New York Law Review

Tag: Third-party settlement

  • Ace Fire Underwriters Ins. Co. v. New York State Special Disability Fund, 31 N.Y.3d 1014 (2018): Workers’ Compensation Carrier’s Right to Reimbursement from Special Disability Fund After Third-Party Settlement

    31 N.Y.3d 1014 (2018)

    A workers’ compensation carrier may seek nunc pro tunc approval from a court to a third-party settlement, even if the Special Disability Fund’s consent was not initially obtained, provided the Fund’s consent is required under Workers’ Compensation Law § 29 (1).

    Summary

    The New York Court of Appeals addressed whether a workers’ compensation carrier, Ace Fire Underwriters Insurance Company, could retroactively obtain the Special Disability Fund’s consent to a third-party settlement under Workers’ Compensation Law § 29 (5). The employee sustained a work-related injury, and the Special Disability Fund was responsible for reimbursing the carrier for benefits after a certain period due to the employee’s pre-existing condition. The carrier approved the employee’s third-party personal injury settlement without the Special Disability Fund’s prior written consent. The Court of Appeals held that the carrier could seek court approval nunc pro tunc because Workers’ Compensation Law § 29 (5) allows court approval for settlements even if the required consent of the lienor was not initially obtained, aligning the carrier’s actions with the statute’s intent.

    Facts

    An employee of Coca-Cola Bottling Company suffered a work-related injury in March 2007. Ace Fire Underwriters Insurance Company, Coca-Cola’s workers’ compensation insurance carrier, paid benefits to the injured employee. The employee was classified as having a permanent partial disability. Due to a pre-existing condition, the Workers’ Compensation Board held that the claim was subject to Workers’ Compensation Law § 15 (8), and the Special Disability Fund was responsible for reimbursement after a certain period. The employee also initiated a third-party personal injury action, subject to Workers’ Compensation Law § 29 (1). Ace Fire approved the settlement of the third-party action. However, Ace Fire did not seek the Special Disability Fund’s written approval before the settlement.

    Procedural History

    The Workers’ Compensation Board determined the employee’s benefits were reimbursable by the Special Disability Fund. The employee filed a third-party personal injury action. Ace Fire approved the settlement of the third-party action. Ace Fire sought retroactive consent from the Special Disability Fund, which was denied. Ace Fire commenced a proceeding in Supreme Court, seeking to compel the Special Disability Fund’s consent nunc pro tunc. The Appellate Division’s order was reversed, and the matter was remitted to Supreme Court.

    Issue(s)

    1. Whether a workers’ compensation carrier can obtain court approval nunc pro tunc under Workers’ Compensation Law § 29 (5) to a third-party settlement if the carrier did not obtain the prior consent of the Special Disability Fund, assuming the Fund is a lienor.

    Holding

    1. Yes, because Workers’ Compensation Law § 29 (5) permits a carrier to seek nunc pro tunc approval for a third-party settlement, even without prior consent from a lienor, aligning with the statute’s provisions.

    Court’s Reasoning

    The Court relied on the principle of statutory interpretation that a statute should be construed as a whole, and that the various sections should be considered together and with reference to each other. The court noted that the language in Workers’ Compensation Law § 29 (1), establishing who may be deemed lienors, is essentially identical to the language in § 29 (5), which refers to entities whose consent to settlement is required. The court reasoned that there was no basis to distinguish the Special Disability Fund, as it is subject to the same rules as other lienors and that the failure to obtain the Fund’s consent can be cured by court order. The court emphasized that the legislature intended for employers to be encouraged to hire disabled employees, and the Special Disability Fund’s purpose is connected to this goal. The court highlighted, “We have repeatedly recognized ‘that a statute . . . must be construed as a whole and that its various sections must be considered together and with reference to each other.’”

