Invisible Hands, Vanishing Liens: The Quiet Power of Intervention

Why Failing to Intervene Is Risky

In the world of workers’ compensation subrogation, what you don’t do can hurt you—and hurt you badly. Nowhere is this more true than in the context of a compensation carrier, its third-party administrator, or its subrogation vendor deciding whether or not to intervene in a pending third-party lawsuit filed by an injured employee. The seemingly innocuous decision to “wait and see” or not to intervene at all often stems from a misguided calculation about statutory requirements or cost efficiency. But this short-sightedness can have profound consequences on the bottom line. Unless a particular state prohibits intervening, filing an intervention is almost always the prudent route to take when protecting your workers’ compensation subrogation liens and your precious potential right to a future credit or vacation.

Statutory Requirements vs. Practical Realities

It is true that in a small minority of states, workers’ compensation carriers are not technically required to intervene in order to preserve a statutory lien. However, the question of whether intervention is statutorily required is only the beginning of the analysis—and not the end. Indeed, in the vast majority of states, failing to intervene or intervening too late can significantly compromise the lien and the overall recovery, even if the statutory right to reimbursement remains theoretically intact.

How Plaintiff’s Counsel Exploits Non-Intervention

Personal injury lawyers, as fiduciaries to their clients, are duty-bound by ethics to maximize the injured worker’s net recovery. That often means minimizing or even attempting to eliminate the workers’ compensation lien through clever procedural tactics, application of equitable doctrines, or close-up sleight of hand techniques, and the gerrymandering of settlements in such a way as to blow up your supposedly “safe” statutory line. In many states, these strategies become exponentially more effective when the compensation carrier fails to appear formally in the action. The notion that the lien is secure simply because it exists on paper or is technically secure due to a subrogation statute belies the procedural realities of litigation in which a subrogation presence matters.

Leverage Lost in Settlement and Court

An experienced plaintiff’s attorney knows that the absence of a lienholder from the litigation allows for powerful leverage in settlement negotiations, motions for allocation, or arguments under the common fund or made whole doctrines. And in many jurisdictions, the court is not obligated to ensure that the absent lienholder receives its due. An award can be apportioned, or a settlement can be structured, in ways that diminish or sidestep the carrier’s interest altogether. If there’s no seat at the table, there may be no share of the meal. Moreover, the longer a carrier delays intervention, the more vulnerable it becomes to procedural deadlines, court-imposed limitations on discovery, and settlement conferences at which critical decisions are made without its input. Worse still, intervention may be denied as untimely. It is not unusual for courts to hold that a carrier who waited until trial was set or settlement was imminent has waived the right to intervene—even if they had a statutory lien. By then, the damage is often already done.

What’s more, the failure to intervene does not just hurt the carrier—it harms the employer as well. When a lien goes unrecovered, the loss directly impacts the employer’s experience modifier, which in turn results in higher premiums. The employer ends up paying twice: once through the compensation system and again through inflated premiums. Subrogation vendors and TPAs, who are often compensated based on recoveries or a fixed fee structure, may view the cost of local counsel as an unnecessary impediment to profitability. But that economic disincentive should not drive decisions that ultimately affect lien preservation. The ethical and fiduciary obligations owed to the insurer and the employer demand a broader view—one that accounts for long-term recovery and strategic positioning rather than short-term cost avoidance.

MWL’s 50-State Chart: Intervention Recommendations

The third column of Matthiesen, Wickert & Lehrer’s chart titled “Workers’ Compensation Subrogation in All 50 States” identifies those states in which intervention is recommended, and why. It is a valuable resource because it reflects not only statutory mandates but also MWL’s vast litigation experience. For example, in states such as Arkansas and Louisiana, failure to intervene may result in a complete waiver of rights. In others, like Indiana and Maine, while the statute may not mandate intervention, case law and practical experience strongly suggest that it is necessary to preserve leverage and ensure fairness in recovery.

Statutes often serve as the floor—not the ceiling—of rights and obligations. Intervention may be technically “unnecessary” under a narrow reading of the law, but tactically essential when confronting plaintiff’s attorneys determined to reduce the lien. It becomes necessary when it is no longer unnecessary. Even in jurisdictions where the statute appears silent on intervention, prevailing trial practices may render non-intervention tantamount to surrender.

Make Intervention the Rule, Not the Exception

One frequently overlooked reality is that settlements are often structured in a way that diminishes the visible allocation to damages covered by the lien. Without a party present to advocate for its share, courts and opposing counsel may allocate damages in ways that favor the claimant and disfavor the compensation carrier. In some states, courts will interpret silence as acquiescence, particularly in the absence of a formal motion or opposition.

