Becker v. Huss Co., Inc., ROLY-DOOR

Citation43 N.Y.2d 527,373 N.E.2d 1205,402 N.Y.S.2d 980
Decision Date09 February 1978
Docket NumberROLY-DOOR
Parties, 373 N.E.2d 1205 Charles E. BECKER, Jr., Respondent, v. HUSS CO., INC., Defendant and Third-Party Plaintiff, Spaulding Lumber Company, Third-Party Defendant, Fedders Corporation, Third-Party Defendant-Appellant. Joseph GONZALEZ, Respondent, v. Douglas P. MANS et al., Defendants, and State Insurance Fund, Appellant. Benjamin ANDREWS, Respondent, v. Kenneth E. WILLIAMS, Defendant, and State Insurance Fund, Appellant. Jack D. FRANCE, Respondent-Appellant, v. ABSTRACT TITLE DIVISION OF TITLE GUARANTEE CO., et al., Defendants and Third-Party Plaintiffs, Niagara Window Cleaning Corp., Third-Party Defendant-Appellant-Respondent, and State Insurance Fund, Appellant-Respondent. George A. COLE, Respondent, et al., Plaintiff, v.SALES CO. OF ROCHESTER, INC., Defendant and Third-Party Plaintiff, et al., Third-Party Defendants, and State Insurance Fund, Appellant.
CourtNew York Court of Appeals
OPINION OF THE COURT

BREITEL, Chief Judge.

These are five separate appeals, each arising out of a third-party personal injury action brought by an injured employee. The State Insurance Fund, as workmen's compensation lienor, seeks to avoid liability under a statute for its share of the litigation expenses incurred by the employee in recovering his damages from the third party (see L.1975, ch. 190, eff. June 10, 1975). * In all five cases the Appellate Division held that apportionment between the employee and carrier is required. The carrier appeals.

In each case the employee had been injured, workmen's compensation benefits ranging from $536.78 to over.$19,000 had been collected, and a third-party action had been brought or a lawyer retained before June 10, 1975, the date the statute was enacted and became effective. In all but one case, however, as of that date, no judgment or settlement in the thir action had been reached. In the France appeal, a verdict was returned in October, 1974, but the judgment, entered on December 16, 1974, was not paid until January, 1976, after affirmance on appeal.

The principal issue is whether the 1975 amendment to section 29 of the Workmen's Compensation Law, requiring a compensation lienor to contribute to an employee's expenses in securing a third-party recovery, applies to accidents occurring and actions brought before its enactment. The amendment provides only that it be "effective immediately" (L.1975, ch. 190, § 3). If there be retroactivity, the method of computing the lienor's share of the expenses is also at issue.

In each of the appeals except France there should be an affirmance. In France, there should be a modification and denial of the employee's application for apportionment. Both policy and practicality suggest applying the amendment to judgments or settlements reached after June 10, 1975, regardless of when the employee was injured or the third-party action brought. The issue having been left, perhaps deliberately, for judicial resolution, it is appropriate, if not required, that the statute's reach be determined in accord with the flexibility and social goals of the compensation system. That system allows for upward adjustment of benefits even with respect to prior accidents. Nor do the practical consequences of retroactivity produce inordinate, unusual, or unanticipatable harm to the carrier. The carrier's financial burden is rarely fixed in amount and fluctuates because of a number of contingencies. With respect to the lienor's share of the litigation expenses, the amendment explicitly calls for equitable apportionment, and, therefore, rigid formulas are inappropriate. In applying the statute realistically, however, standardized lawyers' fees in personal injury cases, where such standardization exists, may be recognized, provided equitable factors present are also considered.

Section 29 of the Workmen's Compensation Law governs the rights and liabilities of employee-claimants and their employers where injury is caused by a third party. Prior to 1937, the employee or his dependents were forced to elect between compensation benefits and a third-party action (see L.1913, ch. 816, § 29; Matter of Curtin v. City of New York, 287 N.Y. 338, 340, 39 N.E.2d 903, 904). If compensation were chosen, the cause of action against the third party was assigned, by operation of law, to the compensation carrier (see L.1913, ch. 816, § 29). If, on the other hand, a third-party action was pursued by the employee, unless the recovery was less than the compensation benefits, the claim to compensation was lost (id.).

