To be Argued by:
Jill B. Singer, Esq.
Time Requested: 5 minutes
COURT OF APPEALS
STATE OF NEW YORK
In the Matter of the Claim for Compensation
Under the Workers’ Compensation Law Made by
BETH V., Appellant,
-against-
NYS OFFICE OF CHILD & FAMILY SERVICES, EMPLOYER and
THE STATE INSURANCE FUND, CARRIER, Respondents,
-and-
WORKERS’ COMPENSATION BOARD, Respondent.
Appellate Division, Third Department Index No.: 513249
Workers’ Compensation Board Case No.: 5050 1070
RESPONDENT’S BRIEF
APL-2013-00017
SPECIAL FUNDS CONSERVATION COMMITTEE
STEVEN M. LICHT, ESQ.
Attorney for Special Funds Conservation Committee
Submitted by:
JILL B. SINGER, ESQ.
Of Counsel
2 Tower Place
Albany, New York 12203
Telephone No.: (518) 438-3585
i
TABLE OF CONTENTS
TABLE OF AUTHORITIES……………………………………………….......ii-iii
PRELIMINARY STATEMENT…………………..................................................1
QUESTION PRESENTED…………………..........................................................2
STATEMENT OF FACTS AND PROCEDURAL HISTORY…...…………….3-7
ARGUMENT………………………………………………………………......8-13
THE COURT’S DECISION UPHOLDING THE
CARRIER’S RIGHT TO AN OFFSET UNDER §29 IS
FULLY SUPPORTED AS A MATTER OF LAW AND
BY SUBSTANTIAL EVIDENCE AND MUST BE
AFFIRMED.
CONCLUSION………………………………………………………………….14
ii
TABLE OF AUTHORITIES
COURT DECISIONS
Pages
Curtin v. City of New York, 287 N.Y. 338 (1942);
…………………………………………………………………..……...8-9
DeMarco v. Federal Ins. Co., 99 A.D.2d 114 at 117 (3
rd
Dept. 1984)
…………………………………………………………………………….9
Hanford v. Plaza, 2 N.Y.3d 348 (2004)
….………………………………………………………………………..10
Kirk v. Central, 50 A.D.3d 1298 (3
rd
Dept. 2008)
......………………………………………………………………………..13
Kondracke v. Blue, 277 A.D.2d 953 (4
th
Dept. 2000)
………………………………………………………………………….....9
Parmelee v. International Paper, 157 A.D.2d 878 (3
rd
Dept. 1990)
…………………………………………………………………………..11
Petterson v. Daystrom, 17 N.Y.2d 32 (1966)
………………………………………………………………………...10-11
Scheer v. New York State Insurance Fund, 22 Misc.3d at 245 (Sup.Ct. 2008)
……………………………………………………………………………11
Sormani v. Orange County, 240 A.D.2d 724 (2
nd
Dept. 1997)
…………………………………………………………………………….9
iii
STATUTORY AUTHORITY
§11 of the New York State Workers’ Compensation Law…………………9
§15-8 of the New York State Workers’ Compensation Law…….…………3
§29 of the New York State Workers’ Compensation Law………….…1-2, 4-14
Internal Revenue Code Section 104…………………………………...…5-6, 12
1
PRELIMINARY STATEMENT
On behalf of the Special Disability Fund, Special Funds Conservation
Committee, (“Special Funds”), submits that the Appellate Division correctly found
that the carrier was afforded the right to offset the third party proceeds in
accordance with WCL §29(4). The fact that the action was brought against the
claimant’s employer and co-employees does not remove it from the provisions of
WCL §29, simply because it was not strictly speaking a “third party action”. In
the case of an intentional tort, the claimant is not limited to the exclusivity
provisions of the worker’s compensation law and can bring an action against the
tortfeasor in addition to collecting workers’ compensation benefits. In such event,
the carrier has the right to assert a lien and credit against the proceeds under WCL
§29 in order to prevent a double recovery.
2
QUESTION PRESENTED
QUESTION:
Is the carrier entitled to exercise its offset under WCL §29 against
the proceeds from a federal civil rights action against her employer
and co-employees based upon the same injuries as her workers’
compensation claim?
ANSWER:
Yes, the carrier is entitled to a credit under WCL §29
since the action is predicated upon the same injuries upon
which the workers’ compensation claim is based.
3
STATEMENT OF FACTS
AND PROCEDURAL HISTORY
This appeal involves a Worker’s Compensation claim of Ms. Beth V.,
(“claimant” or “Appellant”), for injuries arising from an abduction at knifepoint
and sexual abuse occurring on December 28, 2004 while employed at Office of
Children and Family Services, covered by the State Insurance Fund, (“carrier”).
