In the Matter of Joseph A. Terranova, Jr., Appellant,v.Lehr Construction Co. et al., Respondents. Workers' Compensation Board, Respondent.BriefN.Y.November 15, 2017 To Be Argued by: J. EVAN PERIGOE, ATTORNEY. Time Requested: 10 Minutes ══════════════════════════════════════════════════ COURT OF APPEALS OF THE STATE OF NEW YORK _______________ In the Matter of the Claim for Compensation Under the Workers’ Compensation Law made by JOSEPH TERRANOVA, Claimant-Appellant, - against - LEHR CONSTRUCTION CO, Employer-Respondent, - and - NEW HAMPSHIRE INSURANCE CO., Carrier-Respondent, - and - WORKERS’ COMPENSATION BOARD, Respondent, Case No. 521991 WCB No. G018 1559 ══════════════════════════════════════════════════ BRIEF FOR RESPONDENT NEW HAMPSHIRE INSURANCE CO. ══════════════════════════════════════════════════ WEISS, WEXLER & WORNOW, P.C. Attorneys for Carrier-Respondent 25 Park Place, 4th Floor New York, New York 10007 TEL: (212) 227-0347 Fax: (212) 227-1549 DARRYL WORNOW J. EVAN PERIGOE Attorneys ══════════════════════════════════════════════════ i Disclosure Statement Pursuant to Rule 500.1 (f) New Hampshire Insurance Company is a direct, wholly-owned (100%) subsidiary of AIG Property Casualty U.S., Inc., which is a wholly-owned (100%) subsidiary of AIG Property Casualty Inc., which is a wholly-owned (100%) subsidiary of AIUH LLC, which is a wholly-owned (100%) subsidiary of American International Group, Inc., which is a publicly-held corporation. The following are the U.S.-domiciled property and casualty insurance company subsidiaries and affiliates of American International Group, Inc.: AIU Insurance Company AIG Assurance Company American Home Assurance Company AIG Property Casualty Company AIG Specialty Insurance Company Commerce And Industry Insurance Company Granite State Insurance Company Illinois National Insurance Co. National Union Fire Insurance Company Of Pittsburgh, PA. The Insurance Company of the State of Pennsylvania Lexington Insurance Company National Union Fire Insurance Company of Vermont Lehr Construction Company has an active corporate registration, however the company has field for Chapter 11 bankruptcy in the Southern District of New York. It is not a genuine party of interest as it faces no liability under its policy and it has ceased operations. ii TABLE OF CONTENTS TABLE OF AUTHORITIES .................................................................... III PRELIMINARY STATEMENT ................................................................. 1 JURISDICTIONAL STATEMENT............................................................ 2 QUESTIONS PRESENTED ........................................................................ 3 STATEMENT OF FACTS........................................................................... 4 ARGUMENT............................................................................................... 11 I. THE BOARD WAS CORRECT TO APPORTION COSTS ACCORDING TO KELLY V. STATE INS. FUND.................................................................... 11 II. APPLYING KELLY HERE CAUSES NO INEQUITY TO CLAIMANTS OR INEFFICIENCY IN THE JUDICIAL SYSTEM................................................ 24 CONCLUSION............................................................................................ 28 iii TABLE OF AUTHORITIES Cases Briggs v Kansas City Fire & Mar. Ins. Co., 129 Misc 2d 377 (Sup Ct, Albany County 1985) ....................................................................................................... 13 Burns v Varriale, 9 NY3d 207 (2007) ......................................................................... ............................................................................. 1, 7, 9, 15, 16, 17, 18, 23, 25, 26 Hallock v. State, 64 N.Y.2d 224 (1984) ................................................................. 17 Matter of Bissell v Town of Amherst, 18 NY3d 697 (2012)...................... 13, 14, 18 Matter of Kelly v State Ins. Fund, 60 NY2d 131 (1983)............................................. ........................................... 1, 2, 7, 9, 12, 13, 14, 15, 16, 17, 18, 19, 23, 25, 26, 27 Matter of Stenson v NY State Dept. of Transp., 84 AD3d 22 (3d Dept 2011) ...... 16 Statutes Workers’ Compensation Law § 137 ..........................................................................7 Workers’ Compensation Law § 15 (3) ................................................................... 19 Workers’ Compensation Law § 29 ......................................................................... 12 Workers’ Compensation Law § 29 (1) ................................................................... 11 Workers’ Compensation Law § 29 (2) ................................................................... 12 Workers’ Compensation Law § 29 (4) ............................................................. 11, 12 Rules New York State Guidelines for Determining Permanent Impairment and Loss of Wage Earning Capacity (Dec. 2012) ................................................ 20 New York State Workers’ Compensation Board Medical Guidelines (1996) .............................................................................................................. 