The workers’ compensation law provides two separate ways for a compensation carrier to obtain reimbursement from the proceeds of a claimant’s third-party settlement:

1. Assert a lien against the recovery for the amount of benefits already disbursed by the carrier. N.Y. Work. Comp. Law § 29(1); or
2. Offset the claimant’s future compensation benefits by the amount of the claimant’s net recovery in the third-party action. N.Y. Work. Comp. Law § 29(4).

Asserting a Lien for Past Benefits Conferred

The workers compensation carrier “shall have a lien on the proceeds of any recovery from” a third party settlement less reasonable and necessary expenditures, such as attorney’s fees. N.Y. Work. Comp. Law § 29(1). The employee may apply on notice to the lienor to the court for an order apportioning reasonable and necessary expenditures including attorneys fees. The court shall apportion such expenditures equitably between the employee and the lienor. Id.

Offsetting Future Compensation Benefits

The carrier must affirmatively preserve its right to offsets, or it may involuntarily waive such right. See Hilton v. Truss Systems, Inc., 82 A.D.2d 711, 444 N.Y.S.2d 229 (3d Dep’t 1981), order aff’d, 56 N.Y.2d 877, 453 N.Y.S.2d 428, 438 N.E.2d 1143 (1982). The claimant’s third-party settlement recovery less the carrier’s lien is credited by the carrier against future compensation payments. The net amount the claimant receives offsets future compensation payments, and no future payments will be made until the credit is exhausted. The carrier may waive the lien or the offset. N.Y. Work. Comp. Law § 29.

There may be recession on, but New Jersey's petitioner's attorneys will not be feeling the pinch!  Petitioner's attorneys are moving forward on two fronts to skim more money from the compensation system.

Increasing Fees on Awards.

Attorneys fees in New Jersey are controlled by N.J.S.A. 34:15-64, which states that an attorneys fee must be "reasonable" and can not exceed 20% of the total award.

In practice, the Division issues a memorandum each year that sets a threshold fee. In the past, if a petitioner's attorney wanted to get a bigger fee than the "threshold" he or she was required to present an affidavit of services, detailing exactly what they did to earn that money. In practice, Judges of Compensation nearly always award the maximum fee.

Last year, the "no questions asked" fee threshold was $40,000. For 2012, the "no questions asked" fee jumps to $42,000. Also, under the new practice (effective January 3, 2012), petitioner's attorneys will no longer have to submit an affidavit of services - just make some sort of argument for why they are due an enhanced fee on the record.

New Jersey to reconsider fees on "Voluntary" Compensation.

When an employer knows (with certainty) that an employee has been injured and will suffer some degree of permanent injury (for example, when there has been loss of a limb), a voluntary tender, made at the appropriate time, may be offered to reduce exposure for attorney’s fees when the underlying claim is disposed of.

N.J.S.A.34:15-64 provides (in part):

When, however, at a reasonable time, prior to any hearing compensation has been offered and the amount then due has been tendered in good faith or paid within 26 weeks from the date of the notification to the employer of an accident or an occupational disease or the employee’s final active medical treatment or within 26 weeks after the employee’s return to work whichever is later or within 26 weeks after employer’s notification of the employee’s death, the reasonable allowance for attorney fee shall be based upon only that part of the judgment or award in excess of the amount of compensation, theretofore offered, tendered in good faith or paid.

There is now a pending proposed amendment to Section 64 which would grant an attorney a fee on this voluntarily tendered payment.

In other words - even where the petitioner did not have an attorney at the time a voluntary tender was issued - if he later retained counsel his attorney would be due a fee on any money already paid to him or her.

As recently as 2005 the Appellate Division affirmed the decision of the workers’ compensation judge to deny the employer the benefit of a reduced contribution to the petitioner attorney’s fee award because the employer’s voluntary tender of disability benefits was untimely when it occurred slightly beyond the twenty-six week period allowed by statute.  In reviewing the statutory history of N.J.S.A. 34:15-64 and viewing that statute together with N.J.S.A. 34:15-16, the Appellate Division concluded that when the NJ Legislature amended this statute in 1979 it intended to create a “bright line” timeframe and set a clear and certain deadline an employer must meet to reduce its contribution to an attorney fee award by invoking the “26-week rule.”  In other words - most voluntary payments to injured workers have been shielded the increased costs associated with attorneys fees - and that may change.

