The Supreme Judicial Court recently held that pain and suffering damages recovered by an injured plaintiff in a third-party personal injury case were not subject to a lien held by a workers’ compensation insurer that paid benefits to the injured plaintiff. Although it is too early to tell what effect this case will have in civil practice, the likely result is that tort cases with large workers’ compensation liens may be easier to settle by allocating portions of settlements to pain and suffering damages, circumventing the statutory lien rights of workers’ compensation insurers. However, settlement agreements that are subject to a workers’ compensation lien still have to be approved by a judge so any allocation must be reasonable.
DiCarlo v. Suffolk Construction Co., Inc., 2015 WL 10045032, involved two separate underlying cases that both arose out of workplace accidents. In both cases, the plaintiffs, Robert DiCarlo and Bernard Martin, sustained injuries at work and both collected workers’ compensation benefits. Both plaintiffs then reached settlement agreements with third parties, which included damages for pain and suffering. In both cases, the workers’ compensation insurer sought reimbursement under G. L. c. 152, § 15 from the plaintiffs’ settlement proceeds, including pain and suffering damages.
In DiCarlo’s case, a Superior Court judge rejected a settlement agreement because it did not permit the workers’ compensation insurer to recover a lien on the entire settlement amount, including pain and suffering damages. In Martin’s case, a Superior Court judge allowed a similar settlement agreement. The practice of allocating damages between pain and suffering and special damages is relatively new, leading to inconsistent results, as evidenced by the conflicting decisions in the DiCarlo case and Martin case.
The SJC focused on the language of the workers’ compensation statute, which permits a workers’ compensation insurer to recover benefits paid to injured workers’ where the injured worker recovers damages for the same injury from a third-party tortfeasor. A workers’ compensation insurer is entitled to “the gross sum received in payment for the injury.” G. L. c. 152, § 15. The issue before the SJC was whether “injury” included pain and suffering damages. The Court concluded that it did not.
The Court reasoned that since a workers’ compensation insurer pays for lost wages and medical expenses only, not pain and suffering damages, it is not entitled to be reimbursed for something that it did not pay.
Interestingly, the Court recognized the chance that a plaintiff and settling tortfeasor may attempt to inappropriately allocate the bulk of settlement proceeds to pain and suffering damages in order to work around a large workers’ compensation lien. However, the Court noted that since settlements needed to be approved by a judge after a hearing where the workers’ compensation insurer is permitted to participate, such inappropriate allocation would not be permitted.
The American Insurance Association submitted an amicus curiae brief in support of the workers’ compensation insurer’s position, evidence of the fact that workers’ compensation insurers are not going to be pleased with this decision. On the other hand, general liability insurers may be in favor of the decision because it will make it easier to resolve tort claims with large workers’ compensation liens. Going forward, plaintiff’s lawyers may request that juries allocate damages between pain and suffering and medical/lost wage damages to lessen the amount of jury awards that are subject to a workers’ compensation lien.
Pierce & Mandell’s litigation attorneys have years of experience defending personal injury claims on behalf of insurers and self-insureds. Please contact us with any questions about this new development or any other litigation need.