20, 21 1 PRELIMINARY STATEMENT The issue in this case is whether the appellant, a workers’ compensation claimant, may secure from the respondent, an insurance carrier, contributions to his litigation expenses in a third-party action that are in excess of the contributions that the carrier and the claimant agreed the carrier would make. The appellant argues that this Court’s decision in Burns v Varriale, 9 NY3d 207 (2007) requires the respondent to make additional contributions to his litigation costs in order to take credit for his recovery in the related third-party action. These contributions would be beyond those the claimant originally agreed to accept when the respondent consented to the third-party settlement. The workers’ compensation law judge, all three members of the Board’s appellate panel and five judges of the Appellate Division, Third Judicial Department, all considered this question and found the appellant was only entitled to the one-time contribution towards his litigation costs he already received pursuant to the agreed terms under Matter of Kelly v State Ins. Fund, 60 NY2d 131 (1983). The appellant now also submits that the decision on appeal is bad policy, causing inefficiency and inequities. This Court should reject these arguments and affirm the decision on appeal by finding that Kelly, not Burns, determines the respondent’s 2 contribution to the appellant’s litigation expenses here because, when the third-party action settled, there was a non-speculative basis for determining the amount of the appellant’s recovery and the respondent’s benefit. Specifically, there was evidence of a 10% schedule loss of use of the right leg and, under Kelly, a court could have determined the carrier’s contribution to the cost of litigation on that basis. JURISDICTIONAL STATEMENT The respondent agrees that the Appellate Division’s May 19, 2016, decision was a final determination and that this Court has jurisdiction under CPLR § 5602. 3 QUESTIONS PRESENTED I. A carrier’s contribution to litigation expenses in a third-party action follows Matter of Kelly v. State Ins. Fund when the amount of its benefit is not speculative, as in cases of death, total disability, or a scheduled loss. Here, the appellant agreed Kelly applied and his schedule loss award was based on an opinion that was (1) in the Board file when the third-party action settled and (2) supported by all other available medical evidence. Did the Board err by apportioning costs under Kelly? II. Claimants can secure an equitable share of litigation costs from carriers by applying for judicial action, awaiting a Board SLU award or negotiation on the basis of an expected SLU award. Should the Court find that applying Kelly causes inequity to claimants and inefficiency in judicial administration because the appellant here agreed that the respondent could take a credit based on a lump sum payment? 4 STATEMENT OF FACTS On July 7, 2009, the appellant injured his right knee by tripping on some flooring while working for the respondent’s insured, Lehr Construction. (R. 14.) He filed a claim for workers’ compensation benefits with the respondent insurance carrier, New Hampshire Insurance Company. (Id.) Two days after the accident, the appellant saw his physician, Dr. William Long. (R. 20.) Dr. Long’s initial evaluation noted that the appellant’s right knee exhibited a 10 degree deficit in flexion and was stable to varus stress but that the X-ray showed DJD, (id.) or degenerative joint disease. On January 6, 2010, Dr. Long performed a partial medial meniscectomy on the appellant’s right knee. (R. 35; Respondent’s Appendix at 1.) Dr. Long’s notes from his July 8, 2010, exam of the appellant showed that he was “back at work working at full level.” (Respondent’s Appendix at 3.) At a hearing held on July 19, 2010, the Board set the appellant’s average weekly wage at $600 and ordered New Hampshire to pay $7,320 in compensation benefits. (R. 31.) The appellant received no further benefits for a temporary disability after this time. 5 Although the last time Dr. Long saw the appellant was on January 25, 2011, his notes from that visit are limited to describing the injection procedure he performed. (Respondent’s Appendix at 10.) The last two reports that the Board received in which Dr. Long recorded his exam results for the appellant’s right knee were dated September 2 and November 16, 2010. (Id. at 4, 7.) At the September, 2010, exam, Dr. Long noted that the appellant had a full range of motion in both his knees, despite some tenderness and mild crepitus. (Id. at 4.) In November, Dr. Long made similar findings, noting that the appellant had “good range of motion in his knees.” (Id. at 7.) Nearly eighteen months after the appellant’s knee surgery, on May 9, 2011, Dr. Rubinfeld performed an independent medical exam on him. (R. 33.) Dr. Rubinfeld found there was still some tenderness in the right knee, but otherwise found it to be in the same condition as the appellant’s left knee, with a normal 0 to 140 degrees of motion, no instability and no McMurray’s sign present. (R. 35.) Dr. Rubinfeld found that the appellant’s condition was amenable to a 10% scheduled loss of use (SLU) award. (R. 36.) As the law judge later noted, Dr. Rubinfeld’s findings and conclusions were consistent with Dr. Long’s findings that the appellant had lacked only 10 degrees of flexion before surgery and that, around nine months later, on 6 September 2, 2010, he had regained a full range of motion in both knees. (R. 78.) At some