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New York State Association of Self Insured Counties

Explore exclusive remedies, exceptions, employer protections, subrogation, and liability in workers' comp. Learn subrogation rights and employer actions.

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New York State Association of Self Insured Counties

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  1. New York State Association of Self Insured Counties 2014 Spring Conference Best Western Plus Captain’s Quarters Hotel & Conference Center April 30, 2014 – May 2, 2014

  2. How to Be a “Lien”, Mean, Subrogating Machine – Advanced Section 29 IssuesPresented by Melissa A. Day, Esq.Thursday, May 1, 2014, 1:30 PM

  3. Compensation is an Employee’s Exclusive Remedy against the Employer • Workers’ Compensation benefits are a trade off of rights and benefits between employees and employers. Employees give up the right to sue their employers in exchange for “no-fault” benefits and employers’ liability is limited. • “The liability of an employer prescribed by the last preceding section shall be exclusive and in place of any other liability whatsoever, to such employee…on account of such injury or death or liability arising therefrom…” WCL §11

  4. Exceptions to the Exclusivity Rule – WCL §11 • Intentional torts • “The right to compensation has been held not to be the exclusive remedy of an employee under subdivision 6 of §29, when such employee is injured by the intentional wrong of another in the same employ.” Jackson v. Frederick Richman & Co., 15 N.Y.2d 877, 879 (N.Y. 1965). • Failure to secure coverage • “…if an employer fails to secure the payment of compensation…an injured employee…may…elect to claim compensation under this chapter, or to maintain an action in the courts for damages…”

  5. Isabella v. Koubek, 2014 WL 1424567 (April 15, 2014): Claimant was a passenger in a car accident during the course of his employment. A co-worker was driving, her husband owned the vehicle. Claimant was awarded workers’ compensation benefits and brought a third party action against the other driver in 2009. The driver from the other vehicle sought to shift liability back to the owner of the car, the claimant’s employer. The Second Circuit certified the following question to the New York Court of Appeals: Whether a defendant may pursue a third-party contribution claim under New York Vehicle and Traffic Law § 388 against the owner of a vehicle, where the vehicle driver’s negligence was a substantial factor in causing the plaintiff’s injuries, but the driver is protected from suit by the exclusive remedy provision of Workers’ Compensation Law §29(6). The Court of Appeals answered in the affirmative. “Read together, these statutes render workers’ compensation benefits the exclusive remedy of an injured employee, thereby baring the employee from recovering against a negligent coemployee or employer…we hold that a defendant may not pursue a third-party contribution claim under vehicle and traffic law… against a vehicle owner where the driver’s negligence was a cause of the plaintiff’s injuries, but the driver is insulated from a lawsuit under workers’ compensation law.”

  6. Employer Protections from Impleader Actions • WCL §11 also protects the employer from third-party actions. The employer cannot be impleaded for a cause of action for common law contribution or indemnity • Exception – Grave Injuries • Does not apply to causes of action for contractual indemnification • §29 rights still apply

  7. The Right to Bring an Action • WCL §29(1), gives an injured employee the right to pursue a cause of action and collect workers’ compensation benefits. • “If an employee entitled to compensation under this chapter be injured…by the negligence or wrong of another not in the same employ, such injured employee…need not elect whether to take compensation and medical benefits under this chapter or to pursue his remedy against such other but may take such compensation and medical benefits and…pursue his remedy against such other…”

  8. Employer is Subrogated to the Employee’s Right to Bring an Action • Under WCL §29(2), if the injured employee who is injured as the result of the negligence of another person elects not to bring an action, the employer or its carrier is subrogated to the employee’s right to bring an action. • “If such injured employee…has taken compensation under this chapter but has failed to commence action against such other…such failure shall operate as an assignment of the cause of action against such other to the…association, corporation, or insurance carrier liable for the payment of such compensation.”

  9. Pre-Requisites for Employer’s Subrogation Rights If the injured worker has not commenced an action within one year from when the action accrues or six months after the awarding of compensation, whichever comes first, this amounts to an assignment of the COA to the employer The injured worker must be given notice in writing by personal service or by certified mail that the failure to commence an action within 30 days will operate as an assignment of the claim to the employer.

