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Formula for Payment of a Worker’s Compensation Lien Out of Third Party Settlement Funds


Now that you have a third party settlement, how much do you pay the worker’s compensation carrier from your proceeds? Many times an injured person is entitled to both workers’ compensation benefits as well as a third party settlement.  Since the workers’ compensation doctors are often conservative and will not recommend procedures, including surgery, those procedures and surgeries may be paid for under a letter of protection or out of the third party settlement.

Where the workers’ compensation carrier has provided benefits, they will have a lien for the amount they have paid.  The amount the injured person has to pay back to the workers’ compensation carrier is determined by the formula set forth in the case of Manfredo v. Employer’s Casualty Ins. Co., 560 So.2d 1162 (Fla. 1990).

Following the Manfredo formula, the third party settlement is divided by the Claimant’s net tort recovery, which is arrived at by deducting attorney’s fees and costs and outstanding medical bills outside of workers’ compensation.  In other words, the total amount the Claimant will receive (his net tort recovery) over the full value of the case equals a percentage payback to the workers’ compensation carrier.  The example below illustrates this calculation.

My advice for you is that you send the workers’ compensation subrogation adjuster a letter explaining that the case settled and how much the client will net from the settlement.  Explain the formula for payback and have the adjuster sign agreeing to it and indicating to whom the check should be payable.  Here is an example:

Dear Adjuster:

The purpose of this letter is to resolve the workers’ compensation lien with you. I enclose a copy of your payout showing the amount of your lien.

The case of Manfredo v. Employer’s Casualty Ins. Co., 560 So.2d 1162 (Fla. 1990) provides for the formula to use for your repayment.  In this case the third party settlement of $275,000.00 is divided by our client’s net tort recovery, which is $127,124.80. This amount is arrived at by deducting our one-third for attorney’s fees and costs along with the outstanding medical bills as he had surgeries outside of workers’ compensation. The $127,124.80. that he will receive over the full value of the case, $275,000.00, equals a 46% payback.  That 46% payback times your lien of $20,359.38 calls for us to pay you back $9,441.57.  If that is agreeable, please sign below so that I can issue you a check for $9,441.57 upon clearance of the lump sum funds. Please indicate to whom we should make that check payable and if there is any special information that needs to go on the check.

Attorney Signature

I agree to accept $9,441.57 and I request the check be made payable to ______________________________________________.

Insurance Company



Adjuster                                                                   Date

The carrier may want a 46% reduction in future benefits if they are still providing benefits.  They are entitled to that up to the amount of the client’s net tort recovery.  City of Hollywood v. Lombardi, 770 So. 2d 1196 (Fla. 2000).


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