An injured worker can pursue both his New York workers' compensation claim and a claim against the actual tortfeasor at the same time. Pursuant to New York Workers' Compensation Law § 29, the employer or carrier responsible for providing workers' compensation benefits is deemed to have a lien against the proceeds of the third party action. The lien is simple to calculate: it is the sum of the medical benefits issued and indemnity payments made, including future benefits.

Entitlement to reimbursement.

The employer or workers' compensation carrier is entitled to be reimbursed for all benefits paid up to the date of the third party recovery less the proportionate share of the costs of litigation. This is simply the proportionate cost of the attorneys fees and litigation expenses (filing fees, copying fees, records retreival costs, expert costs, etc.) incurred to obtain the judgment or settlement against the actual tortfeasor. (Note: when the third party case is a motor vehicle accident case, the compensation lien does not apply to the first $50,000 of first party benefits available, see NY No Fault Law § 5102 & WCL § 29(1-a)).

Since the decision in Kelly v. State Insurance Fund, 468 N.Y.S.2d 850 (1983), the apportionment of litigation expenses must be made against the entire benefit that the carrier obtained from the third-party recovery -in other words, the litigation expenses and attorneys fees are not "front loaded" into the immediate settlement proceeds, but have to be "spread out" over the life of the workers' compensation benefits which would be due to the claimant. Kelly also introduced the concept of further reducing an employer/carrier's reimbursement by including the "present value" of the future benefits obligation extinguished to be paid as a litigation expense - which serves to reduce the employer/carrier's lien further. In cases involving death, permanent total disability, or scheduled loss of use, the Kelly "future benefits obligation" can be calculated using the present day value of an annuity to cover the cost of these future obligations. (Of course - this should be negotiated - and where a potential obligation is simply unknowbable, like future medicals - it should be left out).

If the claimant's third-party recovery is greater than the amount of workers' compensation benefits issued - then the employer/carrier get something more than just reimbursement - the employer/carrier has the right to credit against future payments to be made. (This credit is called a "holiday" by New York practititioners). Of course, this credit is reduced by the percentage of litigation costs assessed against the employer.

Amount of Employer’s (or Carrier’s) Recovery.

If the amount recovered by the worker (or their dependents) from the third person is equal to or greater than the employer’s (or carriers) obligation under the Workers’ Compensation Law, then the employer is entitled to be reimbursed for the medical expenses incurred and compensation payments made to the worker or his family less the workers’ expenses of suit and attorney’s fees in pursuing the action against the third person. In order to calculate the amount of reimbursement, a statement of the third party settlement/recovery with all litigation expenses must be obtained.

If the amount recovered by the worker from the third person is less than the employer’s obligation, the employer is liable for the difference plus the worker’s attorney’s fees and costs of suit. The employer or carrier is entitled to the recovery from the third person, leaving their obligation to the worker as the difference between the compensation and the medicals paid out and the third person recovery, plus attorney’s fees and expenses of suit in pursuing the third person.

“Expenses of suit” is not limited to a specific dollar figure and “the attorney’s fee percentage" will effect the amount of reimbursement the employer/carrier is entitled to.

Confusion about Burns.

The decision in Burns v. Varriale, 820 N.Y.S.2d 655 (3'd Dep't 2006), aff'd, 9 N.Y.3d 207 (2007), caused confusion about how to apply the subrogation rules in cases where the future compensation is difficult to calculate - for example, in permanent total disability cases (which can go on to the claimant's life expectancy) or claimants not yet found "permanently partial" or totally disabled at the time of the settlement. However, the practical take away from Burns is simple: at the time of settlement, the carrier/employer should be reimbursed from the proceeds of the third-party settlement (less their share of litigation expenses and attorneys fees, of course!) but because the future benefit is unknown, there is no "holiday" or credit. Instead, the employer/carrier simply pays out the ongoing benefits - whether they be indemnity or medical - as they come due at the same proportionate rate as the employer/carrier's portion of those litigation expenses until the lien is exhausted.

Permission to settle third-party case.

Workers' Compensation Law § 29(5) requires either the carrier's written consent or a compromise order from the court in which a third-party settlement is pending for a claimant to settle a third-party case and continue to recieve compensation benefits. If an employer or carrier refuses to consent to a settlement, a claimant may move in the trial court for judicial approval of the settlement, as well as an equitable apportionment of the litigation costs. When an employer/carrier consents to a third-party settlement, the right to future offset should be set forth - otherwise the Board can make a determination.

