New York Subrogation Case Law Upheld by Third Department

Those familiar with subrogation, liens on third-party lawsuits, and Section 29 of the New York Workers’ Compensation Law may be able to recite the holdings of Matter of Kelly v. State Ins. Fund.  and Burns v. Varriale by heart.  For a quick review, the Kelly case dealt with a widow whose husband had passed away in the course of employment.  The Court of Appeals held that an insurance carrier’s equitable share of the litigation costs and disbursements incurred by a claimant must be apportioned based on the total benefit received.  Inclusive in this total benefit is the relief obtained by the Workers’ Compensation carrier of its obligation to make future benefit payments to the claimant.  However, and most importantly, the Court of Appeals noted that when the carrier’s future benefit is “speculative,” it would be inappropriate to apportion attorney’s fees based on such benefit.

The Burns case highlighted a situation where the future benefit is speculative.  Unlike the situation in Kelly, when the death of the employee can result in a fixed rate payable to the dependent spouse, the Burns employee was awarded a reduced earnings weekly benefit, based on having sustained a permanent partial disability.  Because the reduced earnings could fluctuate based on future wages earned by the employee, the Court of Appeals ruled that the Workers’ Compensation insurance carrier’s future benefit was indeed speculative.  Therefore, the carrier was entitled to a reimbursement of its Section 29 lien, after deducting its pro-rated share of the employee’s third-party litigation costs and expenses.

On May 19, 2016, the Third Department issued its opinion in Matter of Terranova v. Lehr Constr. Co.2016 N.Y. App. Div. LEIXS 3839, 2016 NY Slip Op 03947.  In that case, the Workers’ Compensation carrier consented to a third-party settlement, which involved reimbursement of its lien.  A Workers’ Compensation Law Judge later ruled that the employee was entitled to a schedule loss of use award, but that no “fresh money” would be moving because of the carrier’s rights pursuant to Kelly.  Specifically, because the schedule loss of use award was a fixed benefit, i.e. not speculative, the employee was not entitled to ongoing payments for litigation expenses.

The fact that the Third Department still must differentiate between fixed and speculative future benefits only indicates that questions still plague both claimants and insurance carriers.

Later this year, I will participate in a Webinar, part of our monthly webinar series, that will outline the current law and answer any questions on the topic of subrogation in New York workers’ compensation claims.  For any questions you may have prior to that Webinar, please feel free to contact me at CSison@Lois-LLC.com.

Christian Sison is a Partner at Lois Law Firm LLC where he defends employers and carriers in New York workers’ compensation claims. Christian is also the host and moderator of the popular "Third Fridays" legal podcast available on iTunes. Christian can be reached directly at csison@loisllc.com or 201-880-7213.