  10. Consent or Judicial Approval of a Settlement Must Be Obtained

  11. Consent to Settlement • A compromise of any such cause of action by the employee or his dependents at an amount less than the compensation provided for by this chapter shall be made only with the written approval of the commissioners of the state insurance fund or such officer thereof designated by them, if the deficiency of compensation would be payable from the state insurance fund, and otherwise with the written approval of the person, association, corporation, or insurance carrier liable to pay the same. WCL §29(5).

  12. Judicial Approval of Settlement • However, written approval of the commissioners of the state insurance fund or such officer thereof designated by them or written approval of the person, association, corporation, or the insurance carrier need not be obtained if the employee or his dependents obtain a compromise order from a justice of the court in which the third-party action was pending. The papers upon an application to compromise and settle such a claim shall consist of the petition, the affidavit of the attorney, and the affidavit of one or more physicians. WCL §29(4).

  13. WCL §29 Allows Two Avenues for Recovery

  14. One Recovery for One Injury • In the law, there is a legal maxim that there can only be one recovery for one injury

  15. Example #1: One Recovery for One Injury

  16. Benefits of Obtaining a Recovery under §29 • If the amount of the recovery from the “third-party action” is more than the compensation to which the Claimant is entitled, the Claimant benefits. • Example #1: Claimant is entitled to $250,000 in comp benefits. The third party recovery is $1,000,000. Claimant received $750,000 more than he would have received is he had only been entitled to comp. ($1,000,000 - $250,000 = $750,000.)

  17. Example #2: One Recovery for One Injury

  18. Benefits of Obtaining a Recovery under §29 • If the amount of the recovery from the “third-party action” is less than the compensation to which the Claimant is entitled, the Claimant does not benefit. • Example #2: Claimant is entitled to $250,000 in comp benefits. The third party recovery is $75,000. The total amount payable as a result of the work injury is $250,000. • Deficiency Case.

  19. The injured employee does not always benefit when he brings a third party action.

  20. Employer always has the potential to benefit when a recovery is obtained under WCL §29.

  21. WCL §29 Prevents Double Recoveries • At the time of a settlement there are two types of compensation benefits which have to be considered to ensure that a Claimant does not get a double recovery: benefits that have already been paid and benefits which would be paid in the future. • Past Benefits – Lien • Future Benefits – Credit/Offset/Holiday

  22. Past Benefits and Lien Rights • To address the Claimant’s receipt of past benefits, the carrier or employer is given a lien in the amount of benefits already paid against any recovery and this prevents a double recovery by reducing the recovery by the amount of benefits already paid. • “In such case, the state insurance fund, if compensation be payable therefrom, and otherwise the person, association, corporation or insurance carrier liable for the payment of such compensation, as the case may be, shall have a lien on the proceeds of any recovery from such other, whether by judgment, settlement or otherwise…” WCL §29(1).

  23. Example #1 – Lien Recovery • At the time of the $1,000,000 settlement, the carrier has paid $250,000 in comp. No future benefits will be paid because the WC claim was settled under §32. • The carrier’s lien is $250,000. • The Claimant must repay the $250,000 he has already received and he pockets $750,000 from the third party. • His total benefit from the third party is $750,000. • The carrier’s benefit from the third party is $250,000. • The total benefit from the third party is $1,000,000.

  24. Example #1

  25. Example #2 – Lien Recovery • At the time of the $75,000 settlement, the carrier has paid $250,000 in comp. The case was settled under §32. • The carrier’s lien is $250,000. • There is not enough from the third party to satisfy the lien. • The Claimant must pay the entire $75,000 to the carrier. • The Claimant’s benefit from the third party is $0. • The Claimant received $175,000 in compensation benefits. • The carrier’s benefit from the third party is $75,000. • The total benefit from the third party is $75,000. • The total amount payable as a result of the work injury is $250,000.

  26. Example #2

  27. Future Benefits and Credit Rights • To address the Claimant’s entitlement to future benefits, the carrier or employer is given a “credit”, “offset” or “holiday” against any recovery and this prevents a double recovery by relieving the carrier from having to make payments for workers compensation benefits until the credit is exhausted. • “If such injured employee…proceed against such [third party], the…[carrier or employer]…shall contribute only the deficiency, if any, between the amount of the recovery…and the compensation provided…” WCL §29(4).