point after the accident, the appellant also sought recovery from the contractor who had put in the flooring he had tripped on. On March 14, 2012, the appellant’s attorney sent a letter to the respondent’s agent seeking its consent to settle that suit. The letter said the claimant’s gross recovery would be $173,500 and that: Your lien letter of May 19, 2011 states the total pay-out was $21,495.99, with $7320.00 for indemnity and $14175.99 for medical. Disbursement on the [third-party] file are $3,776.29. Deducting $3,776.29 from $173,500 leaves, $169, 723.71. The retainer signed by Mr. Terranova states that after expenses he is entitled to 2/3 of the recovery and the law firm of Grey & Grey is entitled to 1/3. Therefore, the fee for Grey & Grey is $56,574.57. Backing in the expense of $3776.29 means the legal recovery expense is $60,350.86. [This] $60,350.86 is [34.78%] of the total recovery of $173,500. [Keeping in mind that your lien was for $21,495.99, 34.78%] of the total pay-out (your lien) is $7,477. Subtracting $7477.24 from $21,495.99 leaves $14,018.75. By this letter Mr. Terranova offers $14,018.75 as satisfaction for your lien. In addition, it is demanded that you agree that any future workers’ compensation benefits be subject to the New York State Court of Appeals case of Burns v. Varriale, decided October 11, 2007. Please send a letter confirming the above. (R. at 39.) In a letter dated March 30, 2012, the respondent agreed to the amounts above. However, it countered that the appellant should recognize 7 that “the $14,018 lien reimbursement reflects a reduction in the carrier’s lien pursuant to Kelly v. State Insurance Funds” and that the appellant would agree to forgo any and all claims under that case or under Burns v Varriale. (R. 41-42.) (See Matter of Kelly v State Ins. Fund, 60 NY2d 131 [1983] and Burns v Varriale, 9 NY3d 207 [2007].) On April 4, 2012, the parties agreed to the amounts above and that “the $14,018 lien reimbursement reflects a reduction in the carrier’s lien pursuant to Kelly v. State Insurance Funds and all parties reserve all their Rights to Burns v. Varriale.” (R. 43.) On September 19, 2012, a physician who had never previously submitted a record of treatment to the Board’s file, Dr. McMahon, submitted a C-4.3. (R. 45.) Therein, he stated that the appellant should receive a 55% SLU to the right leg. (R. 46.) Initially, the WCLJ precluded Dr. McMahon’s report on the grounds that the doctor was acting as an independent medical examiner and that his report had not been served in compliance with section 137 of the Workers’ Compensation Law. (R. 62- 63.) The WCLJ then adopted Dr. Rubinfeld’s 10% scheduled loss evaluation. (R. 62-63.) After the Board Panel found Dr. McMahon was acting as a treating physician on appeal, (R. 75) the WCLJ considered the testimony of both doctors. (R. 76-79.) On September 25, 2013, the law 8 judge found Dr. McMahon’s one-time clinical findings were entirely contradicted by the reports of Dr. Long over the course of the appellant’s treatment showing improvement from a ten degree deficit of flexion to full flexion. (R. 78.) The law judge also pointed out that Dr. McMahon’s 55% SLU evaluation was excessive given that even a total knee replacement would not merit such a high scheduled loss award. (Id.) The law judge again adopted the 10% SLU evaluation given by Dr. Rubinfeld because it was more consistent with Dr. Long’s findings. (Id.) The law judge’s September 25, 2013, decision also concluded that, because the appellant’s scheduled award totaled just $17,280, then, given that the respondent had already paid him $7,320, and that he had recovered a net $93,130.39 from the third-party defendant that the respondent could claim as a credit, the respondent owed nothing further to the appellant. (R. at 78.) The claimant-appellant appealed both the level of the SLU and the amount of the credit. (R. 82-86.) On April 1, 2014, the Board upheld the WCLJ’s decision to adopt Dr. Rubinfeld’s 10% SLU evaluation, but returned the issue of the amount of the credit to the WCLJ because of the “lack of a closing statement in the record, and the lack of any development of the record on this issue.” (R. 90.) 9 The appellant apparently never filed a closing statement, but the WCLJ allowed the appellant to argue the amount of the credit at a hearing on June 6, 2014. (R. 92-99.) Thereafter, the law judge again ruled that the respondent was entitled to the credit and owed nothing additional to the appellant. (R. 101). The appellant appealed again. He argued that, under Burns v Varriale, 9 NY3d 207 (2007), in order for the respondent to be entitled to a third-party credit against the $9,960 in awards made after the third-party settlement, the respondent needed to pay the equitable proportion of the litigation costs incurred in producing that part of the third-party credit. (R. 104-109.) The Board rejected this argument, concluding that the respondent need contribute nothing further to take the credit because the case was governed by Matter of Kelly v State Ins. Fund, 60 NY2d 131 (1983), not Burns. (R. 11) The appellant then appealed this decision to the Appellate Division of the Supreme Court, Third Judicial Department. That court discussed the history of the Burns and Kelly cases at length and concluded “as did the Board, that Matter of Kelly v. State Ins. Fund (supra) controls the apportionment of the carrier’s equitable share of litigation expenses in a case such as this where claimant has obtained a schedule loss of use award.” (R. A-6.) The Appellate Division recognized that the claimant-appellant had 10 cited a number of other workers’ compensation cases argued before the Board but found these were “not dispositive in light of the foregoing judicial precedent.” (Id.) The appellant now appeals to this Court and has filed a brief that is substantially similar to the one rejected by the intermediate appellate court. 