Usually, no. In Arizona, uninsured motorist and underinsured motorist proceeds are not lienable under A.R.S. § 23-1023 in the way a negligent third party’s liability proceeds can be. That distinction can make a meaningful difference in what you keep after a work-related crash, but the money must be identified and handled carefully.
The short answer: UM and UIM money is treated differently
If you were hurt at work and workers’ compensation paid benefits, you may be familiar with the idea of a workers’ compensation lien. In a standard third-party claim, the carrier may seek reimbursement from a recovery caused by someone other than your employer. That is not the same as a recovery under uninsured motorist or underinsured motorist coverage.
Arizona’s rule is that UM and UIM proceeds are not lienable under A.R.S. § 23-1023, unlike third-party liability proceeds. Put simply, a workers’ compensation carrier does not automatically get a share of UM or UIM insurance money just because it paid workers’ compensation benefits after the same injury.
The authority supporting this rule should be confirmed for the particular claim before anyone relies on it. Our firm’s existing materials identify the rule but note that the supporting citation is still being finalized. That is a good reason to have the workers’ compensation and injury-claim issues reviewed together, rather than assuming that every payment connected to an accident is treated alike.
What UM and UIM coverage mean
Uninsured motorist coverage, often called UM coverage, can apply when the at-fault driver does not have liability insurance. It may be available through an applicable auto policy, depending on the policy and circumstances.
Underinsured motorist coverage, often called UIM coverage, can apply when the at-fault driver has liability insurance, but the available liability coverage does not fully address the loss. UIM is commonly important in serious work-related vehicle crashes where the other driver’s policy limits are limited.
Both UM and UIM coverage are insurance benefits that can be part of the same overall accident picture as a workers’ compensation claim. They are not, however, the at-fault driver’s liability payment. That source-of-recovery difference is central to the lien analysis.
For a broader discussion of insurance issues after a job-related collision, see our guide to Arizona work injury UM and UIM claims.
Why third-party liability proceeds are different
A.R.S. § 23-1023 addresses an injury caused by a negligent third party who is not the employer. It permits the injured worker to pursue a civil claim against that third party. When compensation and medical benefits have been paid, the workers’ compensation carrier has a statutory lien against that third-party recovery to the extent of those benefits.
The statute’s focus is the recovery from the negligent third party. A liability settlement or judgment against the person or business that caused the crash falls within that framework. UM and UIM benefits come from insurance coverage instead, which is why Arizona treats those proceeds differently.
This is not a technicality. It affects the amount of money that may be available to you after a claim resolves. It also means that settlement paperwork, releases, policy information, and the source of each payment should be clear. When a case involves more than one insurance layer, unclear documentation can invite an avoidable dispute.
Our overview of Arizona workers’ compensation liens explains the general lien process and why the source of a recovery matters.
What the workers’ compensation lien can cover
When A.R.S. § 23-1023 applies to a third-party recovery, the carrier’s reimbursement rights are not unlimited. The carrier is entitled to reimbursement for medical expenses and indemnity, meaning lost-wage, payments it made. It is not entitled to reimbursement for legal fees, nurse case management, independent medical examinations, surveillance, or other non-recoverable costs.
The lien attaches at the time of settlement. The statutory calculation also recognizes the amount actually collectable: the total recovery less reasonable and necessary expenses actually spent to obtain that recovery, including attorney fees. The lien itself is not subject to a collection fee.
Those rules concern a lien on a qualifying third-party liability recovery. They do not turn UM or UIM proceeds into lienable proceeds. Still, the facts of a particular settlement matter, especially if liability money and UM or UIM money are paid near the same time.
When a third-party settlement and UIM recovery exist in the same case
A common scenario starts with a work-related vehicle crash. Another driver causes the collision, workers’ compensation begins paying benefits, and the other driver’s liability insurer pays its available limits. If those limits are not enough, an injured worker may then seek UIM benefits under an applicable policy.
There may be two different sources of money in that one accident:
- Third-party liability proceeds from the at-fault driver or that driver’s insurer.
- UIM proceeds paid under the applicable underinsured motorist coverage.
The workers’ compensation carrier may have a lien issue tied to the first category. The UIM category should not simply be folded into the lien calculation as if it were liability money. Each payment should be identified by source, and the settlement documents should accurately reflect what is being resolved.
That does not mean the case can be handled casually. In particular, settling a third-party claim for less than the carrier’s lien can require the carrier’s written approval. Failing to obtain written approval can lead to serious consequences, including an assertion that future medical and indemnity benefits are forfeited. Arizona appellate decisions have moved away from strict forfeiture over time, but some carriers still make that assertion. The presence of a UIM claim does not remove the need to address a below-lien third-party settlement correctly.
