Hamberger & Weiss LLP

Appellate Division Rules that Federal Lawsuit for Sexual Discrimination, Assault is 3rd Party Action Requiring Carrier's Consent to Settle

Shiner v. SUNY at Buffalo stemmed from an incident in December, 2010, when one of claimant’s supervisors sexually harassed and groped her at an office holiday party. Claimant filed a workers’ compensation claim, and also sued her supervisor and the employer in federal court, alleging a hostile work environment, discrimination, battery, and assault. The workers’ compensation claim was established for post-traumatic stress disorder and a neck injury. Claimant settled her federal lawsuit against the supervisor and employer for $255,000.00, with both the employer and supervisor contributing funds to the settlement. $65,000.00 of the settlement amount was specifically allocated for “back and front pay.” Claimant did not obtain consent from the carrier before settling the federal lawsuit.

Upon learning of the settlement, the carrier sought disqualification from all future workers’ compensation benefits under WCL §29 based on claimant’s failure to obtain its consent to the federal lawsuit settlement. Claimant argued that the federal lawsuit was not a third-party action within the meaning of the WCL §29, highlighting language in the statute referring to “the negligence or wrong of another not in the same employ.” Claimant also argued that the lawsuit stemmed from intentional actions of a co-worker, and that this took the lawsuit outside of the scope of a third-party action.

The Appellate Division noted that a portion of the claimant’s recovery from the lawsuit was for lost wages. Citing a previous decision from the Court of Appeals, the Appellate Division stated, “[w]henever a recovery is obtained in tort [a specific form of civil lawsuit] for the same injury that was a predicate for the payment of compensation benefits,” it would be unreasonable to bar reimbursement for workers’ compensation payments made by the carrier simply because the claimant recovered money from the pockets of a co-worker or the employer as opposed to from a stranger. An exception to this rule applies where the actions by the co-worker or employer are done in furtherance of the employer’s business, which is clearly not the case for a sexual assault.

The bottom line is that when there is any doubt about whether a claimant’s civil lawsuit falls within the scope of the definition of a third-party action under WCL §29, the claimant acts at his or her peril by settling that lawsuit without first seeking consent of the workers’ compensation carrier.

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