11 ARGUMENT I. The Board did not err by apportioning the third-party action litigation costs under Matter of Kelly v. State Ins. Fund because the appellant agreed that Kelly applied and his schedule loss award was based on an opinion that was (1) in the Board file when the third-party action settled and (2) supported by all other available medical evidence. Under section 29 of the Workers’ Compensation Law, where an employee is injured by the wrong of a person other than the employer or another employee – normally called a “third party” – the employee may pursue her or his remedy against the third party while also taking workers’ compensation benefits. Under subsection 1 of that provision, the party paying the workers’ compensation benefits to an employee bringing a third- party action has a lien on the proceeds from the suit brought by the employee against the third party: after the deduction of the reasonable and necessary expenditures, including attorney’s fees, incurred in effecting such recovery, to the extent of the total amount of compensation awarded under or provided or estimated by this chapter for such case and the expenses for medical treatment paid or to be paid by it and to such extent such recovery shall be deemed for the benefit of [the carrier.] Under section 29 (4), the party paying workers’ compensation benefits “shall contribute only the deficiency, if any, between the amount of the recovery against [the third party] actually collected, and the compensation provided or estimated by this chapter for such case.” That is, while subsection 1 creates 12 a lien for benefits already paid, less litigation costs, subsection 4 creates a credit that the carrier may claim against future payments that is equal in value to the amount the claimant actually recovered in the third-party suit. In Matter of Kelly v State Ins. Fund, 60 NY2d 131, 140 (1983), this Court found that the provisions of section 29 discussed above serve to prevent double recovery. The Court explained that, under the then-recent amendments to § 29 “the carrier must … contribute the costs of litigation in proportion to the benefit it has received” through equitable apportionment. The Court went on to point out that, in order to make this apportionment it must be the case that: the value of future compensation payments that a carrier has been relieved of paying due to a third-party recovery is not so speculative that it would be improper to estimate and to assess litigation costs against this benefit to the carrier. (60 NY2d at 139.) The Kelly Court made clear that its understanding of the kinds of factors that would make the future compensation payments too speculative to apportion litigation costs to a carrier was informed by the mechanism in § 29 (2) for calculating the “probable total amount” of future workers’ compensation benefits when the roles of the litigants are reversed. Section 29 (2) allows a carrier to bring the suit against the third party as the claimant’s assignee where the carrier has given notice to the claimant and 13 the claimant has failed to bring a suit in a timely fashion. In such situations, the carrier is required to pay the claimant two-thirds of the recovery in excess of the combined cost of the litigation and the total compensation awarded. Because “total compensation” includes compensation awarded that “requires periodical payments the number of which cannot be determined at the time of such award,” § 29 (2) states that the estimate of the probable total amount of these future benefits should be based on “survivorship annuitants table of mortality, the remarriage tables of the Dutch Royal Insurance Institution and such facts as [the Board] may deem pertinent.” As later case law makes clear, the focus of what is “speculative” under Kelly is on whether there is a valid basis for determining how much the carrier will actually end up paying. It is irrelevant whether a legal determination has been made or not. This is why the Kelly analysis ignores a jury’s legal finding about what a claimant’s future medical expenses will be. (Matter of Bissell v Town of Amherst, 18 NY3d 697, 702 [2012].) Such predictions are “sheer speculation.” (Briggs v Kansas City Fire & Mar. Ins. Co., 129 Misc 2d 377, 379 [Sup Ct, Albany County 1985] affd 121 AD2d 810, 820-21 [3d Dept 1986].) “Future medical expenses--when considered 14 in light of the benefit to the carrier, which is the focus of the Kelly analysis-- cannot reliably be calculated.” (Bissell, 18 NY3d at 702.) Of course, Kelly, properly understood, does not require absolute certainty as to how many weeks of indemnity benefits a carrier will pay in order to apply. First, the exact words of the Kelly Court allow that decision to be applied so long as the carrier’s benefit is not “so