The law has not changed yet - but the proposed legislation change will be discussed in committee on December 8th.

Of course, we will continue to monitor this proposed change and keep you updated on any significant developments.

Background

Under the New York Workers’ Compensation Law, there are four types of benefits available to an injured worker:

1. Medical treatment. Emergency and follow-up treatment for their injuries.
2. Wage compensation for earnings lost while they recover from the immediate effects of their injury.
   • This wage compensation is called "temporary total" with the claimant is 100% totally temporarily disabled (cannot work at all) OR
   • "Partial temporary" when the claimant can do some work – but isn't earning their prior level of wages (usually because they can only work part time or have to work at a job that pays less than the work they were doing at the time of the accident). This is calculated as 2/3rds of the difference between old wages and post-accident wages.
3. Death benefits payable to the dependents (usually wife and kids) of a worker killed during the course of employment. This is 2/3rds of their average weekly wage at the time of injury, subject to maximums and minimums, to the wife for life.
4. "Permanency" benefits – these are payments of money to injured worker to compensate them for the "permanent effects" of an accident.

With rare exception, our settlements will focus on resolutions regarding the amount of "permanent disability" that a claimant is due.
 
The amount of permanent disability – the money award at a claimant gets when he has reached maximum medical improvement – is set by statute.
 
The statute envisions two types of permanent disability compensation:

1. "Scheduled loss of use" which relates to injuries to body parts which are listed on this "scheduled loss of use chart" which is attached to this document. This is a fixed amount of compensation for injuries to fingers, toes, hands, feet, arms, ankles, knees, etc.  In other words, the Workers Compensation Law states that if you lose your thumb in accident, you get a fixed benefit – a number of weeks of compensation times your weekly rate – which is determined by the injury.
2. The second type of permanent disability award is called a "classified award” or sometimes it is called a "classification." This term "classification" doesn't really mean anything – it just means you sustained injury to a body part which is not specifically described on the "scheduled loss of use chart." For example, injuries to the head, neck, and low back are considered "classifiable" injuries – and they are compensated in terms of a fixed number of weeks – up to 600 weeks.

Example.

If I made $200 per week and I lose my thumb, according to the scheduled loss of use chart, I would be entitled to 100% loss of the thumb – 75 weeks of compensation. This would be paid at a rate equivalent to 2/3rds (66.6%) of my average weekly wage – or approximately $133.34 per week (two thirds of $200 per week). So in this example, the loss of my thumb would give rise to an award of $10,000 for permanent disability. The other benefit I would get would be medical treatment for life in regards to the lost thumb.
 
Imagine if I sustained an injury to my low back.
 
Assume that the treating and examining physicians all agreed that I was left with a 25% permanent residual impairment. My award would be 2/3rds of my average weekly wage times 25% of 600 weeks (the maximum number of weeks for classifiable injury). So, the award would be $133.34 times 150 weeks of compensation or $20,000.
 
Any amounts already paid to me – the claimant – during the claim for my lost waged – for example, if I lost a few weeks from work – would be subtracted from the overall award.

 Often, there is not a simple agreement between the parties as to the extent and nature of the claimant's residual permanent disability. In such a case, we will often have a trial. During the pendency of the trial both parties have the opportunity to present their own witnesses – usually medical witnesses who claim that the injured worker is either completely and totally disabled (the claimant’s doctors) or is absolutely fine and ready for the Olympics (our IME doctors).
 
If the parties can reach a settlement before the judge reaches his conclusion regarding permanent disability – we can stipulate to an overall resolution. That settlement can be handled a number of different ways. What follows is a description of the three ways in which settlements are typically resolved.
 

Settlements

The main difference between these ways of settlement is whether or not the settlement is "full and final" – that means the claimant can never come back into court and alleged that his condition has worsened and now needs more compensation – and whether or not the employer/carrier remains liable to provide future medical benefits to the claimant should the condition worsen or should the claimant require additional medical treatment.
 
As medical treatment costs are now driving workers compensation claims (the employers and carriers are seeking to minimize medical treatment costs) a settlement in which the medical treatment aspects are closed (a "full and final settlement with closed medical") is the preferred way for a carrier/player to resolve workers compensation case.
 

