Personal Injury Lawsuits and Workers’ Compensation Claims

Whether by construction accident, motor vehicle accident, or slip and fall, often times a personal injury attorney encounters a client whose negligence lawsuit involves injuries that arise out of a work-related accident.

Section 29 of the Workers’ Compensation Law provides that the workers’ compensation insurance carrier shall have a lien on the proceeds of any lawsuit recovery, after the deduction of the reasonable and necessary expenditures, including attorney’s fees, incurred in effecting such recovery. In most cases the lien simply includes all indemnity and medical payments the compensation carrier has made, although in the case of a motor vehicle accident it includes only benefits paid over and above the first $50,000 (as well as any indemnity benefits paid beyond 3 years from the date of accident).

It is well settled that a carrier’s equitable share of litigation costs must be apportioned not only based upon the benefit received by the recovery of its lien, but also on the value of such future compensation payments that, but for the employee’s efforts through bringing the lawsuit, the carrier would have otherwise been obligated to make.1 The purpose of such apportionment is to avoid the compensation carrier benefiting from the injured worker’s recovery while assuming none of the costs incurred in obtaining the recovery.

More recently, the Court of Appeals stated in Burns v. Varriale that unless an injured worker is permanently and totally disabled or deceased the amount of the future indemnity compensation payments (or benefits in the case of death) is speculative.2 The Court reasoned that a since a partially disabled worker has a residual earnings capacity and an ongoing obligation to demonstrate his continued attachment to the labor market, the rate and duration of benefits awarded may change from one period to the next, thus rendering the value of future compensation benefits as speculative. Along the same lines, the Court of Appeals also determined in Bissell v. Town of Amherst that the cost of future medical benefits remains speculative as well.3

Even if the present value of the future benefits cannot be ascertained at the time of claimant’s recovery in a third-party action, the carrier should be required to periodically pay its equitable share of attorney’s fees and costs incurred by claimant in securing any continuous compensation benefits. Since the present value of future benefits is not accurately ascertainable, these benefits cannot be used for the purposes of calculating the carrier’s equitable share of the claimant’s attorney’s fees and costs. This does not mean that the claimant must wait indefinitely for the carrier to pay its equitable share by apportioning litigation costs as payments accrue and ensures that it is based on an actual, non-speculative benefit.

Accordingly in cases other than permanent total disability or death benefit claims, this would require the carrier to contribute towards the cost of the lawsuit by not only reducing its recoverable lien by the percentage of its proportionate share of the cost of bringing the suit (usually around one-third, but based upon the actual expenditures), but must now also contribute its proportionate share by continuing to pay that percentage of ongoing benefits and medical treatment.

For instance, a claimant who is entitled to receive $450 in weekly compensation benefits would continue to receive approximately $150 per week, with the other $300 being applied to the “credit” or “holiday.” Additionally, the carrier would remain responsible for an approximate one-third of ongoing medical costs, with the injured worker bearing responsibility for the other two-thirds (which should also be applied to the “credit”).

Workers’ compensation carriers most often favor a resolution that would allow them to take full and immediate credit for the lawsuit proceeds, and often attempt to obtain such a resolution without having to pay their proportionate share of the costs as they apply to the continuing compensation benefits. However, it is more appropriate to consider a resolution to account for this additional benefit that the carrier is receiving.

In order to accomplish this, one must initially figure out the proportionate share of the costs. This is derived by calculating the percentage of the lawsuit recovery that represents costs, expenses and fees. As previously stated, this figure is often approximately one-third of the recovery and provides the basis for the lien reduction. However, in order to properly account for Burns and Bissell, one must figure the future value of the compensation claim which, while deemed speculative by the Court of Appeals, can often be approximated by the parties.

Currently, Section 15(3) of the Workers’ Compensation Law places a “cap” on indemnity benefits that may be received by a permanently partially disabled worker. The value of future indemnity benefits can thus be assessed by predicting the loss of earning capacity, which will actually dictate the rate of compensation and the maximum number of weeks that such benefits may be received. The value of future medical treatment and prescription medications can also be approximated through a medical set aside computation.

In order to provide for the workers’ compensation carrier’s contribution to such future benefit, the amount of the lien being asserted would be further reduced by the percentage of this amount, or the lien may even potentially be waived completely. However, given that the workers’ compensation carrier would likely prefer to close out its file completely, another and often preferable solution, involves a global settlement which would allow the compensation carrier to effectuate such a resolution.

The future value of the compensation claim can be assessed and the appropriate percentage of costs applied to some combination of an additional lien reduction, and the balance used to effectuate a Section 32 final settlement of the workers’ compensation case. This is most easily accomplished when the liability and compensation carriers are one and the same, although with the cooperation of all parties, it can also be accomplished when the liability and compensation carriers are different.

Simply put, when there is a personal injury action which results from a work related injury, the relationship between the personal injury attorney and the workers’ compensation attorney is crucial to protect the interests of the client and to obtain the best results.

Les D. Jarmol is a partner at the law firm of Polsky, Shouldice & Rosen, P.C. He concentrates in the area of Workers’ Compensation Law, having represented injured workers, insurance carriers, uninsured employers and medical providers through all aspects of the system for the last 21 years.

1. Kelly v. State Ins. Fund, 60 N.Y.2d 131 (1983).
2. 9 N.Y.3d 207 (2007).
3. 18 N.Y.3d 697 (2012).