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Fairness for Third-Party Claimants

Worker’s compensation insurers cannot enforce their lien against third-party settlement proceeds that are allocated to a claimant’s pain and suffering damages, the Supreme Judicial Court recently ruled.  In DeCarlo v. Suffolk Construction Co., Inc., the Court held that the compensation carrier could recover amounts paid for medical bills and lost wages only from settlement proceeds attributable to those categories of damages.

The law in Massachusetts and most other states bars employees from suing their employers for injuries suffered in the workplace, instead limiting them to worker’s compensation benefits.  Those benefits, while usually paid immediately and for the duration of the disability, cover medical bills and part of the wage loss, but provide only limited compensation for loss of function and nothing at all for pain and suffering.  The employee may still bring negligence claims against other persons or entities, and may recover full tort damages.  If the employee recovers additional compensation, the worker’s compensation carrier has a right to be reimbursed for what it has paid.

For years, insurers have successfully insisted that their lien may be satisfied from the employee’s entire recovery, regardless of how it is allocated among the various elements of tort damages.  This process sometimes leaves the employee with little to no compensation for general damages such as pain and suffering, because the lien consumes a large portion of the settlement or judgment.

The plaintiff in DeCarlo argued that the insurer could recover its payments only from amounts allocated to medical bills and lost wages, and that lien could not reach that portion of the settlement attributable to his pain and suffering.  Relying on the language of the third-party recovery statute, G.L. c.152 s. 15, the Court agreed.  The Court noted that the statute specifically referred to an injury “for which compensation is payable…”  Since no compensation is payable for pain and suffering, the insurer could not enforce its lien against damages for that injury.  The result is  consistent with an earlier ruling of the Appeals Court in Hultin v. Francis Harvey & Sons, Inc., which recognized that the insurer could not enforce its lien against a spouse’s recovery for loss of consortium.

The Court noted that employees would not be able to “stack the deck” against the insurer by allocating all or even the lion’s share of a settlement to pain and suffering damages.  The allocation of a settlement is subject to approval by a superior court judge or the Department of Industrial Accidents, at a hearing at which the insurer has a right to be heard.  Plaintiffs and their lawyers should be prepared to justify the allocation of settlement proceeds to different categories.


No Way Around Worker’s Compensation

The Supreme Judicial Court last week blocked a plaintiff’s attempt to circumvent the exclusivity provision of the Massachusetts workers’ compensation statute, General Laws c.152 s.24, holding that a corporate employer’s directors were entitled to the benefit of immunity from suit.  In Moulton v. Puopolo, the Court ordered the entry of summary judgment against the estate of a woman who was killed by a violent resident while working as a mental health counselor.

As most tort lawyers know, the workers’ compensation statute creates a trade-off for employees.  Unless the right to bring a tort suit is preserved at the time of hiring, the employee gives up the right to sue the employer if injured on the job, in exchange for the right to receive worker’s compensation payments without proving that the employer was at fault in causing the injury.  With the exception of a brief time when there was a loophole for consortium claims by family members, see, e.g., Ferriter. Daniel O’Connell’s Sons, Inc., 381 Mass. 507 (1980), this provision has consistently been applied to claims–including those for wrongful death–dependent on the employee’s injury.

The plaintiff in Moulton tried a novel way to avoid the workers’ compensation bar by suing the directors of the non-profit corporation that operated the residential treatment facility, claiming that they were negligent in failing to adopt policies that would have prevented the placement of the attacker at the facility, and thereby prevented the decedent’s death.  In an opinion, review of several basic principles of corporation law, the SJC held that the corporation can act only through its directors, and that, because they were acting as Moulton’s employer, they shared the corporate employer’s immunity under the statute.

The decision makes sense, both on legal and policy grounds.  In order to be responsible for Moulton’s working conditions and the residents she supervised, the directors would have to control her activities–the hallmark of an employer=employee relationship.  This allegation of control, while necessary to support the plaintiff’s theory of liability, was at the same time fatal to her claims.  And, as the Court noted, the exclusivity provision of G.L. c.152 has always been broadly interpreted, and this interpretation of director immunity is consistent with the purpose of the statute.  The fact that the corporation was a non-profit organization only served to make the public policy of protecting those in an employment relationship more compelling–although the Court noted that the same reasoning would likely apply to for-profit enterprises.

The plaintiff’s attorney in Moulton gets credit for creativity and a game effort.  Unfortunately, as with most recent efforts to attack the exclusivity provision, it was doomed to fail.

Read the SJC’s opinion in Moulton v. Puopolo here.