A New York court recently ruled that a workers’ comp insurer can take a credit against its claimant’s third-party civil settlement money.
The case involves Beth V., who was employed at a juvenile detention center. While working as a youth division aide at the detention center, the claimant was physically assaulted, raped and kidnapped.
Her workers’ comp case was established for physical injury, post-traumatic stress disorder and rape, and she was classified with a permanent partial disability and was awarded workers’ comp benefits.
She subsequently sued the employer and several co-employees in the federal court for — among other things — deprivation of her civil rights, alleging physical and psychological damages. The federal action ultimately settled for $650,000.
The workers’ comp carrier, the N.Y. State Insurance Fund, waived any lien for benefits already paid, but reserved its right under Workers’ Compensation Law § 29 to take a credit for future benefit payments against claimant’s net recovery.
The claimant challenged the carrier’s right to take a credit, arguing that the offset provisions of section 29 do not apply to her settlement proceeds.
A workers’ compensation law judge agreed with Beth V., finding that section 29 does not apply to recoveries against the employer and, alternatively, that because the claimant’s recovery in the federal action was for a violation of her civil and constitutional rights, it is not included within the statute.
However, a panel of the Workers’ Compensation Board reversed the workers’ compensation law judge’s ruling — which led to the claimant’s appeal to the State of New York Supreme Court, Appellate Division.
In its ruling, the appellate court stated that when a claimant obtains recovery in a civil action for the same injuries that were the predicate for workers’ comp benefits, the carrier has a lien against any recovery — even where the action is brought against an employer or a co-employee.
The court observed that the settlement stipulation and the testimony of the attorney who represented the claimant in the federal lawsuit offer evidence supporting the the Workers’ Compensation Board’s conclusion that the injuries for which claimant recovered in the settlement were the same injuries for which workers’ comp benefits were awarded.
Accordingly, the carrier is entitled to a credit against the settlement recovery, the appellate court ruled.
The case is Matter of Beth V. v New York State Office of Children & Family Services et al., State of New York Supreme Court, Appellate Division, Third Judicial Department, Sept. 27, 2012. The decision can be found on the New York Unified Court System’s website (a PDF file).