Category Archives: Insurance

Is this Workers’ Compensation Claim Fraud in New York?

  1. Claimant denies having gainful employment while collecting temporary disability benefits. He actually started up a small business, but the business lost money.
  2. Claimant says he applied for jobs at 34 different businesses while seeking benefits. The employer performed its own follow-up search and learned he applied for only two (2) jobs.New York Workers' Compensation law 2017
  3. Claimant lying about his physical restrictions to our IME doctor
  4. Concealing volunteer work while “too disabled” to do your regular job?
  5. Caught selling street drugs while collecting workers’ compensation benefits?
  6. Claimant first admits to working, but her attorneys later state she isn’t. Claimant later found working seasonally while collecting benefits.
    Continue reading Is this Workers’ Compensation Claim Fraud in New York?

Practical Advice on Injury Reporting in New York

When Injury Reporting is Required.

Greg LoisNew York Workers’ Compensation Law §110 states that an accident must be reported when it:

“will cause a loss of time from regular duties of one day beyond the working day or shift on which the accident occurred, or which has required or will require medical treatment beyond ordinary first aid or more than two treatments by a person rendering first aid.”

In order to be reportable, the injury must:

  • Cause the worker to lose one day of work in addition to the date of loss; OR
  • Require more than ordinary first aid; OR
  • Require at least three “first aid” visits.

The Workers’ Compensation Board has an official form for reporting injuries (Form C-2F “Employer’s Report of Work-Related Injury/Illness“). The form must be provided to the injured worker upon request and has to be maintained (held) by the employer for at least 18 years.

The C-2F report must be filed with the Workers’ Compensation Board within 10 days after the occurrence of the accident.

Penalties

Failure to file the report subjects the employer to potential misdemeanor criminal liability, punishable by a fine of not more than $1000. A second penalty – not to exceed $2500 – can be imposed by the Board. Continue reading Practical Advice on Injury Reporting in New York

Penalties Under New York Workers’ Compensation Law Section 52

In New York, all employers are required to carry Workers’ Compensation insurance. This includes employers with less than five employees. Workers’ Compensation Law imposes heavy penalties against the employer for failure to obtain insurance as well as for defrauding the insurance carrier. [See WCL Section 52]

The Law.

Penalties are assessed against the employer for misclassifying and concealing employees. The law specifically includes employer’s actions of intentionally and materially understating or concealing payroll, concealing duties to avoid proper classification or

Tatyana Redko
Tatyana Redko, Esq.

concealing any other information pertinent to the calculation of premiums. Section 52 covers misrepresentations such as paying workers “off the books,” not reporting wages paid to illegal aliens and misclassifying employees as “independent contractors” in an attempt to pay a lower premium. Continue reading Penalties Under New York Workers’ Compensation Law Section 52

Limits to Recovery in a New York Loss Transfer Claim.

In a previous post, we discussed the process of Loss Transfer and specifically why it matters to Workers’ Compensation carriers.  In connection with the Workers’ Compensation aspect, a workers’ compensation carrier can recover up to $50,000.00 by way of arbitration in a Loss Transfer claim through the Arbitration Forums.  However, this does not mean that you can simply assert a right to $50,000.00 against another insurance company and think this is enough. Indeed, when arbitrated, liability still has to be proven as well as damages. Continue reading Limits to Recovery in a New York Loss Transfer Claim.

New York Electronic Data Interchange (“eClaims”) and “Monitoring and Compliance” Initiatives

The Board’s new initiative to enforce EDI (“eClaims”).

Beginning in 2013, the Board has begun an increased tempo of “monitoring and compliance” initiatives intended to enforce the eClaims guidelines and generate more penalty income for the State. The Board has now established a “Compliance Unit” intended to do the following:

  • monitor performance standards for timely submission of First Report of Injury,
  • confirm timely first payment of indemnity benefits,
  • check for timely submission of Subsequent Report of Injury showing first payment,
  • monitor timely submission of Controversy; and
  • track the Percentage of Claims Controverted (how many cases is the carrier denying?).

Timeline of the “Typical” case: Admitted Traumatic Accident with Lost Time.

  1. Initial investigation to confirm loss.
  2. If there is medical and lost time, begin benefits.
  3. File FROI-00.
  4. File update EDI documents as the case progresses.