It is therefore incumbent upon insurance carriers and their representatives to adopt a default posture of formal intervention unless clear and compelling reasons justify a different approach. This should not be the exception—it should be the rule. The legal system is adversarial. Rights that are not asserted are frequently lost or diminished.

By proactively involving experienced subrogation counsel, such as Matthiesen, Wickert & Lehrer, a carrier ensures that its interests are represented, its lien is protected, and its statutory and equitable rights are preserved. Counsel can monitor case developments, participate in settlement negotiations, assert objections to improper allocations, and argue against the application of doctrines such as common fund and made whole where they do not apply. Most importantly, counsel can ensure the carrier’s lien is not simply an afterthought or a bargaining chip.

Failing to intervene may not immediately destroy the lien. But it weakens it in ways that become evident only when it’s too late to act. It invites challenges, facilitates reduction, and creates conditions under which plaintiff’s counsel can argue—often successfully—that the carrier should take nothing or next to nothing. It allows trial lawyers to define the terms of settlement, allocate damages creatively, and present the absence of opposition as consensus.

Key Advantages and Protective Benefits of Intervention

Some trial lawyers will argue that intervention isn’t necessary because the subrogation interests of the workers’ compensation carrier are being adequately represented in the third-party litigation. Again, this might be speciously and technically correct in some states, but in every state, there are myriad hidden reasons to intervene and an endless number of ways that a lien can be attacked if the carrier has not intervened. Some of these include:

