New York Law Review

Tag: Third-Party Action

  • Bissell v. Town of Amherst, 16 N.Y.3d 684 (2011): Determining Workers’ Compensation Carrier’s Share of Litigation Costs for Future Medical Expenses

    16 N.Y.3d 684 (2011)

    A workers’ compensation carrier’s share of litigation costs related to a claimant’s recovery for future medical expenses in a third-party action is determined only when the claimant actually incurs and pays those medical expenses, as future medical benefits are considered too speculative for upfront calculation.

    Summary

    Peter Bissell, a paraplegic due to a work-related accident, received workers’ compensation benefits from the New York State Insurance Fund (the Fund). He also won a third-party lawsuit that included damages for future medical expenses. The Fund asserted a lien on Bissell’s judgment for past benefits paid. Bissell sought to compel the Fund to pay its share of litigation costs upfront, based on the present value of the future medical expense award. The Court of Appeals held that the Fund’s share of litigation costs for future medical expenses should only be calculated and paid as Bissell incurs those expenses, rejecting Bissell’s attempt to have the Fund pay upfront based on the jury’s award.

    Facts

    Peter Bissell sustained injuries in a work-related accident, resulting in paraplegia. The Workers’ Compensation Board determined he had a permanent total disability and ordered the Fund, his employer’s compensation carrier, to pay him $400 monthly for life. Bissell sued a third party (the Town of Amherst) and won a jury award that included $4,650,000 for future medical expenses over 32.7 years, later reduced to a present value of $4,259,536. The Fund asserted a lien of $219,760 against Bissell’s judgment, covering past benefits and medical expenses. The Fund agreed to pay its share of attorney’s fees related to lost wages compensation but refused to pay upfront its share of fees tied to the recovery of future medical expenses, offering to pay only as those expenses were incurred.

    Procedural History

    Bissell initiated a proceeding to extinguish the Fund’s lien and demanded “fresh money” representing the Fund’s share of litigation costs for the future medical expenses award. Supreme Court granted Bissell’s petition in full. The Appellate Division modified the judgment, denying Bissell’s claim to recover litigation costs based on the Fund’s benefit from forgone future medical payments, and remitted for recalculation. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether the future medical benefits that a compensation carrier has been relieved of paying due to a claimant’s successful prosecution of a third-party action are “so speculative that it would be improper to estimate and to assess litigation costs against [that] benefit to the carrier”.

    Holding

    No, because the workers’ compensation carrier need only pay its equitable share of attorneys’ fees and costs incurred by a claimant once the claimant incurs and pays each medical expense, as those future benefits are considered speculative.

    Court’s Reasoning

    The Court of Appeals reasoned that while the Fund undeniably benefited from the third-party action by being relieved of paying future medical expenses, the jury’s award for future medical expenses was not a reliable basis for calculating the Fund’s share of litigation costs upfront. The court distinguished between a jury award in a third-party action, which represents a one-time opportunity to recover future medical expenses, and the workers’ compensation context, where the actual medical expenses incurred by the claimant are determined by the Workers’ Compensation Board. The court emphasized that, unlike death benefits or total disability, future medical expenses are inherently uncertain and depend on the claimant’s actual needs and the cost of care at the time it is provided. The court cited Burns v. Varriale, 9 N.Y.3d 207 (2007), stating that “if a claimant does not receive benefits for death, total disability or schedule loss of use, the carrier’s future benefit cannot be quantified by actuarial or other reliable means.” The court suggested that the trial court could fashion a means of apportioning litigation costs as they accrue, ensuring the carrier’s share is based on realized benefits while also protecting the claimant. The Court affirmed the Appellate Division’s order, requiring the Fund to pay its share of litigation costs only as Bissell incurs and pays his future medical expenses.

  • Majewski v. Broadalbin-Perth Central School District, 91 N.Y.2d 577 (1998): Retroactive Application of Workers’ Compensation Law Amendments

    91 N.Y.2d 577 (1998)

    Statutes are presumed to apply prospectively unless the language expressly or by necessary implication requires retroactive application; classifying a statute as “remedial” does not automatically overcome this presumption.

    Summary

    This case addresses whether amendments to the Workers’ Compensation Law, specifically those affecting third-party actions against employers, should be applied retroactively to pending actions. Plaintiff Majewski, an employee of AMC, sued Broadalbin-Perth Central School District for injuries sustained at the school. The School District then brought a third-party action against AMC for contribution/indemnification. The Workers’ Compensation Law was amended to limit employer liability for such third-party claims unless the employee sustained a “grave injury.” AMC sought summary judgment based on this amendment. The Court of Appeals held that the amendments should be applied prospectively, not retroactively, to actions filed after the amendment’s effective date. The Court emphasized that legislative intent, while aiming to reduce insurance costs, did not explicitly mandate retroactive application, and the presumption against retroactivity prevails.

