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Kelly Case Limited - Burns Applies to Medical Expenses in Permanent Total Cases


For nearly 30 years attorneys have had to try to estimate the future benefit to a workers' compensation carrier of the cost of future medical bills that the workers' compensation carrier would no longer be liable after a related third party action settled. This task was created by the Court of Appeals in Kelly v. State Insurance Fund, 60 N.Y. 2d 131 (1983). The Court of Appeals has now eliminated the requirement to take into account the value of the future medical expenses when seeking to have a workers' compensation carrier reduce their lien beyond their current cost of the litigation by reducing it because of the future benefit they receive. They did so in Bissell v. Town of Amherst, 2012 NY Slip Op 02250 (March 27, 2012). The unanimous decision was written by Judge Eugene F Pigott, Jr.

The first crack in Kelly came in the case of Burns v. Varriale, 9 N.Y. 3d 207 (2007). Under Burns the Court of Appeals limited Kelly to only those cases in which the claimant was found to have either a scheduled loss of use or was found to have a permanent total disability, in addition to death cases. In Burns the Court found that the future benefit to a claimant who was found to have a permanent partial disability was to speculative to require an additional reduction of a workers' compensation carrier's lien because the future benefits to a claimant were too speculative to determine at the time of the settlement the future benefit to the workers' compensation carrier. This meant that the workers' compensation carrier would have to pay for their additional benefit on a weekly basis. The workers' compensation carrier would have to continue to pay the injured worker that percentage of the weekly rate that was equal to the percentage cost of litigation. The percentage cost of litigation is obtain be dividing the sum of attorney fee (AF) plus expenses (E) by the amount of the gross settlement (GS), or in algebraic form (AF +E)/GS. If that figure was 34.68% the workers' compensation carrier would continue to pay the claimant that percentage of the weekly benefits awards. If the awarded rate was $250.00 the workers' compensation carrier would pay the claimant $86.70 per week. They would also have to pay for the same percentage of the medical expenses as they were incurred.

In early 2002 Peter Bissell fell while working on a building owned by the Town of Amherst. After litigation a jury awarded him $30,000,000.00 that after post verdict applications was eventually settled for $23,400,000.00 with a present value of $4,259,536.00 for future medical expenses. The workers' compensation carrier was willing to waive all but approximately $48,000.00 of its lien as its share of the costs of litigation. The plaintiff sought $1,399,734.80 in fresh money from the workers' compensation carrier as the value of its overall future benefit because of the settlement. The workers' compensation carrier rejected the demand. However, the Justice in Erie County Supreme Court ordered them to pay the money sought by the plaintiff. On appeal to the Fourth Department* , the Appellate Division reversed and agreed with the workers' compensation carrier and indicated that Burns applies to future medical expenses even in a case where the injured worker has been found to have a permanent total disability, as Mr. Bissell was found to have.

Despite a unanimous decision in the Fourth Department the Court of Appeals granted leave to appeal. The court rejected the belief that the award by the jury is the way to determine the workers' compensation carrier's share of the cost of litigation, even in permanent total disability case. The Court looked at its language in Burns, and decided that when they were talking about benefits other than for a permanent total disability, scheduled loss of use or death benefits could not be reliably be calculated. As to any other benefit under the Workers' Compensation Law, future medical expenses, it is "impossible to reliably predict the future medical the claimant will need, ..." The Court then went on to say that as the medical expenses are incurred the workers' compensation carrier can contribute their equitable share of the costs. Furthermore, the Court indicated that all future medical care will be determined by the Workers' Compensation Board under the Workers' Compensation Law and not according to an award by a jury in the personal injury action.

Mr. Bissell was found to have a permanent total disability and is a paraplegic as a result of this accident. Therefore, Dole v. Dow Chemical Company, 30 N.Y. 2d 143 (1972) impleader was allowed under Workers' Compensation Law §11. Despite the verdict in the lawsuit the workers' compensation carrier (the State Insurance Fund) has yet to reimburse the direct defendant, the Town of Amherst. This case has become somewhat of a cause célèbre in Western New York. The town of Amherst has sued the State Insurance Fund in the Court of Claims to force them to pay the town back for what it paid in the settlement. The Town has had to issue bonds and borrow money in order to pay the full judgment. The Buffalo News has run a number of articles on this part of the litigation recently. The articles are here, here and here.

* Although this case has an impact upon the Workers' Compensation Law, it is not actually a workers' compensation case. This case is the personal injury action arising out of an accident in which the injured person was entitled to workers' compensation benefits. Therefore, the appeal went to the Fourth Department rather than the Third Department, where all appeals from the Workers' Compensation Board are heard.

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This page contains a single entry from the blog posted on March 27, 2012 8:56 PM.

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