In the Matter of Joseph A. Terranova, Jr., Appellant,v.Lehr Construction Co. et al., Respondents. Workers' Compensation Board, Respondent.BriefN.Y.November 15, 2017Workers’ Compensation Board Case No. G018 1559 Appellate Division, Third Department Docket No. 521991 Court of Appeals of the State of New York IN THE MATTER OF THE CLAIM OF JOSEPH TERRANOVA, APPELLANT, V. LEHR CONSTRUCTION CO., ET AL., AND WORKERS’ COMPENSATION BOARD, RESPONDENTS. BRIEF FOR AMICUS CURIAE INJURED WORKERS’ BAR ASSOCIATION Justin S. Teff, Esq. Of Counsel Injured Workers’ Bar Association Care of Kirk & Teff, LLP 10 Westbrook Lane P.O. Box 4466 Kingston, New York 12402 (845) 338-4477 Date Completed: January 1, 2017 1 TABLE OF CONTENTS Page Table of Contents ....................................................................................................... 1 Table of Authorities ................................................................................................... 2 Corporate Disclosure Statement ................................................................................ 3 Interest of Amicus Curiae .......................................................................................... 3 Preliminary Statement ................................................................................................ 4 Argument.................................................................................................................... 5 I. The Appellate Division erred as a matter of law in holding that reimbursement for third-party litigation expenses pursuant to Burns v. Varriale is never available in cases involving schedule loss of use awards. ............................................................................................. 5 A. The Third Department’s unduly strict adherence to the precise language of Burns negates the fundamental principle of the decision by relieving the carrier of its obligation to contribute to the costs of obtaining its offset right ................................................ 7 B. The Third Department ignored its own precedent in Stenson v. New York State Dept. of Transp. in holding that Burns reimbursement is not available viz. future benefits when there has been no finding of permanent disability at the time the third-party action concludes ............................................................................... 8 Conclusion ............................................................................................................... 10 2 TABLE OF AUTHORITIES Page Statutes Workers’ Compensation Law § 15(1) ....................................................................... 6 Workers’ Compensation Law § 15(3)(a) to (t) .......................................................... 6 Workers’ Compensation Law § 15(3)(w) .................................................................. 6 Workers’ Compensation Law § 16 ............................................................................ 6 Workers’ Compensation Law § 29(1) ....................................................................... 5 Workers’ Compensation Law § 29(4) ....................................................................... 5 New York Cases Burns v. Varriale, 9 NY3d 207 (2007) .................................................. 4, 5, 6, 7, 8, 9 Kelly v. State Insurance Fund, 60 NY2d 131 (1983) ................................... 4, 5, 8, 9 Stenson v. New York State Dept. of Transportation, 84 AD3d 22 (3d Dept. 2011) ..................................... 4, 7, 8, 9 Terranova v. Lehr Construction Co., 139 AD3d 1309 (3d Dept. 2016) ...... 4, 7, 8, 9 3 CORPORATE DISCLOSURE STATEMENT Pursuant to Rule 500.1(f) of the Rules of Practice for the Court of Appeals of the State of New York, the Injured Workers’ Bar Association, Inc. certifies the following: 1. Amicus is a nonprofit organization incorporated pursuant to Section 402 of the New York Not-For-Profit Corporation Law as a Type A Corporation under Section 201 of the New York Not-For-Profit Corporation Law. 2. Amicus has no parents, subsidiaries, or affiliates. INTEREST OF AMICUS CURIAE The Injured Workers’ Bar Association (IWBA) is a New York State-wide organization comprised of attorneys who concentrate their practice in representation of injured workers. The IWBA endeavors to protect the rights and interests of New York’s injured workers by fostering legal education, addressing vital legal developments, engaging the administrative policy process, and surveying relevant legislative activity. The research conducted for these purposes may permit the IWBA to offer this Court an additional perspective on the matter before it. 4 The matter presented is of significant importance to the injured