    Practical Implications

    This ruling clarifies that workers’ compensation carriers, when settling third-party claims, have a potential remedy if they fail to obtain the Special Disability Fund’s consent initially. This allows the carrier to seek court approval after the fact to protect their right to reimbursement from the Fund. This reduces the risk for carriers by providing a mechanism to cure procedural errors and recover funds. The decision reinforces the importance of complying with all requirements under Workers’ Compensation Law § 29 and highlights the need for workers’ compensation carriers to consider the interplay between the various provisions of the law when settling third-party actions. Failure to adhere to procedures could impact the recovery of funds. Furthermore, this case impacts how the Special Disability Fund will handle these situations in the future.

  • Burns v. Varriale, 9 N.Y.3d 207 (2007): Apportionment of Attorney’s Fees in Workers’ Compensation Cases with Nonschedule Permanent Partial Disabilities

    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.”

  • Brisson v. County of Onondaga, 6 N.Y.3d 273 (2006): Employer Must Explicitly Reserve Offset Rights When Consenting to Settlement

    6 N.Y.3d 273 (2006)

    When a self-insured employer or workers’ compensation carrier consents to the settlement of a third-party action, it must expressly and unambiguously reserve its right to offset future compensation benefits, regardless of whether there is an existing lien against the claimant’s recovery.

    Summary

    Alan Brisson, an Onondaga County employee, was injured in a work-related accident and received workers’ compensation benefits. He also filed a third-party action which he settled for $50,000 with the County’s consent. However, the County then sought to offset Brisson’s future compensation benefits by the net proceeds of the settlement. Brisson challenged this, arguing the County had not properly reserved its right to the offset. The New York Court of Appeals held that the County had failed to explicitly reserve its right to offset Brisson’s future workers’ compensation benefits when it consented to the third-party settlement, and therefore, waived its offset rights. This decision clarifies that explicit reservation is required regardless of the presence of a lien.

    Facts

    Brisson, an employee of Onondaga County, sustained a compensable back injury in a motor vehicle accident during the course of his employment on November 4, 1998.

    He received workers’ compensation benefits and also pursued a third-party claim against the driver and owner of the van.

    Brisson requested Onondaga County’s consent to settle the third-party action for $50,000.

    On August 17, 2001, RMSCO, the County’s third-party administrator, gave consent to the settlement but requested information regarding the net proceeds. Brisson’s attorney informed RMSCO that he believed the County had neither a lien nor a right to a payment holiday; RMSCO replied that this was “not entirely correct.”

    The third-party action was settled for $50,000 on September 24, 2001, and Brisson netted $32,958.73 after costs and fees.

    The County then notified Brisson that his benefits would be suspended to offset the net settlement proceeds.

    Procedural History

    Brisson challenged the suspension of his workers’ compensation benefits before a Workers’ Compensation Law Judge (WCLJ).

    The WCLJ ruled that the County was not entitled to offset Brisson’s benefits because it had not specifically reserved its right to claim credit for the settlement, relying on Matter of Hilton v Truss Sys.

    The Workers’ Compensation Board affirmed the WCLJ’s decision, finding that the County failed to unambiguously preserve its offset rights.

    The Appellate Division affirmed the Board’s decision, holding that whether the employer adequately preserved its right to a future offset is a factual issue for the Board, and substantial evidence supported the Board’s decision.

    The County appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether a self-insured employer or workers’ compensation carrier must expressly and unambiguously preserve its right to any offset when consenting to settlement of a third-party action, even if there is no existing lien against the claimant’s recovery?

    2. Whether substantial evidence supported the Workers’ Compensation Board’s finding that Onondaga County did not expressly and unambiguously preserve its right to offset future compensation benefits when consenting to the third-party settlement?

    Holding

    1. Yes, because Workers’ Compensation Law § 29(5) does not distinguish between instances where an employer has both a lien and prospective offset rights and those where only the latter exists. In either case, unless the employer unambiguously reserves a lien or offset right when giving consent, the lien or offset is waived.