The employer/carrer should reserve the right to future offsets in writing and at the time the third-party settlement is approved. Remember - if the claimant fails to seek the approval fo the employer/carrier for the third-party settlement, or abandons that third-party claim without providing notice to the employer/carrier, her right to compensation benefits is extinguished!

Time limits.

The employer by statute has an opportunity to separately pursue reimbursement of workers’ compensation benefits paid and payable if the injured worker has not done so within one year from when the action accrued or six months after the awarding of compensation whichever comes first, but only 30 days after the injured worker has been notified 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. See WCL § 29(1).

Under the Longshore and Harbor Workers' Compensation Act (LHWCA), when an employee has a claim for damages against a third party (other than his employer) he may pursue both a civil remedy and collect benefits under the LHWCA. Section 33(a) of the LHWCA provides:

If on account of a disability or death for which compensation is payable under this Act the person entitled to such compensation determines that some person other than the employer or a person or persons in his employ is liable in damages, he need not elect whether to receive such compensation or to recover damages against such third person.

33 U.S.C. § 933(a).

It used to be the case that a claimant would have to "choose" ebtween collecting workers' comepnsation benefits and maintaining control of their third-party case, under an "assignment" theory. That was changed, and Section 33(b) of the LHWCA provides:

Acceptance of compensation under an award in a compensation order filed by the deputy commissioner, an administrative law judge, or the Board shall operate as an assignment to the employer of all rights of the person entitled to compensation to recover damages against such third person unless such person shall commence an action against such third person within six months after such acceptance. If the employer fails to commence an action against such third person within ninety days after the cause of action is assigned under this section, the right to bring such an action shall revert to the person entitled to compensation. For the purposes of this subsection, the term "award" with respect to a compensation order means a formal order issued by the deputy commissioner, an administrative law judge, or the Board.

33 U.S.C. § 933(b).

The LHWCA is very clear about how the proceeds of a third-party recovery are to be used:

Section 33(e) of the LHWCA provides:
Any amount recovered by such employer on account of such assignment, whether or not as the result of a compromise, shall be distributed as follows:

1. The employer shall retain an amount equal to
2. 1. the expenses incurred by him in respect to such proceedings or compromise (including a reasonable attorney's fee as determined by the deputy commissioner or Board);
   2. the cost of all benefits actually furnished by him to the employee under Section 7;
   3. all amounts paid as compensation;
   4. the present value of all amounts thereafter payable as compensation, such present value to be computed as in accordance with a schedule prepared by the Secretary, and the present value of the cost of all benefits thereafter to be furnished by section 7, to be estimated by the deputy commissioner, and the amounts so computed and estimated to be retained by the employer as a trust fund to pay such compensation and the costs of such benefits as they become due, and to pay any sum finally remaining in excess thereof to the person entitled to compensation or to the representative.
3. The employer shall pay any excess to the person entitled to compensation or to the representative.

33 U.S.C. § 933(e).

This is a straight-forward and dare I say "fair" way of dealing with a third-party recover in the context of simultaneous workers' compensation benefits. The employer/insurer never is allowed to recover more than the benefits actually issued - even when the employer undertakes the entire cost of obtaining a third-party settlement. Any excess money recovered fromt he actual tortfeasor (in excess of the compensation issued by the employer/carrier) is paid directly to the claimant and/or serves as an offset against any future compensation which may be payable.

In order to calculate the Section 33(f) credit, one must break down a claimant's recovery to its net amount. This amount is calculated by taking a claimant's total recovery and subtracting the legal expenses incurred by the claimant. This net amount is then compared to the amount which is due as compensation. If the net amount of recovery exceeds the amount of compensation due, then the employer is not required to pay anything to the claimant. Any previous payments by the employer would be refunded from the claimant's recovery. Bartholomew v. CNG Producing Co., 862 F.2d 555, 22 BRBS 42 (CRT) (5th Cir. 1989); see also Nacirema Operating Co. v. Oosting, 456 F.2d 956 (4th Cir.), cert. denied, 409 U.S. 980 (1972); 33 U.S.C. § 933(e).

