Without seeing the contract you signed with the attorney it's going to be difficult to know whether they are out of line or not. Hate to say it but it doesn't seem like this is necessarily wrong to me. The total amount you got was 100% of the policy limit - the fact that the WC insurance company had a claim to some of that money doesn't change the fact that 100% of the policy limit either went to you or went somewhere (the WC insurance co.) on your behalf.

I guess the best way to analogize would be like this: Adam owes Bill $100. Adam has an insurance claim and I represent Adam in that claim. As a result, Adam gets a $200 insurance payout but it's already been agreed between the 3 of us that Bill will get his $100 out of that pot of money. Even though you only put $100 in your pocket, the fact is that my work got you $200, and I should be able to charge you a fee based on the total amount I got you, shouldn't I? After all, Bill isn't going to pay me (and I assume the WC insurance company isn't going to pay YOUR lawyer.)

Hindsight is 20/20 but I'd have to say that it might have been better to handle these as two separate matters. At the very least it would have been easier to understand where the money was going.