Granger v. Urda, 44 N.Y.2d 91 (1978)

A workers’ compensation carrier possesses an inviolable lien against any recovery obtained by a claimant in a third-party action, even when that action arises under New York’s no-fault insurance law.

Summary

George Granger, an employee, was injured in a work-related car accident. He received worker’s compensation benefits from Unigard, his employer’s insurance carrier. Granger then sued the negligent third-party driver and won a judgment. However, a portion of his damages, representing “basic economic loss,” was not recoverable due to New York’s no-fault law. Unigard asserted a lien on Granger’s recovery for the amount of compensation and medical expenses it had paid. The New York Court of Appeals held that Unigard’s lien was valid, emphasizing the workers’ compensation carrier’s right to recoup payments from third-party recoveries, even in the context of the no-fault insurance system. The court recognized a potential inequity in the interplay between workers’ compensation law and no-fault insurance but ultimately upheld the statutory lien.

Facts

George Granger, while working for Queens Farms Dairy, was injured in a motor vehicle accident caused by the negligence of Thomas Tripple and Garland Jacobs. Granger received $8,923.56 in workers’ compensation benefits and medical expenses from Unigard Jamestown Mutual Insurance Co., the compensation carrier for Queens Farms Dairy. Granger then sued Tripple and Jacobs. The jury awarded Granger $52,759.52. The trial court deducted $21,622.29 from the verdict, representing Granger’s “basic economic loss” (lost wages and medical expenses) which he was barred from recovering in the third-party action under New York’s no-fault law.

Procedural History

Granger recovered a judgment of $31,137.23 against Tripple and Jacobs. Unigard asserted a lien of $8,923.56 (the amount of benefits it paid) on the recovery. Tripple and Jacobs deposited the lien amount with the Clerk of the Supreme Court, Chenango County, due to the dispute over who should receive it. Granger initiated a proceeding to claim the deposited funds. The Special Term and the Appellate Division ruled in favor of Granger, concluding that Unigard could not assert a lien on the third-party recovery under the no-fault law. Unigard appealed to the New York Court of Appeals.

Issue(s)

Whether a workers’ compensation carrier can assert a lien, under Section 29(1) of the Workers’ Compensation Law, against the proceeds of a judgment obtained by a claimant against a third-party tortfeasor under Article 18 of the Insurance Law (no-fault), even though the claimant could not recover “basic economic loss” from the third party.

Holding

Yes, because subdivision 1 of section 29 of the Workers’ Compensation Law gives the compensation carrier a lien against any recovery by a compensation claimant in a third-party action, to the extent of compensation and medical expenses awarded.

Court’s Reasoning

The Court of Appeals emphasized the broad language of Section 29(1) of the Workers’ Compensation Law, which grants the compensation carrier a lien on “the proceeds of any recovery” from a third party. The court recognized that the workers’ compensation system was designed to provide benefits to injured employees regardless of fault, but also to ensure that the costs of the system remained economically practical. Section 29 allows the claimant to pursue a third party for full damages, but it also allows the carrier to recoup its payments, thus avoiding double recovery and cushioning the inflationary impact of compensation insurance costs. The court acknowledged the tension created by the no-fault law, which prevents recovery of basic economic loss in third-party actions and allows no-fault insurers to deduct workers’ compensation benefits from no-fault payments. The court stated that “section 29 of the Workmen’s Compensation Law, by failing to limit the applicability of the compensation carrier’s lien on any recovery by a compensation claimant in a third-party action, results in converting the injured employee into a self-insurer for at least a portion of his basic economic loss”. The court suggested that corrective legislative action was needed to address this potential inequity, but it ultimately held that the existing statutory framework mandated the enforcement of the workers’ compensation lien. The court specifically noted that the no-fault insurer was not a party to the action, and therefore declined to comment on any rights that insurer may have against a third party.