speculative that it would be improper to estimate.” (60 NY2d at 139.) This makes clear that Kelly can be applied in a case where the carrier’s benefit is based on an estimate; that estimate must simply not be a mere guess about something inherently unpredictable, like future healthcare costs or whether a person will remain attached to the labor market. Second, the actuarial tables Kelly considers to be reliable show that perfect certainty is far from required. These tables do not predict the lifespan of a particular person with specific accuracy. As actuarial tables are only designed or intended to be accurate over the average of a large number of cases, to apply them to any one person is to ignore their limits as statistical models. Moreover, the Kelly Court treats these tables as reliable for a group of people – those who are totally disabled under the Workers’ Compensation Law – whose medical conditions likely reduce their life expectancy to less than that of the general population. Nevertheless, 15 applying Kelly requires relying on these tables without accounting for any reduction in life span, whether calculated over the whole group or based on a particular person’s known medical conditions. In cases where it is impossible to give a reliable estimate of the number of weeks that the claimant will be collecting disability benefits for based on the record, the amount of a carrier’s future benefit is too speculative to fully allocate the proportionate share of litigation costs. This Court confronted such a case in Burns v Varriale, 9 NY3d 207, 210 (2007). There, the Workers’ Compensation Board had found that the claimant had a permanent partial disability. (Id.) As the Court pointed out this determination: did not entitle him to weekly compensation benefits at a specific rate over his life or over a set period. Claimant has an ongoing obligation to demonstrate his continued attachment to the labor market and how much he actually earns. However, as these variables cannot be reliably predicted, the rate and duration of benefits awarded by the Board may change from one period to the next. Thus, at the time a permanently partially disabled claimant recovers damages in a third-party action, the value of future compensation benefits is speculative. (Id. at 217.) In cases, like these, where the carrier’s “future benefit cannot be quantified by actuarial or other reliable means,” (id.), the Court concluded, the carrier should still “be required to periodically pay its 16 equitable share of attorney’s fees and costs incurred by claimant in securing any continuous compensation benefits,” (id.). The Burns Court contrasted cases subject to the uncertainty over how long payments would continue against cases where a worker died, was classified with a permanent total disability or where she or he received a scheduled loss of use award. The last of these, the Court found to be “easily ascertainable because such awards are paid out over a specific number of weeks at a set rate.” (Id. at 215.) The Appellate Division has found that Kelly still applies to all three of these types of cases. (Matter of Stenson v NY State Dept. of Transp., 84 AD3d 22, 25 [3d Dept 2011].) The essential difference between the carrier paying its equitable share of litigation costs under Kelly and under Burns is that, under Kelly, the carrier pays its share of the litigation costs all up front, whereas, under Burns, the carrier continues to pay those costs each time the Workers Compensation Board makes a new award of benefits to the claimant. Here, it is undisputed that the appellant’s case before the Workers’ Compensation Board closed when he received a scheduled loss of use. On April 4, 2012, the appellant agreed that carrier could take credit for the third- party recovery and that its “$14,018 lien reimbursement reflects a reduction in the carrier’s lien pursuant to Kelly v. State Insurance Funds.” The 17 respondent submits this agreement by the appellant, even standing alone, is sufficient to require that the Court hold that the Appellate Division and the Board were correct in concluding that the respondent could take credit for the third-party recovery without contributing further to the appellant’s litigation costs. While the appellant notes that his consent letter also states that “all parties reserve their rights to Burns v. Variale,” this statement does not, on its own, entitle the appellant to further payments towards his litigation expenses. First, a statement reserving a right is not the same as a legal act creating or protecting that right. Second, the appellant agreed that the lien reduction was actually made pursuant to Kelly. The appellant has not alleged “cause sufficient to invalidate a contract,” which would be the only basis sufficient to relieve him from the consequences of an agreement made during the litigation. (Hallock v. State, 64 N.Y.2d 224, 230 [N.Y. 1984] citing Matter of Frutiger, 29 NY2d 143, 149-150 [1971]). Under Kelly, the carrier need make no future contributions towards third-party litigation expenses. There are additional reasons that the Court should reject the appellant’s argument that the equitable apportionment of litigation costs under Burns, rather than Kelly, applies here. The main flaw in the 18 appellant’s argument centers on the standard for when a carrier’s future benefit is too