(R. 1-2)
1
.
The workers’ compensation claim was established for injuries of the right
foot, rape and post-traumatic stress disorder with awards commencing as of the
date of accident and continuing for lost wages at the temporary total rate of
$207.25 weekly. (R. 6-7). The claim was subsequently amended to include
injuries of the back, neck, head and left hand, teeth and consequential low back.
(R. 11, 20).
The Special Funds’ liability was established under WCL §15-8(d), whereas
it became liable to reimburse the carrier for all benefits paid subsequent to the
statutory retention period. (R. 22-23). The claimant was classified with a
permanent partial disability with benefits continuing at a $155.44 weekly. (R. 25).
The Claimant settled a third party action under WCL §29 for $650,000.000,
with a net of $429,186.06. (R. 31, 37). Per letter dated May 6, 2008 addressed to
the claimant’s third party attorney, Mr. Baynes, the carrier consented to the
1
References with “R.” refer to pages of the Record.
4
settlement waiving its right to recover any of its $62,099.43 lien; while preserving
its right to full credit against the net recovery under WCL §29. (R. 31).
Subsequently, at the hearing on October 17, 2008, the claimant objected to
the carrier’s right to a credit on the basis that it was a federal civil rights claim and
not a claim in tort. (R. 35). The Worker’s Compensation Law Judge, (“WCLJ”),
continued the case for a Reserve Decision. (R. 37). The carrier was directed to
take credit for ongoing awards without prejudice. (R. 105).
On March 2, 2007, the claimant filed an action in the United States District
Court alleging, inter alia, a denial of her civil rights demanding compensatory and
punitive damages. (R.42-56).
In Reserve Decision filed January 29, 2009, the WCLJ denied the carrier’s
offset rights upon finding that there was no provision for a punitive damages offset
under WCL §29. (R. 57-58).
The Board Panel, in Decision filed June 11, 2009, recognized that the
claimant sought damages on the basis of physical injuries, pain, mental suffering,
medical expenses and deprivation of liberty. (R. 76, 78). Relief was demanded for
compensatory, punitive damages, and attorney’s fees. (R. 76). The Board
acknowledged that the portion of the proceeds allocated for compensatory versus
punitive damages was unknown. (Id.). It also indicated that the carrier was not
entitled to credit for those portions of the net recovery deemed to be for punitive
5
damages, attorney’s fees, or compensation for medical expenses for injuries other
than those for which are established in this claim. (R. 79). The Board found that a
suit against an employer is a third party action under WCL §29. (R. 77, 79). Thus,
the Board Panel remanded the matter for the claimant and employer to produce
evidence demonstrating how the proceeds were allocated between the types of
damages sought. (R. 80).
The Attorney General, representing the State in the federal action, submitted
a letter advising that no part of the $650,000.00 settlement proceeds was allocated
for punitive damages. (R. 89). The Stipulation and Order of Discontinuance of the
underlying federal action, confirmed under paragraph number ten, that all of the
proceeds were allocated to the claimant’s personal injuries and loss of enjoyment
of life and emotional response related thereto. (R. 107, 108-111). The personal
injuries are as set forth in Internal Revenue Code Sec. 104(a)(2). (R. 110).
At the hearing on October 29, 2009, Mr. Baynes, the attorney representing
the claimant in her federal suit, testified that the action was brought against her
employer and co-workers. (R. 122-123). The primary cause of action was for
deprivation of her constitutional right to due process. (R. 123). There was also a
physical injury component. (R. 127). Mr. Baynes admitted that one could not
determine from the settlement document itself what the breakdown was for body
parts and damages. (R. 126). He further indicated that although the action was for
6
civil rights violations, there was a physical injury component; enabling the
recovery to be allocated entirely under the Internal revenue Code section 104, a
non-taxable provision for pain and suffering. (R. 126-127, 134-135). Mr. Baynes
recalled communicating with the workers’ compensation carrier regarding its
workers’ compensation lien around the time of the settlement. (R. 132). The
settlement agreement reflected no punitive component. (R. 135, 136).
In Reserve Decision filed August 9, 2010, the WCLJ denied the carrier the
right to offset the proceeds because the federal action was for a violation of the
claimant’s civil and constitutional rights, not included under WCL §29. (R. 155-
156).
The Board Panel reiterated that WCL §29 provides for a lien against the
proceeds of “any recovery” to the extent of compensation awarded, as well as the
right to offset future compensation benefits by the amount of the net recovery. (R.
