9 N.Y.3d 207 (2007)

In workers’ compensation cases involving nonschedule permanent partial disabilities, the value of future benefits is too speculative to allow for the present apportionment of attorney’s fees based on the carrier’s anticipated relief from those future payments.

Summary

Owen Burns, a police officer, sustained permanent injuries in a motor vehicle accident during his employment and was classified as permanently partially disabled, receiving ongoing workers’ compensation benefits. He later settled a third-party personal injury action related to the accident. A dispute arose regarding the apportionment of attorney’s fees between Burns and the workers’ compensation carrier, Travelers, specifically concerning the carrier’s future relief from benefit payments due to the settlement. The New York Court of Appeals held that because the value of future benefits for a claimant with a nonschedule permanent partial disability is speculative and cannot be reliably ascertained at the time of a third-party settlement, Burns was not entitled to an immediate apportionment of attorney’s fees based on those future benefits.

Facts

Owen Burns, a police officer, was injured in a motor vehicle accident while on duty. He sustained permanent injuries and was classified as permanently partially disabled, receiving $400 per week in workers’ compensation benefits. Burns sued the other driver, Varriale, and reached a settlement for the full amount of Varriale’s insurance policy ($300,000). Travelers, the workers’ compensation carrier, asserted a lien against the settlement proceeds for past benefits paid. A dispute arose concerning the apportionment of attorney’s fees, particularly regarding the value of future benefits Travelers would be relieved from paying due to the settlement.

Procedural History

Burns petitioned the Supreme Court to compel Travelers to consent to the settlement, extinguish Travelers’ lien, and direct Travelers to pay “fresh money” because its share of attorney’s fees exceeded the lien amount. Travelers consented but reserved its right to a credit against future benefits. Supreme Court granted Burns’ petition, extinguishing the lien and ordering Travelers to pay “fresh money.” The Appellate Division modified the Supreme Court’s order, directing Burns to pay Travelers the value of its lien reduced by its share of litigation costs. The Court of Appeals affirmed the Appellate Division’s decision.

Issue(s)

Whether the present value of future workers’ compensation benefits for a claimant with a nonschedule permanent partial disability is ascertainable at the time the claimant recovers damages in a third-party action such that the claimant is entitled to an immediate apportionment of attorney’s fees based on the carrier’s relief from paying those future benefits.

Holding

No, because the value of future workers’ compensation benefits for a claimant with a nonschedule permanent partial disability is speculative and cannot be reliably ascertained at the time of a third-party settlement.

Court’s Reasoning

The Court reasoned that unlike death benefits, permanent total disability benefits, or schedule loss of use awards, benefits for permanent partial disabilities are inherently uncertain. These benefits depend on the claimant’s continued attachment to the labor market, their actual earnings, and other factors that can change over time. The Court stated, “[I]n a permanent partial disability case, whether a claimant has maintained a sufficient attachment to the labor market must be resolved by the Board in determining his or her reduced earning capacity and whether benefits should be awarded.” Because the rate and duration of these benefits may fluctuate, the value of future compensation payments is too speculative for an immediate apportionment of attorney’s fees. The Court distinguished this situation from death benefit cases, where benefits are paid at a set rate for life unless the spouse remarries, or permanent total disability cases, where there is no expectation of returning to the workforce. The Court emphasized that while immediate apportionment is not possible, the carrier can be required to periodically pay its equitable share of attorney’s fees as continuous compensation benefits are awarded. The trial court can fashion a means of apportioning litigation costs as they accrue and monitoring how the carrier’s payments to the claimant are made. This ensures that the carrier’s payment of attorney’s fees is based on an actual, nonspeculative benefit. The court quoted Matter of Kelly v. State Ins. Fund, 60 N.Y.2d 131, 138 (1983): “[Equitable apportionment] was purposely adopted to avoid ‘rigid statutory formulas’ and to implement a ‘practical and flexible’ approach towards ensuring that a compensation carrier assumes its fair share of the costs of litigation.”