1. One big reason why carriers should be allowed to intervene is the ubiquitous habit of trial lawyers have of never responding to subrogated workers’ compensation carriers or their representatives. Plaintiff’s counsel is not your friend. And silence and lack of information on the pending third-party case are one of the lien’s greatest enemies. Workers’ compensation carriers must make significant claims decisions based on the likelihood or not of a third-party recovery in the offing. With no feedback, responses, or information from plaintiff’s counsel, you are flying blind. Intervention allows you to know the precise status, size, value, and likely resolution timeline of the third-party lawsuit.
2. With significant dollars at stake, multi-billion dollar companies may not want the billboard lawyer on the Turnpike to hold their future recovery in his or her hands. Having subrogation counsel in the picture may save the case from damage or dismissal.
3. Moreover, a workers’ compensation carrier is almost never subrogated to loss of consortium awards to spouses, and a carrier with no voice in the litigation is impotent to combat an allocation of a huge portion of a recovery to a spouse in an effort to avoid repayment of the lien if they are not engaged in and aware of all developments and discovery in the underlying third-party case. How is our interest adequately protected when the other side is free to conspire and gerrymander a settlement to benefit themselves and harm the very insurance company who is told it can’t intervene because it is protected?
4. Another reason for intervening is that the carrier will have its own counsel on which to rely on in evaluating third-party liability and chances for third-party recoveries. When a claims handler must rely on the plaintiff’s attorney to give them an opinion as to third-party liability and chances of recovery, they are invariably told that liability has suddenly become weak, that chances of recovery are slim, and that the carrier should reduce its lien significantly or risk recovering nothing at trial. Often, they are not able to, and should not, rely on the plaintiff’s attorney’s opinions and suggestions in these areas. Utilizing plaintiffs’ counsel to represent the carrier’s interest, although provided for in § 417.003 of the Labor Code, is almost invariably an extremely unwise alternative. This particular advantage to intervening is highlighted in cases involving high reserves and catastrophic injuries, where the carrier’s credit becomes of paramount importance. Plaintiff’s counsel calls us and says, “The case sucks, please reduce your lien.” We have no information on whether the case sucks, so we say no. A case must now be tried because somebody thought the carrier was adequately represented.
5. Intervening also provides the best-known defense against awarding or allocating settlement monies from particular defendants who have immunity to subrogation, such as waivers of subrogation, additional insured endorsements, indemnity provisions, and the like. Only by actively intervening in a third-party case will the carrier have any ability to protect when and how such schemes occur. This happens all the time.
6. Although plaintiffs’ attorneys have, on occasion, ran off with the carrier’s money despite its intervention, intervening and active participation in third-party cases is the most successful preventative measure to avoid costly conversion suits when plaintiffs’ attorneys flatly refuse to reimburse the carrier or otherwise abscond with your subrogation money. The chances of this happening while the carrier is represented in a case are very remote.
7. Another advantage to intervening is that it allows subrogation counsel to serve as a watchdog over the plaintiff’s attorney’s activities and to make sure that discovery is pursued, that the case is properly prepared for trial, and that the maximum recovery (carrier’s credit) is obtained. Often, a claimant’s attorney will file suit against only certain defendants, and not others, in order to avoid repayment of workers’ compensation lien. Other times, they will file suit, send out written discovery, and then let the suit sit dormant for several months or years. Unlike wine, personal injury lawsuits do not improve with age.
8. If a plaintiff nonsuits his cause of action without the carrier having intervened, and the statute has run, the carrier will be barred from making any recovery. Frequently, claimants will opt to take such action and accept the benefits of workers’ compensation in light of a significant lien and weak liability in the third-party action. This often occurs where a third party has minimum limits of insurance and there is no distinct advantage to making a third-party settlement. Plaintiffs frequently overlook the assets of a minimum limit’s defendant, or creative causes of action against other vicariously liable defendants such as employers, partners, joint enterprises, and co-conspirators. Instead, they look to underinsured motorist coverage or other avenues of recovery to which the carrier is not subrogated. Quality subrogation counsel will protect your interests in such situations.
9. Intervening in a third-party case prevents numerous methods of reducing the statutory credit which a carrier is otherwise entitled to. Often, obtaining the statutory credit is more important than recovering the lien.
10. Handling subpoenas for the workers’ compensation file, protecting the file from production in a complicated or sensitive third-party case, and preventing harmful investigation from reaching the hands of the defense lawyer, which would otherwise torpedo and totally destroy the third-party case and the workers’ compensation carrier’s right of subrogation, can only be effectively accomplished through intervention in the litigation.
11. A third-party suit may be dismissed as a result of a sanction against a plaintiff’s attorney or the plaintiff. Dismissal of such a suit will prevent the carrier from making a subrogation recovery unless the carrier had previously intervened in the case to protect its interest. A judge cannot dismiss a carrier’s subrogation interests even when the plaintiff’s pleadings are struck for discovery sanctions, provided the carrier has intervened.
12. Only by intervening in third-party actions will the carrier have the ability to steer clear of negligent inspection claims, liability of additional insured, and the like. Only by intervention will a carrier be able to ascertain that the sole defendant against whom the carrier has waived subrogation does not ultimately become the only defendant against whom liability is proved up. These techniques can often be so subtle that a subrogated insurance carrier who has not actually intervened in a case may never know what hit them.
13. It is possible that a carrier’s subrogation rights can be disposed of summarily by a judge if it has not intervened in the case. (This does not necessarily mean the carrier can’t recover its lien, but it will be significantly more expensive and time-consuming to do so.) However, once a carrier has intervened, the judge cannot dispose of an intervention with a trial on the merits. Without an intervention, the plaintiff may argue that the carrier is estopped to assert or has otherwise waived its right to a recovery. Without an intervention, the carrier is helpless to prevent the judge from ruling in the plaintiff’s favor.
14. A carrier that intervenes in a third-party action is under no greater legal obligation to negotiate its lien than is a carrier that does not intervene. No Texas cases have held that failure to negotiate a lien in any way subjects a carrier to bad faith liability. No Texas case suggests that a carrier’s right to a full recovery is any less because it has intervened in a lawsuit. Intervention is frequently the only way for a subrogated carrier to preserve error on appeal for any egregious wrongs committed against it in a third-party action to which it was not a party, and you will rarely learn of such situations without actively pursuing subrogation.