The process in detail.

Investigation and Communication.

All accidents should be investigated fully. The employer should contact the insurance carrier and maintain those communications throughout the claim. The investigation’s results should be copied to your defense attorney in the case of a controverted claim.

Continue reading New York Electronic Data Interchange (“eClaims”) and “Monitoring and Compliance” Initiatives

Third party recoveries and workers’ compensation in New York.

If the claimant recovers at law, the carrier/employer has the right to reimbursement, subject to certain limitations.

Under the New York Workers’ Compensation Law, a worker injured by the negligence of another can collect workers’ compensation benefits and then recover in a civil suit against the actual tortfeasor. WCL § 29. Under those circumstances, the insurance carrier that paid benefits has a lien on the proceeds of the third-party settlement “after the deduction of the reasonable and necessary expenditures, including attorney’s fees, incurred in effecting such recovery.” Id.The employee may ask the court for an order apportioning the “reasonable and necessary expenditures.”

The Employer/Carrier has the right to recover compensation benefits issued against the actual tortfeasor.

The carrier paying workers’ compensation benefits has the right to sue the actual tortfeasor in court (subrogation). However, the employer/carrier can not bring this action unless

  • one year has passed from the accident or six months from the compensation award (whichever comes first); and
  • the employee has been notified in writing (certified mail or personal service) and 30 days has elapsed. WCL § 29(1).

First, some vocabulary.

Discussing subrogation rights in New York is a journey into a land of bizarre vocabulary. To begin, let’s review some key terms:

  • “Third party” refers to the “negligent third party” or the civil action itself. In common usage, in the workers’ compensation context there are always two parties: the employer and the injured worker. the “third party” (the negligent party – not the employer) is how practitioners refer to the “not comp” action.
  • A permanent total disability award, scheduled loss of use award, or death benefits (dependency benefits) are for a “fixed’ amount of compensation and the present day values of those awards is readily ascertainable. (For more on these types of awards, see Chapter 9 of my book.
  • New York Workers’ Compensation Law allows for “reduced earnings benefits” and permanent partial disability benefits. The value of those benefits may fluctuate (and even cease completely) during the lifetime of the claimant. Reducing those benefits to a “present day value” is not as easily ascertainable as in the case of a death, total disability, or scheduled loss of use benefit.

Limitation on reimbursement: motor vehicle claims.

Section 29(1-a) states that the employer’s reimbursement right does not extend to any recovery the claimant may have made under § 5104(a) of the insurance law. That insurance law section (§ 5104(a)) states that a person injured in a motor-vehicle accident is not entitled to recovery for “non-economic loss” or for “basic economic loss” except in certain cases (where there has been “serious injury”).

Section 5102 of the New York State Insurance Law defines “Basic Economic Loss as up to $50,000 in medical expenses, lost wages and other reasonable and necessary expenses (up to $25 per day) arising from a motor vehicle accident. Because these expenses are paid by the injured party’s own insurer, they are not recoverable in a personal injury lawsuit. As a result, a person injured in car accident who incurs less than $50,000 in expenses cannot proceed with a personal injury lawsuit unless he or she has otherwise suffered a serious injury.

The prohibition against allowing the comp carrier to get reimbursment from this first $50,000 in “first party” benefits makes sense in a roundabout way: an employee who is injured (while working) in a car accident collects $50,000 in lost wages and medical expenses from her own insurance policy, so granting the compensation carrier the right to reimbursement from that money is kind of like letting the comp carrier get away with having the claimant self-fund the first $50,000 of her own workers’ compensation losses.

Limitation on reimbursement: the Kelly decision.

The decision in Kelly v. State Insurance Fund is simple: it stands for the proposiiton that the carrier’s reimbursement is reduced as a percentage of what the claimant expended on securing the third-party recovery. It does not matter if, as in the Kelly case, the claimant recovers $315,000 and the workers’ compnesation carrier had paid out only $54,127.56 in benefits. The $54,127.56 was reduced by the percentage of the claimant’s litigations expenses (“reasonable and necessary expenditures, including attorney’s fees”, see WCL § 29) which was determined to be 34.27% of the total recovery (for how this percentage is calculated, read on).

