Avoiding the Child Support Lien Trap: Best Practices for Workers’ Compensation Defense
When defending workers’ compensation claims in Maryland, settlements offer an opportunity to close exposure, bring finality to claims, and limit litigation costs. But failing to address outstanding child support liens against the claimant before settlement disbursement can expose employers and insurers to liability, post-settlement complications, and ethical missteps.
Here are key best practices for Maryland defense attorneys and claims professionals to avoid getting caught in the child support lien trap—along with relevant legal obligations and practical guidance.
Why Child Support Liens Matter in Workers’ Compensation
In Maryland, workers’ compensation settlements are subject to attachment for child support arrears. This is codified under Md. Family Law Code § 10-140(2024), which mandates that unpaid child support, due under an order requiring payments through a support enforcement agency, constitutes a lien in favor of the obligee on all real and personal property of the obligor.
If a defense attorney or insurer fails to recognize and resolve a valid lien, they may remain liable for the amount that should have been paid to the state, even after the funds have been disbursed to the claimant.
Defense counsel must also be mindful of their ethical obligations under the Maryland Attorneys’ Rules of Professional Conduct, especially Rule 1.15 (safekeeping property). Disbursing funds in disregard of a perfected child support lien may constitute a breach of these duties.
Best Practices for Employers, Insurers & Defense Counsel
1. Check for Child Support Liens Early
At the outset, employers and insurers should provide any documents received concerning a child support lien to defense counsel. Documents will most commonly be in the form of a notice of a lien, a writ of garnishment, or an Order. At the point at which an employer receives any of these documents, they are obligated to comply with satisfying the lien when benefits are owed. This can have a significant impact on settlement negotiations as it can significantly impact the disbursement of those funds, depending on the size of the lien.
When a case appears headed toward settlement, defense counsel should consult with the employer and insurer and check whether the claimant is subject to a child support lien. They should also confer with the claimant’s counsel so that counsel may inquire with their client as to whether a child support lien is issued against them.
Once aware of a child support lien, proceed to obtain an accompanying Order, which will explain the amount of the settlement funds that must be used to comply with the lien. You can request this information from the Maryland Child Support Administration (CSA) (or the relevant state’s child support enforcement agency) if the employer or insurer has not been provided with the Order. Usually, the employer has been served with the Order.
Notably, the state a claimant was living in at the time of their divorce or custody determination typically retains jurisdiction of the child support lien, unless all parties leave the originating state, at which time any state in which the mother and children or father reside may have jurisdiction to enforce or modify the order.
However, before enforcing or modifying such an order, the order must be domesticated/registered as an order of that state. Maryland has clarified that 25% of the net recovery can be subject to garnishment for a child support lien.
2. Include Lien Acknowledgments in Settlement Agreements
Settlement agreements should contain:
A representation by both parties as to the existence or non-existence of any outstanding child support obligations.
A provision affirming that the lien will be satisfied from settlement proceeds before disbursement.
Our best practices recommend that the parties specify the child support lien figure and account number at the time of signing the settlement agreements to verify that all parties consent to a lump sum payment being diverted to the CSA.
3. Hold Funds in Trust Until Lien Clearance
Do not disburse any settlement funds until you receive confirmation that:
No lien exists, or
Any existing lien has been paid as required per Order.
Use indemnity provisions to ensure claimants are responsible for satisfying outstanding liens, but remember these do not insulate the insurer from liability if funds are paid in violation of the lien.
4. Coordinate with the WCC and CSA.
The Maryland Workers’ Compensation Commission can help verify compliance before settlement approval. When submitting a settlement, also submit any required child support compliance forms through the CompHub portal and notify the appropriate CSA when payments are pending to help facilitate the correct file being credited.
5. Document Everything
Retain a record of:
Lien search requests and responses
Correspondence with the CSA
Final lien satisfaction letters
Proof of payment to the CSA (if applicable)
Documentation protects the employer, insurer, and defense counsel if a dispute arises later.
Final Thoughts
Ensuring compliance with child support liens can be a time-consuming process. However, wasted time attempting to communicate with enforcement agencies can be avoided if defense counsel begins communicating with the employer and insurer early on in the development of a claim and explains the importance of providing any documentation received from CSA or other state child support enforcement agencies.
Additionally, open communication between defense counsel and claimant's counsel ensures all parties are on the same page. The last thing defense counsel wants is to lose the opportunity to settle a claim because the claimant’s counsel is unaware of a child support lien and, upon being informed, the claimant decides not to settle.
Ultimately, following these guidelines will allow all parties to avoid the child support lien trap.
Francesca Fabiani