PUTTING THE CART BEFORE THE HORSE: Amendment Proposed To Massachusetts’ Workers’ Compensation Subrogation Statute in Response to Judicial Activism

Massachusetts FlagIn the normal course of American jurisprudence, legislation is passed and courts decide cases according to the laws that have been passed. It seems that in Massachusetts, they have it backwards. Section 15 of the Massachusetts’ Workers’ Compensation Act provides unequivocally that in third-party tort cases, “the sum recovered shall be for the benefit of the insurer.” An amendment to the statute was recently proposed in order to bring the statute into compliance with a Massachusetts Court of Appeals’ decision which ignored this clear language of the statute and announced that something less than the “sum recovered” is for the benefit of the insurer.

In Massachusetts, an injured employee is generally obligated to pay over to the carrier, from any judgment or settlement received in a third-party case, any and all benefits previously paid by the carrier. Pina v. Liberty Mut. Ins. Co., 445 N.E.2d 1057 (Mass. 1983). However, Massachusetts’ courts have recently begun to limit the specific elements of damages recovered by a plaintiff to which the workers’ compensation is subrogated, at least in the context of a wrongful death action.

Curry v. Great American Insurance Company

In 2011, the Massachusetts’ Court of Appeals held for the first time that the recovery under a lien of a workers’ compensation carrier in a wrongful death case was limited to the portion of damages allocated to loss of net-expected income of the next of kin of the deceased. Curry v. Great Am. Ins. Co., 954 N.E.2d 580 (Mass. App. 2011), review denied, 958 N.E.2d 530 (2011). In Curry, a medical malpractice wrongful death case, the parties agreed to a high/low arbitration agreement and the plaintiff received an unallocated $300,000 award. Great American filed a statutory lien to recover its workers’ compensation lien under § 15. The estate filed a declaratory relief action seeking to have the lien declared invalid. A Superior Court judge allocated damages as follows:

$100,000         Net Future Loss of Earning Capacity

$100,000         Conscious Pain and Suffering of Deceased

$60,000           Loss of Consortium to Spouse

$40,000           Loss of Consortium to Emancipated Son

Of note, the insurer did not contest the fairness of the allocation between the components of the third-party damages and there was not an argument that the allocation was wrongfully structured to gerrymander the settlement to avoid the lien and future credit. The carrier argued that its lien extended to claims for consortium-like damages recovered under the Wrongful Death Act as well as to claims for the deceased worker’s conscious pain and suffering. While such liens do not extend to loss of consortium claims, the carrier argued that a wrongful death claim is different because it is brought by the estate’s personal representative and not a separate action by a consortium survivor. The Court of Appeals held that damages in the third-party wrongful death action allocated to loss of consortium or conscious pain and suffering are not recoverable by a subrogated workers’ compensation carrier under § 15 because they are not monies received under the Workers’ Compensation Act. While Curry involved a wrongful death case and death benefits, it was only a matter of time before this case was used in non-wrongful death/personal injury cases as well, because the Curry Court justified its decision by saying, “…conscious pain and suffering was not a compensable injury under the workers’ compensation statute.” Whether further limitations evolve remains to be seen.

Pain and Suffering

In the 2014 decision of DiCarlo v. Suffolk Construction, the Court of Appeals extended Curry by allocating consortium and pain and suffering damages in a personal injury (non-death) case and declaring those elements of damages as being beyond the reach of the workers’ compensation lien. According to Curry, such damages “are not compensable injuries,” and “entirely independent and distinct from the personal injury claims of the employee.” The Court stated that “the primary goal of the workers’ compensation statute is wage replacement,” which would obviously prevent an insurer’s lien from attaching to an employee’s damages for pain and suffering, among other injuries.

The trial court in DiCarlo refused to allocate damages and limit the workers’ compensation lien, indicating that there were important distinctions which distinguish that case from Curry. For instance, the Court noted that in Curry, the allocation of pain and suffering went to the widow – not the employee. The language of § 15 is quite clear:

The sum recovered [in the third-party case] shall be for the benefit of the insurer, unless such sum is greater than that paid by it to the employee, in which event the excess shall be retained by or paid to the employee. For the purposes of this section, “excess” shall mean the amount by which the gross sum received in payment for the injury exceeds the compensation paid under this chapter.

Since § 15 clearly provides for allocation to family members, the DiCarlo trial court said that the allocation in Curry might have been proper because it involved payments to persons other than the injured employee, but an allocation between economic and non-economic damages recovered by the injured employee would not be proper. The trial court noted that the Curry decision arose in the context of a medical malpractice/wrongful death action, and suggested that it should be limited to wrongful death cases and a workers’ compensation carrier’s reimbursement rights should not be defeated by a simple allocation to plaintiff for pain and suffering. The DiCarlo trial court ruling also stated that Curry did not overrule the 1993 Massachusetts Supreme Court decision in Rhode v. Beacon Sales, Co. Rhode v. Beacon Sales Co., 616 N.E.2d 103 (Mass. 1993). The Rhode decision held that “until an excess recovery exists, the entire recovery is for the insurer.” In Rhode, the court held that any damages recovered by the employee himself would be subject to the carrier’s lien.

On appeal, the DiCarlo trial court ruling was reversed by a Massachusetts Court of Appeals which misconstrued Curry. In reversing the trial court, the Court of Appeals said:

Thus, we follow Curry as the binding precedent of this court and hold in this case that DiCarlo’s compensation for pain and suffering was not subject to the G.L. c. 152, § 15, insurer’s lien.

Interestingly, though DiCarlo was a 3-0 decision, one justice wrote a lengthy “concurrence” which was more of a very logical dissent. Associate Justice Peter Agnes wrote that he only joined in the result because of adherence to stare decisis. In his opinion, Curry was wrongly decided. He wrote:

Because this case involves an issue of considerable importance to the administration of justice, an outline of the reasons why a different outcome in this case should be reached may assist the Supreme Judicial Court or the Legislature.