    Facts

    Plaintiff, an employee of Adirondack Mechanical Corporation (AMC), was injured on October 26, 1994, while performing repair work at a school operated by Broadalbin-Perth Central School District. The plaintiff fell from an allegedly defective ladder provided by the school district.
    Plaintiff sued the school district on December 20, 1995, alleging violations of Labor Law §§ 200 and 240(1).
    On January 29, 1996, the school district commenced a third-party action against AMC, claiming negligent supervision and seeking contribution/indemnification for any damages the plaintiff might recover.
    On July 12, 1996, the Omnibus Workers’ Compensation Reform Act of 1996 was passed, amending Workers’ Compensation Law § 11 to limit employer liability for contribution/indemnity to cases involving “grave injury.” The Act took effect immediately on September 10, 1996.

    Procedural History

    AMC moved for summary judgment on September 20, 1996, arguing the amended law barred the school district’s third-party claim.
    Supreme Court granted AMC’s motion, finding the legislation retroactive.
    The Appellate Division reversed, holding the amendments applied prospectively only.
    The Appellate Division certified the question to the Court of Appeals: “Did this court err as a matter of law in reversing the order of the Supreme Court and denying the third-party defendant’s motion for summary judgment?”

    Issue(s)

    Whether the amendments to Workers’ Compensation Law § 11, enacted as part of the Omnibus Workers’ Compensation Reform Act of 1996, should be applied retroactively to third-party actions pending on the effective date of the amendments.

    Holding

    No, because the legislative intent, while aiming to modify the impact of Dole v. Dow Chemical Co. and reduce insurance costs, did not clearly mandate retroactive application, and the strong presumption against retroactive operation of statutes was not overcome.

    Court’s Reasoning

    The Court began by stating that statutory interpretation aims to effectuate legislative intent, primarily gleaned from the statutory text itself. The phrase “take effect immediately” is not definitive on the issue of retroactivity. The Court reiterated the fundamental principle that retroactive operation is disfavored unless expressly required. While remedial legislation can be applied retroactively, this classification alone does not overcome the presumption of prospectivity. Examining the legislative history, the Court acknowledged that the Act intended to modify Dole v. Dow Chem. Co., which allowed third-party actions against employers for contribution/indemnification. However, legislative declarations during debates and a task force report suggested a prospective application. Statements by the Governor supporting retroactive application were given limited weight, as individual opinions of legislators are not definitive. Critically, an initial draft of the Act that explicitly applied to pending lawsuits was removed, indicating an intent against retroactivity. The Court rejected the argument that sections of the Act concerning audits and assessments on insurance carriers required retroactive application, as those sections could still function with a prospective approach. The court agreed with the Appellate Division that the purpose of the act was to abolish most third-party actions in order to enhance the exclusivity of the Workers’ Compensation Law, thereby reducing insurance premiums and decreasing the cost of doing business in New York. The court stated that prospective application of the legislation would still accomplish the legislative purpose of reducing insurance premiums and workers’ compensation costs for employers and, in that way, assist “our State’s ability to attract and maintain businesses and jobs”.
    The Court concluded that applying the legislation prospectively to actions filed after the effective date aligned with the legislative goals, upholding the presumption against retroactive application in the absence of a clear expression of intent to the contrary. The Court emphasized that “it is in considerations of good sense and justice that the solution must be found in the specific circumstances of each case,” quoting Matter of Berkovitz v Arbib & Houlberg, 230 NY 261, 271.

  • Matter of Augello v. Hastings Plastics Corp., 51 N.Y.2d 773 (1980): Impact of Third-Party Settlement on Workers’ Compensation

    Matter of Augello v. Hastings Plastics Corp., 51 N.Y.2d 773 (1980)

    When an injured employee settles a malpractice claim against a third party (e.g., a doctor) without the consent of the workers’ compensation insurer, the settlement only affects the portion of the workers’ compensation award attributable to the malpractice itself, not the compensation for the initial injury.

    Summary

    Augello injured his arm at work and underwent surgery, which ultimately led to amputation. He filed for workers’ compensation and also sued the hospitals and doctors for malpractice, alleging the medical care worsened his condition. He discontinued the malpractice suit without the consent of the workers’ compensation insurer. The Workers’ Compensation Board initially ruled that the malpractice action was not a third-party action under Section 29, but later reversed course and denied further benefits. The Court of Appeals reversed, holding that the unauthorized settlement only impacted benefits related to the malpractice, not the original injury. This ensured compensation for the initial injury while preventing a double recovery for the malpractice.

