Opinion
2000/2407.
December 14, 2010.
Michael E. Maxwell, Esq., for Plaintiff.
Renee E. Heitger, Esq., for Defendant.
In March 2000, Roger J. Wiechec (plaintiff) commenced an action against John E. Dolina (the tortfeasor) to recover damages for personal injuries sustained in a motor vehicle accident of February 23, 1998. The accident had occurred in the course of plaintiff's employment. In October 2000, that so-called "third-party action" ( see Workers' Compensation Law § 29) was settled by plaintiff with the tortfeasor's insurer for $82,496.80, the full amount of the coverage then available under the tortfeasor's automobile liability policy after payment of certain claims of property damage.
In the meantime, plaintiff's employer's workers' compensation carrier, Merchants Mutual Insurance Company (Merchants or the carrier) paid plaintiff workers compensation benefits totaling at least $28,430.21, including $20,160 in lost wages for about ten weeks of missed time from work and $8,270.21 in medical bills, all indisputably incurred within three years of the accident. Payment of such benefits corresponded to a 17.5% schedule loss of the use of plaintiff's left leg, as found in the Workers' Compensation Board's November 2000 Notice of Decision. Plaintiff emphasizes that the workers' compensation benefits received by him were in lieu of first-party benefits that plaintiff otherwise might have received under the No-Fault Law ( see Insurance Law § 5102 [a]; § 5103), meaning that the carrier had no lien against the settlement proceeds for the workers' compensation benefits it paid to plaintiff ( see Workers' Compensation Law § 29 [1-a]; Dietrick v Kemper Ins. Co., 76 NY2d 248, 251). It is not disputed that plaintiff failed to elicit Merchants's consent to the settlement of the third-party action, nor did plaintiff contemporaneously seek judicial approval of the settlement, as assertedly required by Workers' Compensation law § 29 (5). Counsel for plaintiff asserts that it did not seek the carrier's consent to the settlement inasmuch as there was no workers' compensation lien.
Merchants puts the figure at $29,151.65, including $20,160 in lost wages and $8,991.65 in medical payments.
Some of the materials before the Court state that plaintiff was awarded the $20,160 for less than ten weeks of missed work. The November 10, 2000 Notice of Decision of the Workers' Compensation Board states, however, that the benefits covered an aggregate 50.4-week period of either "Temporary Total Disability" or "Permanent Partial Disability" endured by plaintiff through February 15, 1999. In either case, the decision recited that the Board planned at that time to take no further action on plaintiff's workers' compensation claim.
Subsequent to the time of settlement, and allegedly on account of the injuries sustained in the motor vehicle accident, plaintiff came to require additional medical care. Sometime before January 2003, plaintiff made an additional claim for workers' compensation benefits under his original claim number. Following a hearing of that claim on January 6, 2003, and as set forth in a Notice of Decision dated January 13, 2003, the Workers Compensation Board denied that claim on the following basis:
"There is no evidence that the carrier gave consent to the third[-]party settlement or that a nunc pro tunc order [approving the settlement] was issued. Therefore, the carrier has no further liability on this claim. No further action is planned by the Board at this time."
That denial was thus issued pursuant to Workers' Compensation Law § 29 (5), or at least the courts' reading of it, which is to the effect that an employee who is the recipient of workers' compensation benefits may compromise a third-party claim arising out of the same accident without prejudice to the continued payment of benefits, but only upon obtaining either the written consent of the compensation carrier before the compromise, or judicial approval of the compromise after it ( see Matter of Johnson v Buffalo Erie County Private Indus. Council, 84 NY2d 13, 19).To the Court's understanding, no review was sought by plaintiff of the January 2003 decision of the Board.
