Shutter v. Philips Display Components Co., 90 N.Y.2d 703 (1997)
A workers’ compensation insurance carrier may only offset future compensation payments to a claimant by the amount the claimant recovered from a third-party tortfeasor, and not from uninsured motorist benefits under the claimant’s own insurance policy.
Summary
Charlotte Shutter was injured in a car accident during a business trip. Because the taxi’s insurance disclaimed coverage, Shutter received $124,697.95 under the uninsured motorist provision of her own auto insurance policy. She also received workers’ compensation benefits from her employer. The employer’s workers’ compensation carrier sought to offset Shutter’s future compensation payments by the amount she received from her uninsured motorist claim. The Workers’ Compensation Board reversed the Workers’ Compensation Law Judge’s ruling against the offset, and the Appellate Division affirmed. The New York Court of Appeals reversed, holding that the offset provision of the Workers’ Compensation Law only applies to recoveries from third-party tortfeasors.
Facts
Charlotte Shutter was injured in a single-car accident while traveling in a taxi to the airport for a business trip. The taxi driver lost control of the vehicle.
The taxi owner’s insurer disclaimed coverage, and the driver was uninsured.
Shutter filed a claim under the uninsured motorist provisions of her own automobile insurance policy, which had a coverage limit of $300,000.
She recovered $124,697.95 from her insurer after arbitration.
Shutter also received workers’ compensation benefits from her employer, Philips Display Components Company, based on her permanent partial disability.
The employer’s workers’ compensation insurance carrier sought to offset Shutter’s future compensation payments by the amount she obtained from her uninsured motorist policy.
Procedural History
The Workers’ Compensation Law Judge ruled that the carrier was not entitled to the offset.
The Workers’ Compensation Board reversed, concluding that the employer was entitled to the offset.
The Appellate Division affirmed.
The New York Court of Appeals reversed.
Issue(s)
Whether a workers’ compensation insurance carrier may invoke Workers’ Compensation Law § 29(4) to offset its future compensation payments to a claimant, who was disabled in a work-related auto accident, by the amount that the claimant recovered in uninsured motorist benefits under an insurance policy she purchased.
Holding
No, because under New York’s Workers’ Compensation Law, the carrier may only offset its future payments by amounts recovered in an action against a third-party tortfeasor.
Court’s Reasoning
The court emphasized that the workers’ compensation system is statutory, and its terms should be strictly construed. Workers’ Compensation Law § 29(4) authorizes liens and offsets only against recoveries constituting proceeds of an action against “such other.” The court reasoned that “such other” refers to the person whose negligence or wrong causes the claimant’s harm, meaning the lien and offset can only be applied against recoveries from third-party tortfeasors.
The court noted that the workers’ compensation carrier is subrogated to the employee’s rights against the third party, indicating a legislative decision that the loss be borne by the wrongdoer. Here, Shutter’s recovery was not from the tortfeasor, but from her own insurance carrier.
The court highlighted that the statutory scheme requires vigilant preservation of the carrier’s subrogation rights in an “action” against a “third party” but doesn’t contemplate intervention by the carrier when the employee proceeds with a claim under their own insurance policy. Workers’ Compensation Law § 30 states that “[n]o benefits, savings or insurance of the injured employee, independent of the provisions of this chapter, shall be considered in determining the compensation or benefits to be paid under this chapter.”
The court rejected the argument that the injured employee’s insurer steps into the shoes of the tortfeasor. The court explained, “Where the claim is made against the injured worker’s uninsured motorist coverage, the recovery is predicated on that insurer’s contractual obligation to assume the risk of loss associated with an uninsured motorist on the insured’s behalf in exchange for the payment of premiums. Although liability will be measured by the damages caused by the tortfeasor, the insurer’s obligation to pay is not derived from any relationship with or duty owed to the tortfeasor.”
The court found the argument regarding Workers’ Compensation Law § 29 (1-a) irrelevant because it presumes that the lien or offset is available in the first instance, which the carrier failed to establish. Furthermore, uninsured motorist coverage compensates for noneconomic loss and economic loss exceeding basic economic loss, whereas workers’ compensation benefits are limited to basic economic loss. Therefore, the unavailability of the offset does not result in a double recovery.