Waiver of Lien Prevents Subsequent Enforcement

Saturday, November 19, 2005 | 0

ONCE PLAINTIFF OBTAINS WAIVER OF COMP LIEN AND SETTLES HIS BI ACTION, HE CANNOT GO BACK TO COMP CARRIER FOR ITS SHARE OF LITIGATION EXPENSES

by Larry Rogak

Sambets Jr. v. Morgan Stanley Dean Witter & Co. Inc., NYLJ 11/17/05 (Supreme Court, New York County) (KAPNICK, j.)

This personal injury action was settled in December 2003 for the sum of $500,000. Plaintiff then moved for an order pursuant to Workers' Compensation Law section 29(1), in accordance with Matter of Kelly v. State Insurance Fund, 60 N.Y.2d 131 (1983), entering judgment against the plaintiff's workers' compensation carrier, Hartford Insurance Company, directing it to pay plaintiff the carrier's equitable share of the litigation expenses in the sum of $71,903.24, together with statutory interest from February 12, 2004, the date the Workers' Compensation Board classified the plaintiff as having a "permanent partial disability" and set his benefits to continue at the maximum rate of $400/week.

Plaintiff claimed that after the parties to this action reached a settlement, he sent a letter to the Hartford dated December 17, 2003, in which he listed his litigation expenses and further stated that "Since the carrier's proportionate share of litigation expenses will not [be] subject to calculation until the claimant is classified or the case is otherwise closed, we are requesting that the Hartford give the claimant consent to settle the third-party claim and we will hold the issue of the carrier's proportionate share of litigation expenses in abeyance pending the determination of his case by the Worker's Compensation Board."

Plaintiff's counsel sent another letter to Hartford dated January 8, 2004 which reflected that the parties had spoken and that the Hartford was refusing to give consent. However, by letter dated February 3, 2004, the Hartford on behalf of itself and the Special Funds Conservation Committee, did consent to the settlement between plaintiff and defendant and agreed to compromise its lien of $81,985.42 in full. The letter further stated that the "Hartford . . . and Special Funds Conservation Committee, will have no future exposure for legal expenses of the claimant based on Kelly vs. The State Insurance Fund decision."

Plaintiff contended that pursuant to section 29(1) of the Workers' Compensation Law and the case of Matter of Kelly the Hartford's equitable share of the litigation expenses in this case exceeds the current lien, and thus the Hartford must now pay "fresh money" to the plaintiff.

Hartford opposed the motion on the grounds that (i) the 'petition' is fatally defective because it fails to include the Special Funds Conservation Committee which is a necessary party to this proceeding, since under Workers Compensation Law section 15[8], Hartford would only be responsible for the first 5 years of benefits and the remainder of the benefits payable to the claimant would be the responsibility of the Special Funds Conservation Committee; and (ii) the relief sought was specifically precluded by the terms of the letter dated February 3, 2004.

Hartford further argued that if the Court chose to entertain the 'petition' it must still be denied, as the claimant is not entitled to the benefits of a 'Kelly' calculation where the value of compensation payments to be paid to the claimant in the future was speculative or uncertain at the time the personal injury action was settled, as was the case here. It was Hartford's position that the 'petitioner' was, in essence, attempting to bootstrap a subsequent classification by the Board and apply that classification retroactively to an already completed settlement.

Finally, Hartford argued that the petitioner was not entitled to "fresh money" as that would constitute an improper double recovery to the claimant and result in the carrier contributing to the costs of litigation in an amount that is not in proportion to the benefit the carrier is receiving.

The Court stated that "The instant case was settled with the defendant on or about December 5, 2003 and plaintiff proceeded with the disbursement of moneys received based on the Hartford's consent as contained in the letter of February 3, 2004. Plaintiff could have waited to finalize the underlying settlement until after the Workers' Compensation Board made its final determination, at which time the value of the compensation payments to be paid to the claimant in the future would be readily calculable and the carrier could have made the appropriate 'Kelly' calculation, but chose not to. Having taken advantage of the carrier's waiver of the full lien in order to settle the case in December 2003, plaintiff cannot now come back over one year later and seek additional money based on the subsequent determination and classification by the Workers' Compensation Board."

Plaintiff's Motion was denied.

Article by Larry Rogak. Lawrence N. Rogak is an insurance defense attorney in New York. He writes The Rogak Report, a daily insurance law newsletter, and his insurance law articles appear in several industry publications. For more information see www.Rogak.com.

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