1. Lump-sum dismissals – everything gets closed.

    This is often referred to as a "section 32" settlement after the section of the statute which allows for this type of settlement. This is the preferred way for employer/carrier to close a case. In this type of settlement, the claimant is paid one lump sum – usually agreed upon between the parties and usually a whole number – for example, $50,000 – to resolve all issues. The claimant loses the right to reopen this claim should his condition worsened. The claimant loses the right to seek additional medical treatment which must be paid for by the employer/carrier. The claimant is responsible for paying his own attorney's fee – usually 15% of any settlement – directly to his attorney.
   
   A section 32 settlement must be approved by a judge of compensation. There are number of forms which must be completed and submitted to the court for settlement of this type to take place. Addiitonally, consideration of Medicare's potential future interest must be made - in many cases, a set-aside allocation should be considered.
    
   These forms are:
    
   1. C–32 settlement form.
   2. C–32.1 settlement form
   3. A–9 form.
   4. An addendum document, explaining that the claimant's right further compensation is waived, that medicals are closed, and laying out any other particular aspects of the proposed settlement.
   5. A further correspondence must be sent to the office of Child support enforcement seeking a statement that the claimant does not know any child support payments in the state of New York. This should be simply sent to the Office of Child Support Enforcement – and does not have to be submitted to the workers compensation board except as a copy.

2. Lump-sum dismissals – medical stays open.

   This is still a "section 32" settlement with the only aspect of the case that is closed is the amount and nature of the claimant's permanent residual disability. In other words, we our paying the claimant a lump sum for the amount of permanent impairment to the body part injuries the accident.  The claimant is also giving up the right to reopen the case – he can never come into court and say's condition has worsened and he needs more compensation for increased impairment. However, the carrier remains "responsible" for additional medical treatment should the claimant's condition worsen and require additional care. In this type of settlement, Medicare's potential future insterest does not have to be considered - medical stays open and so the claimant can come back to the medical carrier for any necessary treatment.
    
   The specific forms which must be filed in this case are the same as the lump-sum dismissal of all claims (above at one).
    
   1. C–32 settlement form.
   2. C–32.1 settlement form
   3. An addendum document, explaining that the claimant's right further compensation is waived, that medicals are closed, and laying out any other particular aspects of the proposed settlement.
   4. A further correspondence must be sent to the office of Child support enforcement seeking a statement that the claimant does not know any child support payments in the state of New York. This should be simply sent to the office of Child support enforcement – and does not have to be submitted to the workers compensation board except as a copy.
    

3. Stipulated settlement

   – classification or scheduled loss of use with medical staying open. In this case, we are stipulating to the fact that the claimant has a residual permanent impairment to a "scheduled" body part or to a body part which is "classified." In this case, we complete form 300.5 S completely as possible – describing the injuries, the percentage of permanent pyramid, and all necessary particular facts to establish the award – which will include the average weekly wage of the claimant. In this type of stipulated settlement, we will be granted credit for payments of temporary total or temporary partial wage continuation benefits which were issued during the pendency of the case – while the claimant recovered.
    
   • Forms:  C-300.5

Have any questions about settling claims in New York? Contact Greg Lois.

The 2011 schedule of disabilities is available here. (Caution: links to PDF).

In 2007 New York's Workers' Compensation law was changed to eliminate the possibility of 'lifetime' partial disability benefits. Instead, awards of partial permanent disability are now subject to a 'capped' number of weeks. Benefits for injuries resulting in permanent disability that occurring after March 13, 2007 are subject to 'week capping.'
The 2007 changes in the law also created an 'Aggregate Trust Fund.' Under the new law, the carrier must pay the 'present value' of any permanent partial disability directly into the Aggregate Trust Fund, which then doles out the payments to the claimant.

There have been a number of cases where the claimant was injured before March 13, 2007, but not classified as having a permanent partial disability until after July 1, 2007. Employers in this circumstance DO NOT get the benefit of a 'capped' number of weeks - because the injury occurred before the reform legislation became law on March 13, 2007. Employers in this circumstance MUST deposit the 'present value' of the claimant's (potentially) lifetime benefit into the Aggregate Trust Fund.

Employers and insurance carriers argued that the value of the potentially-lifetime benefits was 'speculative' and they would be required to make enormous deposits with the Aggregate Trust Fund.