workers of this state. Given the IWBA’s pervading interest in protecting the rights of New York’s stricken veterans of industry, it respectfully submits this memorandum to this Honorable Court. PRELIMINARY STATEMENT In Terranova v. Lehr Construction Co. (139 AD3d 1309 [3d Dept. 2016]), the Workers’ Compensation Board and Appellate Division have held that reimbursement for third-party litigation expenses pursuant to Burns v. Varriale (9 NY3d 207 [2007]) is never available in cases involving schedule loss of use awards. This constitutes error as a matter of law. In so holding, the Board and the Third Department have negated the fundamental underpinnings of this Court’s decisions in Burns and Kelly v. State Insurance Fund (60 NY2d 131 [1983]), and relieved the carrier from its obligation to reimburse the claimant for the costs associated with obtaining its right to offset future benefits. Moreover, the Third Department has ignored or misconstrued its own precedent in Stenson v. New York State Dept. of Transportation (84 AD3d 22 [3d Dept. 2011]), as the claimant in Terranova had no finding of permanent disability at the time his third-party action (TPA) concluded, and non-speculative benefits accrued subsequent to TPA 5 finalization. The IWBA respectfully requests that this Honorable Court reverse the decisions below. ARGUMENT I. The Appellate Division erred as a matter of law in holding that reimbursement for third-party litigation expenses pursuant to Burns v. Varriale is never available in cases involving schedule loss of use awards. When a workers’ compensation claimant recovers in a third-party action, the compensation carrier is granted both a lien against the third-party recovery for compensation payments made to date, and a right to offset future benefits to the extent of the claimant’s net third-party sum (WCL § 29 [1], [4]). As stated by this Court, “there is no question that the carrier benefits not only by the recovery of its lien but also by the value of the estimated future compensation payments that, but for the employee’s efforts, the carrier would have been obligated to make” (Kelly, at 138). To that end, this Court has held that the carrier’s equitable share of litigation costs shall be apportioned on the “basis of the total benefit that the carrier derives from the claimant’s recovery,” including both the carrier’s past lien and future offset rights (Kelly, at 135). In Kelly, which involved a death benefit, the value of the future compensation liability was reasonably ascertainable at the time of the TPA finalization, and thus the court required the carrier to contribute at that time not only a sum to pay for its cost share of obtaining the lien recoupment, but 6 an additional up-front sum for its share of obtaining the separate future offset benefit. At the time a third-party action is concluded, a claimant may have one of several legal disability statuses: (1) no finding of permanent disability; (2) a prior finding of a scheduled permanent disability (WCL § 15 [3] [a] – [t]); (3) a classification of a non-schedule permanent partial disability (WCL § 15 [3][w]); (4) a classification of a permanent total disability (WCL § 15 [1]); or (5) a work- related death (WCL § 16). The benefits payable for death, scheduled permanent disability, and permanent total disability are set forth with specificity in the statute, and their value can be reasonably estimated at any given moment. A claimant with no finding of permanent disability, or one with a non-schedule permanent partial disability, may or may not receive ongoing or future benefits depending on a multitude of circumstances. The Court thus held, in Burns v. Varriale, that in cases involving non- schedule permanent partial disabilities, where the future value of benefits was speculative, a carrier would not be required to pre-pay for its share of litigation expenses viz. its offset right, but could reimburse the claimant on a pay-as-you-go basis as future benefits accrued. The Court mentioned three situations, death claims, permanent total disability claims, and schedule loss of use awards, in which the sum of benefits payable were ascertainable at the time of TPA finalization (see, 7 Burns, at 215-216). However, the Court made very clear that “[e]ven if the present value of the future benefits cannot be ascertained at the time of claimant’s recovery in a third-party action, the carrier should be required to periodically pay its equitable share of attorney’s fees and costs incurred by the claimant in securing any continuous compensation benefits” (Burns, at 217). Burns did not make mention of the situation in which a claimant has no finding of permanent disability at the time of TPA finalization; the