speculative for an equitable share of the litigation costs to be apportioned to it. The appellant alleges that because the Board had not actually made its scheduled loss of use award, the number of weeks of benefits was uncertain. But this is not the standard under Kelly or Burns. Under Burns, a carrier’s future benefit is speculative when it “cannot be quantified or reliably predicted.” (9 NY3d at 215, emphasis added.) Conversely, Kelly applies even if the benefit to the carrier is based on an estimate, so long as this estimate is not “so speculative that it would be improper”. (60 NY2d at 139.) Thus, so long as the estimate of the carrier’s benefit is based on reliable information – no more unreliable than an actuarial table – and is not about an issue that is inherently uncertain, the carrier’s benefit is not speculative. Here, the appellant only showed that the amount of his scheduled loss of use had not been legally fixed by the Board when he reached his settlement with the third party not that the amount of this scheduled loss could not have been quantified or reliably estimated. Indeed, as this Court’s decision in Bissel made clear, whether or not such a legal determination has been made does not affect the analysis of whether or not the future benefit from a third-party settlement is speculative. (18 NY3d at 702.) 19 Indeed, the amount of the carrier’s benefit and the appellant’s scheduled loss was easily ascertainable to both parties and the Board on April 4, 2012, at the time when the parties agreed how much the carrier would contribute to the litigation expenses of the third-party action. At that time, Dr. Rubinfeld’s May 9, 2011, report was in the Board’s electronic case file, available for all to see. This report stated quite explicitly that, “[t]here is a scheduled loss of use of 10% of the right leg.” Such a scheduled loss of use translates directly into a particular number of weeks of indemnity payments, specifically 28.8 weeks. (See Workers’ Compensation Law § 15 [3].) Thus, not only was it possible to quantify the amount of that the claimant’s workers’ compensation award – and by extension the amount of those benefits that the third-party settlement relieved the carrier of paying – Dr. Rubinfeld had actually quantified this precisely. The 10% SLU opinion the doctor gave is clearly a non-speculative basis for applying Kelly because, at the critical moment when litigation costs were apportioned, there was no triable issue of fact regarding the amount of the SLU. It could even have been an abuse of discretion for the Board to make any award that varied substantially from this level. This is because the appellant’s own physician, Dr. Long, and the carrier’s consultant, Dr. 20 Rubinfeld, agreed on the findings that are the most important in determining a schedule loss of use. Under the guidelines that the Board uses to determine the amount of a claimant’s scheduled loss of use, the overwhelming proportion of any loss of use related to defects of the knee are based on two factors – a claimant’s range of motion and what surgeries, if any, she or he has received. Awards based on deficits of range of motion are common because the Board’s guidelines provide for an SLU of the leg of up to 40% (equivalent to 115.2 weeks of benefits) to any claimant who exercises flexion between 90 degrees and full extension. (New York State Workers’ Compensation Board Medical Guidelines at 18 [1996]; see also New York State Guidelines for Determining Permanent Impairment and Loss of Wage Earning Capacity at 26 [Dec. 2012].) Ranges of motion can be subjective based on a person’s own effort and 90 degrees of flexion is enough to stand, run or walk normally and to sit normally in a chair with both feet on the ground. The guidelines also provide for a 7.5%-10% SLU for any claimant who has had a meniscectomy or partial excision of the patella, a 15% SLU for total excision of the patella and 50-55% SLU for a total knee replacement that leaves the claimant with 90-110 degrees of flexion. (1996 Guidelines at 18- 19; 2012 Guidelines at 28.) Thankfully, work accidents resulting in 21 amputations are exceedingly uncommon before the Board today. Other knee conditions in the guidelines are both rare and have a lower percentage of loss when they occur. (Id.) Here, it can hardly be said that the amount of the appellant’s award was “speculative” at the time of the settlement because his own physician of two and one half years, Dr. Long, and the independent examiner retained by the respondent, Dr. Rubinfeld, were in agreement about both the appellant’s range of motion and the surgery he had undergone. Dr. Rubinfeld found the appellant’s range of motion was entirely normal, as was the rest of his exam. Since Dr. Rubinfeld examined Dr. Long’s operative report and Dr. Rubinfeld’s own clinical exam of the appellant’s right knee is essentially free of objective clinical deficits, his 10% SLU opinion clearly rests on the nature of the surgery Dr. Long performed. (R. 33-36; see 1996 Guidelines at 18-19.) Obviously, Dr. Long was aware of the meniscectomy he, himself, performed. (Respondent’s Appendix at 1-2). The last two times that Dr. Long recorded findings for the appellant’s right leg range of flexion, on September 10 and November 16, 2010, he found no deficits at all. (Id. at 4, 7.) Indeed, even two days after the