With a 1937 amendment, however, the Legislature abolished the forced election, giving the employee or his dependents the right to collect compensation benefits without relinquishing the right to a third-party action ( § 29, subd. 1, as amd. by L.1937, ch. 684). But to avoid a double satisfaction, and continuing the concept that the carrier's obligation should be diminished when damages are recovered from a third party, the carrier's lien was introduced (id.; Matter of Curtin v. City of New York, 287 N.Y. 338, 342-343, 39 N.E.2d 903, 905, supra ). Subject only to "deduction of the reasonable and necessary expenditures, including attorney's fees, incurred in effecting (the third-party) recovery", the carrier has a "lien on the proceeds of any recovery" from a third party "to the extent of the total amount of compensation awarded" ( § 29, subd. 1). If, however, after a prescribed time period the employee or his dependents fail to pursue the remedy against the third party the employer or his carrier is, as under the earlier statute, subrogated to the claim (id., subd. 2). Should the carrier then recover more than the compensation paid plus the expenses incurred, two thirds of that excess must be turned over to the employee or his dependents (id.).

Despite its liberalizing changes the 1937 amendment still proved unsatisfactory. Where an employee recovered from a third party, once the attorney's lien was satisfied the carrier received the full amount of its lien without contributing to the litigation expenses, including the lawyer's fees. In short, the carrier benefited from a fund without having shared the burden of creating it. Yet, when the third-party action was brought by the carrier, not only did the carrier's and attorney's liens again receive priority over the employee, but the employee received only two thirds of the excess. Also problematic were modest third-party recoveries. Discharge of the lien of the attorney and carrier meant that little of the fund, if any, was left for the employee. (See Recommendation of the Law Revision Commission, McKinney's 1975 Session Laws of N.Y., p. 1552.)

These inequities prompted widespread criticism, some litigation, and ultimately, legislative correction (see Koutrakos v. Long Is. Coll. Hosp., 47 A.D.2d 500, 506, 368 N.Y.S.2d 528, 533, affd., 39 N.Y.2d 1026, 387 N.Y.S.2d 247, 355 N.E.2d 301; Kussack v. Ring Constr. Corp., 1 A.D.2d 634, 635, 153 N.Y.S.2d 646, affd., 4 N.Y.2d 1011, 177 N.Y.S.2d 522, 152 N.E.2d 540). The Law Revision Commission had repeatedly recommended that the carrier share responsibility for the litigation expenses, including lawyer's fees, incurred by the employee (see, e. g., Recommendation of the Law Revision Commission, McKinney's 1975 Session Laws of N.Y., pp. 1551-1554, N.Y.Legis.Doc., 1975, No. 65(F); McKinney's 1974 Session Laws of N.Y., vol. 2, pp. 1904-1907, N.Y.Legis.Doc., 1974, No. 65(F); McKinney's 1971 Session Laws of N.Y., vol. 2, pp. 2333-2335, N.Y.Legis.Doc., 1971, No. 65(B)). Eventually, the 1975 statute was enacted. To the provisions of subdivision 1 of section 29 it added: "Should the employee or his dependents secure a recovery from (a third party), whether by judgment, settlement or otherwise, such employee or dependents may apply on notice to such lienor to the court in which the third party action was instituted, or to a court of competent jurisdiction if no action was instituted, for an order apportioning the reasonable and necessary expenditures, including attorneys' fees, incurred in effecting such recovery. Such expenditures shall be equitably apportioned by the court between the employee or his dependents and the lienor." (L.1975, ch. 190.) Thus, New York joined the increasing number of States favoring apportionment (see Recommendation of the Law Revision Commission, McKinney's 1975 Session Laws of N.Y., p. 1553; 2A Larson, Workmen's Compensation Law, § 74.32, esp. pp. 14-232 14-233, and n. 56 (1976 & 1977 Supp.); Workmen's Compensation Tort Suit Expenses, Ann., 74 A.L.R.3d 854, pp. 863-866).

With respect to retroactivity, however, the act provided only that it be "effective immediately" (L.1975, ch. 190, § 3; see Memorandum of the Law Revision Commission, McKinney's 1975 Session Laws of N.Y. p. 1551). There is no explanation in the studies accompanying the proposed bills nor did the available proposed bills contain...

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