Scheer v. New York State Insurance Fund

22 Misc. 3d 239
CourtNew York Supreme Court
DecidedOctober 16, 2008
StatusPublished

This text of 22 Misc. 3d 239 (Scheer v. New York State Insurance Fund) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Scheer v. New York State Insurance Fund, 22 Misc. 3d 239 (N.Y. Super. Ct. 2008).

Opinion

OPINION OF THE COURT

Patrick H. NeMoyer, J.

[240]*240Before this court are a petition by the injured employee and a cross motion by the workers’ compensation insurance carrier for a judicial determination of (a) the amount of the workers’ compensation lien to be enforced against the proceeds of settlement of the injured employee’s tort or personal injury action, and (b) of the carrier’s obligation to make future workers’ compensation payments to the injured employee (see generally Workers’ Compensation Law § 29 [1], [4]). Basically, the carrier would have the court set the amounts of the lien and the future benefits in accordance with section 29, as construed by such cases as Matter of Kelly v State Ins. Fund (60 NY2d 131 [1983]) and Burns v Varriale (9 NY3d 207 [2007]). The injured employee, on the other hand, asks the court to set the amount of the lien and ongoing payments based additionally upon those equitable considerations outlined in a Medicaid lien case out of the United States Supreme Court, Arkansas Dept, of Health & Human Servs. v Ahlborn (547 US 268 [2006]). On the basis of the parties’ submissions, this court renders the following determinations:

The Undisputed Facts

Gary A. Scheer (petitioner or the injured worker) was injured on February 13, 2001 while working at a construction site owned or controlled by respondent Huntley Power, LLC (Huntley). Petitioner sought benefits from his employer’s workers’ compensation carrier, New York State Insurance Fund (the carrier or respondent), and petitioner and his wife further commenced a so-called “third-party action” against Huntley for its alleged negligence and/or violation of the Labor Law. From the carrier, petitioner received benefits totaling $193,225.91 as of December 10, 2007, including $142,000 in lost wage benefits and $51,225.91 in medical reimbursements. Further, by its decision of April 26, 2007, the Workers’ Compensation Board classified petitioner as permanently partially disabled and ordered the carrier to pay petitioner an ongoing maximum benefit of $400 per week, an amount based on petitioner’s average weekly wage before the accident. Meanwhile, on December 10, 2007, petitioner obtained a $600,000 tort settlement from Huntley. If that settlement was allocated to particular claims and elements of damages, that allocation has not been revealed to this court. As part of the settlement, petitioner’s counsel agreed to accept $126,330.62 as their reduced fee. That reduced counsel fee, in [241]*241conjunction with litigation disbursements of $3,002.63, gives rise to a cost-of-litigation percentage of 21.56%.1

The Parties’ Respective Positions

Respondent’s position with respect to past payments is that, after discounting its gross lien amount of $193,225.91 by the 21.56 cost-of-litigation percentage, respondent’s net lien is $151,566.40, an amount that respondent is entitled to recover (along with interest at 9% per year from Dec. 10, 2007) out of the settlement proceeds, since those proceeds exceed the amount of the net lien. (To put it another way, respondent acknowledges that its equitable share of the injured worker’s litigation costs is $41,659.51 [or $193,225.91 minus $151,566.40].) Respondent further contends that petitioner’s net recovery from the third-party action is $319,100.35 (or $600,000 minus litigation costs of $3,002.63, counsel fees of $126,330.62, and respondent’s recoverable or net lien of $151,566.40).

With respect to workers’ compensation benefits paid prior to the settlement, petitioner’s position is that the lien should be limited by the court to $6,676.20, or to such other amount as the court may determine to be appropriate based upon such equitable considerations as the fact that the $600,000 tort settlement represented only 24% of the counsel-estimated $2.5 million “full value” of the injured worker’s case against the tortfeasor (with such compromise being attributable to close issues of liability and witness credibility); and the further fact that only 22% of the settlement proceeds included elements of damages for which the injured worker had been compensated by respondent.2

[242]*242With respect to ongoing payments for lost wages and any qualifying medical expenses that might be incurred postsettlement, respondent’s position is that the compensation rate of $400 per week should be reduced, based on the cost-of-litigation percentage of 21.56% to $86.24 per week, and that there should be a similar proration of petitioner’s qualifying medical expenses, for the duration of respondent’s “credit,” i.e., until the worker’s $319,100.35 net recovery from the third-party action is exhausted at the compensation rate. Further, respondent contends that petitioner should be ordered to remit to respondent the difference between any payments received at an incorrect equitable rate of 33.67% (i.e., payments of $134.68) and those payments that petitioner should have been receiving at the correct rate of 21.56% (i.e., payments of $86.24), with such aggregate difference to be paid with interest at 9% from December 10, 2007.