    Facts

    1. On February 26, 1971, Augello injured his right arm while working at Hastings Plastics.
    2. The following day, surgery was performed on his arm.
    3. On May 26, 1972, his arm was amputated.
    4. He filed a workers’ compensation claim.
    5. Augello also sued hospitals and doctors, claiming malpractice aggravated his injury.
    6. On October 7, 1976, he discontinued the malpractice action without the workers’ compensation carrier’s (Royal Globe Insurance Co.) consent.

    Procedural History

    1. The Workers’ Compensation Law Judge-Referee initially ruled the malpractice action was not a third-party action and allowed further recovery for the original injury.
    2. The Workers’ Compensation Board reversed, holding the malpractice action was a third-party action, and its discontinuance without the carrier’s consent barred further recovery.
    3. The Appellate Division affirmed the Board’s decision.
    4. The Court of Appeals reversed and remitted the case to the Workers’ Compensation Board for further consideration.

    Issue(s)

    1. Whether a worker’s settlement of a malpractice action against a third party, without the consent of the workers’ compensation insurer, bars all further recovery under the Workers’ Compensation Law, even for the initial injury.

    Holding

    1. No, because the compromise of the malpractice action affects only that portion of the compensation award attributable to the malpractice, not the compensation for the original, work-related injury.

    Court’s Reasoning

    The court reasoned that the aggravation injuries due to malpractice are a direct consequence of the initial compensable injury, and the employee is entitled to compensation for the ultimate disability resulting from that initial injury. The court relied heavily on Matter of Parchefsky v. Kroll Bros., 267 N.Y. 410, emphasizing that recovery in the malpractice action cannot include compensation for the original injury. The court stated, “The injured employee is entitled to receive compensation for the result of the original injury apart from the result of the negligent treatment of the original injury… Recovery in the malpractice actions cannot include compensation for results of the original injury apart from the result of the malpractice.” The court emphasized that the insurer’s subrogation rights are limited to the damages caused by the malpractice. The court concluded that the compromise of the malpractice action only forecloses recovery of compensation benefits to the extent that such benefits are attributable to the malpractice itself. The case was remitted to the board to determine the benefits attributable to the initial accident only, apart from any malpractice aggravation. This approach prevents double recovery for the malpractice while ensuring the employee is compensated for the original work-related injury. The court sought to balance the employee’s right to pursue a malpractice claim with the insurer’s right to be protected against unauthorized settlements that could prejudice their subrogation rights.

  • Lazarow, Rettig & Sundel v. Castle Capital Corp., 49 N.Y.2d 508 (1980): National Bank Venue Statute and Third-Party Actions

    49 N.Y.2d 508 (1980)

    A national bank may not be sued against its will in a third-party action, even one brought in good faith, except as provided by 12 U.S.C. § 94, which dictates venue for suits against national banks.

    Summary

    This case addresses whether 12 U.S.C. § 94, which restricts where actions can be brought against national banks, applies to third-party actions. A New York law firm, Lazarow, Rettig & Sundel (Lazarow), sued Castle Capital Corp. (Castle) in New York. Castle then filed a third-party complaint against Fidelity Bank, N. A., an Oklahoma bank, alleging conspiracy to defraud. Fidelity moved to dismiss based on 12 U.S.C. § 94. The New York Court of Appeals held that the statute’s restrictions apply to third-party actions, preventing the suit against Fidelity in New York, emphasizing the mandatory nature of the statute as interpreted by the Supreme Court.

    Facts

    Lazarow, a New York law firm, invested in a limited partnership through Castle Capital Corp., relying on a tax shelter scheme. The scheme depended on a “Carved Out Production Payment” (COPP) loan, allegedly agreed to by Fidelity Bank of Oklahoma City. Castle guaranteed Lazarow’s investment would be bought back if the COPP loan was not obtained. The IRS disallowed the tax deductions, deeming the transaction a sham. Lazarow sued Castle in New York on its buy-back guarantee. Castle then filed a third-party complaint in New York against Fidelity Bank, alleging conspiracy to defraud.

    Procedural History

    The trial court dismissed the third-party complaint against Fidelity Bank based on 12 U.S.C. § 94, citing lack of subject matter jurisdiction. The Appellate Division modified this decision, concluding that § 94 did not preclude New York courts from exercising jurisdiction in a third-party action. Fidelity appealed to the New York Court of Appeals.

    Issue(s)

    Whether 12 U.S.C. § 94, which permits actions against national banks only in specified locations, mandates dismissal of a third-party action against such a bank brought in a non-specified jurisdiction.

    Holding

    No, because the Supreme Court has interpreted 12 U.S.C. § 94 as a mandatory restriction on where national banks can be sued, and this restriction applies to third-party actions as well as direct suits. The change in form (third-party action versus direct suit) does not diminish the bank’s statutory privilege.