This matter came before the Appellate Division which ruled that
(1) cases where the injury occurred before the new law was enacted do not get the benefit of capped weeks; and
(2) deposit of permanent partial awards not subject to capping must be done. The carriers were directed to deposit funds as computed by the Workers' Compensation Board.

Case: Matter of Garcia v. Wings Digital, (N.Y. App. Div. decided October 14, 2010).

The MSP has been in effect since 1980, and there has been little effort to enforce its provisions in third-party liability cases. Moreover, there has been no indication from CMS that they would seek to exercise their MSP rights retroactively. Indeed, the workers’ compensation example has shown that CMS is not interested in ‘looking back’ to impose MSP responsibility.
We think that the MSP Act applies to third-party liability cases.
Although Medicare has not traditionally enforced its rights under the MSP with respect to third-party liability cases, it is clear that the Act applies to those cases. Lack of enforcement will likely soon change. All insurers, third-party health plans, self-insured plans, and self-administered plans must identify situations where the Plan is or has been primary to the Medicare program. The requirements of the MMSEA including the carrier/self-insured’s duties to identify claimants and provide “such other information as the Secretary may specify” certainly signal the beginning of an enforcement effort by CMS in third-party liability cases.
It is true that there is not yet a “formal” CMS process in place for reviewing settlements in the liability arena as there is in the workers’ compensation world. However, CMS offices in Dallas and Atlanta have begun reviewing third-party liability settlements and granting approvals of set-aside agreements. At a CMS “town hall” meeting - a dial-in telephone conference call - which took place on March 16, 2010, CMS stated that “the obligation of liability settlements to protect CMS for past-due and future medical bills is exactly the same as the workers’ compensation side.” CMS said “[w]here future medicals are a consideration in arriving at a settlement, then appropriate arrangements should be made for appropriate exhaustion of the settlement before Medicare is billed for related services.”

The impact of the Medicare Secondary Payer Act on civil and workers’ compensation litigation is growing. In the next few years we expect that CMS’s enforcement activities will increase. On May 24, 2010, the New Jersey Appellate Court decided a case (Jackson v. Hudson Court) that we believe is the first case in New Jersey focusing on the MSP and a civil claim. In Jackson, the plaintiff sought to have the trial court issue an order allocating the proceeds of her settlement to discharge a Medicare lien. The Court refused to do so - forcing the payee to consider Medicare’s interest in her settlement.

This article (caution - very long!) is a comprehensive guide to handling claims (workers' comepnsation claims and liability matters) in which medicare may have an interest. Read on for my review of this important topic, with flow-charts illustarting the decisions facing the employer/defendant in personal injury/workers' compensation claims. Read More...

1. When must Medicare’s interest be considered?
Medicare’s interest must always be considered whenever:
(A) Medicare has paid for treatment for a disability/injury alleged in the claim petition; and/or
(B) In the closure of a workers’ compensation case the petitioner is Medicare entitled and future medicals for a disability/injury maintained in the claim petition are being foreclosed.

2. When is a petitioner considered “Medicare entitled”?
A petitioner is Medicare entitled if he or she is:
65 years or older (assuming sufficient work quarters); or
On Social Security Disability (SSD) for 24 months or longer; or
Suffering from End Stage Renal Disease (ESRD).

3. Is repaying Medicare for conditional payments (or obtaining a waiver) always required when the petitioner has received Medicare benefits?
Yes. CMS recommends that the process outlined under Question 4 of this memo be initiated as soon as possible for petitioners who have received Medicare benefits. To ensure that a record of any Medicare benefits be established, this process must be initiated in all cases when the petitioner is a Medicare beneficiary. One should also keep in mind that repaying CMS for past /conditional payments Medicare made on behalf of the petitioner is required even when no set-aside allocation review is required. Therefore, pleadings become very important in determining the extent to which past/conditional Medicare payment issues may play a role in resolving a claim. Plaintiffs/Petitioners who allege work injuries or disabilities that clearly cannot be sustained may be subjecting their cases to more extensive CMS/Medicare review and delay for alleged injuries or disabilities that will be found “non-compensable” later in the proceedings. In summary, adequate consideration must be given to the issue of conditional payments in all cases involving a Medicare beneficiary at the time of settlement. This includes cases resolved by Orders Approving Settlement, Section 20 Settlements, Judgments, and Second Injury Fund Awards. As long as the petitioner is a Medicare beneficiary, this issue must be addressed.