accident, Dr. Long found the appellant’s deficit of flexion was just 10 degrees. (R. 20.) The appellant then returned 22 to work by the time of Dr. Long’s July 8, 2010 exam (Respondent’s Appendix at 3) before recovering his full range of motion. At the time of the third-party settlement, Dr. Rubinfeld’s 10% SLU opinion was uncontradicted by any medical evidence, let alone contemporaneous medical evidence, in the Board file that would create a triable issue of fact. (R. 33-36.) Indeed, Dr. Rubinfeld’s opinion was supported by and highly consistent with Dr. Long’s medical reports from months and years earlier. (R. 20; Respondent’s Appendix at 3, 4, 7.) If the Board had made an award contrary to the 10% SLU opinion at the time of the third-party settlement, that award would have certainly been overturned on appeal. All parties were in a position to examine all of Dr. Long and Dr. Rubinfeld’s opinions prior to agreeing on the apportionment of the litigation costs and so would be able to recognize this. Indeed, in light of Dr. Long’s extensive history of near normal and normal findings, it is difficult to imagine the law judge accepting any SLU opinion, even one based on new evidence, that departs in anything but the most minor way from the 10% SLU opinion in the file. If there was ever any doubt that the Board was destined to adopt the 10% SLU opinion supported by Dr. Rubinfeld and Dr. Long’s findings, the Board’s reaction to the appellant’s attempt to persuade it to accept Dr. 23 McMahon’s contrary SLU opinion should utterly dispel this. The appellant saw Dr. McMahon on September 19, 2012, after agreeing on the apportionment of the third-party action’s litigation costs. (R. 45.) Dr. McMahon found the appellant had a 55% SLU of the right leg. (R. 46.) In a move that was beyond unsurprising, the law judge rejected this opinion as wholly inconsistent with all of the medical records that Dr. Long had submitted during his two and half years of treatment. (See R. 78.) The Board’s appellate panel upheld that judgment (R. 90.) Given that the Board had every reason to adopt, and no basis to reject, the 10% SLU opinion at the time of the third-party settlement, there was a more than sufficient basis to apply Kelly. The appellant could have, like the appellant in Burns, petitioned a court to apportion the respondent’s share of the litigation costs at the time of the third-party settlement. Had he done so, that court would have had a sufficient basis, under Kelly, to order the respondent to contribute towards those litigation expenses based on the estimate that the appellant was entitled to a 10% SLU. That is, the “value of future compensation payments that [the respondent] has been relieved of paying due to a third-party recovery [was] not so speculative that it would be improper to estimate.” (60 NY2d at 139.) 24 II. The Court should find that applying Kelly in this case will result in neither inequity to claimants nor in inefficiency in judicial administration and that, rather, the result here was the product of the appellant agreeing that the respondent could take a credit based on a lump sum payment. Upholding the Board’s refusal to allow the appellant to recover litigation expenses beyond the value he agreed to accept in the April 4, 2012, consent letter will not result – as he contends – in any inequity to claimants in workers’ compensation cases generally. Specifically, such a ruling would not allow “carriers [to take] a full credit for the injured workers’ net third- party recovery while paying none of the litigation expenses that w[ere] incurred in creating that credit.” (Brief for Appellant, at 24.) The reason that there is no risk of inequity to future workers’ compensation claimants is that the appellant’s own agreement to accept a lump-sum contribution towards his litigation expenses is the sole reason for the alleged under-contribution in this case. Specifically the appellant here agreed to allow the respondent to take its credit based a lien reduction that – in his own words – “did not take into account any future workers’ compensation payments that might be due to the Claimant-Appellant.” (Id. at 22-23.) The appellant was not required to make such an agreement. He was free to apply to a court of competent jurisdiction to have it determine the 25 carrier’s share of equitable contribution. Again, that court could have apportioned costs based on the appellant’s future workers’ compensation payments by relying on the 10% SLU evaluation supported by both Dr. Rubinfeld and Dr. Long’s findings. As such, the only workers’ compensation claimants who might be disadvantaged by this Court affirming the judgment below are those who, like the appellant, agree to allow the workers’ compensation carrier to take credit for the third-party recovery while paying less than the full equitable contribution Kelly would otherwise require. The appellant’s argument that he is entitled to further payments towards his litigation expenses under Burns because the payments he had already received were inadequate under Kelly is also doomed by his April 4, 2012, agreement. Again, the payments he received were solely a function of the agreement he accepted. Fundamentally, the appellant’s argument is flawed because it is based on a confusion over the direction of causality. The amount that a party agrees to accept in a consent letter or settlement does not, as the appellant contends, affect the law that would govern the case in the absence of any agreement. Rather, parties typically consider what law would apply in the absence of an agreement as guidance in reaching their agreements. 