In a claim with significant future exposure, which was established for multiple work-related injuries arising from a motor vehicle accident, Lois Law Firm trial attorney Hannah E. Bacon Esq., with assists from Christopher J. Major, Esq., Partner Joseph N. Melchionne, Esq., and Paralegals Nicholas Fortino and Loriana Diaz, successfully argued that the claimant settled his third-party civil lawsuit without the Workers’ Compensation carrier’s consent in violation of Workers’ Compensation Law §29(5) (“WCL §29(5)”) resulting in a Memorandum of Board Panel Decision finding that the claimant is disqualified from receiving any future Workers’ Compensation benefits (including both medical and indemnity).
The claimant filed a third-party action against the at-fault driver which ultimately settled; however, the policy maximum was only $25,000. The carrier’s Section 29 lien was already almost $150,000 at the time the third-party action settled. The carrier issued its written consent to settlement, and the consent agreement contained specific terms and conditions. These terms and conditions were that: (i) the lien reimbursement check was to be issued to the carrier within fifteen (15) days of receipt of the third-party settlement funds; (ii) the lien reimbursement check was to be issued from the third-party settlement proceeds; and (iii) the third-party settlement proceeds were to be kept in an escrow account by the third-party attorney until such disbursement.
Though third-party counsel countersigned the consent letter, in which it was agreed that the carrier would receive the balance of the $25,000 after third-party counsel’s costs and fees were deducted. However, third-party counsel used the proceeds from the settlement to repay a settlement funding loan taken out by the claimant, with the remaining balance sent to the claimant directly. When the carrier did not receive the check and the issue was raised to third-party counsel, third-party counsel attempted to argue that there was an agreement that the carrier would instead assert “dollar for dollar” offset rights per Burns v. Varriale. Critically, however, this alleged agreement was never reduced to a writing, and the carrier had no recollection of ever orally agreeing to such an arrangement.
In an attempt at posthumous compliance with WCL §29(5), third-party counsel issued a check for the full amount of the reimbursement to the carrier, albeit six months after the date the check was supposed to be issued. Lois Law Firm trial attorney Hannah Bacon noticed that the check was from a settlement funding loan company, implying the claimant had gotten yet another settlement advance from another source. It was revealed that the claimant had a claim for underinsured motorist benefits, and third-party counsel was attempting to rectify the consent noncompliance with an advance on that settlement. The carrier denied this attempt, returned the check, and proceeded with filing the RFA-2 to litigate the WCL §29(5) violation.
The Law Judge ultimately denied the carrier’s application, finding that there was no prejudice in the carrier getting the check a few months later than agreed. On appeal, however, attorney Hannah Bacon. argued that the prejudice consideration missed the point entirely. Not only is prejudice never a consideration in determining compliance with a consent letter, but Section 29 does not even apply to UIM recoveries under the law. How, then, could the claimant satisfy the terms of the consent with a settlement to which Section 29 is inapplicable, after having spent the third-party settlement proceeds? Hannah further argued that to hold that this was permissible was to hold that compliance with WCL §29(5) is optional, as ruling in the claimant’s favor sends a clear message that the claimant can decide how, when, and from what source to pay the lien reimbursement whenever it is most convenient to the claimant, so long as the carrier gets the money eventually. Alternatively, if the claimant could cure the WCL §29(5) noncompliance with proceeds from a UIM settlement, then the carrier should have a Section 29 lien on the rest of the UIM settlement as well.
The Board Panel agreed with this rationale, finding that the claimant had violated WCL §29(5). This resulted in a finding that the claimant had waived the right to all future indemnity and medical benefits. Effectively, in a case with almost half a million dollars in potential exposure, the carrier was relieved from paying any further benefits over a failure to pay a small Section 29 reimbursement.
Even prevailing on Section 114-a fraud only results in a potential discretionary penalty of a waiver of the right to future indemnity benefits. The WCL §29(5) violation, conversely, is akin to a subsequent disallowance of the claim entirely. The takeaway from this result is clear: compliance with the express written terms of a consent agreement, mutually agreed to by the parties, is not optional, and even a case with significant exposure can be subject to a WCL §29(5) violation over a small third-party settlement if there is clear noncompliance with the terms of the carrier’s consent.