A related timing issue also matters. An injured worker must pursue a third-party claim within one year of the injury. If that does not happen, the right is automatically assigned to the workers’ compensation carrier. As that date approaches, the worker or counsel can request a written reassignment from the carrier. A written reassignment restores the right to the worker and preserves the additional year. These deadlines concern the third-party claim, so do not assume a UM or UIM claim changes them.
What to do if the carrier asserts a lien against UIM proceeds
Do not ignore a lien letter, but do not assume the carrier’s position is correct either. Ask for an itemized statement showing the benefits it says it paid and the basis for the claimed lien. Then separate the sources of recovery: third-party liability funds, UM funds, UIM funds, and any other payments should not be treated as one undifferentiated settlement pot.
A careful review can identify whether the carrier is seeking reimbursement only for medical and indemnity payments or is including non-recoverable costs. It can also identify whether it is treating UIM money as third-party liability proceeds. Because Arizona treats UM and UIM proceeds as non-lienable under A.R.S. § 23-1023, that distinction should be raised and the controlling authority confirmed before the matter is resolved.
If you are represented in an injury claim, your personal injury lawyer and workers’ compensation lawyer should coordinate before signing a release or distributing settlement funds. If you are a personal injury attorney, early communication with the carrier and any subrogation counsel can help clarify the asserted lien and protect the client’s position. A free consultation with a firm that practices only workers’ compensation can help you understand the workers’ compensation side of that coordination.
How this can affect your net recovery
The practical question is often how much money reaches you after the claim is over. On a qualifying third-party recovery, the workers’ compensation carrier may seek reimbursement for covered medical and indemnity benefits, subject to the applicable rules and deductions. On UM or UIM proceeds, the lien rule is different.
For example, imagine a case with a liability payment from the at-fault driver and a separate UIM payment. It may be necessary to resolve a workers’ compensation lien as to the liability payment. But the UIM portion should not automatically be reduced by that lien merely because the same work injury gave rise to both payments.
The difference may preserve more of the insurance recovery for you. It also reinforces why the claim should not be evaluated by looking only at a single settlement total. The labels, releases, and allocations should match the actual policies and payments involved. There is no guaranteed result, and the final analysis depends on the facts, coverage, benefits paid, and settlement terms.
If you are trying to understand a reimbursement demand after a settlement, read whether you have to pay back workers’ compensation from an Arizona settlement. That page addresses the general question, while this page focuses on the different treatment of UM and UIM proceeds.
Frequently Asked Questions
Does workers’ comp lien attach to uninsured motorist money in Arizona?
No. Arizona treats uninsured motorist proceeds as not lienable under A.R.S. § 23-1023, unlike proceeds recovered from a negligent third party’s liability coverage. The controlling authority should be confirmed for the specific claim before settlement or distribution.
Does workers’ comp get a cut of my UIM settlement?
Generally, UIM proceeds are not lienable under A.R.S. § 23-1023. A carrier may still assert a position, so it is important to identify the UIM funds separately from any liability settlement and have the claim reviewed before money is distributed.
What if the other driver’s insurer paid limits and I also have UIM coverage?
You may have both a third-party liability recovery and a UIM recovery. The liability recovery can raise workers’ compensation lien issues, while the UIM proceeds are treated differently. Make sure the payment sources and settlement documents are clear.
Can a carrier include nurse case management or surveillance in its lien?
No. The carrier’s reimbursement is limited to medical expenses and indemnity payments. Legal fees, nurse case management, independent medical examinations, surveillance, and other non-recoverable costs are not reimbursable through the lien.
Do I need the carrier’s approval to settle with the at-fault driver?
If the third-party settlement is less than the amount of the carrier’s lien, written approval from the carrier is required. Without it, the carrier may assert serious penalties involving future workers’ compensation benefits. Do not let the UM or UIM part of a case distract from this separate requirement.
Is there a deadline for the claim against the driver who caused the crash?
Yes. A third-party claim must be pursued within one year of the injury or it is automatically assigned to the workers’ compensation carrier. A written reassignment may restore the right to the worker and preserve the additional year. This differs from Arizona’s ordinary two-year personal injury limitations period.
Talk with Arizona’s Work Injury Firm
A work-related crash can involve workers’ compensation, the at-fault driver’s insurer, and UM or UIM coverage at the same time. Arizona’s Work Injury Firm, Snow Carpio & Weekley, PLC, practices only workers’ compensation and can help you understand how a claimed lien fits into your case. For a free consultation, call (877) 370-5788. There is no fee unless benefits are secured.
For a free consultation, contact the firm.