If the claimant's third-party recovery is less than what the employer would be required to pay, the employer only pays the difference between the third-party recovery and the compensation, see Inscoe v. Acton Corp., 19 BRBS 97 (1986), provide that the provisions of Section 33(g) are complied with. Regardless of whether the recovery is more than or less than the compensation due, the employer is entitled to set off any net recovery from a third party. Jackson v. Land & Offshore Servs., Inc., 855 F.2d 244, 21 BRBS 163 (CRT) (5th Cir. 1988).

In dealing with the Section 33(f) credit, the credit is not limited to the claimant's economic loss. The credit is also applied to such items as pain and suffering and death benefits. The employer's credit also includes payments for any future medical benefits for which the employer would be liable. Inscoe v. Acton Corp., 19 BRBS 97 (1986). As per 33 U.S.C. § 933(g), the claimant must obtain the employer/carrier's permission to settle the third-party claim for less than the compensation would be entitled under the Act.

New Jersey Statute 34:15-40 governs the credit due a respondent for any third-party recovery by the petitioner and provides in part:

. . . out of that part of any amount about to be paid in release or in judgment by such third person or his insurance carrier on account of his or its liability to the injured employee or his dependents, the employer or his insurance carrier shall be entitled to receive from such third person or his insurance carrier so much thereof as may be due the employer or insurance carrier pursuant to subparagraph (b) or (c) of this section. Such sum shall be deducted by such third person or his insurance carrier from the sum to be paid in release or in judgment to the injured employee or his dependents and shall be paid by such third person or his insurance carrier to the employer or his insurance carrier. Service of notice, hereinbefore required to be made by the employer or his insurance carrier upon such third person or his insurance carrier, shall be by registered mail, return receipt and in cases other than an individual shall be mailed to the registered office of such other third person or his insurance carrier.

The Appellate Division has recently held that where an individual settles an intentional tort suit against an employer, the workers' compensation carrier is entitled to assert its N.J.S.A. 34:15-40 lien with respect to the settlement amount. Specifically, the court found that the tort litigation is equivalent to a third party action and that without the lien the petitioner might receive a double recovery for the injuries. Calalpa v. Dae Ryung Co., Inc., 357 N.J. Super. 220 (App. Div. 2003).

1. How to assert a workers’ compensation lien under N.J.S.A. 34:15-40.
   Serve notice upon the liable third person or that person’s insurance carrier, that compensation has been applied for by the injured employee (or his dependents). As a practical matter, it is a good idea to serve a notice letter upon the plaintiff/worker, as well as the plaintiff’s attorney, usually the same attorney representing the worker in the compensation matter.
   
   How- by registered mail, return receipt requested upon the third person or his insurance carrier or (when not an individual) upon the registered office of such third person or his insurance carrier.
   
   
2. Effect of notice.
   When notice is given, as above, to the liable third party or their insurance carrier, it then becomes the duty of the third person or their carrier to inquire, from the employer or the employer’s insurance carrier, the amount of medical expenses incurred and compensation paid to the injured worker or their dependents. It also becomes the duty of the third person (or carrier) to inquire from the injured worker the amount of attorney’s fees and expenses of suit in the action or settlement against the third person (or carrier) before the third party makes any payment to the injured worker.
   
   Then, out of any amount to be paid by the third person (or carrier) in release or in judgment of the claim, the employer (or carrier) is paid the amount they are entitled to. That amount is deducted from the monies to be paid to the injured worker (or dependents) and paid directly to the employer or carrier.
   
   Failure to strictly comply with notice requirements could preclude your right to reimbursement.
   
   
3. Amount of Employer’s (or Carrier’s) Recovery.
   If the amount recovered by the worker (or their dependents) from the third person is equal to or greater than the employer’s (or carriers) obligation under the Workers’ Compensation Act, then the employer is entitled to be reimbursed for the medical expenses incurred and compensation payments made to the worker or his family less the workers’ expenses of suit and attorney’s fees in pursuing the action against the third person. Usually, this yields a two-thirds recovery, but the recovery can be greater depending on the contingency fee arrangement.
   
