Case # 00402039
Date of Accident: 11/19/2003
District Office: NYC
Employer: Crescent Contracting Corp.
Carrier: State Insurance Fund
Carrier ID No.: W204002
Carrier Case No.: 48880181-326
Date of Filing of Decision: 06/11/2012
Claimant's Attorney: Grey and Grey LLP
Panel: Robert E. Beloten

The Full Board, at its meeting held on May 15, 2012, considered the above captioned case for Mandatory Full Board Review of the Board Panel Memorandum of Decision filed on May 10, 2011.

ISSUE

The issue presented for Mandatory Full Board Review is whether the carrier, State Insurance Fund (SIF), may take credit for a third-party settlement before the claimant receives the settlement proceeds.

In a Notice of Decision (NOD) filed on July 30, 2010, the WCLJ found that the claimant suffers from a 25% schedule loss of use (SLU) of the left leg and awarded the claimant 72 weeks of benefits. The WCLJ directed that payment of the SLU was subject to SIF's investigation into whether the claimant had been paid in the third-party action.

The Board Panel majority found that the parties agreed that SIF may immediately stop payments because SIF reserved its right to stop all payments in its letter consenting to the settlement of claimant's third-party action (consent letter). The Board Panel majority modified the WCLJ NOD to direct that SIF is entitled to offset benefits as of the date of the consent letter.

The dissenting Board Panel member found that the claimant must actually collect the third-party settlement proceeds before SIF can take a credit against those proceeds. The dissenting Board Panel member would affirm the WCLJ decision directing that payment of the SLU payment was subject to further investigation regarding whether the claimant had received the settlement proceeds.

In the claimant's request for Mandatory Full Board Review, he argues that WCL § 29 provides that a carrier may only take a credit against a third-party settlement once the claimant actually receives the settlement proceeds. The claimant further asserts that allowing the carrier to take a credit prior to distribution of the settlement proceeds is an impermissible waiver of the claimant's rights without Board approval.

The SIF did not file a rebuttal.

Upon review, the Full Board votes to adopt the following findings and conclusions.

FACTS

The claimant suffered injuries to his left hip, left leg, and back on November 19, 2003. SIF did not controvert the claim.

On January 28, 2010, SIF filed its consent letter with the Board, indicating that it consented to the claimant settling a third-party action for $300,000.00. The consent letter provides that:

"[SIF] reserves its rights to take credit for the claimant's net third-party recovery when computing deficiency compensation pursuant to [WCL] § 29 (3,4) of the Workers' Compensation Law. Said credit will apply to any past, current and/or future workers' compensation or medical benefits to which the claimant is or may become entitled. Accordingly, [SIF] will make no further payments of workers' compensation and/or medical benefits for amounts owed or to be owed until the claimant exhausts the net third-party recovery at the compensation rate."

On March 3, 2010, the claimant filed a Form RFA-1, Claimant's Request for Further Action, requesting a hearing regarding permanency. The claimant testified at a hearing on July 27, 2010, at which he consented to a finding that he suffers from a 25% SLU of the left leg. He also testified that he had not received any settlement monies "in hand." SIF requested that the WCLJ allow SIF to investigate whether any amounts had been paid pursuant to the claimant's third-party settlement before being required to make payment on the SLU.

At the close of the hearing, the WCLJ found that the claimant suffers from a 25% SLU of the left leg, but held payment of the SLU in abeyance subject to SIF's investigation into whether the claimant had been paid any third-party settlement proceeds.

SIF sought administrative review, arguing that it was entitled to stop payments following the January 28, 2010, consent letter.

LEGAL ANALYSIS

WCL § 29(4) provides that "[i]f [a claimant]…proceed[s] against such other, the state insurance fund…shall contribute only the deficiency, if any, between the amount of the recovery against such other person actually collected, and the compensation provided or estimated" (emphasis added).

In this case, SIF asserts that the settlement was finalized, and the monies distributed. However, the record does not reflect when that occurred. The date of the consent letter was January 28, 2010. The date of the SLU hearing was August 10, 2010. At the hearing, the claimant testified he had received no settlement proceeds, and did not indicate that the case was even settled.