174). As such WCL §29 applies to the civil lawsuit involving an intentional tort;
since the damages arise from the same injury. (R. 177). Thus, under WCL §29,
the carrier may take credit for the proceeds of the settlement since WCL §29
applies to any recovery by a compensation claimant whether for pain or suffering
or otherwise. (R. 171-178). The Board also reconciled its prior decision to the
extent that it may have been inconsistent with its current decision. (R. 177).
7
Appellant filed a Notice of Appeal to the Appellate Division in response to
the Board Panel Decision. (R. 180-181). Pursuant to Memorandum and Order
decided and entered September 27, 2012, the Decision below was affirmed. (R.
191-193).
Appellant moved for leave to appeal and this Court granted leave to appeal
the Appellate Division’s Order on January 15, 2013. (R. 189-190).
8
ARGUMENT
THE COURT’S DECISION UPHOLDING THE
CARRIER’S RIGHT TO AN OFFSET UNDER §29
IS FULLY SUPPORTED AS A MATTER OF LAW
AND BY SUBSTANTIAL EVIDENCE AND MUST
BE AFFIRMED.
§29 of the Workers’ Compensation Law permits an injured employee to
accept statutory benefits for injuries arising out of and in his course of employment
and simultaneously pursue an action against a tortfeasor, not in the same employ,
for the same injuries. The section includes provisions to prevent a double recovery
from the tortfeasor and the employer for the same injury. The carrier or employer
is given a lien against “any recovery” from the third-party under §29(1).
Reimbursement of the carrier’s lien prevents a double recovery as a result of
payments already made on the compensation claim at the time of the recovery;
while the credit, or holiday, ensures against a double recovery for benefits that
would be due after such recovery. The lien addresses the past and the credit
addresses the future. See Curtin v. City of New York, 287 N.Y. 338 (1942).
Specifically, §29 (1) provides that “the state insurance fund, if
compensation be payable therefrom, and otherwise the person, association,
corporation or insurance carrier liable for the payment of such compensation, as
the case may be, shall have a lien on the proceeds of any recovery from such other
...” . (Id.).
9
The statute is not to be so narrowly construed to apply only to “others”
outside of the employ, otherwise the injured worker would be limited to only
collecting workers’ compensation benefits which consist of wage replacement
benefits and medical expenses, in the event of intentional torts committed outside
of the scope of employment. The exclusivity provisions of the Workers’
Compensation Law provide the injured worker an action against his or her
employer or co-employees in the event of an intentional tort. (See WCL §11,
29(6)). Workers’ Compensation benefits are the exclusive remedy to an employee
injured or killed as the result of another in the same employ as long as such other is
acting within the scope of his or her employment. (Id.). Thus, co-workers acting
outside of the scope of their employment are not insulated by WCL §11, 29(6), and
are subject to civil suit. If “ . . . the gravamen of plaintiffs' cause of action lies in
intentional tort and/or fraudulent breach of an insurer's duty of good faith and fair
dealing; many of the damages claimed are clearly outside of the purview of
awardable workers' compensation benefits. It was never intended that injuries thus
caused were to be exclusively the province of the Workers' Compensation Board.
As stated by a leading commentator, ‘Plainly the existence of a compensation
claim does not give insurers or employers a blanket exemption from the entire law
of tort’ (2A Larson, Workmen's Compensation Law, § 68.34 [b] )”. DeMarco v.
Federal Ins. Co., 99 A.D.2d 114 at 117 (3
rd
Dept. 1984). Thus, claims for sexual
10
discrimination and racial discrimination against the employer are not barred under
WCL §11. (See, Kondracke v. Blue, 277 A.D.2d 953 (4
th
Dept. 2000); Sormani v.
Orange County, 240 A.D.2d 724 (2
nd
Dept. 1997)). Accordingly, the Appellant
was able to sue in federal court for injuries suffered due to intentional torts such as
civil rights violations and other damages beyond those provided under workers’
compensation, while still maintaining a claim in workers’ compensation from such
injuries.
Therefore, contrary to Appellant’s contention, the civil lawsuit herein is
considered a third party action under WCL §29 and is subject to the carrier’s lien
and credit under WCL §29(4); even though the instant action is brought against the
claimant’s employer and co-employees. The Court of Appeals addressed this very
situation in Hanford v. Plaza, 2 N.Y.3d 348 (2004), upon finding that the
exclusivity provisions do not apply to the commission of an intentional tort outside
of the scope of one’s employment. (Id.) In Hanford, the claimant brought a civil
action under the New York Human Rights Law alleging emotional distress,
discrimination and sexual harassment, among other things, similar to the case at
bar. (Id.). Such action was not barred under the exclusivity provisions of the
worker’s compensation law and was subject to the provisions of WCL §29. (Id.).
