picture, the available third-party coverage, and the proposed settlement terms before either case closes.

Coordination means calculating the lien, addressing any possible reduction, measuring the future-benefit credit, and planning for treatment that may still be needed. Those steps often decide what an injured worker actually receives.

Before You Settle Either Case

If you have a workers' compensation claim and a personal injury lawsuit arising from the same injury, do not settle either one without understanding how it affects the other.

Our firm handles Connecticut workers' compensation claims and third-party injury cases together. If you are facing a lien or considering a settlement, contact our office for a free consultation before you sign. We can review both matters, explain how the current numbers interact, and help you plan the next step.