    Court’s Reasoning

    The court relied heavily on the Supreme Court’s interpretation of 12 U.S.C. § 94 in Mercantile Nat. Bank v. Langdeau, which emphasized the mandatory nature of the statute. The court quoted Langdeau: “The phrase ‘suits . . . may be had’ was, in every respect, appropriate language for the purpose of specifying the precise courts in which Congress consented to have national banks subject to suit and we believe Congress intended that in those courts alone could a national bank be sued against its will.” The court rejected arguments that § 94 should not apply to third-party actions based on policy considerations, stating that such arguments should be addressed to Congress. The court also cited Radzanower v. Touche Ross & Co., which held that even the broad jurisdictional provisions of the Securities Exchange Act of 1934 did not override the specific venue protections afforded to national banks under the National Bank Act, illustrating the strength of this protection. The court acknowledged potential inconveniences, but stressed that such concerns are for legislative resolution, not judicial intervention. Even when the bank is sued in its capacity as a fiduciary, the statute controls.

  • Barry v. Niagara Frontier Transit System, Inc., 35 N.Y.2d 632 (1974): Prior Notice Requirement for Claims Against Municipalities

    Barry v. Niagara Frontier Transit System, Inc., 35 N.Y.2d 632 (1974)

    A municipality cannot be held liable in a third-party action for contribution or indemnification relating to a defective street or sidewalk condition if the municipality did not receive prior written notice of the condition, as required by statute.

    Summary

    Dorothy Barry sued Niagara Frontier Transit System for injuries sustained while exiting a bus at a bus stop in the Village of Kenmore, alleging negligence in failing to provide a safe place to alight. Niagara Frontier then brought a third-party action against the Village, seeking contribution or indemnification should it be found liable to Barry. The Village moved to dismiss the third-party complaint, arguing that it had not received prior written notice of the defective condition as required by Village Law § 341-a. The New York Court of Appeals affirmed the dismissal, holding that allowing a third-party action without prior written notice would undermine the statute’s intent to limit municipal liability for nonfeasance.

    Facts

    Dorothy Barry allegedly sustained personal injuries on September 10, 1968, while alighting from a bus operated by Niagara Frontier Transit System at a bus stop within the Village of Kenmore. Barry sued Niagara Frontier, claiming negligence in operating the bus and failing to provide a safe place to alight. Niagara Frontier then filed a third-party complaint against the Village of Kenmore, seeking contribution or indemnification, arguing that if Barry’s injuries occurred as claimed and Niagara Frontier was found liable, the Village should be responsible for all or part of the judgment. It was conceded that the Village had not received prior written notice of the alleged defect.

    Procedural History

    The Special Term dismissed Niagara Frontier’s third-party complaint, relying on Village Law § 341-a, which requires prior written notice to the Village of any dangerous condition before an action can be maintained. The Appellate Division affirmed the Special Term’s decision. The Court of Appeals granted leave to appeal to consider the applicability of the notice requirement in the context of a third-party complaint for apportionment, following the principles established in Dole v. Dow Chem. Co., 30 N.Y.2d 143.

    Issue(s)

    Whether a third-party action for contribution or indemnification can be maintained against a village for personal injuries allegedly caused by a dangerous condition in a street or sidewalk when the village did not receive prior written notice of the condition, as required by Village Law § 341-a (now CPLR 9804).

    Holding

    No, because allowing a third-party action without prior written notice would undermine the legislative intent of Village Law § 341-a to restrict a village’s liability for nonfeasance regarding defective street and sidewalk conditions.

    Court’s Reasoning

    The Court of Appeals reasoned that the rule of apportionment applies when tortfeasors share responsibility for an accident due to violations of duties they respectively owed to the injured person. In this case, the village’s duty of care to the plaintiff was to repair or remove any defect within a reasonable time after receiving written notice of the dangerous condition. Because no prior notice was given, no cause of action accrued against the village directly. The court emphasized that allowing a third-party action would permit indirectly what could not be done directly due to the failure to comply with the notice requirement. The court stated, “applies when two or more tort-feasors have shared, albeit in various degrees, in the responsibility by their conduct or omissions in causing an accident, in violation of the duties they respectively owed to the injured person.” The Court further explained that Village Law § 341-a was enacted to address municipal street and sidewalk liability and modified the general substantive law of torts by varying a village’s duty of care. The practical consequence of this requirement is to prevent any possibility of liability for nonfeasance, except where the village fails or refuses to remedy the condition within a reasonable time after receipt of notice. The Court noted that permitting a Dole claim to proceed without notice would undermine the legislative intent to restrict the village’s liability and potentially subject the village to significant financial burdens arising from unnoticed defects. As the Court argued, “To permit a Dole claim to go forward in the absence of notice would undermine the legislative design to restrict the village’s liability for nonfeasance and might subject the village to ultimate responsibility to pay a ‘catastrophe judgment’ arising from unnoticed defects.”