By order to show cause granted October 22, 2010, plaintiff seeks an order approving the settlement of the third-party action nunc pro tunc. Merchants opposes that request. Upon its consideration of the parties' respective submissions, this Court renders the following determinations:
The sole question before this Court is whether a compromise order pursuant to Workers' Compensation Law 29 (5) should issue nunc pro tunc with respect to the $82,000 settlement of the third-party action between plaintiff and the tortfeasor. The starting point of the Court's analysis of this matter is the statute, which provides in pertinent part that the
The Court expresses no view and would hazard no prediction with regard to the effect, if any, of such an order on any future decision of the workers' compensation board, let alone on any past decision (such as the one rendered in this case in January 2003). The Court is quite confident, however, that the January 2003 decision of the Workers' Compensation Board is no bar to this Court's entertaining and granting a nunc pro tunc order of compromise ( see Kusiak v Commercial Union Assur. Cos., 49 AD2d 122, 126 [4th Dept 1975]).
"compromise of any such [third-party] cause of action by the employee . . . at an amount less than the compensation provided for by this chapter shall be made only with the written approval of the . . . insurance carrier liable to pay the same. However, written approval of the . . . insurance carrier need not be obtained if the employee or his dependents obtain a compromise order from a justice of the court in which the third-party action was pending" (Workers' Compensation Law 29 [5]).
The statutory proviso that carrier consent or judicial approval need be obtained only in the case of a settlement of the third-party action for an amount "less than" the available workers' compensation benefits has generally been underemphasized by the courts ( but see King v New York City Bd. of Educ., 132 AD2d 742, 743 (3d Dept 1987]; see also Jackson v City of New York , 70 AD3d 694, 695 [2d Dept 2010]; Singh v Ross , 12 AD3d 498 [2d Dept 2004]).
The statute then goes on to prescribe the required contents of a petition and supporting papers (including a detailed physician's affidavit) to be submitted in support of a request of a judicial approval-of-settlement or "compromise order." The statute concludes by stating:
Both sides here have ignored those requirements (plaintiff by failing to meet them, the carrier by failing to argue that plaintiff has not met them), and the Court will do likewise, as the papers before it are sufficient to decide the issues raised ( see Dauenhauer v Continental Cas. Ins. Co., 217 AD2d 943 [4th Dept 1995]; but see Snyder v CNA Ins. Cos., 306 AD2d 677, 678-679 [3d Dept 2003]).
"If the third-party action is on trial at the time the offer of settlement which is acceptable to the plaintiff, is made and either such written approval or order as provided in this subdivision is required, the action may be marked settled subject to the securing of such written approval or such order. If such written approval or such order is not subsequently secured within three months the action shall be restored to the head of the trial day calendar" (Workers' Compensation Law 29 [5]).
Although the statute nowhere says so, most courts seem to construe the statute as requiring the settling plaintiff to seek judicial approval of any carrier-non-approved settlement (and not just the settlement of a case actually being tried at the time) within three months of such settlement ( see e.g. Jackson, 70 AD3d at 695; Matter of Cosgrove v County of Ulster, 51 AD3d 1326, 1327 [3d Dept 2008]; Matter of Paneto v RMSCO, Inc. , 41 AD3d 253 , 254 [1st Dept 2007]; but see Matter of Bernthon v Utica Mut. Ins. Co., 279 AD2d 728, 729 n [3d Dept 2001] [holding three-month approval period inapplicable where settlement not entered into during trial of third-party action]). Moreover, although the statute lists the consequence of not obtaining trial-court approval of the settlement within three months merely as the restoration of the case to the head of the trial calendar, the courts consistently have treated the three months as a presumptive deadline which, once disregarded by the plaintiff, would require the plaintiff to obtain a court order approving the settlement nunc pro tunc or else be barred from receiving any further workers' compensation benefits ( see Jackson, 70 AD3d at 695; Cosgrove, 51 AD3d at 1327; Singh, 12 AD3d at 499; see generally Johnson, 84 NY2d at 19).
In other words, the statute by its terms describes the penalty for not complying with the three-month rule as the undoing of the settlement, not the attachment of an adverse consequence to the settlement, a fact seemingly ignored by every decision that cites the statute. Here, thankfully, no one is talking about the restoration to the Supreme Court trial calendar of the now decade-old, long-since happily settled action brought by plaintiff against the tortfeasor.