As the Court of Appeals stated in Petterson v. Daystrom, 17 N.Y.2d 32
(1966), “ Section 29, read in its entirety and in context, clearly reveals a legislative
11
design to provide for reimbursement of the compensation carrier whenever a
recovery is obtained in tort for the same injury that was a predicate for the payment
of compensation benefits. It would be unreasonable to read the statute as
mandating a different result merely because the recovery came out of the ‘pockets
of a coemployee and not from the resources of a stranger.’” (Id. at 39). Thus,
whether the tortfeasor is a stranger or a co-employee WCL §29 is applicable.
Clearly, any recovery predicated upon the same injuries upon which
workers’ compensation benefits are based are subject to the lien and credit rights
afforded under WCL §29. The WCL §29 lien unambiguously and clearly attaches
to “any recovery” as long as it arises from the compensable injury, which here
involve physical and mental injuries suffered on December 28, 2004: right foot,
rape and post-traumatic stress disorder, back, neck, head, left hand, teeth and
consequential low back. “Any recovery” includes any proceeds of a third party
action under WCL §29, even if they are allocated for pain and suffering. Parmelee
v. International Paper, 157 A.D.2d 878 (3
rd
Dept. 1990). Accordingly, “. . . the
funds to which the lien attaches properly include any sums earmarked for pain and
suffering or other elements of damages not covered by workers compensation.”
(Scheer v. New York State Insurance Fund, 22 Misc.3d at 245 (Sup.Ct. 2008).
Such other damages arguably would include punitive damages.
12
However, the record reflects that the instant recovery was not allocated
towards punitive damages. The settlement document describes the settlement as
being entirely allocated to personal physical injuries and the loss of enjoyment of
life and emotional response related thereto. Appellant does not dispute the fact
that the settlement stems from claimant’s personal physical injuries; and in fact
indicates that this was strategically characterized as such in order to avoid tax
consequences, falling under Internal Revenue Code sec. 104(a)(2). Thus, in the
absence of any evidence that such physical injuries in the civil rights action were
different from those established in the workers’ compensation claim; the physical
injuries referenced in the settlement document refers to one and the same.
Therefore, the Appellate Division properly held that the proceeds herein are
subject to the lien and credit rights provided under WCL §29, since predicated
upon the same injuries that the workers’ compensation claim is based. The lien is
not at issue here only because the carrier voluntarily waived its WCL §29 right to
its lien.
Appellant argues that allowing the carrier a credit under WCL §29 would
discourage injured workers from filing claims outside of workers’ compensation
against their employers and or co-employees for constitutional deprivation,
resulting in employers not changing their policies and procedures. (App. Brief pg.
14). This is not true. The worker’s compensation carrier’s lien and credit rights
13
are limited, and only extend to the amount of workers’ compensation benefits
actually paid or to which the injured worker is entitled in the future for lost wages
and medical benefits. The carrier has no claim to monies above and beyond such
amounts granted under WCL §29. WCL §29 only allows the carrier a right to a
lien and credit based upon the amount of workers’ compensation benefits it has
already paid or will be obligated to pay, in order to prevent a double recovery.
Kirk v. Central, 50 A.D.3d 1298 (3
rd
Dept. 2008). Thus, an injured worker can
potentially seek and obtain a recovery that far exceeds the amount provided for
under the workers’ compensation law; and will be beyond the reach of the carrier’s
WCL §29 lien and credit rights. Accordingly, an injured worker always has an
incentive to file a third party action against tortfeasors both outside of his or her
employ, as well as within the same employ as appropriate.
14
CONCLUSION
WHEREFORE, on behalf of the Special Disability Fund, Special Funds
Conservation Committee respectfully requests that the Appellate Division’s
Decision, affirming the carrier’s lien and credit rights under WCL §29(1) be
upheld; as WCL §29 applies against any recovery predicated upon the same
injuries upon which workers’ compensation benefits are based.
Respectfully Submitted,
JILL B. SINGER, ESQ.
2 Tower Place
Albany, New York 12203
Telephone No.: (518) 438-3585
Of Counsel to
STEVEN M. LICHT, ESQ.
Attorney for Special Funds
Conservation Committee
SPECIAL FUNDS
CONSERVATION COMMITTEE
