Sounds like if you don't go after the negligent third party, the WC insurer may file suit on your behalf. The only downside of the so-called third-party claim, at least in VT, is that you may have to pay back the dollar amount of WC benefits you get from whoever caused your injury. If you recover more money from the people that caused your injury than from WC, you may be able to keep the difference. In other words if you get $5k in comp and $10k from whoever caused your injury, you may only be...
In my state, Vermont, for example, there is no prohibition on a bank foreclosing against a borrower collecting workers' compensation. It is a common worrry for claimants, especially when a claim is denied.
Other than working with your lender, perhaps it may be possible to receive an advance of weekly benefits, i.e. permanency benefits, in a lump sum or you may consider settling the indemnity/non-medical portion of your claim if it is reasonable to do so.
From a defense attorney's perspective:
It means that the carrier has retained an attorney to protect its interests in a likely similar way that you hired one to protect yours. You can ask your attorney more about this. He/she may know the defense counsel and offer some insight. It is not always because the carrier doesn't trust you that it hires an attorney. Settlement issues, Medicare set-asides, adjusters working a jurisdiction their not overly familiar with, and lots of other issues...
Do you contest that you have reached medical end result? Have you returned to work? In many states, including Vermont, you have the option to get your own rating at no cost to you. Typically, employers/carriers will not (or cannot be ordered to) pay a lump sum absent an agreement to the amount of permanency.
If the injury arose out of and in the course of your employment, meaning you were hurt on the job before retirement, and it was reported timely (usually within a set period of time that varies by state), the fact of your retirement should not prevent you from claiming benefits, namely medical benefits. Where I would see as a challenge would be on wage loss benefits because if you're retired, you're not losing wages.
In Vermont there may be a separate award to cover attorney's fees and litigation costs, so it doesn't cut into what you what you get. You will need to look at the fee agreement you entered into. Here, most claimant's attorneys take a percentage of the whole award and are not content with the separate award of fees and costs granted by the Department of Labor.
In Vermont, you cannot collect wage replacement (temporary total) and unemployment at the same time. If the settlement is a lump sum for your injury, you may be ok, but you must discuss this with your lawyer or one licensed in your state.