The Court in Kelly ruled that the carrier had also received a second benefit from the claimant’s recovery against the third-party: not having to pay an ongoing dependency award (remember that dependency awards can be estimated by taking the claimant’s life expectancy in weeks and multiplying it by the weekly award). The Kelly Court ruled that the carrier’s lien should not only be reduced by the amount paid by the claimant to obtain her award (attorneys fees and “reasonable” costs) but also by the amount of future payments avoided by the carrier.

Example: Applying Kelly math to see how the carrier’s reimbursement is reduced.

Figuring out the impact of a third-party settlement on a carrier’s exposure involves knowing the following facts:

  1. The settlement amount.
  2. Total of disbursments made to get the settlement (legal costs such as filing, expert witness fees, exhibits fees, etc.)
  3. The attorney’s fee paid (either dollar figure or percentage).
  4. Amount paid by the compensation carrier for medical and indemnity benefits.
  5. Present value of future benefits due to the claimant.

Then, the following formula can be applied:

(Carrier's lien amount) * (cost of collection percentage) = net lien recovery

To use easy, round numbers for an example:

  1. The settlement amount: $400,000.
  2. Total of disbursments made to get the settlement: $10,000.
  3. The attorney’s fee: 33% ($130,000)
  4. Amount paid by the compensation carrier for medical and indemnity benefits: $90,0000.
  5. Present value of future benefits due to the claimant: Presume nothing.

In this formula, the lien amount is the total value of the past medical and indemnity paid. Here it is, as a math formula:
$130,000 attorney's fee + $10,000 in costs = $140,000 paid to get the settlement.
$140,000 cost of collection / total settlement ($400,000) = 35% of total recovery
Under this example, the carrier’s lien would be reduced by 35% (percentage costs of recovery).
$90,000 lien * .35% = $31,500. So, the carrier would recover $58,500.
After the carrier’s reimbursement, the formula for calculating the claimant’s net is:
$400,000 - costs and fee $140,000 - carrier's lien = $201,500 net to claimant.

What about where the carrier’s obligation to pay continues, but is reduced or extinguished by the amount of the third party settlement? (This was the case in Kelly).

In that circumstance, the carrier didn’t just get repaid for benefits already issued – but got to defer payment on future benefits which would have been paid out if the third party had not settled. In that case, the carrier’s second benefit is reduced too.

Presume that the claimant would be entitled to a fixed benefit for either a scheduled loss of use, permanent disability or a dependency benefit (the claimant is Kelly was entitled to a dependency benefit.) In that case, the carrier is getting the second benefit – not having to pay all those weeks of compensation that the claimant would have had coming to her.

For example, if the claimant was getting a benefit of $300 a week, it would take 671.66 weeks or approximately 13 years to use up the remaining “net settlement”” (see above example, where the claimant “netted” $201,500, and dividing that figure by the $300 weekly rate to arrive at a number of weeks). In such a case, the future benefit is reduced to present value. Assume for the sake of this example that the present value of $201,500 is $136,188. Then, the real amount that the carrier recovered is the total amount already paid in indemnity and medical benefits plus the current value of the future benefits avoided ($136,188).

This benefit ($90,000 + $136,188 = $226,188) would be reduced by the percentage cost of procurement (35%) and then subtracted from the carrier’s lien for benefits already paid ($90,000). In our example, the $90,000 lien (current value of medical and indemnity alreayd paid) would be reduced by the future benefit (payment avoidance) so the carrier’s net lien is reduced by $79,166 to just $10,834.

In this example, where the claimant recovered $400,000 in a third party claim, where the carrier expended $90,000 in medical and indemnity benefits during the case, and has an ongoing obligation ot pay benefits, the impact of the third-party case is that the carrier recovers $10,834 from the third party action and then takes a break from having to pay anything until 13 years passes.

The formula for this would be:
$Current lien -(($Current lien + $future benefit)* cost of recovery%)

“Fresh Money.”

As is shown above, the amount the workers’ compensation carrier pays is the function of two things: the amount already paid at the time of settlement (medical and indemnity benefits) plus the future payments avoided. In our example above, this “total” amount is then multiplied by the “equitable share” percentage (the costs of procuring the recovery divided by the recovery) to arrive at the new, total (lower) lien reimbursmenet (but remember, the carrier then gets a holiday until the proceeds are exhausted).