  28. Example #1 – Credit Rights • At the time of the $1,000,000 settlement, the carrier has not paid any comp because the case was controverted. The carrier does not have a lien. • The case gets established and the Claimant received medical treatment during remainder of his life totaling $100,000. • During the remainder of his life, the claimant was entitled to indemnity benefits totaling $150,000. • The carrier does not have to pay for the Claimant’s medical treatment or his indemnity benefits because of its credit. • His total benefit from the third party is $750,000. • The total benefit to the carrier in compensation benefits it does not have to pay is $250,000. • The total benefit from the work injury is $1,000,000.

  29. Example #1

  30. Example #2 – Credit Rights • At the time of the $75,000 settlement, the carrier has not paid any comp because the case was controverted. The carrier does not have a lien. • The case gets established and the Claimant needs surgery which costs $75,000. • The carrier has a $75,000 credit and does not have to pay for the Claimant’s surgery. • The Claimant pays for the surgery. • After the surgery, the Claimant is found to have an SLU which is worth $175,000. • The carrier has to pay the SLU. • The Claimant’s total benefit from the third party is $0. • The carrier’s benefit is $75,000. • The total benefits payable as a result of the work injury is $250,000.

  31. Example #2

  32. Lien and Credit Rights • Many times, the carrier or employer obtains its benefit by recovering a lien for its payments of past benefits and then exercising a credit against the Claimant’s recovery to account for future benefits. • This prevents a double recovery by reducing the Claimant’s recovery by what he has already received (a lien attaches to the recovery for past benefits) and keeping him from collecting what he would otherwise be entitled to receive (a credit must be absorbed against future benefits).

  33. Example #1 – Lien and Credit Rights • At the time of the $1,000,000 settlement, the carrier has paid $100,000 in medical and lost wages. • The Claimant’s future benefits are valued at $150,000. • The carrier recovers its lien of $100,000. • The carrier exercises a credit of $150,000 during the remainder of the Claimant’s life against future benefits that otherwise would have been due. • The Claimant’s total benefit from the third party is $750,000. • The carrier’s total benefit from lien and credit rights is $250,000. • The total benefit from the work injury is $1,000,000.

  34. Example #1

  35. Example #2A – Lien and Credit Rights • At the time of the $75,000 settlement, the carrier has paid $100,000 in benefits. • The value from the third party is less than the total amount of workers’ compensation due. • The carrier recovers $75,000 through lien repayment. • The parties negotiate a §32 in the amount of $175,000. • There is no credit because the Claimant did not receive anything from the third party. • The Claimant’s total benefit from the third party is $0. • The carrier’s total benefit from the third party is $75,000. • The Claimant’s benefit from the work injury is $175,000. • The total payable as a result of the work injury is $250,000.

  36. Example #2A

  37. Example #2B – Lien and Credit Rights • At the time of the $75,000 settlement, the carrier has paid $25,000 in benefits. • The carrier recovers $25,000 through lien repayment. • The carrier exercises a credit in the amount of $50,000 against the $225,000 in benefits that the Claimant is entitled to during the remainder of his life. • After $50,000 in benefits have been “paid”, actual payments resume. • The Claimant’s total benefit from the third party is $0. • The carrier’s total benefit from the third party is $75,000. • The Claimant’s benefit from the work injury is $175,000. • The total payable as a result of the work injury is $250,000.

  38. Example #2B

  39. The Claimant and the Carrier Can Benefit from the Third Party • If the value of the third party exceeds the value of the third party settlement, the Claimant and the carrier benefit. • If the value of the third party is less than the total amount of workers’ compensation benefits due, only the carrier benefits. • If there is a recovery from a third party, the carrier always stands to benefit but the Claimant may not.

  40. Who Pays for the Benefit? • When the Claimant and the carrier benefit, each pays their share of the costs based on the benefit they receive. • When only the carrier benefits from the third party, it should have to pay 100% of the costs from obtaining the recovery.