    2. Yes, because the County’s response to the claimant’s attorney’s assertion that the County had neither a lien nor a right to a payment holiday was insufficient to explicitly reserve its right to an offset.

    Court’s Reasoning

    The Court of Appeals reasoned that the key consideration is whether the claimant is fully informed of the ramifications of the settlement. Claimants are unable to assess the value of a settlement without knowing the status of the employer’s or carrier’s claims against settlement proceeds.

    The Court emphasized that ambiguities are resolved against the carrier in settlement negotiations.

    The Court noted that Workers’ Compensation Law § 29(5) does not distinguish between cases where an employer has both a lien and offset rights, and cases where only offset rights exist.

    Failure to secure the employer’s or carrier’s consent results in forfeiture of the claimant’s future compensation benefits. Similarly, unless an employer or carrier unambiguously and expressly reserves a lien or the right to offset when giving consent, the lien or offset is waived.

    The Court stated that “a carrier or self-insured employer and claimant are deemed to be involved in… settlement negotiations, [and] ambiguities [will] be resolved against the carrier.”

    Whether an employer adequately preserved its right to a future offset is a factual issue for the Board, and the Board’s factual findings are conclusive if supported by substantial evidence. In this case, the Board’s determination was supported by substantial evidence.

    In dissent, Judge R.S. Smith agreed with the majority’s main holding but argued that the employer’s reservation of offset rights was clear in this case. The dissent stated, “The words ‘we can take credit against net third party proceeds’ are as unambiguous a statement as can be imagined that the employer retained its offset right.”

  • Walsh v. New York State Workers’ Compensation Bd., 66 N.Y.2d 836 (1985): Apportioning Litigation Costs in Workers’ Compensation Third-Party Settlements

    66 N.Y.2d 836 (1985)

    In workers’ compensation cases involving third-party settlements, when equitably apportioning litigation costs, courts must consider the total benefit the carrier derives from the recovery, including any relief from future compensation obligations.

    Summary

    This case addresses the proper method for apportioning litigation costs between a workers’ compensation insurance carrier and an employee who recovers a settlement in a third-party lawsuit. The employee, Walsh, settled a third-party action for $85,000, while the carrier had already paid $16,567.14 in benefits. The court considered whether the carrier’s share of litigation costs should be calculated based not only on the recoupment of past benefits but also on the extinguishment of any future benefits the carrier would have been obligated to pay but for the settlement. The Court of Appeals affirmed that the carrier’s total benefit, including relief from future obligations, should be considered.

    Facts

    Joseph Walsh, an employee-claimant, received workers’ compensation benefits from the New York State Workers’ Compensation Board’s insurance carrier. Walsh also pursued a separate third-party action, which he settled for $85,000. At the time of the settlement, the carrier had paid Walsh $16,567.14 in benefits. The carrier then sought to enforce its lien on the settlement proceeds to recoup the benefits it had paid, less its equitable share of Walsh’s litigation costs in the third-party action.

    Procedural History

    The carrier initiated an action to enforce its lien. The Supreme Court ruled that the carrier’s lien should be reduced by Walsh’s litigation costs in recovering the portion of the settlement that inured to the carrier’s benefit. This included recoupment of past benefits and extinguishment of future obligations. The Supreme Court referred the matter for a hearing to determine if the carrier had future compensation obligations to Walsh. The Appellate Division affirmed this decision, and the Court of Appeals granted leave to appeal.

    Issue(s)

    Whether, in equitably apportioning litigation costs to a workers’ compensation carrier, the court should consider the total benefit the carrier derives from the third-party recovery, including relief from future compensation payments.

    Holding

    Yes, because the court should consider the total benefit the carrier has derived from the recovery, including any relief from a future obligation to make compensation payments.

