Consent with regard to Section 29 lien rights

Under NY WCL Section 29, a Workers’ Compensation carrier has the right to recover its lien against a negligent party who caused injury to the claimant.  Since the idea of Workers’ Compensation is to streamline benefits to the claimant immediately after the injury, the Workers’ Compensation carrier must pay benefits accordingly and expeditiously.  The idea is to have the Workers’ Compensation carrier rest easy knowing that if a negligent third party is involved in an injury, the right to subrogate and the right to recovery is protected by statute.

In a majority of cases, the amount recovered in the third party action is generally less than the amount paid out by the carrier in the Workers’ Compensation case and the carrier and the plaintiff’s attorney tend to spar over just how much should be paid and how the calculations should be made.  There are differences in opinion with regard to costs of future medical as well as present valuations of a case which each side will use to maximize their respective client’s positions during negotiations.

The golden rule in these Section 29 lien issues is that consent must be obtained from the carrier or the claimant may give up his right to future benefits.  Indeed, the general intent of Section 29 was meant to protect carriers from their claimant’s imprudent and irrational settlements and to ensure the priority of a carrier’s compensation lien.

However, the rule flips when the money obtained by way of third party settlement is in excess of what the value of the Workers’ Compensation claim is.  The specific statute on Section 29 lien recovery addresses this as an exception. In WCL Section 29(5), the exception to the blanket rule requiring the carrier’s consent occurs where the third party recovery exceeds what the claimant would have received in total compensation benefits.  Benjamin McComber v. Lehrer McGovern Bovis, Inc., 28 A.D.3d 402; 818 N.Y.S.2d 1; N.Y. App. Div 2006..

In the McComber case, the jury verdict recognized a high-low settlement agreement where the claimant recovered 14.5 million dollars.  The carrier in that case tried to argue that consent had not been obtained by the plaintiff in that case which rendered the settlement defective.   The court held that the purpose of WCL Section 29(5) was not defeated by the settlement 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. The recovery in this instance far exceeded what the claimant would have received in future compensation benefits, and nothing in the high low agreement jeopardized the carrier’s lien.

As can be seen by the Court’s language, the need for consent depends on the value of the third party settlement as compared to the value of the Workers’ Compensation carrier’s lien.  Therefore, when a case has a subrogation component and the third party case is nearing conclusion, the prudent Workers’ Compensation carrier will be sure to evaluate what the claim is worth and determine whether or not consent will be needed.  If it appears that consent may not be needed, then the carrier should put their counsel on notice to see if there is any means to evaluate the claim differently so as to arguably place the case back into the realm of necessary consent.

Steve Bedoya is a partner at Lois LLC where he defends employers and carrier in New York workers’ compensation claims. Steve chairs the Lois LLC Mentorship Committee which welcomes and provides guidance for all new associates joining Lois LLC. Steve is a member of the Firm’s Diversity Committee. Steve is active in the Hispanic National Bar Association. He can be reached directly at sbedoya@lois-llc.com or 201-880-7213.