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The Workers' Compensation Lienholder

You may recall in the past that I have spoken about the situation where workers who have been injured on the job have two kinds of claims. The first is a workers’ compensation claim which is lodged or brought against the employer, either an insurer or, occasionally, a self-insurer. The second is a claim for negligence against a party who is not the employer.

It is the claim for negligence that is heard in the Massachusetts Superior Court. The other claim, for workers’ compensation, is heard before the Division of Industrial Accidents, formerly known as the Industrial Accident Board. The tort claim, or personal injury claim, which is brought in the court, is done so under Massachusetts General Law c. 152, sec. 15 and that statute has requirements for what must happen at the end of the case. There needs to be a hearing in the Superior Court or a petition filed at the Division of Industrial Accidents to have the settlement approved. A real thorn in the side, and I have spoken about this, is the lien(s).

In this instance, in this situation, I do not mean lien holders who are medical providers, but rather the workers’ compensation insurer. It is the workers’ compensation insurer who has an automatic lien on the third party case and any ultimate recovery. Therefore, an allocation has to be made at the conclusion of the case in either forum (the Superior Court or the Division of Industrial Accidents) and all relevant parties must agree to the distribution, including the amount to be paid back to the lien holder, i.e. the workers’ compensation insurer. (There are times where all parties don’t agree and the Motion/Petition can nevertheless be brought. Those relatively rare circumstances where there is no agreement will be the subject of another blog.)

In the Court’s view, liens are no small matter so they are not to be easily dismissed. Now in recent years, there have been things known, and some of you will have heard of this, the Curry case as well as other cases which allow the employee to insulate some of the proceeds from the workers’ compensation insurer. Curry v. Great American Insurance Company, 80 Mass. App. Ct. 592 (2011). Allocations in the petition for pain and suffering are the so-called Curry allocations. Allocations that are done for loss of consortium also avoid the harshness of the lien because a wife’s or children’s claims for loss of consortium are not subject to the workers’ compensation lien either.

In DiCarlo v. Suffolk Construction Co., 86 Mass. App. Ct. 589 (2014), Justice Agnes stated, “Legislative recognition of an insurer’s right to be made whole . . . By electing to receive workers’ compensation benefits, an injured employee is relieved of the need to bring a lawsuit, to prove negligence, and to risk suffering the consequences of comparative negligence and a reduction or loss of the right to recover any damages which may result if a tort action was brought instead of a claim for benefits under G.L. c. 152. . . Instead, the Supreme Judicial Court has written that the goal of §15 is to provide workers’ compensation insurers with first priority in the allocation of third-party recoveries.”

You can see the sentiment expressed in the above. Appellate Courts have not confined themselves to weighing in on Curry’s pain and suffering exemption either. “Where in the bulk of the settlement proceeds has been allocated to claims which the insurer may not be reimbursed [speaking in that instance of loss of consortium claims], those allocations must be eyed by the court with a healthy dose of skepticism”. Hultin v. Francis Harvey & Sons, Inc., 40 Mass. App. Ct. 692, 699 (1996). Thus getting approval for a third-party settlement can be difficult if your lawyer is overzealous in attributing too much to pain and suffering and/or loss of consortium.

However, that is not to say that your lawyer cannot attempt, assuming the fact situation supports it, to make an allocation for consortium and to make the allocation, now done automatically, for the Curry pain and suffering. Again, the effect of that will be to protect the employee, the client from having to pay that portion at all towards the lien.This advantage can be illusory, however, depending on the numbers involved. For example, in a situation where the lien holder has compromised quite a bit but wants a certain amount back, allocations may not help. If the amount to be paid to the lien holder is for substantially less than they could have insisted upon -that is, where they are already reducing their lien- I am afraid that those allocations will not advantage the employee. Why? The lien holder could then say that they want everything back and that their compromise, which is voluntary, will be pulled back once they see allocations that raise their eyebrows. However, to be sure, in many instances, allocations for pain and suffering and loss of consortium are useful and should be attempted in the right fact situation.

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