In his papers, petitioner likewise takes the position that respondent must continue to make reduced weekly compensation payments and qualifying medical reimbursements based on the cost-of-litigation percentage “until the [petitioner's net recovery from his third-party lawsuit is exhausted.” At oral argument, petitioner emphasized that limiting the carrier’s lien for past benefits pursuant to the Ahlborn factors would merely entitle the carrier to a larger and lengthier period of “credit” in the future, and that petitioner thus would not obtain a windfall.

The Law

“Section 29 of the Workers’ Compensation Law governs the rights and obligations of employees, their dependents, and compensation carriers with respect to actions arising out of injuries caused by third-party tort-feasors. The claimant has the first right to bring a third-party action, and, while undertaking such an action, may continue to receive compensation benefits .... In the event that a claimant recovers in a third-party action, the compensation carrier is granted a lien on the amount of the recovery proceeds equal to the amount of past compensation it has paid, with interest .... The lien, however, is subordinate to a [243]*243deduction for costs and attorney’s fees . . . .” (Kelly, 60 NY2d at 136.)

Actually, section 29 confers two rights upon the carrier with regard to the proceeds of a favorable judgment or settlement of the third-party action. The first is the right to enforce a lien against the recovery in the amount of benefits paid in the past, whereas the second is the right to a have “credit” against the payment of further benefits — in other words, to enjoy a “holiday” in the payment of such benefits up to the amount of such credit (see Kelly, 60 NY2d at 137-138; Matter of McHenry v State Ins. Fund, 236 AD2d 89, 91 [3d Dept 1997]; Matter of Miller v Arrow Carriers Corp., 130 AD2d 279, 281 [3d Dept 1987]). Both rights, however, are subject to the carrier’s obligation to contribute ratably to the attorneys’ fees and other costs incurred by the injured worker in obtaining the settlement or recovery (see Kelly, 60 NY2d at 137-138; Hammer v Turner Constr. Corp., 39 AD3d 705 [2d Dept 2007]). Thus, Kelly

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Related

Burns v. Varriale
879 N.E.2d 140 (New York Court of Appeals, 2007)
Ahlborn v. Arkansas Department of Human Services
397 F.3d 620 (Eighth Circuit, 2005)
Kelly v. State Insurance Fund
456 N.E.2d 791 (New York Court of Appeals, 1983)
Claim of Johnson v. Buffalo & Erie County Private Industry Council
636 N.E.2d 1394 (New York Court of Appeals, 1994)
Miszko v. Gress
4 A.D.3d 575 (Appellate Division of the Supreme Court of New York, 2004)
Burns v. Varriale
34 A.D.3d 59 (Appellate Division of the Supreme Court of New York, 2006)
Hammer v. Turner Construction Corp.
39 A.D.3d 705 (Appellate Division of the Supreme Court of New York, 2007)
Feller v. Sano-Rubin Construction Co.
62 A.D.2d 1071 (Appellate Division of the Supreme Court of New York, 1978)
Claim of Miller v. Arrow Carriers Corp.
130 A.D.2d 279 (Appellate Division of the Supreme Court of New York, 1987)
Claim of Simmons v. St. Lawrence County CDP, Inc.
147 A.D.2d 323 (Appellate Division of the Supreme Court of New York, 1989)
Claim of Parmelee v. International Paper Co.
157 A.D.2d 878 (Appellate Division of the Supreme Court of New York, 1990)
Raponi v. Orange & Rockland Utilities, Inc.
221 A.D.2d 786 (Appellate Division of the Supreme Court of New York, 1995)
Claim of McHenry v. State Insurance Fund
236 A.D.2d 89 (Appellate Division of the Supreme Court of New York, 1997)
Scannell v. Karlin
252 A.D.2d 552 (Appellate Division of the Supreme Court of New York, 1998)
McKee v. Sithe Independence Power Partners
281 A.D.2d 891 (Appellate Division of the Supreme Court of New York, 2001)
Claim of Arena v. Crown Asphalt Co.
292 A.D.2d 743 (Appellate Division of the Supreme Court of New York, 2002)

Cite This Page — Counsel Stack

Bluebook (online)
22 Misc. 3d 239, Counsel Stack Legal Research, https://law.counselstack.com/opinion/scheer-v-new-york-state-insurance-fund-nysupct-2008.