    Court’s Reasoning

    The Court of Appeals affirmed the lower court’s decision, emphasizing that the equitable apportionment of litigation costs should reflect the “total benefit the carrier has derived from the recovery.” This total benefit includes not only the recoupment of past benefits paid to the employee but also the extinguishment of any future obligations the carrier would have had to the employee. The court cited Matter of Kelly v State Ins. Fund, 60 NY2d 131, to support this proposition. The court reasoned that failing to consider the elimination of future obligations would unfairly advantage the carrier, as it would be recouping past payments and avoiding future expenses without contributing its fair share to the litigation costs that made this outcome possible. The court effectively stated that the carrier benefits from the claimant’s efforts and should share in the expense. This encourages settlements and ensures fairness in the allocation of costs. The court did not provide dissenting or concurring opinions.

  • Matter of Empire Mutual Insurance Company, 27 N.Y.2d 146 (1970): Reimbursement from Special Disability Fund After Waiver of Lien

    Matter of Empire Mutual Insurance Company, 27 N.Y.2d 146 (1970)

    An insurance carrier that waives its lien on a third-party settlement as part of its contribution to the settlement cannot then seek reimbursement from the Special Disability Fund for payments made beyond the statutory retention period.

    Summary

    Empire Mutual, acting as both the workmen’s compensation carrier and the employer’s liability carrier, sought reimbursement from the Special Disability Fund for payments made to a claimant beyond 104 weeks after the claimant settled a third-party action. Empire Mutual had waived its compensation lien and contributed $29,000 towards the settlement. The court held that because Empire Mutual effectively received reimbursement for its compensation payments by reducing its liability carrier contribution, it was not entitled to reimbursement from the Special Disability Fund. Allowing such reimbursement would constitute a windfall.

    Facts

    In 1960, a claimant sustained severe injuries. The claimant had a pre-existing physical handicap due to a prior injury while working for the same employer. Empire Mutual Insurance Company was the workmen’s compensation carrier for the employer. Empire Mutual made compensation payments to the claimant for 186-4/5 weeks.

    Procedural History

    The Workmen’s Compensation Board directed the Special Fund to reimburse Empire Mutual for payments made beyond 104 weeks. The Appellate Division affirmed the Board’s decision. The Special Fund appealed to the New York Court of Appeals.

    Issue(s)

    Whether an insurance carrier, acting as both compensation and liability carrier, is entitled to reimbursement from the Special Disability Fund for payments made to a claimant beyond the statutory retention period, when the carrier waived its lien on the proceeds of a third-party settlement and contributed to the settlement as the employer’s liability carrier.

    Holding

    No, because the insurance carrier, in voluntarily waiving its lien for the total amount of the compensation paid to the claimant and contributing to the settlement, is effectively reimbursed for its compensation payments, making it ineligible for further reimbursement from the Special Disability Fund.

    Court’s Reasoning

    The court reasoned that generally, a carrier can exercise its statutory rights as a lienor to recover payments made to the claimant from a third-party recovery, and then turn to the Special Fund for any deficiency arising after the 104th week. However, in this case, Empire Mutual acted in dual capacities: as the workmen’s compensation carrier and as the employer’s liability carrier. Empire Mutual actively participated in the third-party settlement by contributing $29,000 and waiving its lien for compensation payments.

    The court found that Empire Mutual’s cash settlement as liability carrier was reduced by the amount of payments made previously as compensation carrier. If two separate carriers had been involved, the liability carrier would have had to contribute a greater amount to satisfy the compensation carrier’s lien. In effect, Empire Mutual was already reimbursed for its compensation payments by having its payments as liability carrier reduced.

    The court emphasized that allowing further reimbursement from the Special Disability Fund would constitute a windfall for Empire Mutual. The court stated, “Here, Empire Mutual, acting in dual capacities, was fully reimbursed for its compensation payments to claimant by having its payments as liability Carrier correspondingly reduced. To allow Empire Mutual reimbursement under such circumstances would be, in effect, a windfall.”

    The court reversed the Appellate Division’s order and dismissed the claim for reimbursement from the Special Disability Fund.