   If the amount recovered by the worker from the third person is less than the employer’s obligation, the employer is liable for the difference plus the worker’s attorney’s fees and costs of suit. The employer or carrier is entitled to the recovery from the third person, leaving their obligation to the worker as the difference between the compensation and the medicals paid out and the third person recovery, plus attorney’s fees and expenses of suit in pursuing the third person.
   
   “Expenses of suit” is limited to $750.00, and “attorney’s fee” cannot exceed 1/3rd on the part of the recovery to which the employer is entitled to. The 1/3rd cap does not apply to sums in excess of the employer’s entitlement.
   
   
4. How to assert a lien when the workers does not settle with or file suit against the liable third person.
   If the injured worker does not settle with or file suit against the liable third person within one year of the accident, the employer or carrier must make a written demand that the worker or dependent do so.
   After 10 days of the written notice to the worker (or dependents), the employer (or carrier) can either effect a settlement with, or file suit against, the third person (or the carrier). Any such action can only be for such rights as the injured worker would have had against that third person (Thereafter, the worker is barred from filing a claim on their own behalf).
   
   If the amount obtained from the third person (or carrier) is more than the amount of the employer’s lien and expenses of suit, such excess is then paid to the injured worker (or their dependents).
   Where the worker has instituted an action against the liable third person, but the action is procedurally dismissed, the employer (or carrier) is entitled to have the dismissal set aside and continue the prosecution of the action upon motion or application to the Court within 90 days of the dismissal.
   
   
5. Time to file suit.
   In New Jersey you must file suit against the adverse party within two years from the date of accident, no later, or be forever barred. N.J.S.A. 2A:14-2.

When a claimant gets workers' compensation benefits and makes a recovery in a civil suit, the workers' compensation carrier is due a credit (or reimbursement) for up to 2/3rds of the moneys it paid in WC benefits. This right to reimbursement is set forth in the New Jersey Workers' Compensation Act at N.J.S.A. 34:15-40 ('Section 40'). Read More...

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...

It's a sad commentary on New Jersey: even our own state employees don't want to live here. When you travel to Trenton the parking lots of the various state agencies are filled with cars bearing Pennsylvania license plates - and the rush hour traffic is directed out of New Jersey as New Jersey state workers travel home to their residences in Pennsylvania, where they enjoy lower property and income taxes.

This sad state of affairs gives rise to a recent decision that examines what happens when an employee collects workers' comp benefits in one state but live sin another, where he recovers under an Uninsured Motorist policy.

In a recent case, a New Jersey state employee was injured while driving a New Jersey-issued car. He recovered New Jersey workers' compensation benefits. Apparently, the vehicle which struck his official vehicle was not identified or did not carry insurance. So, the employee brought a claim for "Uninsured Motorist" benefits against his own (personal) auto policy (a personal policy under Pennsylvania law).

The New Jersey workers' comp insurer asserted a lien against any recovery the petitioner recived from his personal auto insurer.

If the claimant was a New jersey resident, this would be a 'no-brainer': the workers' comp carrier would pay medical, temporary, and permanency benefits and then recover a lien against the UM (uninsured motorist) carrier. However, this claimant accepted new jersey benefits, then recovered under his Pennsylvania auto policy, and then resisted reimbursing the New Jersey carrier, stating that he was entitled to keep both recoveries because Pennsylvania law allowed him to.

The New Jersey workers' comp Judge relied on New Jersey state law - which forbids double recovery - and Ordered the claimant to reimburse the New Jersey Workers' Comp carrier. The claimant appealed.

On appeal, a three-Judge panel (including Judge Maryann Espinosa, formerly a partner at Tompkins, McGuire, Wachenfeld & Barry) ruled that the Judge of Compensation should have performed a 'conflict of laws' legal analysis before summarily ruling that New Jersey law controlled. The case was remanded to the New Jersey workers' comp Judge to make a final decision.

Conflict of laws issues crop up all the time - most often in cases where a claimant live sin one state and works in another. Some states (like New York) have 'carve outs' where specific amounts ($50,000, in New York's case) are immune from subrogation by a comp carrier. The attorneys at Tompkins have been successfully arguing these cases for years - arguing that New Jersey law controls in issues of subrogation. We sty up-to-date on all changes in this area of the law and keep you informed as well!

Case: Terrence Johnson v. State of New Jersey, A-3202-07T3 (App. Div. Decided Nov. 20, 2009).