Workers Compensation: Using Kelly and Burns Calculations to Determine Claimants' Compensation

When a work-related injury occurs and the wrong of a third-party is involved, the injured worker does not have to choose between receiving workers compensation and filing an action against a third-party. However, New York Workers Compensation Law (WCL) seeks to prevent an injured worker from receiving double recovery for the same injury by allowing compensation insurance carriers to have a lien encompassing the sum of past benefits paid on the claim. This lien can be reimbursed at the time of settlement or judgment, and the carrier is permitted to offset, or withhold payment of, future benefits in an amount equal to the remaining net recovery.

Because insurance companies receive such a benefit from being able to take this lien, WCL 29(1) provides that "claimants may apply to the court for an order apportioning the reasonable and necessary expenditures, including attorney's fees, incurred in effecting such recovery. Such expenditures shall be equitably apportioned by the court between the employee or his dependents and the lienor." In Kelly v. State Insurance Fund, 60 N.Y.2d 131 (NY Ct. App. 1983), the court held that the carriers equitable apportionment of expenditures is the percentage of the gross recovery represented by the sum of costs/disbursements and attorney's fees. Kelly further provided that a carrier must not only reduce its lien by a proportionate share of the third-party action costs, but must make additional expenditure payments for the benefit derived from the future offsets they will not be required to pay.

Kelly served as the standard until Burns v. Varriale, 2006 N.Y. Slip. Op. 6346 (3d. Dep't 2006). In Burns, the court stated that the "value of future workers' compensation benefits for a claimant with a nonscheduled permanent disability is speculative, that the present value of these benefits cannot be ascertained at the time claimant recovers damages in a third-party action, and that claimant is not entitled to an apportionment of attorney's fees based on such future benefits." The court reasoned that quantifying the claimants' future benefits can be difficult. Burns provided that in cases where the claimant was classified with a permanent partial disability, the carrier did not have to immediately contribute to the percentage of cost litigation (PCOL) at the offset. Rather, carriers could make periodic payments for the equitable share of attorneys' fees and costs, calculated as the PCOL share of the claimant's ordinary weekly benefit entitlements.

Whether the Kelly calculation or the Burns calculation applies to how much the insurance company will have to equitably pay depends upon the type of injury suffered by the claimant. The Burns calculation is more likely to apply where there is no finding of disability or the claimant is classified as having a permanent partial disability. The Kelly calculation will most likely apply when the claimant is classified as having a permanent disability or suffering a work-related death.

Read a copy of Kelly v. State Insurance Fund

Read a copy of Burns v. Varriale

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