Third Department later addressed this question in Stenson v. New York State Dept. of Transportation (84 AD3d 22[2011]). A. The Third Department’s unduly strict adherence to the precise language of Burns negates the fundamental principle of the decision by relieving the carrier of its obligation to contribute to the costs of obtaining its offset right. In Terranova, the Board and the Appellate Division have seized upon the Burns dicta in an unreasonably literal manner in holding that Burns pay-as-you-go reimbursement is never available if the claimant receives a schedule loss of use award after finalization of the third-party action. The Court in Burns focused on two central concepts. First, if at the time of TPA finalization, future benefits cannot be quantified, it is unreasonable to require a carrier to pay upfront for a speculative future benefit. Second, a carrier must always contribute its share of costs in obtaining its offset right against future benefits, and if it does not pre-pay for this 8 right, it must reimburse the claimant for its share as future benefits actually accrue. It is respectfully submitted that it was never this Court’s intention in Burns to outline any particular situation where a carrier would be wholly relieved of any obligation to contribute to the costs of its offset right. The Board and Appellate Division in Terranova have effectively negated this central concept of Burns by seizing upon the type of award made (schedule loss of use) rather than the timing of the award, when the benefits actually accrue, namely after finalization of the third-party action. In so doing, they have misconstrued the nature of the carrier’s dual obligation under both Kelly and Burns, and effectively relieved the carrier of reimbursing the claimant for the future offset right, simply because the future benefits were in the form of a schedule loss of use. This constitutes error as a matter of law, and the IWBA respectfully asks this Court to reverse the decisions below. B. The Third Department ignored its own precedent in Stenson v. New York State Dept. of Transp. in holding that Burns reimbursement is not available viz. future benefits when there has been no finding of permanent disability at the time the third-party action concludes. In Stenson v. New York State Dept. of Transp. (84 AD3d 22[2011]), the Third Department was confronted with the argument that Burns reimbursement should not be required for awards made after the finalization of a third-party action in cases where the claimant had no finding of permanency at the time the TPA 9 concluded. The claimant in Stenson was classified with a non-schedule permanent partial disability after his third-party action had settled, and the Board held that he was not entitled to reimbursement for ongoing awards as Burns only applies, per its language, in cases where a claimant was found permanently partially disabled prior to the TPA finalization. The Court rejected this argument, explaining, “[t]here is no requirement that a claimant be classified with a permanent partial disability to obtain continuing apportionment under Burns; rather, the requirement is that the compensation benefits upon which apportionment is based be nonspeculative, such as those that have accrued” (Stenson, at 27). By holding in Terranova that an award of benefits after the conclusion of the TPA is not subject to Burns reimbursement simply because it is nominally in the form of a schedule loss of use, the Third Department effectively misconstrued or ignored its own precedent in Stenson, which itself was precisely in accordance with the fundamental Burns rationale. Technically, the Terranova situation fits within the Stenson rule, as claimant had no finding of permanency at the time of TPA finalization, and was thereafter awarded a monetary benefit. Yet even using the Court’s own language in Stenson, a schedule loss of use award made after TPA finalization is entirely non-speculative, and its value can be ascertained to the dollar. Under these circumstances, there is no reasonable justification for the 10 carrier to be relieved of its equitable apportionment obligation for its future offset right, which Kelly first mandated as a matter of fundamental legal fairness. CONCLUSION For reasons set forth above, the IWBA respectfully requests that this Honorable Court reverse the decisions of the Appellate Division and Workers’ Compensation Board in this matter. Dated: January 1, 2017 Kingston, New York Respectfully Submitted, Justin S. Teff ________________________________ Justin S. Teff, Esq. Of Counsel Injured Workers’ Bar Association Care of Kirk & Teff, LLP 10 Westbrook Lane P.O. Box 4466 Kingston, New York 12402 (845) 338-4477