Concerning whether a nunc pro tunc approval-of-settlement order should be granted, a matter committed to the sound discretion of the this Court (see Jackson, 70 AD3d at 695; Reynar v Village of Sloatsburg , 17 AD3d 601 [2d Dept 2005], lv denied 5 NY3d 706; Matter of Gilson v National Union Fire Ins. Co., 246 AD2d 897 [3d Dept 1998]), this Court sets forth the Fourth Department's most recent analysis of the issue, as follows:
"The delay of petitioner in seeking a compromise order does not by itself require dismissal of her petition ( see, Matter of Dauenhauer v Continental Cas. Ins. Co., 217 AD2d 943, 944), and respondent failed to demonstrate prejudice resulting from the delay ( see, Borrowman v Insurance Co., 198 AD2d 891). The remaining issue is whether respondent was prejudiced by the settlement itself. That issue turns largely on whether the settlement terms were reasonable ( see generally, Matter of Gregory v Aetna Ins. Co., 231 AD2d 906), and the court did not reach that issue. Because the record does not indicate whether the settlement represented the full amount of the insurance coverage and does not otherwise establish the reasonableness of the settlement', we reverse the order, reinstate the petition, and remit the matter to Supreme Court for a hearing on that issue ( Matter of Dauenhauer v Continental Cas. Ins. Co., supra, at 944; see, Amsili v Boozoglou, 203 AD2d 137, 138; Davison v Chemical Leaman Tank Lines, 136 AD2d 937, 938)" ( Buchanan v Scoville, 241 AD2d 965, 966 (4th Dept 1997]).
Other appellate courts, however, emphasize an issue or element not prominently mentioned in the Fourth Department cases, i.e., the plaintiff's reason or excuse for not sooner seeking judicial approval of the settlement. For example, in Furtado v Mario's Bakery ( 17 AD3d 527 , 527-528 [2d Dept 2005]), it was said:
"[A] party may seek judicial approval of the compromise beyond the three-month period upon demonstrating that the compromise is reasonable, the delay in seeking approval was not attributable to the party's fault or neglect, and the workers' compensation carrier was not prejudiced by the delay ( see Zamfino v Furman , 1 AD3d 591 [2003]; Matter of Bernthon v Utica Mut. Ins. Co., 279 AD2d 728 [2001]; Matter of Gilson v National Union Fire Ins. Co., 246 AD2d 897 [1998]). . . . In view of the inordinate delay of more than three years between the compromise and the application for approval in this case ( see Matter of Taylor v Continental Ins. Co., supra), the lack of any reasonable explanation therefor, and the prejudice to the rights of the carrier, the Supreme Court providently exercised its discretion in denying the motion ( see Singh v Ross, supra; Matter of Bernthon v Utica Mut. Ins. Co., supra; Harosh v Diaz, 253 AD2d 850 [1998]; Matter of Gilson v National Union Fire Ins. Co., supra; Matter of Wilbur v Utica Mut. Co., 228 AD2d 928 [1996]).
Thus, in the aforementioned Taylor decision ( 9 AD3d 657, 659 [3d Dept 2004]), the court overturned a nunc pro tunc compromise order based on the plaintiff's unexcused and "inordinate" delay of nine years in seeking such approval, without considering the reasonableness of the settlement or the extent of any prejudice to the carrier. Even the other Departments of the Appellate Division have held, however, that the "reason for [the] petitioner's delay rather than its length determines the timeliness of a motion pursuant to Workers' Compensation Law 29 (5) for a nunc pro tunc compromise order" ( Amsili v Boozoglou, 203 AD2d 137, 137 [1st Dept 1994]). Further, the other Departments have stated that, although "misconstruction of the applicable law does not constitute a reasonable excuse for the . . . delay in applying for judicial approval of the settlement" ( Gilson, 246 AD2d at 898), a "well justified belief . . . that [the carrier] had no lien against the third-party recovery" might constitute a sufficient reason for the delay ( see DeRosa v Petrylak, 290 AD2d 596, 598-599 [3d Dept 2002]).