Medicare filed a new lawsuit on December 1, 2009 signaling a possible change in the recovery focus - from claimants (Medicare beneficiaries) to insurance carriers who contribute to settlements.
In the past, workers, their attorneys, employers, and even insurance companies have ignored or attempted to evade the fact that workers’ compensation is primary to Medicare. There were undoubtedly some instances in which a worker would go into a hospital for treatment of a work-related problem and show a Medicare card, and the hospital would bill Medicare. At times, no one on behalf of the employer or its insurer went out of the way to tell the hospital that the bill should have been sent to workers’ compensation or to reimburse Medicare after it had paid the bill.
In July 2001 CMS issued a memo to its regional offices. It suggests that under certain circumstances parties to workers' compensation claims should not settle those cases until after CMS has had an opportunity to review the settlement and approve the allocation to future medical expenses. In addition, Medicare asserted a right to repayment for medical expenses for treatments ‘related’ to the workers’ compensation claim but which had been paid by Medicare (“conditional payments”).
Since then, the settlement of workers’ compensation claims in which an employee’s future right to medical treatment is foreclosed and the claimant is Medicare-entitled or eligible have required a Medicare Set-Aside approval (or waiver). As any claims person can tell you, this has dramatically slowed down the closure rate of higher-value ‘lump-sum’ type claims (Section 20s in NJ, Section 32s in NY). At the same time, Medicare has been issuing ‘Conditional Payment Statements’ showing payments made for medical care which Medicare asserts may be related to the workers’ compensation claim - and therefore not payable by Medicare under the Secondary Payer Act. Read More...

The WCB has issued the following statement:

“The Board has been asked about the use of indemnification or hold harmless provisions in Section 32 agreements to protect a carrier or employer from liability of medicare payments related to an established workers’ compensation claim. The Board will not approve agreements containing such indemnification for payments made by Medicare for services provided prior to the Section 32 agreement.”

Workers’ Compensation Law Section 32 (part b1) directs the WCB to disapprove unfair agreements. We expect the WCB to decline to approve Section 32s where there have been conditional payments made by Medicare and the carrier seeks indemnification. (We also think such a disapproval would be appealable under Section 23). Of course, a Section 3 can be ‘silent’ on the conditional payment issues, but we continue to recommend that the payments be addressed at time of settlement.

New Jersey Claimant Kimberly Paladino was injured at work on March 30, 2001. On February 3, 2005, she agreed to an 'Order approving Settlement.' Nine days later (February 14th, 2005) the respondent issued her draft for the settlement. The claimant then waited seventeen months (until July, 2006) to take the settlement draft tot he bank for deposit. The bank refused to honor the old check.
After the bank refused to honor the original check, the claimant requested that another draft be issued. the respondent complied, and issued a replacement check on July 26, 2006. The claimant deposited the check and enjoyed the proceeds.
The claimant then filed a 're-opener' application on August 28, 2007, alleging that her disability had increased since the entry of her February 5, 2005 settlement and that she was entitled to more compensation.
The respondent raised the statute of limitations as a defense to the re-opener. Under the New jersey Workers' Compensation Act, a claimant has "two years from the date when the injured person last received a payment upon the application of either party on the ground that the incapacity of the injured party has subsequently increased" to file a 're-opener' claim. The respondent argued that the claimant has two years from the date of the original check being issued - not two years from the date the replacement checked was actually cashed - to re-open her claim. Under this reasoning, the claimant was 'out-of-time' on her re-opener.
The Appellate Court agreed: regardless of when the draft was actually cashed, the claimant's opportunity for re-opener was governed by the date the respondent delivered the original check to the petitioner.
Case: Paladino v. Pier One Imports, App. Div. 39-2-5671 (Decided October 26, 2009).

Until September, injured workers in New York State collected incremental payments for "loss-of-use" injuries (permanent partial disabilities). This practice followed a 2007 appeals court decision finding that a 'periodic system of payments' could not be paid as a lump-sum without a change to the law. Governor Paterson just signed legislation allowing loss-of-use injuries to be paid in one lump sum.