26 When negotiating a carrier’s contribution to his or her litigation expenses, a claimant has the option of basing his or her position on any SLU opinions on file with the Board, even if no SLU award has been made. The various options litigants have – including the ability of parties to negotiate for an agreement in light of any rule the Court arrives at – makes clear that affirming the application of Kelly here would not endanger the efficient administration of justice. That is, the appellant is simply incorrect that the only way to get a carrier to pay its fair share of litigation expenses is to “defer settlement of the third-party action until his or her workers’ compensation case [i]s finalized.” (Brief of Appellant at 25.) Likewise, the amicus brief filed by the New York State Trial Lawyers Association is simply wrong that “the only way this injured worker could have avoided the undue burden of paying [a greater] portion of litigation costs … would have been to delay, delay and delay settlement of the third party [sic] action.” (NYSTLA Brief, p. 11-12.) Indeed, NYSTLA’s brief ignores that claimants can, like the claimant in Burns, have a judge determine the amount of the carrier’s contribution to the cost of the third-party litigation. As such, the brief fails to account for the leverage this gives claimants in negotiating a carrier’s contribution towards those expenses. 27 Moreover, the briefs filed by both the appellant and NYSTLA also ignore that insurance carriers often have a strong incentive to help the claimant settle the third-party action quickly. Specifically, so long as the workers’ compensation case and the third-party case both remain open, the carrier recovers nothing and it may be required to pay more benefits. If and when the carrier recovers a lien on the claimant’s third-party recovery, often years later, it does so without interest on its prior payouts. As such, each new award against a carrier before settlement of the third-party action is, at best, another advancement of money to the claimant. Moreover, each delay in settlement only delays the reimbursement to the carrier. During any period of delay, rather than earning an investment return on the money that would be reimbursed, the carrier may see that sum devalued by continuous inflation. In fact, affirming the application of Kelly here actually assists claimants, since it will allow them to receive the contribution towards their litigation costs more quickly. They do not need to wait, as the claimant suggests, for the Board’s SLU award to become final to recoup those expenses. Rather, they can apply to a court for, or have the carrier agree to make, a contribution towards their litigation expenses based on a scheduled loss of use opinion that is supported by the evidence in the Board’s file. Of 28 course, since a claimant has the right to such a contribution, she or he can also waive that right in whole or in part, as the appellant did here. CONCLUSION For the reasons stated above, the Court should affirm the order of the Appellate Division, Third Department dated May 19, 2016. Dated: New York, New York January 27, 2017 Respectfully submitted, Darryl Wornow WEISS, WEXLER & WORNOW, P.C. J. Evan Perigoe WEISS, WEXLER & WORNOW, P.C. Attorneys for Carrier-Respondent 25 Park Place, 4th Floor New York, New York 10007 (212) 227-0347 Rule 500.13 (c) (1) Certification I, J. Evan Perigoe, an attorney with a place of business at 25 Park Place, 4th Floor, New York, NY 10007, certify that this document contains 6741 words in total and that this number of words was automatically calculated by the word processing software used to prepare the document. ______________________ J. Evan Perigoe 29 For filing of an original and nine copies with: CLERK OF THE COURT Court of Appeals of the State of New York 20 Eagle Street Albany, New York 12207 I, J. Evan Perigoe, do swear under penalty of perjury that I am an attorney licensed to practice in New York, and that my place of business is 25 Park Place, 4th floor, New York, NY, 10007. I further swear under penalty of perjury that on January 27, 2017, I served three copies of this respondent’s brief and appendix upon each of the following parties by depositing those copies at an official depository under the exclusive care and custody of U.S. Postal Service within the State of New York, with sufficient postage and with the following last known addresses of each party upon the envelopes: HON. ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney for Respondent Workers’ Compensation Board 120 Broadway New York, New York 10271 NEW YORK STATE TRIAL LAWYERS ASSOCIATION 132 Nassau St., 2nd Floor New York, New York 1008 LAW OFFICES OF GREY & GREY, L.L.P. Attorney for Claimant-Appellant 360 Main Street Farmingdale, New York, 11735 INJURED WORKERS BAR ASSN. C/O KIRK & TEFF, LLP 10 WESTRBROOK LANE PO BOX 4466 Kingston, NY 12402 OFFICE OF THE SECRETARY NEW YORK STATE WORKERS’ COMPENSATION BOARD 328 State Street Schenectady, New York 12305-2318 Dated: New York, New York January 27, 2017 _________________________ J. EVAN PERIGOE
