The Massachusetts Supreme Judicial Court has ruled that a Workers' Compensation insurance carrier's lien on damages an employee recovered from a third party did not attach to damages paid by the third party for the employee's pain and suffering.
The case
Robert M. DiCarlo and Bernard J. Martin were injured in the course of their employment, collected Workers' Compensation benefits, and then reached settlement agreements with third parties including damages for, among other things, their pain and suffering.
The Workers' Compensation insurance carrier that insured both employers sought reimbursement under Massachusetts law from the employees' recoveries, including from their awards for pain and suffering.
In DiCarlo's case, the trial court rejected a settlement agreement providing that the insurer would not have a lien on the damages for pain and suffering, concluding that the insurer's lien attached to DiCarlo's entire recovery. DiCarlo appealed.
In Martin's case, the trial court approved a settlement agreement similar to the agreement rejected by the trial court in DiCarlo's case; the insurer appealed from that decision.
The appellate court determined that the employees' awards for pain and suffering were exempt from the insurer's liens.
The cases reached the Massachusetts Supreme Judicial Court.
Massachusetts law
Massachusetts law provides that:
Where the injury for which compensation is payable was caused under circumstances creating a legal liability in some person other than the insured to pay damages in respect thereof, the employee shall be entitled, without election, to the compensation and other benefits provided under this chapter…. The sum recovered 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…. Except in the case of settlement by agreement by the parties to, and during a trial of, such an action at law, no settlement by agreement shall be made with such other person without the approval of either the board [of the Department of Industrial Accidents (department)], the reviewing board [of the department], or the court in which the action has been commenced after a hearing in which both the employee and the insurer have had an opportunity to be heard. At such hearing the court shall inquire and make a finding as to the taking of evidence on the merits of the settlement, on the fair allocation of amounts payable to the employee and the employee's spouse, children, parents and any other member of the employee's family or next of kin who may have claims arising from the injury for which are payable, under this chapter in which the action has been commenced after an opportunity has been afforded both the insurer and the employee to be heard on the merits of the settlement and on the amount, if any, to which the insurer is entitled out of such settlement by way of reimbursement, and on the amount of excess that shall be subject to offset against any future payment of benefits under this chapter by the insurer, which amount shall be determined at the time of such approval…. In the case of a settlement by agreement by the parties to and during a trial of such an action at law, only the justice presiding at the trial shall have and exercise, relative to the approval of such settlement by agreement and to the protection of the rights and interests of the employee, his family members, and the insurer, the powers granted in the preceding sentence.
The Supreme Court's decision
The court affirmed, concluding that an insurer's lien did not extend to damages allocated to an employee's pain and suffering.
In its decision, the court determined that it had to construe the term "injury" in the statute consistently throughout the section, to mean the injury "for which compensation is payable" and, therefore, as excluding damages for pain and suffering.
The court then stated that the fact that employees will receive both workers' compensation benefits and damages for pain and suffering did not constitute a proscribed "double recovery" because they would be recovering separately for two separate harms: from the insurer, workers' compensation benefits covering lost wages and medical expenses, and from the third-party defendants, damages for pain and suffering.
It concluded by observing that a settlement amount allocated "entirely or in large part to pain and suffering" would "be eyed by the court with a healthy dose of skepticism."
The case is DiCarlo v. Suffolk Construction Co., Inc.
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