Virginia Court of Appeals Provides Guidance on Recovery of Workers’ Compensation Liens
The Virginia Court of Appeals recently issued an opinion concerning an employer’s entitlement to an offset against future benefits when the claimant’s gross recovery from a third-party claim exceeded the employer’s existing lien against the third party. In Goode v. Va. Commonwealth Univ., 2025 Va. App. LEXIS 270 *; 2025 LX 77662; 2025 WL 1373400, the Court of Appeals of Virginia affirmed the Commission’s suspension of an award for temporary total disability benefits upon the entering of a third-party order until the excess credit from the third-party recovery was exhausted.
In workers’ compensation claims that involve an injury caused by a negligent third-party during the course of employment, claimants have the right to sue that third-party in a common law action as well as claim compensation benefits from the employer under the Act. To bar unjust enrichment of the claimant, the Act only allows for one full recovery for the injury. Under Virginia Code § 65.2-309(A), “a lien is created on behalf of the employer against any verdict or settlement” arising from the claimant’s right to recover damages for the workplace injury from a third-party. While this serves to bar a claimant from double recovery at the employer’s expense, it also prevents an employer from benefitting without sharing in the claimant’s litigation costs. A pro rata apportionment of reasonable attorney’s fees and expenses is divided between the claimant and the employer.
When a third-party settlement is reached and the total recovery for such is greater than the workers’ compensation lien, the employer is entitled to an offset on future benefits for the difference between the gross recovery by the claimant and the employer’s compensation lien. Virginia Code § 65.2-313 requires an employer to pay the claimant a “percentage of each further entitlement as it is submitted equal to the total attorney’s fees and costs bear to the third-party recovery” until the offset credit has been exhausted.
In Goode, an award was entered entitling the claimant to disability benefits which the Commission suspended upon the entering of a third-party order that memorialized VCU’s lien against the proceeds of the third-party settlement. The Court of Appeals affirmed this decision, reasoning that Virginia Code § 65.2-313 required a suspension of benefits until the credit was exhausted because VCU was responsible only for reimbursements of attorney’s fees and expenses when the entitlements were submitted by the claimant. These reimbursements differ from a disability award in that they are not automatic, but predicated on the submission of each entitlement by the claimant as they are accrued. Insurance carriers and employers who are under an open award for a claimant receiving a third-party settlement should be mindful that the suspension of the open award is not automatic and also be mindful of their credit.