As pointed out by Justice Agnes, the Curry decision amounts to a “strained reading” of § 15. His problem with the decision is worth setting forth at length:

The reasoning in Curry is also problematic in light of the Legislature’s use of the word “injury” in that portion of the statute quoted above in the text. The word “injury” in § 15 and throughout G.L. c. 152 as a whole appears to refer to the personal injury sustained by the employee as a result of the work-related accident. Section 15 begins with the phrase “the injury for which compensation is payable,” using the term “injury,” I believe, to refer to the personal injury, and the term “compensation” to refer to the wage benefits and medical expenses payable under G.L. c. 152. Section 18, which pertains to independent contractors and subcontractors, further explains that workers’ compensation benefits and medical expenses are not the “injury” but rather are paid “on account of any injury to the employee.” Additional sections of G.L. c. 152 use the term “injury” in a manner that suggests it refers to the personal injury suffered by the employee and not the category of damages awarded on account of an injury resulting from the tortious conduct of a third party.

Legislative recognition of an insurer’s right to be made whole for amounts it has paid to an injured employee in workers’ compensation benefits before the employee retains any portion of an award of damages or settlement in a third-party action is grounded in equitable considerations. 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. See Richard v. Arsenault, 349 Mass. 521, 524, 209 N.E.2d 334 (1965). Although there is an equitable argument to be made on behalf of the employee, namely, that pain and suffering damages recovered in a third-party action provide relief that is not available under G.L. c. 152, prior to Curry this view did not animate the discussion in the cases interpreting § 15. 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. Bongiorno, supra.

Another problem with the reasoning in Curry is that it requires that the phrase “the sum recovered,” as it appears in § 15, to refer not to the entire amount recovered in the third-party action, nor to the “gross sum received in payment for the injury,” as the statute provides, but instead to some lesser amount of that “gross sum” consisting exclusively of damages awarded for lost wages and medical expenses. This requires a strained reading of the statute’s text. It is based on speculation about a distinction that the Legislature could have made between economic and non-economic damages, but that does not appear in the statute. See Saab v. Massachusetts CVS Pharmacy, LLC, 452 Mass. 564, 572, 896 N.E.2d 615 (2008) (“[I]t is not the role of courts to create a more comprehensive or logical system of compensation…. That is a task for the Legislature”). In order to read such a distinction into the law we would have to disregard the Legislature’s specific direction to courts about how to read statutes, see G.L. c. 4, § 6, Third as well as our own canons of construction. “[T]he statutory language itself is the principal source of insight into the legislative purpose.”

While the law in other States relating to the scope of the insurer’s lien is not a certain guide, it is noteworthy that a majority of courts in other jurisdictions with statutes comparable to § 15 include damages for pain and suffering recovered in a third-party action within the scope of the insurer’s lien. See 6 Larson’s Workers Compensation Law § 117.01[1] and accompanying digest (2014 ed.) (collecting cases). See also Gary Wickert, Workers’ Compensation Subrogation in all 50 States § 3.4 (5th ed. 2012); and 1 Modern Workers Compensation 103:57 (Clark Boardman Callaghan 2014).

Justice Agnes argued logically that, until the statute was amended to reflect a legislative purpose to the contrary, its clear language should be followed and adhered to. In 2015, House Bill 3457 was introduced into the Massachusetts Legislature, proposing to change the language of § 15 by allowing a carrier reimbursement only for “The sum recovered attributed to damage elements for which compensation was paid.” 2015 Massachusetts House Bill No. 3457, Massachusetts One Hundred Eighty-Ninth General Court.

Despite the clear language of the statute, trial lawyers are now emboldened to argue that the Curry decision means that any recovery allocated to pain and suffering is exempt from the workers’ compensation carrier’s subrogation interest. Curry is an extremely questionable decision seeing as § 15 states that the “sum recovered” all goes to the carrier first, with any excess going to the employee. The only damages “carved out” as being out of reach of the compensation carrier’s subrogation reach were loss of consortium payments to a spouse or other family members.

On January 14, 2015, two Massachusetts Democrats introduced House Bill No. 3457, which proposed to add the following language to § 15:

The sum recovered attributed to damage elements for which compensation was paid shall be for the benefit of the insurer, unless such sum is greater than that paid by it to the employee, in which event the excess shall be retained by or paid to the employee.

Clearly, this is different than the intent of the original § 15. Workers’ compensation represents a huge societal compromise in which an innocent employer is burdened with potentially millions of dollars in medical expenses and lost wages flowing from a work-related accident for which it is not at fault. In return for the security of certain lifetime benefits and compensation, the employee agrees that if a third-party is responsible for causing the injury or death, the employer (or its workers’ compensation insurance carrier) will receive first money reimbursement from any third-party lawsuit recovery. Over the years, however, trial lawyers have decided that they want their cake and want to eat it too. But it must be one or the other. Courts and legislatures must realize that the social compromise represented by the American system of workers’ compensation must be honored – not chipped away at by arguing that it’s just another form of routine subrogation in which greedy insurance companies are out to harm the injured victim.

If you have any questions regarding Massachusetts’ workers’ compensation subrogation statute, or subrogation in general, please contact Gary Wickert at gwickert@mwl-law.com

Gary L. Wickert

Gary L. Wickert is an insurance trial lawyer and partner with the law firm of Matthiesen, Wickert & Lehrer, S.C. Gary has nearly four decades of litigation experience and is regarded as one of the world’s leading experts on insurance subrogation. He is the author of several subrogation books and legal treatises and a national and international speaker and lecturer on subrogation and motivational topics.