15. In an increasing number of cases, plaintiffs’ attorneys fail to bring in all of the proper defendants for strategic reasons. A carrier who intervenes may desire to and can effectively bring into the lawsuit any of these defendants to serve its purposes. One example is a plaintiff who sues a premises’ owner for an injury occurring in a slip and fall accident, but fails to sue doctors who subsequently commit malpractice on the plaintiff. Texas law allows the plaintiff to recover damages caused by negligent medical care from the original tortfeasor. Nonetheless, it may be advantageous for the carrier to maintain a separate malpractice claim (or at least preserve the statute of limitations in the same) against these other defendants. This often cannot be done without intervening.
16. One of the most effective methods of maximizing recoveries for minimum costs is the concept of “networking.” Networking allows subrogation counsel to negotiate agreements with plaintiff’s attorneys who are in the “network,” allowing for a full recovery by the carrier for a minimum investment. The carrier must intervene or file suit first to take advantage of networking.
17. Intervening is the only effective way of obtaining favorable stipulations that are entered into the record and allow for full recoveries by the carrier. These stipulations are obtained by offering various things, such as specific activity in developing the case on the part of the carrier’s subrogation counsel, turning over an investigation conducted by the carrier, contributing a limited amount toward the expense of particular experts, or other costs in the case.
18. If a judgment does not dispose of a carrier that has intervened in a lawsuit, it is not final. Nonetheless, a judgment that disposes of a third-party case in which a subrogated carrier has not intervened will become final. The finality of such a judgment affects the rights of the plaintiff to appeal any decisions made by the trial court, which indirectly will affect certain rights of the subrogated carrier. The carrier will have no say about the occurrences preceding such a disposition if it has not intervened in the case.
19. In one case, it was held that a claimant who didn’t file an actual compensation claim (he received only some medical expenses), but who actively pursued a third-party claim, did not have to repay a subrogated workers’ compensation carrier because the carrier was not subrogated under such circumstances. A carrier that has intervened in a third-party action may have the ability to counter such a decision, either directly or indirectly, by asserting a claim for recovery of mistaken benefits, equitable subrogation, or the like.
20. In an increasing number of cases where the carrier has opted not to intervene, the plaintiff has taken the opportunity to “set up” the carrier for bad faith by deposing doctors under oath on the treatment, which was recommended by them, but not authorized by the carrier. I have experienced this personally in three different cases.
21. Any significant loss involving large reserves will almost always run into logistical problems regarding settlement because of the “gap theory.” The “gap theory” involves the difference between carriers claiming a “gross credit” as opposed to a “net credit.” A carrier that has intervened in a large third-party action can indoctrinate other counsel as to the carrier’s legal right to a “gross credit,” and then negotiate down to a “net credit” in exchange for significant concessions and repayment of the lien in full. Again, this cannot be accomplished without intervening.
22. A claimant who is barred from recovering against a tortfeasor who claims that the claimant was a “borrowed servant” of theirs at the time of the accident will recover nothing. If the claimant does not recover, neither will the subrogated carrier. However, if a carrier has actively intervened into such a case, it may pursue equitable subrogation recovery against the workers’ compensation carrier of the third-party tortfeasor who has obtained summary judgment.
23. By intervening in any third-party case where limitations are an issue, for injuries occurring prior to September 23, 1992, a carrier can assert the special limitations offered in Hix v. Guillot. Otherwise, the carrier will live and die by the statute of limitations applicable only to the claimant.
24. If a claimant settles a third-party case for an insignificant sum that will not fully reimburse the carrier, the carrier will have no recourse unless it has intervened into the case. If it has intervened into the case, it will be able to pursue a separate cause of action against the third party for a full recovery based on the original injury. Otherwise, there will be no cause of action for “wrongful settlement.”
25. Any case in which the available insurance limits are less than the workers’ compensation lien provides an opportunity for the carrier to make a full recovery. It cannot do so if it does not intervene in the third-party case and prevent the plaintiff’s attorney from recovering a full third of the limited proceeds, plus a proportionate share of the expenses.
26. When no-fault is involved, the carrier must know whether or not the verbal threshold is met, as it affects its payment obligations and its subrogation rights. It has no way of knowing this unless it is a party to the suit. Is plaintiff’s counsel going to call and tell them?
27. In states where an intervening workers’ compensation carrier is able to settle directly with the third party, this is an effective method to make a full recovery for little or no expenses in cases where the defense attorney is more interested in removing competent subrogation counsel from the case and dealing directly with a particular plaintiff’s attorney. The third party can then assert a credit for the full amount of the workers’ compensation lien. Such a maneuver is usually only feasible once the carrier has intervened in the case and threatens to be active.
28. It is often important to have the judgment and settlement documents drafted in a manner that benefits the carrier’s rights to recovery of their lien and statutory credit. Intervening is the only way to accomplish this. Employees’ attorneys are notorious for ignoring all calls and efforts to obtain third-party distribution sheets, orders, judgments, etc.
29. The need for Medicare Set-Asides (MSA) in the settling of workers’ compensation claims and third-party litigation has exploded in recent years. By intervening and actively representing the workers’ compensation carrier in third-party litigation, subrogation counsel will be in a position to negotiate the responsibilities for MSA compliance and, if the responsibility falls to the carrier, take the necessary action to put the necessary MSA paperwork into play. Trial lawyers loathe MSAs and the work associated with them. Negotiating a settlement that includes the workers’ compensation carrier shouldering responsibility for obtaining an MSA, in the right file, can result in significant cost savings and a dramatically increased subrogation recovery.

The Cost of Waiting

There are many more reasons to intervene if you are serious about protecting your lien and maximizing your recovery. In the end, intervention is not just a procedural act—it is a declaration of interest, an assertion of rights, and a signal that the lien will not be quietly ignored. Those who fail to make that declaration are too often left with the remnants of what should have been a full recovery. It is not enough to ask, “Do we lose the lien if we don’t intervene?” The better question is: “What do we lose if we don’t?” The answer, as it turns out, is—everything.