  41. The Right to Attorney’s Fees and Costs • §29(a)(1) continued • [The carrier has a ]…lien on the proceeds of any recovery from such other, whether by judgment, settlement or otherwise after the deduction of the reasonable and necessary expenditures, including attorney's fees, incurred in effecting such recovery, to the extent of the total amount of compensation awarded under or provided or estimated by this chapter for such case and the expenses for medical treatment paid or to be paid by it and to such extent such recovery shall be deemed for the benefit of such fund, person, association, corporation or carrier.

  42. Determining the Parties’ Share of Costs • Should the employee or his dependents secure a recovery from such other, whether by judgment, settlement or otherwise, such employee or dependents may apply on notice to such lienor to the court in which the third party action was instituted, or to a court of competent jurisdiction if no action was instituted, for an order apportioning the reasonable and necessary expenditures, including attorneys' fees, incurred in effecting such recovery. • Such expenditures shall be equitably apportioned by the court between the employee or his dependents and the lienor. WCL §29(1).

  43. Example #1: • $1,000,000 recovery, $250,000 payable in comp • Total Costs are $333,333.33 • Claimant’s benefit is $750,000 • Share of costs is $250,000 • Carrier’s benefit is $250,000 • Share of the costs $83,333.33

  44. Example #2: • $75,000 recovery, $250,000 payable in comp • Total Costs are $25,000. • Claimant’s benefit is $0 • Share of costs is $0 • Carrier’s benefit is $75,000 • Share of the costs $25,000.

  45. How do the Costs Get Paid? • The attorneys from the third party get paid at the time of the recovery. • If the carrier and the Claimant’s benefits from the third party settlement are known at the time of the recovery, the costs associated with the benefits are determined at the time of the recovery. • At the time of the recovery, the benefit to the Claimant and the carrier may not be known and may have to be estimated.

  46. Kelly v. State Insurance Fund60 N.Y.2d 131 (1983) • When an employee brings a third-party action and recovers an amount greater than the amount of his or her statutory entitlement to compensation, there is no question that the carrier benefits not only by the recovery of its lien but also by the value of estimated future compensation payments that, but for the employee's efforts, the carrier would have been obligated to make.

  47. Kelly v. State Insurance FundContinued • Furthermore, the value of future compensation payments that a carrier has been relieved of paying due to a third-party recovery is not so speculative that it would be improper to estimate and to access litigation costs against this benefit to the carrier. Indeed, when it is the carrier that brings a third-party action, the statute specifically authorizes determining the amount of excess recovery owing to the employee by estimating the “probable total amount” of future compensation “upon the basis of the survivorship annuitants table of mortality, the remarriage tables of the Dutch Royal Insurance Institution and such facts as * * * may [be] deemed] pertinent” (Workers' Compensation Law, §29, subd. 2).

  48. Kelly Example #1: • $1,000,000 recovery, $100,000 lien, $150,000 value of future comp. • Total Costs are $333,333. Net benefit from 3rd party is $666, 667. • Claimant’s benefit is $750,000 • Claimant’s share of costs is $250,000 • Claimant’s net benefit is $500,000 • Carrier’s benefit is $250,000 • Carrier’s share of the costs $83,333 • Carrier’s net benefit is $166,667 • Lien gets reduced by $83,333 • Carrier receives $16,667 in lien repayment and gets $150,000 credit.

  49. Kelly Example #2: • $1,200,000 recovery, $100,000 lien, $500,000 value of future comp • Total Costs are $400,000, net benefit from third party is $800,000 • Claimant’s benefit is $600,000 • Share of costs is $200,000 • Claimant’s net benefit is $400,000 • Carrier’s total benefit is $600,000 • Share of the costs $200,000 • Carrier’s net benefit is $400,000 • Lien is wiped out completely. • Carrier has to pay “fresh money” of $100,000 • Carrier does not have to pay the $500,000 in future comp • Claimant receives $900,000 in cash at the time of the recovery but is subject to a $500,000 credit.

  50. Burns v. Varriale9 N.Y.3d 307 (2007) • Permanent partial disability determination did not entitle claimant to weekly compensation benefits at specific rate over his life or over set period; • Present value of future compensation benefits was speculative at time that nonschedule permanently partially disabled claimant recovered damages in third-party action; and • Trial court could not use present value of future benefits in nonschedule permanent partial disability case for purposes of calculating workers' compensation carrier's equitable share of claimant's attorney's fees and costs.

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