Petterson v. Daystrom Corp., 17 N.Y.2d 32 (1966)
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A workmen’s compensation carrier is entitled to a credit against future compensation payments for the net proceeds of a third-party settlement, even when the tortfeasor is a fellow employee, if the recovery stems from the same injury that was the basis for the compensation benefits.
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Summary
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An employee died from injuries sustained in a car accident caused by a fellow employee’s negligence. His estate received both workmen’s compensation benefits and a settlement from a lawsuit against the driver and the car’s owner. The workmen’s compensation carrier sought to credit the settlement proceeds against its future compensation obligations. The New York Court of Appeals held that the carrier was entitled to such a credit, despite the fact that the negligent party was a fellow employee, reasoning that the legislative intent of Section 29 of the Workmen’s Compensation Law was to prevent double recovery for the same injury.
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Facts
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Binar Petterson, an employee of Daystrom Corp., died from injuries sustained in a car accident in Connecticut. The car, leased by Daystrom from Triboro Drive-It-Yourself, Inc., was driven by a fellow Daystrom employee, Verven. Petterson’s estate sued Verven and Triboro in federal court in Connecticut. American Motorists Insurance Company, Daystrom’s liability insurer, defended the suit. Petterson’s survivors also received workmen’s compensation benefits from American Motorists, as Daystrom’s compensation carrier, under New York law. The lawsuit was settled for $140,000, with contributions from Verven’s insurer and American Motorists on behalf of Daystrom and Triboro.
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Procedural History
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The U.S. District Court for the District of Connecticut initially struck down the defense that the suit was barred by the New York Workmen’s Compensation Law because Connecticut law allows suits against fellow employees. The District Court also denied American Motorists’ motion to intervene as a plaintiff to assert a lien on any recovery, reasoning the lien only applies when the tortfeasor is *not* a co-employee. Subsequently, before the Workmen’s Compensation Board in New York, the carrier sought to credit the net proceeds of the settlement against its obligation to make future compensation payments. The Board denied the claim. The Appellate Division affirmed, stating the statute only allowed a setoff against a recovery from someone *not* in the same employ. The Court of Appeals then reviewed the case.
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Issue(s)
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Whether a workmen’s compensation carrier is entitled to credit the net proceeds of a settlement obtained in a tort action against its future compensation obligations when the tortfeasor was a fellow employee of the injured worker.
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Holding
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Yes, because Section 29 of the Workmen’s Compensation Law aims to prevent double recovery for the same injury, and a strict, literal interpretation of the statute would lead to an unjust result by allowing the employee’s survivors to receive both full compensation benefits and a full tort recovery.
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Court’s Reasoning
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The court acknowledged that a literal reading of Section 29 would seem to preclude the carrier from obtaining a credit because the statute refers to recovery from