Car Accident Lawsuit Settlements? Christopher T. McGrath New York Lawyer

By Christopher T. McGrath, Esq. -In this article, New York lawyer Christopher McGrath describes the circumstances when a victim of a car accident must repay liens following the settlement of a lawsuit.  

In New York, the settlement of a lawsuit may require the repayment of all or a portion of workers compensation benefits previously received from the workers compensation carrier.

Workers Compensation Lien 

Workers Compensation Law §29 permits an injured worker to collect workers compensation benefits while pursuing a tort action against a third-party, which, generally speaking, is a party other than the plaintiff’s employer or co-employee. 

Workers Compensation Law §29(1) creates a statutory lien and an offset for future benefits in favor of the workers compensation carrier. The purpose of the lien to avoid double recovery by the plaintiff while, at the same time, shifting the burden for wage replacement and medical costs to the negligent party. 

The workers compensation lien attaches to any funds received by the claimant from the tortfeasor, regardless of source, even if they are described as recovery for pain and suffering.  Parmalee v. International Paper Company, 157 AD2d 878, 550 NYS2d 150 (3rd Dept, 1989) and 404 NYS2d 319. 

But, the workers compensation lien only attached to injuries caused by the tortfeasor responsible for the accident.  The Court of Appeals held in Shutter v Philips Display Components Company, 90 N.Y.2d 703, 665 N.Y.S.2d 379 (1997) that the workers compensation carrier could not offset claimant’s future compensation payments by the amount she obtained pursuant to the uninsured motorist endorsement of her policy because those benefits were not recovered from the third-party tortfeasor. Similarly, claims for loss of consortium are not subject to the lien because those damages are not recovered by the claimant, but rather by the claimant’s spouse. 

Not only does the workers compensation carrier have a lien for what was paid in the past, it also has an offset and may take a credit for any future payments of medical, indemnity or miscellaneous expenses and will only be liable for deficiency compensation. This means that the workers compensation carrier will only have to pay bills in the future after the plaintiff has exhausted the proceeds of the third-party settlement and a deficiency exists with respect to payments of compensation and/or medical expenses.  The carrier must reserve the right to offset at the time of the third party settlement or it is waived. 

The plaintiff has the responsibility at the time of settlement of securing the workers compensation carrier’s consent to the settlement, or getting judicial approval, if the settlement is for less than what the claimant would have received in future compensation benefits. As the court noted in McComber v. Lehrer McGovern Bovis, Inc., 28 A.D.2d 402, 818 N.Y.S.2d 1, (1st Dept. 2006), where the client’s share of the settlement is greater than the benefits to be paid, Workers Compensation Law §29(5) is not defeated by a settlement (without consent) as the statutory provision requires a carrier’s consent to or judicial approval of a settlement only if the settlement is for less than the statutory amount of compensation benefits, and the recovery in the case far exceeded what claimant would have received in future compensation benefits. Thus, nothing in the settlement jeopardized the carrier’s lien.  

Workers Compensation arising from Motor Vehicle Accident 

Consider the situation where an employee has both workers compensation and no-fault available to cover expenses for an injury. In such instances, the workers compensation carrier is primary to no-fault, and should pay first, although workers apply for both types of coverage since the available benefits are not necessarily identical.  Available no-fault first party benefits are reduced by any like benefits recoverable from workers compensation. Thus, in cases involving automobile accidents, the workers compensation carrier pays the injured party’s medical bills that would otherwise have been paid by no-fault. 

While in the non-automobile case the workers compensation carrier has a workers compensation lien on the proceeds of the third-party lawsuit brought against the tortfeasor, a workers compensation lien arising from a motor vehicle accident does not include payments made by workers compensation in lieu of no-fault’s basic economic loss. Workers Compensation Law §29(1)(a).  Thus, whatever benefits the workers compensation carrier pays that would otherwise have been paid by a no-fault carrier are not part of the workers compensation lien.  However, if, workers compensation benefits exceed no-fault’s basic economic loss, those benefits in excess of the basic economic loss are a lien. 

Sullivan Papain Block McGrath & Cannavo, P.C.
Manhattan Office
120 Broadway – 18th Floor
New York, NY 10271
Phone: 212-732-9000
Fax: 212-266-4141
Email: [email protected]