In Matter of Terranova v. Lehr Construction Co. 2016 N.Y. App. Div. LEXIS 3839, the Appellate Division, Third Department issued a perplexing ruling limiting the right of New York’s injured workers to collect from their workers’ compensation claims following resolution of their lawsuits. While the law has long been settled that the carrier may assert “offset” rights against third-party recovery, it has also been accepted that the carrier must pay their share of the value for the cost of litigation borne by the injured worker. Thus, where the carrier avoids a defined benefit payment because of the claimant’s lawsuit recovery, that carrier must pay equitable cost for litigation expense. Indeed, one of the defined awards where such litigation expenses were shared involved schedule loss of use awards. These awards were specifically noted by the New York Court of Appeals to be non-speculative and that such awards may be used to calculate a workers’ compensation carrier’s equitable share of litigation expenses. See, Burns v. Varriale, 9 N.Y.3d 207 (N.Y. 2007).
The Third-Department in Terranova (Id.) makes an inexplicable departure from the Court of Appeals’ rulings. In Terranova, the claimant suffered a work related accident to his knee. A report from the insurance carrier’s own physician found the claimant to have a ten-percent loss of use to the leg. Not long after this opinion was rendered by the insurance doctor, claimant settled his lawsuit against the third-party defendant with the consent of the workers’ compensation insurance carrier and specifically reserved his rights pursuant to the Burns (Id.) case, above cited. Thereafter, the workers’ compensation board awarded the schedule loss of use as found by the insurance carrier’s doctor, but found that no monies would be payable (even for cost of litigation expense) as the carrier’s credit from the lawsuit recovery exceeded the value of the loss of use award. The claimant appealed.
The Court ruled that the holding in Burns (Id.) was somehow inapplicable and was rather controlled by the case of Kelly v. State Ins. Fund, 60 N.Y.2d 131 (N.Y. 1983). Kelly held that the present value of future benefits was to be used in computing the insurance carrier’s recoverable lien when those benefits were not speculative. In the Kelly case, the claimant had been killed in a construction accident and death benefits were being paid. The Court’s rationale in Terranova (Id.) is not explicable other than perhaps to note that the opinion providing the loss of use was made prior to settlement of the lawsuit and perhaps the court therefore sees this as having been resolved in the recoverable lien calculation or “Kelly calculation”. The result is that where a claimant may have previously expected to receive roughly a third of the value for his loss of use award premised on cost of litigation, that is apparently no longer the case.
In cases such as this, it is important to consider obtaining your loss of use award under the compensation claim prior to settling your lawsuit. While this may add to the workers’ compensation lien, the carrier will only be able to recover roughly two-thirds of their money back (due to reduction by percentage cost of litigation), whereas if the claimant waits to pursue the loss of use award, he or she may receive no value. We strongly recommend that anyone with a workers’ compensation claim consult with a qualified workers’ compensation lawyer and this is particularly so where there is interplay with a related personal injury claim. The law is complicated and knowledgeable representation can be the difference between receiving full value for your claim, or no value. We urge you to contact our office with any questions.