As you may know, Curry v. The American Insurance Company, 80 Mass. App. 592 (2011) is a decision that has altered and helped facilitate settlements of third-party claims by workers injured in the course of their employment. In Curry, the Appeals Court ruled that though workers’ compensation insurers’ rights to reimbursement extend to medical expenses and lost earnings or earning capacity, both being compensable under the worker’s compensations act, they do not extend to damages allocated for pain and suffering and loss of consortium in third party claims, which are not compensable under the Act. On December 1, 2011, the SJC denied review of the Court of Appeals’ decision so its findings stand in Massachusetts.
Curry involved a medical malpractice wrongful death case arising from injuries sustained initially in a work-related automobile accident. The parties agreed to arbitrate the third party claim pursuant to a high/low arbitration agreement. The plaintiff received an unallocated $300,000 award. Great American filed a statutory lien to recover full amounts it had paid in workers’ compensation benefits under G.L. c. 152 §15. The estate filed a declaratory relief action seeking to have the lien declared invalid. A Superior Court judge allocated damages as follows: $100,000 representing net expected loss of income, $100,000 representing conscious pain and suffering of the deceased, and loss of consortium damages of the decedent’s spouse ($60,000) and emancipated son ($40,000). Of note, the insurer did not contest the fairness of the allocation between the components of the third party damages and there was not an argument that the allocation was wrongfully structured to insulate a significant portion of the proceeds from the insurer’s statutory rights nor a possible offset against any excess recovery for future compensation benefits it may have to pay, the so-called Hunter offset.
However, the insurer argued that their right of lien reimbursement extended to claims for consortium like damages brought under the Wrongful Death Act as well as to claims for the deceased workers conscious pain and suffering. A Superior Court justice ruled that their lien attached to neither. While it had long been well settled that a workers’ compensation lien does not attach to loss of consortium claims, See Eisner v. Hertz Corp., 381 Mass. 127, 132–133 (1980), the insurer argued that a wrongful death claim is distinguishable since brought by the estate’s personal representative and not a separate action by a consortium survivor. However, the appellate court agreed with the Superior Court’s view that such a result would “put form over substance”, and that “the reasoning behind the court’s holdings in [loss of consortium cases] does not derive from the fact that a spouse or other family member brought a separate loss of consortium claim, but from the independent nature of the loss suffered by the person”. The Appeals court also agreed with the lower Court judge that the primary goal of the compensation statute is wage replacement, as distinguished from more expansive tort damages, and that the workers’ compensation payment is not for pain and suffering, which is not a compensable injury under the Act.
Accordingly, plaintiff’s attorneys representing injured employees and their families in third party cases are being dutiful in negotiating respective allocations when resolving these cases, particularly at mediation sessions. They are also including such allocations in mediation settlement agreements, releases and other needed closing documents. Though most defendants and their insurers seek and insist upon finality when agreement is reached to settle a third party case, in cases where final agreement cannot be reached with the workers’ compensation lien holder involved, plaintiffs have at times been able to have the agreed settlement be contingent upon either subsequent acceptance of specific terms of allocation and net recovery by the lien holder and/or approval of such specific allocations and terms by the Court or Department of Industrial Accidents under G. L. c. 152, § 15.
Ideally, the workers compensation lien holder will be invited and agree to participate in person, or at least by telephone conference, at the mediation session to provide agreement with any such allocations made as well as to negotiate and reach agreement as to the net lien amounts to be paid out of the third party settlement. This would allow for a Petition for Settlement Approval under G.L. c. 152, §15 to be jointly submitted and approved by either the Court or the Department of Industrial Accidents.
While agreement with the lien holder is reached in most cases settled at mediation, at times the insurer may disagree with either the allocation of damages being proposed and/or the net amount of the lien to be payable.
In cases where agreement cannot be reached, the Court in Curry found that if the allocation proposed by the plaintiff is fair and reasonable and has a “sound basis in law” it must be approved even over the objections raised by the insurer, and that a judge cannot impose their own allocations. The workers’ compensation insurer is placed in the position to establish they are not fair or reasonable and seek to have a new proposal submitted.
In light of the Curry decision, the Industrial Accident Board in April of 2012 revised its § 15 interactive calculator and petition by circular as follows:
……..Henceforth, § 15 petitions submitted to the industrial accident board for
approval should specify the amount allocated to compensate the employee for
her/his conscious pain and suffering, as well as any amount(s) recoverable in
damages for the loss of consortium claims of family members. Amounts so allocated
are beyond the reach of the workers’ compensation insurer’s lien, and therefore are
not subject to offset against the employee’s future entitlement to c. 152 benefits. See
Hunter v. Midwest Coast Transport, 400 Mass. 779 (1987).Where the employee and the
workers’ compensation insurer are unable to agree on the amount of an allocation,
either party may submit a petition delineating the amounts of all proposed allocations
and request a hearing before the board. After notice to all parties, the matter will be
assigned to an administrative law judge to consider “the merits of the settlement” as proposed.
G. L. c. 152, § 15. The judge will approve or reject proposed settlement petitions. The judge
will not substitute his judgment of that of the parties and impose upon them his own formula.
See Walsh v. Telesector Resources Group, Inc., supra at 233.” Hultin, supra, at 698 n.8.
The Curry findings support the understanding that the function of the board or the court in a Section 15 approval is to approve or reject the settlement, and not to make its own findings as to allocations based on reasonableness.
Accordingly, plaintiffs and their counsel must be careful to evaluate and be prepared to support that any allocation of damages made in a third party settlement where there is a workers’ compensation lien be “fair and reasonable” and have a “sound basis in law”.
The Curry decision is troubling for the workers’ compensation subrogation industry, as it relates to subrogation against damages awarded for conscious pain and suffering since it has the potential to lower subrogation recoveries in Massachusetts. Accordingly, worker’s compensation insurers are becoming more proactive in third party subrogation cases prior to the presentation of the Section 15 petition to engage in the process of establishing fair and reasonable allocations and net monies to be recovered by the workers’ compensation insurer under Section 15 and are filling appeals to dispute the allocations by plaintiffs.
There are very few reported cases in Massachusetts that address the issue of fairness in the allocation of damages. What can we at MDRS do to assist parties in this context? As in many such circumstances, ADR IS THE ANSWER.
Mediation: An impartial experienced mediator can assist plaintiffs and workers compensation insurers in negotiating not only appropriate allocations of damages in third party cases but also the net amount to be payable to satisfy workers compensation liens. That is why it is so important that particularly large lien holders, such as workers’ compensation lien holders, be invited to attend a mediation session, or at least be available during the session by telephone, so that they can hear directly from the impartial mediator and participate in reaching a binding resolution for all involved.
Arbitration: While arbitrators may well respond to such requests differently, parties, ideally jointly, might consider requesting that the arbitrator selected to decide a third party case which involves a workers’ compensation lien, specifically make allocations of damages in their award, such as medical expenses, lost wages, loss of consortium and pain and suffering. Plaintiff’s attorneys are more often making such requests in the Courts for modifications to special verdict slips to itemizing the allocation of damages among the damage components that are reimbursable and those that are not.
It is the adaptability afforded by ADR processes such as mediation and arbitration that affords plaintiffs, defendants, and workers compensation lien holders in these cases the opportunity to talk, reason, negotiate and resolve third party cases so that the Curry findings can be navigated and its uncertainties avoided.