A line of Board Panel MOD's suggests that a carrier may exercise a credit as of the date of the consent letter, even if the settlement proceeds have not been received by claimant. In Matter of Laterra Drywall, 2010 NY Wrk Comp 628287, the carrier was permitted to exercise a credit against a serious facial disfigurement award from the date of the consent letter, where third-party settlement proceeds were being held in escrow pending resolution of medical credits.

Likewise, in Matter of Poughkeepsie Business Park, LLC, 2007 NY Wrk Comp 50210032, the carrier was permitted to exercise credit against ongoing awards from the date of the consent letter. The Panel held that, generally speaking, "the carrier is not entitled to exercise its credit rights until the third party action has actually settled which necessarily entails disbursement of the settlement proceeds." However, that Panel found that the Board may evaluate the conduct of the parties, and allow the exercise of credit from the date of the consent when the consent letter contains terms virtually identical to the third-party settlement, and a "clear and concise statement" regarding the lien, and equitable apportionment, and, most importantly, a clear statement "that no further payments would be made unless and until the carrier's credit right under WCL § 29(4) was exhausted" (Id.) The Panel also noted that a delay may occur between consent and the disbursement of proceeds, but downplayed the severity of such a circumstance by concluding that such delays are typically only thirty days in length, and that the parties can negotiate into the consent letter a provision for gap payments of compensation until the date of disbursement. This, of course, presumes that the claimant's compensation attorney is aware of the negotiation, and is a party thereto.

Deficiency compensation is measured as the difference between the third-party recovery that is actually collected and the amount of compensation due. When a carrier explicitly reserves its credit in a consent letter and settlement agreement, it is relieved from making compensation and medical payments until the credit is exhausted. The statement in the consent letter in both the instant case and the MODs cited above that "no further payments [will] be made unless and until the carrier's credit right under 29(4) [is] exhausted" is nothing more than a reflection of the definition of deficiency compensation. It is not a special exemption from making payments from the date of the consent letter.

The Board Panels' holdings in Matter of Laterra Drywall and Matter of Poughkeepsie Business Park LLC are not reflective of the statutory provision of § 29(4), and are not based on case law. The Full Board hereby finds that the carrier may exercise its credit rights, if explicitly reserved, upon the actual receipt of third-party proceeds. A claimant may not waive the right to compensation other than in a WCL § 32 agreement, and therefore the consent letter and settlement agreement cannot be read to abrogate the claimant's entitlement to compensation absent such an agreement.

However, the WCLJ correctly held payment of the SLU award in abeyance pending investigation of whether the claimant had settled the third-party litigation. At the time of the SLU award, almost seven months had elapsed since the claimant requested SIF's consent to settlement. While no closing statement was filed with the Board and the claimant testified that he had not received money, the claimant confirmed that he had agreed to a settlement and did not provide any explanation for why the settlement had not been consummated. Notably, even in the claimant's application for review, he does not allege that the matter was not settled or that he did not receive any settlement funds. Thus, the SLU award should not be paid until the claimant had provided information on the status of the third-party settlement. If the evidence shows that a third-party settlement was reached, and claimant received payment prior to the decision to award a schedule loss of use, then the SLU award would be subject to a credit if specifically reserved in the third-party settlement agreement. If, on the other hand, the evidence shows that the third-party proceeds were paid after the rendering of the SLU award, the award shall be fully payable.

The Full Board notes that the amount of compensation paid subsequent to a consent letter will increase the carrier's lien at the time of the distribution of the third-party settlement proceeds.

Therefore, the preponderance of the evidence in the record supports a finding that SIF was not entitled to take a credit against the claimant's third-party settlement prior to the claimant's receipt of settlement funds, but that the WCLJ correctly held payment of the SLU award in abeyance pending production of documents regarding whether the claimant had received settlement funds. Both claimant and SIF should be directed to produce the closing statement.

CONCLUSION

ACCORDINGLY, the WCLJ decision filed on July 30, 2010, is AFFIRMED. The case is continued.