 |
 |
 |
|
|
|
 |
 |
 |
 |
 |
 | |
|
VOLUME 7 February 2005 | ||||||
|
|
AN EMPLOYER’S SUBROGATION RIGHTS UNDER NEW YORK’S WORKERS’ COMPENSATION By Linda Strauss, Esq. and James N. Zeris, Esq.
If a third party’s negligence injured an employee, the third party is not absolved of recompensing the employee merely because the employee’s employer carried workers’ compensation insurance. N.Y. Work. Comp. §29(1), Parchefsky v. Knoll Bros., Inc.. Ultimately, the losses arising from negligence fall upon the tort-feasor (in this context, the wrongdoer is a third party, not the employer or employee). An injured employee does not need to choose between the proceeds from workers’ compensation or proceeding against the third party under tort law. However, the employee is not entitled to a windfall, collecting both the award from the employer’s workers’ compensation insurance and an award from the negligent third party. The statutory scheme motivates the employee to pursue a direct action against the negligent third party. In the alternative, if the employee does not proceed against the third party, the employer may pursue a claim against the third party tortfeasor, which impels the employer to achieve as large of a reward as possible (without settling just for out-of-pocket expenses). To that end, the third party tortfeasor’s disbursements are usually divided as follows: where the employee initiates a successful action against a third party tortfeasor, the employee receives the entire excess over the workers’ compensation outlay. Where an employer or insurer initiates a successful action against a negligent third party, the employee receives only two-thirds of the award. N.Y. Work. Comp. §29(2), Shulman v. Ben Shulman Assoc., Inc.. An injured employee can file an action against a negligent third party at any time prior to accepting workers’ compensation benefits, or within six months after accepting the benefits. N.Y. Work. Comp. §29(1). If the employee is successful in its claim against a negligent third party, the employer is entitled to its outlay and the employee receives the amount that exceeds whatever the employer paid. If the employee does not commence suit against the third party within six months of receiving compensation benefits, the carrier (which remains liable for payment to the injured employee) can commence suit as an assignee of the claim against the negligent third party. However, at least thirty days before the expiration of the employee’s time to file an action, the carrier must provide written notice to the employee notifying the employee that his/her failure to file an action against the negligent third party constitutes an assignment of the action to the carrier. Where the employee does not timely initiate an action against the negligent third party, the claim is effectively assigned to the carrier that provided workers’ compensation benefits to the employee. N.Y. Work. Comp. §29(2). The suit, in effect, remains the employee’s cause of action. The causes of action for the employer remain the same as the employee’s because the cause of action is assigned to the employer. Exchange Mut. Indus. Ins. Co. v. Central Heat Gas & Elec. Co.. Therefore, any defenses available to the third party against the employee are available to a third party against a subrogated employer or insurer. This includes the statute of limitations and an employee’s contributory negligence. Once there is an effective assignment and the carrier is successful against the third party, the compensation carrier is entitled to a recovery different than if the employee would have commenced an action. Instead of the carrier merely recovering its outlay, if the carrier proceeds against the negligent party and recovers a sum in excess of its outlay to the injured employee, the injured employee receives two-thirds of the award in excess of the amount expended by the carrier and the carrier receives the remaining one-third. N.Y. Work. Comp. §29(2). Reasonable and necessary expenditures are to be equitably apportioned between the claimant and the compensation carrier. Id. In Kelly v. State Ins. Fund, the highest Court explained equitable apportionment where the employer brings suit. The carrier’s award is reduced by one-third (representing the carrier’s share of attorney’s fees and costs associated in recovering the amount of that lien). Then, the carrier’s lien on the award is further reduced by one-third of the present value of the workers’ compensation carrier’s obligation that is extinguished as a result of recovery from the third party. The present value of the carrier’s obligation is the cost of an annuity to cover the cost of future payments due to the injured employee. However, where the value of future benefits is speculative, the carrier’s lien is not reduced beyond the initial one-third. Briggs v. Kansas City Fire & Marine Ins. Co. Generally, a carrier does not have a right to reimbursement for proceeds from an uninsured motorist policy. If an employee has uninsured motorist coverage, as part of an automobile liability insurance policy, and is subsequently injured within the scope of employment to qualify for workers’ compensation benefits and uninsured motorist coverage, the compensation carrier cannot obtain a lien against the additional recovery. Shutter v. Philips Display Components Co. Additionally, a workers’ compensation carrier cannot have a lien on medical benefits that are in lieu of first party benefits that another insurer would have been obligated to pay under the no-fault insurance law. N.Y. Work. Comp. §29(1-a), Granger v. Urda.. The compensation carrier’s lien is limited to payments in excess of basic economic loss. Fellner v. Country Wide Ins.. Where both no fault and a controverted compensation liability are involved, the no fault carrier must first pay, obtaining an agreement from the claimant to diligently pursue a compensation claim and reimburse the no-fault carrier from the compensation proceeds. In conclusion, the statutory scheme in New York entitles the employer or carrier to a lien, and it protects the employee. It enables the employee to be made whole, either by the employee commencing an action (and the employer or carrier procuring a lien) or by the employee benefiting from the employer’s or carrier’s action against the tortfeasor. At the same time, the employer receives a reimbursement for expenses in compensating the injured employee. This scheme provides that no one party receives a windfall while the other party would suffer an unnecessary loss. |
||
|
|
|||