Applying the analysis followed by the Fourth Department, albeit with some deference to the other Appellate Divisions, this Court concludes that plaintiff's protracted delay in seeking a compromise order does not by itself require dismissal of her application ( see Buchanan, 241 AD2d at 966; Dauenhauer, 217 AD2d at 944). However, even if it were to consider the length of and reasons for that delay as a factor in its analysis, this Court would find that plaintiff's delay in seeking approval was justified by the apparent fact that the amount of the settlement far exceeded the amount of workers' compensation benefits paid to plaintiff ( see McComber v Lehrer McGovern Bovis, Inc. , 28 AD3d 402 , 403 (1st Dept 2006]). Under any literal reading of the statute, neither consent of the carrier nor judicial approval would be required under that circumstance. The delay is further explained by plaintiff's counsel's recognition at the time that the benefits thus far paid to plaintiff by the carrier were in lieu of first-party benefits and thus gave rise to no lien on behalf of the carrier against the settlement proceeds, and counsel's mistaken belief that no carrier consent was necessary under those circumstances (see DeRosa, 290 AD2d at 598-599).
As to the crucial question whether Merchants can demonstrate any prejudice resulting from the delay — or more important, from the settlement itself — the Court concludes that it cannot under the circumstances of this case. Here, Merchants long ago acquired knowledge of both plaintiff's continuing claim for benefits and the fact of settlement — how else to explain the carrier's denial of additional benefits to plaintiff in advance of the Board's January 2003 determination? Moreover, the carrier never had any lien against the settlement proceeds, since the benefits furnished by it were in lieu of first-party benefits. Merchants thus has no real standing, let alone any principled reason, to object to the settlement. Further, the amount of the settlement was reasonable, inasmuch as it exhausted the tortfeasor's policy ( see Severino v Liberty Mut. Ins. Co., 238 AD2d 837 [3d Dept 1997]; Borrowman, 198 AD2d at 891-892; Merrill v Moultrie, 166 AD2d 392 [1st Dept 1990], lv denied 77 NY2d 804; see generally Buchanan, 241 AD2d at 966; Dauenhauer, 217 AD2d at 943) and was entered into at a time when plaintiff had returned to work and apparently was believed by everyone — Merchants included — to have recovered from his accident-related injuries ( see Matter of Stiffen v CNA Ins. Cos., 282 AD2d 991, 993 [3d Dept 2001], lv denied 97 NY2d 612). Merchants does not even bother contesting the reasonableness of the settlement at this juncture ( see Kusiak, 49 AD2d at 126). Finally, the Court can discern no potential prejudice to the carrier as a result of the delay or the settlement itself inasmuch as the carrier would — assuming its future payment of a sum of compensation benefits not corresponding to first-party benefits — retain a right to offset any such future benefits by the amount of petitioner's recovery in the third-party action ( see Cosgrove, 51 AD3d at 1327; Neblett v Davis, 260 AD2d 559, 560 [2d Dept 1999]; see generally Workers' Compensation Law § 29, [4]).
Clearly, the purpose of Workers' Compensation Law § 29 (5) is not to trap unwary litigants or their counsel into an unwitting forfeiture of workers' compensation benefits. Rather the "sole purpose" of the statute is to "prevent imprudent settlements of [third party] suits by the employee or his estate to the prejudice of the employer's (or carrier's) subrogat[ation or lien recoupment] rights" ( Matter of Meachem v New York Cent. R.R. Co., 8 NY2d 293, 297; see Kusiak, 49 AD2d at 124). Given that statutory purpose, this Court sees absolutely no reason to withhold its approval of the settlement.
Accordingly, the motion of plaintiff for a nunc pro tunc order of compromise is GRANTED.