When the amount already paid is much smaller than the future benefits avoided, the carrier may have to pay “fresh money” to the claimant as its equitable share for the recovery.

Here is an example where “fresh money” would have to be paid, using the same settlement in our example above, but reducing the already-incurred medical and indemnity component (the present lien) to show how fresh money would be payable.

To use easy, round numbers for an example:

  1. The settlement amount: $400,000.
  2. Total of disbursments made to get the settlement: $10,000.
  3. The attorney’s fee: 33% ($130,000)
  4. Amount paid by the compensation carrier for medical and indemnity benefits: $20,0000. Note bene: this is the only figure we will change for this “fresh money example” versus our prior example, above.
  5. Present value of future benefits due to the claimant: $138,188.

In this formula, the lien amount is the total value of the past medical and indemnity paid. Here it is, as a math formula:
$130,000 attorney's fee + $10,000 in costs = $140,000 paid to get the settlement.
$140,000 cost of collection / total settlement ($400,000) = 35% of total recovery
Under this example, the carrier’s lien would be reduced by 35% (percentage costs of recovery).
$20,000 lien + $138,188 * .35% = $55,365.80. This would be subtracted from what the carrier has already paid to get to the net lien: $20,000 – $55,365 = $35,365 in fresh money moving to the claimant.
After the carrier’s reimbursement, the formula for calculating the claimant’s net is:
$400,000 - costs and fee $140,000 - carrier's lien (add $35,365) = $236,865 net to claimant.

Permanent partial disability and reduced earnings awards: Burns v Varriale, 9 N.Y.3d 207 (2007).

In Burns the Court of Appeals reviewed a case in which the claimant was receiving “reduced earnings” benefits of $400 per week. This benefit represented the difference between the claimant’s pre-injury and post-injury wage (after his condeition had reached a state of partial permanent disability.) This case is interesting because under the Kelly calculations, taking into the account the “future exposures” avoided by the workers’ compensation carrier by the claimant, the claimant would have been due fresh money from the compensation carrier.

The compensation carrier argued that the future benefits was essentially unknowable – that the reduced earning benefit would change during periods of higher and perhaps lesser earnings. Therefore, the compensation carrier (Travelers) argued that it was unfair for the claimant to get the benefit of the carrier’s contribution for benefits which may never have been realized by the claimant.

The Court in Burns stated

“if a claimant does not receive benefits for death, total disability or schedule loss of use, the carrier’s future benefit cannot be quatified by actuarial or other means.” Burns v Varriale, 9 N.Y.3d 207 at 146 (2007), citing Matter of McKee v. Sith Independnence Power Partners, 281 AD2d 891 (4th Dep’t 2001) and Matter of Briggs v. Kansas Fire & Mar. Ins. Co, 121 AD2d 810, 812 (3d Dep’t 1986).

The Court found it unfair to have the carrier pay an “equitable share” of attorneys fees and costs for future benefits whose future value could not be ascertained at the time of the third party recovery. Instead, the Court ruled that

“the trial court, in the exercise of its discretion, can fashion a means of apportioning litigation costs as they accrue and monitoring (e.g., by court order or stipulation of the parties) how the carrier’s payments to the claimant are made.”

 

Future medicals: Bissell v. Town of Amherst, 18 N.Y.3d 697 (3rd Dept. 2012).

In Bissell the claimant received a third-party award that included an amount awarded by a jury for “future medical expenses” ($4,260,000). Under a Kelly calculation, the carrier would have had to pay $1,399.734 in “fresh money” representing its equitable portion of the fees and costs necessary to obtain the verdict that would ultimately allow the compensation carrier to avoid those future medical expenses.

The Court in Bissell ruled that future medical expenses

“cannot reliably be calculated in a manner similar to [benefits for death, total disability or schedule loss of use] because it is impossible to reliably predict the future medical care the claimant will need, when the expenses from such care will accrue and how much it will cost when it does.”

Instead, the compensation carrier offered to pay its equitable portion of the cost when Bissell actually incurred each medical expense. The Bissell Court expressly agreed with this approach.

Questions about this topic? Contact glois@wglaw.com. Join my mailing list: